BPP401k.com Newsletter June 1

Beneficiary Designation Forms Can Cause Headaches for Benefits Administrators Benefit administrators, 401k vendors, recordkeepers and benefits professionals regularly recommend that participants in qualified retirement plans periodically review and update their beneficiary designation forms. What could be simpler that merely indicating to whom or to what entity a participant wishes their assets to be transferred in the event of death? Unfortunately, numerous issues arise in connection with the simple task of designating a beneficiary. Source: Employee Benefit News.

Additional Expenses Qualify for Safe Harbor Hardship Withdrawals Plan sponsors of 401k and 403(b) plans that use the 401k safe harbor hardship withdrawal rules for determining if an employee has an immediate and heavy financial need, will need to consider breast pumps and other lactation supplies as medical expenses that may be eligible for hardship withdrawal. In addition, amounts paid to repair damage to personal residences due to corrosive drywall building materials would be considered deductible costs for repairing a principal residence that also may qualify for hardship withdrawal. Source: Prudential

Baby Boomers' Emotions Threaten Retirement Security Near-retirees and retirees are feeling uncertain about the future, fearful of poverty, not confident in their investing abilities, and distrustful of unscrupulous financial services and insurance firms, according to a new white paper issued by Financial Engines. Source: 401khelpcenter.com.

How To Rollover A 401k You don't always have to move an old workplace plan, but making the move can help you better keep track of your finances. The average person holds 11 jobs from the age of 18 to 44, according to the Bureau of Labor Statistics, and for many of us that means 11 or more workplace retirement accounts. Because not all employer plans require you to leave the plan when you leave the company, you could end up with several, disparate retirement accounts. Source: Smart Money

Despite High Participation, Automatic Enrollment is Hindering Contribution Rates Forty-one percent of participants who were automatically enrolled are not saving enough to receive the full match from their employers, compared to only 25 percent of participants who proactively enrolled. Source: 401khelpcenter.com.

30% of Job Switchers Unaware of 401k Rollover Options Many investors are unaware of the options available for their 401k account left with a previous employer. Nearly one-third (30%) who made a job transition are unsure of what to do with their workplace retirement savings. Source: Employee Benefit News.

Trends in Pension Plan Management: The Annuity Dilemma This article examines some key issues facing late-career employees who are desperate for information about payout options from defined benefit and defined contribution plan assets. In particular, it assess the three key questions. Source: Mercer

Compliance Checklist for Retirement Plans Subject to ERISA This Checklist as a "quick glance" resource to help you meet plan reporting and disclosure requirements for plans subject to the reporting and disclosure requirements of ERISA. This easy-to-follow Checklist should help you provide timely and complete information to individuals and appropriate government agencies. Source: Prudential

Retirement Plans Struggle With Annuity Issue Helping retirees convert their own lifetime savings into a regular paycheck is proving a challenge for retirement-plan sponsors. One solution involves having the retiree buy some kind of annuity, but some plan sponsors fear that could create a legal liability for them. While they have held off, other sponsors have moved ahead, offering annuities that employees can invest in gradually as they build their 401k nest eggs. Source: Marketwatch.com.

Outsourcing: SAS 70 Superseded for Service Provider Control Reporting By SSAE 16 Prior to 2011, entities who engaged third-party service providers to perform functions and/or processes that impacted the user entities' internal control over financial reporting (ICFR) typically required Statement on Auditing Standards (SAS) No. 70 Type 2 reports from service organization auditors. Going forward, where the service organization's services affect the user entity's ICFR, user entities should require in their outsourcing services contracts that service organizations provide Service Organization Control 1 Type 2 reports under SSAE 16 rather than SAS 70 Type 2 reports. Source: Sutherland Asbill & Brennan LLP

New 403(b) Survey Shows Resilience of Sponsors and Participants Despite a potentially crushing recession and a spate of complex new regulations, the 403(b) retirement plan system appears to be healthier than ever. That is the findings of the just-released 2010 403(b) Plan Survey from the Profit Sharing/401k Council of America. Survey highlights revealed. Source: 401khelpcenter.com.

403(b) Plans Increase Use of Advisers and Online Communications The latest 403(b) plan sponsor survey from the Profit Sharing/401k Council of America (PSCA) reveals sponsors are increasingly asking for help from investment advisers and their plan providers and are rolling out more online communications to participants. Source: Plansponsor.com.

403(b) Plan Termination Guidance An updated summary and overview of 403(b) plan termination guidance. Source: McKay Hochman.

Due Diligence, Best Practices Tips for RIAs While Congress, the SEC and individual states continue to work out the precise definition of a fiduciary and precisely what his or her requirements will be going forward, RIAs and other financial services professionals still need to take it upon themselves to implement best practices that will ensure they'll be in compliance whenever these new regulations are finalized. Source: Onwallstreet.com.

New Survey Findings on Investment Committee Leadership Styles While leadership styles on investment committees may vary, the democratic style is most common, according to a new Vanguard survey. Source: Vanguard.

Fiduciaries Required to Document Prudence of Retaining Unitized Stock Fund Plan fiduciaries may have breached their fiduciary duties by failing to deliberate and make a documented reasonable decision regarding means of reducing investment and transactional costs associated with a unitized company stock fund, according to the U.S. Court of Appeals in Chicago (CA-7) in George v. Kraft Foods Global, Inc. Source: CCH.

Door Closes on SPD-Based Benefits Claims, but Plaintiffs See New Hope for Relief The U.S. Supreme Court this week issued a decision that closes the door on benefit claims based on the language of summary plan descriptions (SPDs), but opens up the possibility of a much less restrictive judicial approach to the type of equitable relief available under ERISA Section 502(a)(3). Source: Ballard Spahr LLP.

Court Tells Participants That Door to Monetary Awards Against Fiduciaries is Opening The Supreme Court on May 16, 2011, issued a major ERISA remedies decision in CIGNA Corp. v. Amara holding that ERISA's authorization of suits by pension plan participants "to recover benefits due" or to "enforce [their] rights" under the terms of the plan is not authority for courts to enforce the terms of a summary plan description or to revise the plan to conform it to representations made in the SPD. More importantly, however, the Court appeared to use the case to signal that it has rethought the scope of "other appropriate equitable relief" available under ERISA's catch-all remedial provision. Source: Trucker Huss.

BP Accused of Mismanaging Retirement Plans BP Plc, BP's North American unit was accused in a lawsuit by its employees of mismanaging their retirement savings plans by investing heavily in its own stock before last year's Gulf of Mexico oil spill. Source: Benefitspro.com.

Fourth Circuit Recognizes ERISA Fiduciary Exception to the Attorney-Client Privilege Adopting the rule applied by several other appellate courts, the Fourth Circuit has recognized a fiduciary exception to the attorney-client privilege in the case of a DOL investigation of two multiemployer plans (collectively bargained plans, administered by a separate board of trustees, under which more than one employer contributes on behalf of its employees). Source: EBIA.

Sixth Circuit Affirms Trustee's Conduct Was Within ERISA § 404(c) Safe Harbor In this case, the participants chose their investment advisor, relied solely on the advisor for their investment decisions, directed the trustee to implement those investment decisions, and were unable to establish that the trustee had prevented them from exercising “independent control.” Since they were unable to collect any of their losses from the investment advisor, they attempted this unsuccessful claim against the plan's trustee. It is notable that the participants also were ordered to pay the trustee's litigation costs. Source: EBIA.

Restrictive IRS Guidance for 457(f) Plans Likely to be Issued in 2011 After a lengthy period of silence, it appears that the IRS is getting ready to issue the long-anticipated regulations governing Internal Revenue Code (Code) Section 457(f) plans. Source: Drinker Biddle & Reath LLP

IRS Rules That Annuity Payouts With Automatic Increases Are Not "Substantially Equal Periodic Payments" The IRS ruled that nonqualified annuity payouts that automatically increase by a fixed percentage are not within the "substantially equal periodic payment" (SEPP) exception to the IRC § 72(q) premature distribution 10% penalty tax. Although the ruling applies by its terms only to nonqualified annuities, its conclusions implicitly extend to the comparable exception under the § 72(t) premature distribution penalty for qualified retirement plans. Source: Sutherland Asbill & Brennan LLP

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