BPP401k.com Newsletter October 26

Top 10 Best States for Workers in Retirement Plans Even as lots of people these days are thinking, “Retirement? What's that?” others are lucky enough to belong to a retirement plan of some sort. But retirement is a luxury not offered to just anyone; all over the country, retirement plan participation is on a downturn, along with the economy. Source: AdvisorOne

Why Leave Money on the Table -- Make the Most of Your Employer's 401k Match Would you turn down free money? Many employers match an employee's 401k contributions up to a certain percent of salary. If you contribute less than your employer is willing to match, you may be passing up free money and doing so makes no sense. Source: FINRA

How Many Investment Options Should 401k Plan Sponsors Offer? Far too many 401k plan sponsors don't know how to answer this important question. Of greater concern for 401k investors, far too many 401k plan sponsors fail to even ask the question. Instead, they opt to trust the guidance of their service providers, who may have a pecuniary interest in maximizing the number of offerings. Source: Fiduciarynews.com

Interpreting Ambiguous Plan Language So half the parties interpreting a possibly ambiguous plan term that is subject to discretionary review come out one way in reading the term, and the other two the other way. Who wins? The side who wins that split is whichever one the appeals court agrees with. Source: Boston ERISA Law Blog

More 401k Plans Get 'Socially Responsible' A growing number of 401k plans are adding to their investment menus so-called socially responsible funds -- mutual funds that invest in or avoid certain companies, based on pre-stated ethical guidelines. But do they fit? Source: Smartmoney.com

Target-Date Funds: Plan Sponsor Considerations Some of the issues addressed in the article: 1) Growth in TDFs, especially in retirement plans, can in part be attributed to the qualified default investment alternatives (QDIAs) regulations released in 2006 and 2007; 2) More on the "To versus Through" difference between funds; and, 3) Some considerations for sponsors as they include TDFs in their plans: required disclosures, communications, and ongoing benchmarking. Source: Milliman

The Current State of Retirement Document Drafting This article surveys the current state of document drafting, including an overview of IRS-recognized document types and recommendations for improvement to the IRS determination letter program. Suggestions include allowing new types of plans into the pre-approval program and modifying the required interim amendment procedures. Also discusses when to request a determination letter and provides general drafting tips. Source: FTwilliam.com

Reclaiming Fiduciary Duty Balance Reclaiming fiduciary duty balance between prudence, loyalty and impartiality is critical to sustaining pension promises. It would encourage better alignment of pension service providers’ supply chain interests, adoption of fit-for-purpose pension fund

Retirement Plan Providers Trying New 401k Ideas to Help Boost Balances Several 401k providers are rolling out new bells and whistles. Some of the changes are driven by the realization that many workers haven't saved enough to get them through retirement. In addition, this summer's market volatility amid concerns of a global economic crisis has reduced their balances yet again, prompting many to pull their money out of the market. Source: TheRepublic.com

Fiduciary Duty Main Reason Clients Choose to Work With RIAs Fiduciary duty tops the reasons why clients choose to work with independent registered investment advisors, according to a recent advisor sentiment survey released by TD Ameritrade Institutional. Twenty-nine percent of those surveyed said they chose to work with an RIA because they offer advice that is in the best interest of their clients. Source: Benefitspro.com

Lifetime Retirement Income: Annuities and Beyond Planning for retirement can be complicated, fraught with emotions, and overwhelming for participants. This white paper reviews annuities, guaranteed minimum withdrawal benefit options, managed accounts, annuity shopping services, and out-of-plan options, and what to consider when selecting among these choices. Source: Arnerich Massena

How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near Retirement Age Population This white paper uses asset and labor market data from the Health and Retirement Study (HRS) to investigate how the recent "Great Recession" has affected the wealth and retirement of those in the population who were just approaching retirement age at the beginning of the recession, a potentially vulnerable segment of the working age population. Source: Michigan Retirement Research Center

Study: What Are Plan Sponsors Focused on and Concerned About Today? 'Report on Retirement Plans - 2011' portrays a complex retirement plan environment in which plan sponsors are balancing the need to encourage employees to better prepare for their retirement, while managing expenses in a dynamic market. Source: 401khelpcenter.com

Ownership of Individual Retirement Accounts and 401k-Type Plans The percentage of workers ages 21-64 with an individual account plan (IRA or 401k-type plan) grew significantly in the late 1990s into the early 2000s. By 2009, 33.0 percent of workers owned a 401k-type plan and 20.8 percent owned an IRA. Source: Employee Benefit Research Institute
Forty Percent of Americans Save Nothing Towards Retirement The eNation survey, conducted on behalf of LIMRA, also found that 19 percent of adults not yet retired typically save less than $100 a month, while more than a quarter (27%) of consumers save $100 to $499 a month. Even those with household incomes of $50,000 or more, a sizeable proportion (42%) are either saving $100 or less, or nothing, each month. Source: 401khelpcenter.com

A Look at Defined Contribution Match Reinstatements During the recent financial crisis, many employers took cost-cutting measures to preserve their cash. These included layoffs, hiring freezes, furloughs, salary freezes and, in a few cases, salary reductions. Some employers also scaled back retirement benefits, although the cutbacks were often temporary. This analysis looks at 260 companies that either reduced or suspended their 401k plan matching contribution after 2008 to see what happened next. Source: Towers Watson

Retirement Confidence Drops Nearly 20% in 2011 American workers' trust in their future retirement has reached a four-year low, according to the Unretirement Index, a poll of nearly 1,500 working Americans by Sun Life Financial. After remaining stable for three years, retirement confidence dropped nearly 20% this September compared to a year earlier, according to the survey. Source: 401khelpcenter.com

401k Fee Litigation Update -- October 2011 Over the past several years, more than two dozen lawsuits have been filed relating to 401k plan fees and, more specifically, "revenue sharing" arrangements with plan service providers. The focus of these lawsuits against the plan sponsors has evolved over time to include broader challenges to, among other things, the plan sponsors' selection of actively managed mutual funds as plan investment options. Source: Groom Law Group

How Do You Handle U.S. Plan Document Requests? Fifth Circuit Finds Broad Fiduciary Responsibility If you are like most 401k or pension plan administrators, you have procedures for participants to request plan documents and forms. They may be as simple as requiring document requests to be sent in writing to a designated employee. Section 104(b)(4) of ERISA requires that certain plan documents, including summary plan descriptions and 5500's, be provided to participants upon request. Failing to comply could result in a $110 per day penalty if a participant does not receive a requested document within 30 days and the plan administrator has no reasonable cause for the delay. But a recent case indicates that your exposure could be even broader. Source: Pensions & Benefits Law

Citigroup Wins in Workers' 401k Stock Drop Appeal A federal appeals court said Citigroup Inc is not liable to thousands of workers who said it should not have offered bank stock in its retirement plans because it knew its subprime mortgage exposure made that stock a bad investment. Source: Reuters

IRS Announces Plan Limits for 2012 On October 20, 2011, the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2012. In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged. Source: 401khelpcenter.com

Model Participant-Directed Defined Contribution Plan Investment/Expense Disclosure Package The DOL's new disclosure regulation does not provide a comprehensive model disclosure package, although it does include a form of comparative chart that would satisfy some of the new requirements. This is a copyrighted model package, which incorporates a slightly modified version of the Department of Labor chart. The model package here is intended to be a starting point from which plan administrators can develop customized disclosures that will satisfy all of the new requirements. Source: Paul Hastings LLP

IRS Changes and Clarifies Rules for Pre-approved Plans The IRS released Rev. Proc. 2011-49, which updates its guidance for pre-approved (prototype and volume submitter) documents. This replaces Rev. Proc. 2005-16. The update is crucial since the deadline for submission of the next generation of preapproved defined contribution plans is January 31, 2012. Source: Sungard/Relius

IRS Updates List of Required Modifications for 401k and Other DC Plans The IRS has released a revised list of required modifications (LRM) for 401k plans reflecting Code requirements as amended through the Small Business Jobs Act of 2010. The sample plan provisions include new text on eligible automatic contribution arrangements, in-plan Roth conversions and "gap period" earnings, among other items. A separate LRM covers all types of defined contribution plans and takes into account current qualification requirements as reflected in the IRS's 2010 cumulative list of changes. The LRMs are intended as a guide for drafters of preapproved plans. Source: Mercer

Listings of Required Modifications Are Updated to Reflect Changes in 2010 Cumulative List The IRS updated its Listings of Required Modifications (LRMs) for defined contribution plans and cash-or-deferred arrangements to reflect many of the changes identified under the 2010 Cumulative List for plans that will be submitted for determination in the current cycle. Source: Benefitslink.com

Forfeitures in Safe Harbor Plans The IRS has recently put the use of forfeitures in a safe harbor 401k plan into doubt. This article provides background on the issue, discusses the latest IRS position, and explores options for plan sponsors. Source: Sungard/Relius

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