BPP401k.com Newsletter December 21

Been There, Done That. Now What: The Road Ahead for Plan Sponsors By some accounts, this was supposed to be a year of change-which wound up being another year of waiting for that change. Regulations promised were proposed, re-proposed, and/or deferred for further consideration. There was, however, plenty for plan sponsors to deal with in 2011. Here is a look at the trends that were on our mind this past year-and those just over the horizon. Source: Plansponsor.com

Advisers Who Are Asset Fee-Based Feel Handcuffed After another disappointing year in the markets, many financial advisers who base their fees on assets under management are thinking that there has to be a better way. But few have the stomach to make any changes right now — and that may be the wisest course. Source: Investmentnews.com

New Regulations Might Boost Your 401(k) Balance In 2012 The hard-earned dollars you defer each month into your 401(k) are about to get the money equivalent of a face lift in 2012. Why? Fees that affect your net 401(k) plan balance could drop on account of regulatory changes in 2012. These changes force providers to disclose all their fees to your employer and to you for the first time ever. Source: Forbes

Low-income workers benefit from 401(k) plans A new paper from the Center for Retirement Research at Boston College challenges the assumption that the tax deferral advantage offered by 401(k) plans mainly benefits high-income workers, who face higher marginal tax rates. Source: Employee Benefit News

Automate Your 401(k) Considering all the turbulence of the past year, the thought of ratcheting up your 401(k) contribution may make you somewhat seasick. But an unstable market means you need to save and invest more, not less, if you want to better the odds of still being afloat in retirement. Source: US News

Majority of Retirement Plan Sponsors Do Not Feel Prepared for New Fee Disclosure Rules Sixty-five percent of middle market executives say benefits costs are the leading factor impacting compensation decisions, largely outweighing a mere four percent of survey respondents who say economic conditions/financial performance is the leading factor, according to the Verisight and McGladrey 2011/2012 Compensation, Retirement and Benefits Trends Survey. The survey also found that the vast majority (61%) of retirement plan sponsors do not feel prepared for new fee disclosure rules. Source: 401khelpcenter.com

2012 Key Administrative Dates and Deadlines for Calendar-Year DC Retirement Plans The Milliman 2012 DC calendar contains general information on key administrative dates and deadlines for calendar-year defined contribution retirement plans. Source: Milliman

Target Benefit Plans: On the Edge of Extinction One of the more interesting effects caused by the IRS' elimination of the National Sponsor category in Rev. Proc. 2011-49 may be the projected elimination of pre-approved target benefit prototype and volume submitter plans. While some of you may be thinking "who cares" and others may be thinking "this will never happen," author shares some analysis that may change your mind. Think of target benefit plans as the canaries in our coal mine of a plan document system. Source: Pension Protection Act Blog

403(b) Plans Progressing Despite Shaky Economy In the face of prolonged economic instability, 403(b) plan sponsors are forging ahead with a variety of plan improvements—such as increased use of automatic enrollment, greater participant education, refined investment lineups and more. Consequently, many plans also reported higher participation rates. These and other insights are revealed in this 403(b) plan sponsor survey. Source: Plan Sponsor Council of America

The 408(b)(2) Burden on Fiduciaries In evaluating service providers, plan fiduciaries should not limit their analysis to cost. Instead, fiduciaries must take into account other factors that are relevant to making a prudent decision, such as conflicts of interest, the results being produced by the service provider, references, and the needs of the plan and its participants. Source: Plansponsor.com

The Fiduciary Duty to Ask for Help Fiduciaries are held to the highest legal standard. Where they are unsure of their expertise, fiduciaries must seek the advice of experts and carefully evaluate the advice given. Source: Mohler, Nixon & Williams

Why You Should Care About the Labor Department's Redefining "Fiduciary" Guidelines Many plan sponsors have not paid much attention to the DOL's current effort to substantially broaden the definition of a plan fiduciary, agrees Lynn Dudley, Senior Vice President, Policy, at the Washington-based American Benefits Council. They do it at their peril, she suggests. "Because there are so many lawsuits based on investment menus and investment choices, this is not something to take lightly," she says. Source: Plansponsor.com

Annual Compensation, Retirement and Benefits Trends Survey The annual Compensation, Retirement and Benefits Trends Survey conducted by Verisight and RSM McGladrey is designed to uncover key trends across the broad spectrum of retirement, benefits, and employee reward programs. More than 850 organizations participated in the survey. The majority of participants are mid-sized, private and not-for-profit companies. Source: Verisight (PDF File)

Three in Four African American Small Business Owners: Retirement Preparedness Crisis Looms A new small business survey by Nationwide Financial finds that seventy eight percent of African American small business owners say the number of workers financially unprepared for retirement is at "crisis levels." Source: 401khelpcenter.com

Do Low-Income Workers Benefit From 401k Plans? Economists frequently assume that employees "pay for" employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. This paper challenges these assumptions. Because low-income employees receive little tax benefit from saving in qualified retirement plans, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401k plan. Source: Urban Institute

The Small Market 401k Opportunity Craig Howell, who heads up Business Development for The Online 401k, talks about the business opportunity for advisors in the small plan space and how they're trying to make 401k's more compelling for the 90% of businesses that don't have one. Source: Retiremaphq.com

Four Regulatory Hot Spots and What They Mean for You What will be the top four regulatory items for financial advisers to deal with in 2012? Josh Cohen and Ben Jones of Russell Investments shared their thoughts. Source: Planadviser.com

Morningstar Changes the Way It Classifies Fixed-Income Funds Morningstar is drilling down deeper than ever before when it looks at fixed-income funds, the investment research firm said, announcing the launch of a new fixed-income classification system. Source: Financial-planning.com

Overview of the Small Business Pension Promotion Act (H.R. 3561) To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to reduce administrative burdens and encourage retirement plan formation and retention. Source: American Benefits Council

December ERISA Litigation Newsletter Reviews the following: Third circuit finds "inequitable" the enforceability of a clear ERISA welfare plan reimbursement provision that deprived a participant of a full recovery; District court dismisses ERISA § 502(a)(2) claim based on plaintiffs' failure to make pre-suit demand - and DOL takes notice; and, Application of ERISA section 510 to internal workplace complaints: a review of circuit court decisions. Source: Proskauer Rose LLP

Fourth Circuit Rules on Duty to Investigate and Diversify Investments A very recent decision by the Fourth Circuit Court of Appeals clarifies an important point with respect to the duty of ERISA trustees to investigate investment alternatives and to diversify the portfolio in which the plan funds are invested. In vacating the judgment of the United States District Court, the Fourth Circuit held that a breach of the fiduciary duty to investigate investment alternatives or breach of the duty to diversify does not necessarily mean the actual investments were imprudent. Therefore, such a finding, in and of itself, is insufficient to impose liability on the trustees. Source: Nixon Peabody LLP

Puerto Rico Qualified Retirement Plan Provisions Are Finally Amended On December 10, 2011, Governor Luis Fortuño signed into law Act No. 232-2011 (formerly, House Bill No. 3410), a technical amendments bill to the Internal Revenue Code for Puerto Rico. The Act brings a number of major changes to Puerto Rico qualified retirement plans, which are outlined in this article. Source: McConnell Valdes LLC

IRS Announcement 2011-82: Notice of Upcoming Changes in Determination Letter Procedures This announcement describes several important changes to the Employee Plans determination letter program that will take effect in 2012. These changes eliminate features of the determination letter program that are of limited utility to plan sponsors in comparison with the burdens they impose. The changes also are expected to improve IRS efficiency by reducing the time it takes the Service to process determination letter applications. Under these modified procedures, many employers will no longer apply for determination letters. Source: Benefitslink.com

DOL Slightly Expands E-Delivery Options for Participant Fee Disclosures At present, on or before May 31, 2012, many participant-directed defined contribution plans must deliver the first annual disclosures to participants under the new fee disclosure rules. The DOL just released Technical Release 2011-03R, which gives plans additional options for delivery of required information. Source: Sungard/Relius

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