BPP401k.com Newsletter January 26

Advisor Service Agreements: The Weak Link While a well drafted, reviewed and understood service agreement can help preclude errors and claims, the service agreement is also the primary defense against liability caused by service provider mistakes and negligence. In spite of this important role, many plan sponsors - particularly small plan sponsors - sign standard service agreements without adequate review or counsel. Source: Pension Risk Matters.

Many Miss Out On Retirement Tax Credit The Saver's Credit is designed as an incentive for low- to middle-income workers to save for retirement. But, according to the Transamerica Center for Retirement Studies, very few workers who may be eligible may even know it exists. Source: Thestreet.com

Best Practices: Conducting Provider Searches for Plan Sponsor Clients Selecting a service provider represents an even greater challenge than it has in the past as employer sponsored plans become more critical in both attracting and retaining employees and in meeting the retirement planning needs of the participating employees. This paper highlights the best practices for conducting a provider search. Source: Principal Financial Services

3 Tips for a Less Confusing 401k If you get confused about choosing a mutual fund for your investment portfolio or 401k plan, there may be a reason. It’s because the companies intentionally make the process of selecting a mutual fund more complicated. Source: Investor Place

The Costs to Employers of Having Employees Who Are Unable to Retire Our company is trying to decide whether a retirement preparedness program is worth the cost. What are the costs to an employer of having employees who aren't able to retire? Source: 401khelpcenter.com

403(b) Plans Best Practices Document The SPARK Institute has released for public comment a draft of an update to its information sharing best practices for 403(b) plans. The update reflects certain industry developments that occurred since it was originally published in June 2009. Source: SPARK Institute

5 Ways to Make Your 401(k) Balance Last Longer If you spend too much of your 401(k) account balance early on in retirement, you will reach your later years with very limited resources. But there are steps you can take to make your retirement account balance last longer. Here are some strategies to make sure your retirement savings lasts the rest of your life. Source: US News

Retirement Advice Along Gender Lines Men and women have distinct approaches to financial management, according to a new survey from Charles Schwab. The firm found that in investors 50 and older, 47% of men trust only themselves to make the right financial decisions, compared to 32% of women. Source: Employee Benefit News.

Boomers Hitting Retirement With Fewer Assets in Hand As the first wave of Boomers, those born between 1946 and 1955, enter retirement they are doing so with on average 12% fewer assets today than they had four years ago. This and other findings are included in the recently released Cogent Research 2011 Investor Brandscape report. Source: 401khelpcenter.com

AUDIO: New Directions For Professional Practices Doctors, lawyers, architects and other professional groups have unique business structures. Fortunately, new ideas for the design and management of retirement plans for professional practices can meet their needs. An interview with Pete Swisher, Sr. Institutional Consultant, Unified Trust Company on these new ideas. Source: BigMediaUSA.com (mp3).

Survey: Client Service Now Key to Retirement Plan Buying Decisions According to a new survey by Anova Consulting Group, retirement plan sponsors report that client service has now become the #1 or #2 reason for choosing a new plan provider over a rival firm. Source: 401khelpcenter.com

Stable Value Funds: Performance to Date Little in the scholarly economics literature is directed specifically to stable value funds, although they occupy a leading place among retirement investment vehicles. This study suggests that stable value funds dominate two (and nearly three) major asset classes based on a historical analysis, and that they often occupy a significant position in optimal portfolios across a broad range of risk aversion levels. Source: Social Science Research Network.

Analyzing Defaulted Participant Behavior and QDIA Target-Date Design Are target-date funds serving the needs of defaulted participants? Prompted by the extreme markets in 2008, this question has dominated industry discussion about the suitability of different target-date strategies as qualified default investment alternatives. Source: PIonline.com

More U.S. Households 'At Risk' of Running Short of Money in Retirement Depending largely on age and income, between 4 percent and 14 percent of Americans who otherwise would have had adequate income to cover basic expenses in retirement became "at risk" of running short because of the housing and financial crisis of 2008–2009, according to a new report by the nonpartisan Employee Benefit Research Institute. Source: Employee Benefit Research Institute

DOL Pushes Intensified Scrutiny of ESOP Fiduciaries The Department of Labor says the proposed regulation is designed to clarify which adviser roles carry fiduciary responsibility under federal law. The department's main complaint is that the current rule is old and doesn't work considering the significant changes in the financial industry as well as the massive shift to defined contribution plans. Source: Workforce.com (free registration may be required).

SEC's Fiduciary Study Released The Securities and Exchange Commission submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers -- no less stringent than currently applied to investment advisers under the Advisers Act -- when those financial professionals provide personalized investment advice about securities to retail investors. Source: SEC.

SEC Staff Study Recommending a Uniform Fiduciary Standard This is the actual study just released by the SEC. It recommends that the SEC should adopt rules implementing a uniform fiduciary standard for Broker-Dealers and Investment Advisers that requires them to act in the best interest of the client without regard to the financial or other interests of the broker or adviser. Source: SEC

Participant Fee Disclosure Regulations – Methods of Delivery and Effective Date This is an article regarding the October 2010 participant fee disclosure regulations which discusses the method of delivery of these disclosures and the effective date of the new regulations. Source: Sungard/Relius.

For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com

BPP401k.com Newsletter January 19

Small But Mighty: Micro plans start to catch up to their larger brethren Traditionally, micro plans have been assumed to be the laggards of the retirement plan market—as many in the industry often are waiting for them to “catch up” to their larger peers in terms of the type and number of plan features and participant involvement. However, respondents to this year’s PLANSPONSOR Defined Contribution Survey sponsoring plans with assets of less than $1 million (micro A) and those with assets of $1 million to $5 million (micro B) show that, while there might be some slight statistical differences, micro plans do appear to be catching up to their larger peers in many areas. Source: Plan Adviser

Designating a QDIA: What Are You Waiting For? Although seeking fiduciary relief and promoting better participant diversification may seem like benefits worth pursuing, about 42% of plans at Vanguard have not yet designated a QDIA. Even more puzzling—about 40% of these non-QDIA plans are already using investments that would qualify as QDIAs, but plan sponsors haven't taken steps to officially designate them as such. Source: Vanguard Research and Commentary.

New Year's Resolutions Defined Contribution Plan Sponsors Should Make Mercer has published its "10 for 2011" checklist of New Year's resolutions that US defined contribution plan sponsors should make now to address investment and plan-design concerns, fulfill fiduciary responsibilities and help participants meet their retirement objectives. Source: 401khelpcenter.com.

Plan Administrators Should Prepare Now to Comply with New Participant Disclosure Requirements A sweeping new set of participant disclosure requirements will take effect for most 401k and 403(b) plans later this year. The regulation creates a new ERISA fiduciary duty for administrators of all retirement plans that provide for participant investment direction. Plan administrators of covered plans will need to give participants an expanded array of information that meets specific content, formatting and frequency requirements. Source: McGuire Woods LLP

Two Simple Ideas for Improving DC Plans There are two proposed pieces of legislation sitting in Congress that would seem to be no-brainers for helping people save for retirement and helping advisers help their clients. Source: Employee Benefit News

The New Retirement Journey: What Today's Woman Needs to Know and Do While women today have more economic opportunity than ever before, it comes with big financial responsibilities. This is especially true when it comes to funding our retirement. Source: Women's Institute for a Secure Retirement (PDF File).

Key 2011 Dates and Deadlines for DB Plans Milliman published this 2011 key administrative dates and deadlines for calendar-year defined benefit retirement plans subject to ERISA and the Internal Revenue Code. Source: Milliman (PDF File).

Lower Payroll Tax Could Bring Higher 401k Savings The reduction in Social Security payroll taxes is essentially a gain for American workers in their take-home pay. Sponsors of defined contribution retirement plans can take advantage of the reduced payroll deduction by encouraging employees to increase their plan contributions by a like amount, which could greatly improve their odds of saving enough for a secure retirement. Source: Society for Human Resource Management.

FASB Revises Its Position on Reporting of Participant Loans According to FASB's new position, the financial statements of defined contribution plans should classify participant loans as notes receivable, measured as the outstanding principal amount plus accrued but unpaid interest. This change affects any defined contribution plan that offers participant loans. Source: Prudential Retirement (PDF File).

The Role of Committees in Maximizing DC Plan Effectiveness and Minimizing Exposure The most effective way for employers to manage a DC plan is through a well-defined process of plan governance and management with clear allocation of roles and accountability. Organizations that establish and maintain retirement and investment committees give themselves the best opportunity to meet their obligations in overseeing the plan. Source: Sibson Consulting (PDF File).

Participant Fee Disclosure Regulations: Investment Disclosures This article discuss the investment disclosures the plan administrator (or the person the plan administrator designates) must make to participants and beneficiaries. The DOL has posted a model chart demonstrating the investment disclosures. Source: Sungard/Relius.

Most Investors Understand Design and Risk of Target-Date Funds While there has been a great deal of speculation about investors' understanding of target-date funds, a new Vanguard survey finds that most target-date fund investors understand the funds' basic design and are aware of the accompanying investment risks. Source: 401khelpcenter.com.

Investor Comprehension and Usage of Target-Date Funds More than 4,700 IRA owners and plan participants responded to a Vanguard online survey designed to gauge the knowledge of target-date fund (TDF) investors. Among the chief findings: Retirement investors who are aware of TDFs generally understand both the funds' basic design and their risks. In this research paper we discuss how well retirement investors know TDFs and point out opportunities for plan and fund sponsors to improve investors' understanding of how TDFs work. Source: Vanguard (PDF File).

For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com

BPP401k.com Newsletter January 12

IRS Releases Pay Withholding Change Guidance The Internal Revenue Service (IRS) has released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011. Source: PlanSponsor

Plain language financial marketing targets end user Sun Life Financial's Ann Hibbard shares how helping employees understand the language of finance helps advisers as well — giving them the ability to better meet the needs of clients. Podcast. Source: Employee Benefit Adviser

DOL's About-Face on Advancement of Fees Leaves Heads Spinning The Department of Labor long has recognized that attracting and retaining qualified individuals to serve as plan fiduciaries is an important public policy goal. And for 30 years, in furtherance of this goal, DOL has taken the position that under the ERISA, a plan may, within certain guidelines, advance defense costs to a plan fiduciary facing a claim for breach of fiduciary duty. DOL seemingly reversed its decades-old position in early 2009. In Johnson v. Couturier, DOL urged the Court of Appeals for the Ninth Circuit to affirm the denial of advancement of defense costs to alleged fiduciaries. Source: Groom Law Group (PDF File).

DC 2.0: Designing Outcome-Oriented Defined Contribution Plans to Maximize Returns DC plans are moving – by necessity – from “pure DC” to “outcome-oriented DC plans” that target a retirement income replacement goal and apply a more conservative, diversified and risk-managed approach. And plan sponsors should manage and diversify the risk exposure in their DC portfolios as well as consider explicit tail risk hedging strategies.
Source: PIMCO

Health Plan TPA Ruled ERISA Fiduciary A third-party administrator committed a fiduciary breach when it paid its expenses with funds supposed to be used for benefit claims in a self-funded health plan, a federal judge has ruled. Source: PlanSponsor

Banks release data on HSAs Research analyzing health saving accounts managed by three large banks shows that accounts with employer contributions had an average contribution of $1,058 for calendar year 2009. Source: Employee Benefit News

Highlighting Employee Investment Gaps Some employers are more proactively educating workers about insufficient contributions to their 401k plans, a trend that's expected to persist into 2011. One company, after mailing nearly 17,000 personalized letters about current employee investing levels, tracked a 45 percent increase in contributions. Source: Workforce.com (free registration may be required).

Employee Education Boosts 401k Participation at Brady Corp Due to changes made in late 2009, Milwaukee-based Brady Corp. was able to make significant gains in the number of employees making full utilization of its 401k program and other retirement programs. Source: Milwaukee Small Business Times.

When Revenue Sharing Exceeds Reasonable Costs Since fiduciaries have a legal duty to pay no more than reasonable compensation, and since there is a duty to ask, the failure to take any steps may be found to be a fiduciary breach, subjecting plan sponsors and committee members to liability for the excess payments. Source: Reish & Reicher.

Solutions to the Target-Date Fund Dilemma TDFs are not created equal. Too often, they are comprised of proprietary funds that restrict fiduciary oversight, and proposed DOL regulations will add transparency, but won't affect a plan's underlying strategy. Plan sponsors should review their investment options, analyze the "glide paths" of the funds and ensure that the strategy chosen best suits the needs and demographics of plan participants. Source: HREonline.com.

Despite Growth of Target-Date Funds, Sponsors Ill- Informed Despite the increasing proliferation of target-date funds in employer-sponsored retirement plans, many sponsors aren't very knowledgeable about the funds, Janus found in a survey. Source: Employee Benefit News.

The New Form ADV Part 2: Convergence of ERISA and Securities Law Disclosure

This is one of a series of Bulletins about the convergence of employee benefits and securities law and its impact. This article generally discusses the new Form ADV Part 2 disclosure rules, and points out a few items of interest to those investment advisers with ERISA clients. Source: Reish & Reicher (PDF File).

Retirement Readiness of Employees is Top Priority for Employers Corporate executives responsible for overseeing the retirement plans offered to their employees identified retirement readiness as one of their top priorities this past year, according to the 10th Annual 401k Benchmarking Survey conducted by Deloitte, the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists. Source: 401khelpcenter.com.

Survey: Trends Swing Positive for Defined Contribution Plans Callan Associates' "2011 Defined Contribution Trends Survey: Positioning the DC Plan for the Future" finds that plan sponsors will revive efforts to move their plans forward after enduring a severe market collapse and several years of economic challenges. Source: 401khelpcenter.com.

Case Highlights the Perils of Revenue Sharing Much commentary has been generated about Tibble v. Edison International, the first 401k excessive investment fee case to go to trial that resulted in a judgment. The case brings some interesting issues to light. Source: Morningstar Advisor Magazine.

ERISA Plan Fiduciaries Gain Protection from Employee Lawsuits Employee stock ownership plans, 401ks, and other types of eligible individual account plans are often an effective way to build employee loyalty, especially when the plans invest in the employer's own stock. A potential downfall has always been the possibility of employees bringing a class action lawsuit if the stock drops in value. Even if an employer ultimately wins the case, it could incur major costs defending itself in court. Good news: the 9th Circuit Court of Appeals has stepped in and made it much harder for employees to get these cases to trial. Source: Business & Legal Resources.

Wilmington Trust Targeted in 401k Investigation The law firm of Stull, Stull & Brody announced that it has commenced an investigation relating to the 401k defined contribution retirement plan of Wilmington Trust Corporation. Looks like the New Year is going to kick off on a litigious note. Source: Plansponsor.com.

Text of Live Q&A Session with EBSA's Phyllis C. Borzi In this January 4th live Web chat, Assistant Secretary of Labor Phyllis C. Borzi discussed the Department of Labor's Semiannual Regulatory Agenda. She noted that they will focus on their fee transparency initiatives, on who is considered a fiduciary when providing investment advice, and on the "lifetime income" initiative. Source: US Department of Labor.

DOL Issues Final and Proposed Regulations on Disclosure Requirements for Participant-Directed Individual Account Plans The U.S. Department of Labor (DOL) has released final regulations on fee disclosure in defined contribution-type retirement plans, such as 401k plans. The DOL also issued proposed regulations regarding additional disclosures for qualified default investment alternatives (QDIA) and specific disclosures related to target date funds. The proposed regulations would amend both the QDIA rules and the new participant disclosure regulations. Source: Towers Watson.

IRS Provides Relief for Retirement Plan Providers from 5500 PTIN Requirements In Notice 2011-6, to be published on January 17, 2011, the IRS reversed direction and provided that the preparation of certain enumerated tax forms, including 5500, are not within recent new PTIN initiatives. Source: Sutherland Asbill & Brennan LLP (PDF File).

IRS Rules Again on Annuity Issues in Defined Contribution Plans In PLR 201048044, the Internal Revenue Service again addressed the application of certain tax rules relating to distributions from defined contribution retirement plans in the form of an annuity. Source: Sutherland Asbill & Brennan LLP (PDF File).

IRS Issues List of Retirement Plan Changes for Cycle A Qualification Requests Retirement plans seeking determination letters in Cycle A should incorporate the necessary plan updates outlined in the 2010 Cumulative List of Changes in Plan Qualification Requirements issued by the Internal Revenue Service in Notice 2010-90. Source: CCH.

EBSA Regulatory Agenda Focuses on Fees In a live Web chat discussing the Department of Labor's Employee Benefits Security Administration's Semiannual Regulatory Agenda, Assistant Secretary of Labor Phyllis C. Borzi said the Agency will focus on its fee transparency initiatives. Source: Planadviser.com.

For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com

BPP401k.com Newsletter January 5

Avoid The One-Stop Shop for 401(k) Administration One-stop shopping for 401(k) plans would allow your company’s trustees to select a Third Party Administrator (TPA) that is able to provide the full range of administrative, legal, and investment services. It would also seem that the ease of dealing with only one retirement advisor would have the added benefit of reducing plan administration cost. This construct seems to make sense on paper, but in reality, big box TPAs often administer 401(k) plans in ways that result in higher plan administration costs, conflicts of interest, dual loyalties, and a potential for increased liability to the plan sponsor. Source: Rosenbaum Law Firm

A Social Security Reality Check Once upon a time, workers were told that Social Security was but one leg of a three-legged stool that would support them during retirement. Private pensions and personal investments would serve as the other two legs. As time passed, most employers eliminated their pension plans. Instead of defined-benefit plans, workers were given access to defined-contribution plans. The three-legged stool then became the two-legged stool. Source: San Francisco Chronicle/Investopedia

Do Surviving Spouses Have a Right to a 401k or an IRA? When choosing a beneficiary for a retirement plan, it is important to understand how your spouse will be treated under the plan. Surviving spouses are treated differently under 401ks and individual retirement accounts (IRAs). While a 401k provides protections for a surviving spouse, an IRA does not. Source: Elderlawanswers.com.

Suspended 401k Matches Poised for a Comeback Employers are clearly more optimistic about the economy, for another 40% that had suspended 401k contributions will resume them by mid 2011, doubling the 40% that already have resumed suspended or reduced matches, reports the Profit Sharing/401k Council of America. Source: Employee Benefit News.

Making Sense of Minimum Distribution Rules If you're approaching retirement, you'll eventually need to make serious decisions about when to begin taking withdrawals from your retirement accounts, how to receive the money, and how to calculate the taxes you'll owe. Source: U.S. News & World Report.

Doing Your Homework: Understanding 401k Fees This article dissects the various types of fees within 401k plans and outlines specific steps plan sponsors can take to make sure their own plan's fees are competitive and their fiduciary risks are minimized. By following these steps, employers will gain knowledge, control and confidence to identify and manage fees now and over time. Source: Aon Hewitt (PDF File)

NTSAA Issues 403(b) Compliance Resolution Summit Report The National Tax Sheltered Accounts Association just released this 16 page report from their second annual 403(b) Compliance Resolution Summit last May in Chicago. Source: ASPPA

The Spark Institute Issues Alert Regarding Participant Fee Disclosure The SPARK Institute issued a "Compliance Alert" regarding potential disclosure problems and fiduciary issues for retirement plan sponsors and certain providers of non-mutual fund plan investment options. Source: 401khelpcenter.com

The Importance of Procedures and Controls The importance of internal controls was mentioned at a recent Mid-Atlantic IRS liaison meeting and the existence and use of procedures and controls will go a long way in helping you survive a government audit. Source: ERISAdiagnostics

Using Target-Date Funds? Get Ready for Even More Participant Disclosures The DOL and SEC issued an Investor Bulletin addressing target-date funds with advice to help evaluate these funds. The DOL recently also proposed regulations requiring special participant disclosures for target-date funds, even if participants are not defaulted into them, and for other "qualified default investment alternatives." Source: Osler, Hoskin & Harcourt LLP.

Private Pension Plan Bulletin - Abstract of 2008 Form 5500 In 1978, when legislation was enacted authorizing 401k type plans that allow employees to contribute to their own retirement plan on a pre-tax basis, participants contributed 29% of the contributions to DC plans and only 11% of total contributions to all DB and DC pension plans. In the years following 1978 employee contributions to DC plans steadily rose to a peak of approximately 60% in 1999, where it has remained. Other findings from Form 5500 series reports for 2008 plan years are summarized in this 66 page report. Source: US Department of Labor

In-Plan Roth Rollovers - New Tax Planning Opportunities The Small Business Jobs Act of 2010, in addition to offering tax breaks for small businesses, provides two new provisions involving Roth contributions and rollovers to Roth accounts under employer qualified plans. Six pages. Source: Patterson Belknap Webb & Tyler LLP

Department of Labor Announces Hearing on Definition of Fiduciary DOL announced it will hold a public hearing on March 1, 2011 and if necessary, March 2, 2011, in Washington, D.C. on the proposed rule amending the definition of the term "fiduciary." Source: 401khelpcenter.com

Treasury Releases 2010-2011 Priority Guidance Plan The Treasury and the IRS have issued their 2010-2011 priority guidance plan. The plan is released annually and reflects the guidance that IRS and Treasury have issued or intend to issue between July 1, 2010 and June 30, 2011. Treasury has already released some of the employee benefit-related items. Source: Buck Consultants

For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com