Why Retirement Plan Sponsors Shouldn't Only Focus on Low Fees While paying unreasonable plan expenses is a breach of fiduciary duty, picking providers solely or mainly because they are low in fees can also breach the fiduciary duty. The duty of prudence requires the selection of competent plan providers and selecting an incompetent provider is a certain breach of that duty. So a plan provider needs to select competent plan providers, not just the lowest cost vendor. Source: The Rosenbaum Law Firm.
The 401k Auditor's Wish List As we approach the audit deadline for employee benefit audit plans, hopefully things are already in motion with your plan auditors. You have received the list of items they need to complete the audit, documents have been exchanged and meetings are planned. But what else can you do to make this year's audit more efficient, less painful and - dare we say - more enjoyable than last year? Source: Employee Benefit News.
Nowhere to Hide on Hidden 401k Fees Under ERISA, CFOs and other retirement-plan fiduciaries are required to understand the fees and expenses charged and the services provided to the plan. With plan participants increasingly litigious, plan sponsors must take care that investment and administration expenses are "reasonable." Source: CFO Magazine.
Gender Gap in Financial Literacy Perhaps due to the economic recovery, the gender gap in financial literacy narrowed significantly after widening in 2010 -- with women gaining ground in virtually all areas of financial planning. Young women under 30, in particular, gained the most ground on their male counterparts. Source: Financial Finesse
Do Investment Committee Leadership Styles Matter? Vanguard examined the impact of various leadership styles on investment committee decision-making. Results of this survey reinforce the presumption that there will always be powerful situational determinants that drive leadership effectiveness. This reality should serve as a reminder to all investment committee leaders to focus on what they can control. Source: Vanguard
The Pros and Cons of Taking a 401k Loan As banks have scaled back on consumer lending, Americans are increasingly borrowing from their 401k retirement accounts. It can make good sense to borrow from a 401k. Still, there are risks to taking out such a loan. Source: Smartmoney.com.
The 2011 Higher Education Retirement Confidence Survey The college and university workforce is more confident regarding its prospects for a financially secure retirement than are American workers in general. Twenty-five percent of higher education employees are very confident in their retirement income prospects and 50% are somewhat confident, compared with 13% and 36%, respectively, for U.S. workers. Source: TIAA-CREF Institute
Some Fiduciary Services Are More Equal Than Others With the increased focus by the Department of Labor on the fiduciary aspects of 401k plans, the market place has responded. 401k providers offer services allowing fiduciaries to delegate some or all of their responsibility for plan investments. But some fiduciary services are more equal than others. Source: Retirementplanblog.com.
Why Fees Matter for 401k Plan Fiduciaries, But Not DB Pension Plans It's okay with the DOL if plan sponsors spend money foolishly on the administration and management of defined benefit pension plans. However, DOL balks at similar behavior for defined contribution plans. To understand the difference, let's look at who bears the risks in providing for plan participants' retirement. Source: Smart Investor.
Fiduciary Safe Harbor Protection and the Duty to Share The Sixth Circuit recently affirmed the decision of a trial court. The case appears to serve as a cautionary tale for participants to choose and monitor their investment advisors more carefully given the protections that the 404(c) safe harbor provides for plan fiduciaries. A closer look at the trial court's decision sheds light on this as the trial court specifically notes that while a plan fiduciary cannot conceal material nonpublic facts from plan participants, ERISA does not require a fiduciary to guarantee that all material facts are shared with participants. Source: Fi360.com.
Research Finds That Written Retirement Income Plans Can Help Drive Business Growth for Advisors The Fidelity survey of more than 500 financial advisors and 500 pre-retirees and retirees reveals that advisors who provide comprehensive retirement income planning -- specifically, written, detailed plans -- generally receive higher satisfaction, referrals and, ultimately, higher concentrations of client assets. Source: 401khelpcenter.com.
Advisers to Hedge Funds Must Register with SEC The Securities and Exchange Commission adopted rules that require advisers to hedge funds and other private funds to register with the SEC. The rules also establish new exemptions from SEC registration and reporting requirements for certain advisers, and reallocate regulatory responsibility for advisers between the SEC and states. Source: Planadviser.com.
Vanguard Finds More 401k Participants Getting Professional Investment Help The portfolios of nearly 30% of participants in 401k retirement plans at Vanguard are in automatic professionally managed investment programs, which particularly benefit individuals who lack the skills to invest properly on their own, according to Vanguard's How America Saves 2011. Source: 401khelpcenter.com.
How America Saves 2011: A Report on Vanguard 2010 Defined Contribution Plan Data This 92 page report, now in its 10th edition, is widely used as a barometer of retirement planning trends. Along with a look at the overall patterns of Vanguard's three million-plus participants, How America Saves this year includes supplemental reports with analyses of participant behavior in the defined contribution retirement plans of eight specific industries. Source: Vanguard
Study Shows Gen-Xers Fear Bleak Retirement Only about one in ten so-called Generation-Xers is very confident of being be able to maintain their current standard of living when they retire, and 82 percent cannot say they are well along their path to planning a successful retirement, the study revealed. Source: 401khelpcenter.com.
Helping Improve the Retirement Outlook for the Unemployed In order to gauge the impact on the retirement outlook on these displaced workers, Transamerica Retirement conducted a survey among 668 Americans who are either unemployed or underemployed. Not surprising, two-thirds (67 percent) of these un/underemployed workers are less confident in their ability to achieve a financially secure retirement since the recession began. Many have tapped their savings, gone into debt, and taken withdrawals from their retirement accounts to cover expenses during their unemployment or underemployment. Source: Transamerica Retirement Services
Retirement Account Balances (Updated 6/11) The retirement savings of American households took a big hit when the stock market crashed in 2008. Recently, however, a good portion of these losses has been reversed. This fact sheet follows trends in retirement account balances since the beginning of 2005. Source: Urban Institute.
IASB Adopts International Accounting Rule on Employee Benefits The International Accounting Standards Board (IASB) has released an amended version of its Financial Reporting Standard IAS 19 Employee Benefits, completing its project to “improve” the accounting for pensions and other post-employment benefits. For U.S. employers that will be required to comply with this standard, the effective date is for fiscal years beginning on or after January 1, 2013. Source: Milliman.
IRS and Treasury Officials Provide Informal Views on 401k Plan Topics The Joint Committee on Employee Benefits (JCEB) of the American Bar Association has reported on its May 2011 Q&A session with IRS and Treasury officials. Highlights include unofficial, nonbinding remarks about a number of issues, reviewed in this article, affecting 401k plans. Source: Thomson Reuters/EBIA.
IRS Extends the Deadline for Filing the 2009 and 2010 Form 8955-SSA In an IRS Employee Plans Newsletter released on June 21, 2011, the IRS announced that it will shortly be releasing guidance extending the filing due date for the 2009 and 2010 Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits. Source: Sungard/Relius.
IRS Releases 2009 Form 8955-SSA The IRS has released the final version of the 2009 Form 8955-SSA and its instructions. The Service has not released the 2010 version or the updated Form 5558 extension request. Employers have the option of using the 2009 to list all persons that the employer would otherwise list on the 2010 form. Such a form would still include a 2009 date. Source: Sungard/Relius.
IRS Employee Plans News Issue Number 2011-5 - June 22, 2011 Topics include: 2009 Form 8955-SSA and 2010 Form 5500-EZ Released, Form 5500 Special Extensions of Time to File, Employee Plans Rulings & Agreements Priority Items, Are SEP IRA Contributions Deductible if a Return is Filed Late, How to calculate RMDs for employees, retirees and beneficiaries , Form 5300 Applications for Employee Stock Ownership Plans, Completing a Power of Attorney Form for Form 5330, What's on the Employee Plans Compliance Unit's Radar Screen and Tax Relief in Disaster Situations. Source: IRS
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
6.21.2011
BPP401k.com Newsletter June 22
NIPA Announces 2011-2012 Officers and Directors The National Institute of Pension Administrators appointed Patrick Shelton, managing member in Benefit Plans Plus, to its board of directors. Source: NIPA
Tapping 401(k) Opportunities Financial advisors in the 401(k) space are optimistic about future prospects in a shifting regulatory landscape. Source: Financial Advisor
401k and 403(b) Plans - Siblings, Not Twins Kind of similar, but really different, 401k plans and 403(b) plans are the fraternal twins of the retirement plan universe. People think that 403(b) plans are just a funny version of a 401k, but that is not true. While the rules for the two different types of plans are similar, there are significant differences, and advisers need to know the differences. This article covers five common misperceptions and misunderstandings about 403(b) plans (and how they compare with their 401k brethren). Source: Planadviser.com.
VIDEO: Understanding 401k Fees Fees associated with 401k plans are often unknown, hard to identify and difficult to review. This AARP video introduces some common 401k fees and explains how those fees may impact your retirement security. Source: Youtube.com.
Plan Advisor Tools Five: How will 404(a)(5) impact advisors and plan sponsors? David Williams, attorney with Schiff Hardin, discusses the new 404(a)(5) regulations and how it may impact advisors and plan sponsors. Source: Ridgeworth Investments
2010 Form 5500-EZ Released The IRS has released Form 5500-EZ is used by one-participant plans that are not subject to the requirements of section 104(a) of the ERISA and that are not eligible or choose not to file Form 5500-SF electronically to satisfy certain annual reporting and filing obligations imposed by the Code. Source: IRS
The Two Biggest Traps Behind 401k Loans and How to Avoid Them Most financial experts will tell you that tapping a 401k for a loan should always be viewed as a last resort. But, for many they can still sound pretty attractive. If you're thinking about taking one out, you need to understand the down side of 401k loans and, in particular, two areas that are especially hazardous. Source: Forbes.
Prepping Participants Ahead of New Fee Disclosure Regulations That their plan is free to them is a very common misconception that plan participants have. With new participant fee disclosure regulations coming into effect next year, some employees may be in for a shock. Here's what you can do to start prepping them now. Source: Employee Benefit News.
Picking the Best Provider A bad provider selection can ruin even the best-designed plan. Plan sponsors who want to build a better 401k plan can, however, build on the success and ideas fostered by a great provider relationship-and that is why your choice of a recordkeeping provider may well be the most critical you will make as a plan fiduciary. Source: Plansponsor.com.
Investors Clueless on Suitability vs. Fiduciary Standards By a vast majority, investors don't know the difference between the standards that are now in effect. At issue is the question of a suitability standard (under which an advisor is required to make investments he judges to be suitable for his clients) vs. a fiduciary standard (under which an advisor is required to act in his clients' best interests, and disclose to them all conflicts of interest). Source: Advisorone.com.
A Look Inside Fee Benchmarking Services A number of fee benchmarking services have come to the fore in recent years, employing different assumptions, built on different databases, and deployed in different ways and through varying media. This article touches on four of these services as well as the controversies around them that have emerged. Source: Plansponsor.com.
What You Need to Know About TDFs Many fiduciaries may not be aware of their duties in selecting target-date funds for their plan or how to fulfill them. The worst fiduciary "sin" is to fail to engage in a prudent process-a nonexistent process cannot be a prudent process. For target-date funds, that process should include the asset allocations and glide paths-particularly over the last 10 years-and the needs of the participants. Source: Plansponsor.com.
Five Things You Need to Understand About Target-Date Fund Glide Paths Only 34% of defined contribution sponsors see target-date funds as the best QDIA for their plan, down from 57% a year earlier. Confusion about glide paths clearly plays a role: Fifty percent do not know the end date of their funds' glide paths, and more than a third are unfamiliar with the "to" versus "through" decision. Sponsors evaluating target-date fund glide paths should make sure they understand five factors. Source: Plansponsor.com.
Study Finds Benefit Plans Key to Employer Talent Retention Strategies Bank of America Merrill Lynch released these findings from its Workplace Benefits Report, a new study focused on the role financial benefit plans play in employers' talent management strategies and the overall financial well-being of their employees. The study includes responses from 650 C-level executives, HR and benefit plan leaders and examines ways in which employers are helping to address the financial needs of perhaps the most demographically diverse workforce in history. Source: 401khelpcenter.com.
Improving the Auditing of Employee Benefit Plans The 2010 Employee Retirement Income Security Act Advisory Council recently issued a report, "Employee Benefit Plan Auditing and Financial Reporting Models." The report focused on retirement plans, given the many industry changes that have occurred since ERISA's audit requirements were enacted in 1974. More specifically, the Council zeroed in on three areas: the quality of plan audits and auditors, limited scope audits, and 403(b) plans. Source: IDG News Service.
Delivering DC Plan ERISA Disclosures: Why the Time Has Come to Prefer Electronic Delivery This 46 page white paper systematically evaluates the facts and law relevant to deciding when to favor electronic or paper delivery of notices for defined contribution plans. The paper offers the perspective of a law professor and former White House official who has written on information technology and Internet law and policy. Based on this experience and extensive research for this project, the paper concludes that the time has come for a major shift toward greater reliance on electronic delivery of defined contribution plan notices. Source: ASPPA
The Availability and Utilization of 401k Loans This research documents loan provisions in 401k savings plans and how participants use 401k loans. For example, research found that although only about 22% of savings plan participants who are allowed to borrow from their 401k have such a loan at any given point in time, almost half had used a 401k loan over a longer, seven-year horizon. Source: Yale University
How Does Your Retirement Program Stack Up? - 2011 Edition This report provides a comprehensive review of retirement plan benchmark data from a broad range of perspectives and financial effects. Includes perspectives and in-depth analysis on the current state of pension programs (pension health and materiality), risk management with regard to benefits earned and the assets backing them (volatility), delivery of future benefits and retirement program life cycles (sustainability), and management assumptions and decisions that drive accounting results. Source: Mercer.
Lack of Retirement Funds Is Americans' Biggest Financial Worry More Americans are worried about not having enough money for retirement (66%) than are worried about seven other financial matters Gallup asked about. Majorities of Americans, however, are also very or moderately worried about not being able to pay medical costs for a serious illness or accident and about not being able to maintain their standard of living. Source: Gallup.
Will Congress Slash Your 401k Tax Break? Is Congress getting ready to slash the tax deduction on retirement saving? This might be Washington's second most important retirement policy regulatory issue - coming right after the Department of Labor's preparations to add fiduciary responsibility to workplace retirement plan platform providers. Yet the odds look long for any immediate action on retirement savings deductibility. Still, the retirement industry is taking the matter seriously. Source: Reuters.
Seventh Circuit Requires 401k Plan Fiduciaries to Stand Trial The litigation was brought by participants of a 401k plan against the plan’s sponsor and various individuals affiliated with the plan sponsor, as well as the relevant corporate committee that was responsible for overseeing the plan. After earlier having certified the case as a class action, the district court thereafter ended the case in its entirety by granting summary judgment to all defendants. An appeal followed. A panel of the Seventh Circuit reversed the decision, in part, thereby setting the case on track for trial, unless further appeals are allowed or the case is resolved by the parties. Source: Goodwin Procter LLP.
VIDEO: Regulatory Update: 401k Fee Disclosure Retirement plan fee disclosure is a top priority for the U.S. Department of Labor but delays in the final regulations could put employers in a time crunch to communicate these updates to their plan participants. ASPPA's General Counsel and Director of Regulatory Affairs, Craig Hoffman explains what ASPPA is doing to raise the issue with the DOL. Source: ASPPA.
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
Tapping 401(k) Opportunities Financial advisors in the 401(k) space are optimistic about future prospects in a shifting regulatory landscape. Source: Financial Advisor
401k and 403(b) Plans - Siblings, Not Twins Kind of similar, but really different, 401k plans and 403(b) plans are the fraternal twins of the retirement plan universe. People think that 403(b) plans are just a funny version of a 401k, but that is not true. While the rules for the two different types of plans are similar, there are significant differences, and advisers need to know the differences. This article covers five common misperceptions and misunderstandings about 403(b) plans (and how they compare with their 401k brethren). Source: Planadviser.com.
VIDEO: Understanding 401k Fees Fees associated with 401k plans are often unknown, hard to identify and difficult to review. This AARP video introduces some common 401k fees and explains how those fees may impact your retirement security. Source: Youtube.com.
Plan Advisor Tools Five: How will 404(a)(5) impact advisors and plan sponsors? David Williams, attorney with Schiff Hardin, discusses the new 404(a)(5) regulations and how it may impact advisors and plan sponsors. Source: Ridgeworth Investments
2010 Form 5500-EZ Released The IRS has released Form 5500-EZ is used by one-participant plans that are not subject to the requirements of section 104(a) of the ERISA and that are not eligible or choose not to file Form 5500-SF electronically to satisfy certain annual reporting and filing obligations imposed by the Code. Source: IRS
The Two Biggest Traps Behind 401k Loans and How to Avoid Them Most financial experts will tell you that tapping a 401k for a loan should always be viewed as a last resort. But, for many they can still sound pretty attractive. If you're thinking about taking one out, you need to understand the down side of 401k loans and, in particular, two areas that are especially hazardous. Source: Forbes.
Prepping Participants Ahead of New Fee Disclosure Regulations That their plan is free to them is a very common misconception that plan participants have. With new participant fee disclosure regulations coming into effect next year, some employees may be in for a shock. Here's what you can do to start prepping them now. Source: Employee Benefit News.
Picking the Best Provider A bad provider selection can ruin even the best-designed plan. Plan sponsors who want to build a better 401k plan can, however, build on the success and ideas fostered by a great provider relationship-and that is why your choice of a recordkeeping provider may well be the most critical you will make as a plan fiduciary. Source: Plansponsor.com.
Investors Clueless on Suitability vs. Fiduciary Standards By a vast majority, investors don't know the difference between the standards that are now in effect. At issue is the question of a suitability standard (under which an advisor is required to make investments he judges to be suitable for his clients) vs. a fiduciary standard (under which an advisor is required to act in his clients' best interests, and disclose to them all conflicts of interest). Source: Advisorone.com.
A Look Inside Fee Benchmarking Services A number of fee benchmarking services have come to the fore in recent years, employing different assumptions, built on different databases, and deployed in different ways and through varying media. This article touches on four of these services as well as the controversies around them that have emerged. Source: Plansponsor.com.
What You Need to Know About TDFs Many fiduciaries may not be aware of their duties in selecting target-date funds for their plan or how to fulfill them. The worst fiduciary "sin" is to fail to engage in a prudent process-a nonexistent process cannot be a prudent process. For target-date funds, that process should include the asset allocations and glide paths-particularly over the last 10 years-and the needs of the participants. Source: Plansponsor.com.
Five Things You Need to Understand About Target-Date Fund Glide Paths Only 34% of defined contribution sponsors see target-date funds as the best QDIA for their plan, down from 57% a year earlier. Confusion about glide paths clearly plays a role: Fifty percent do not know the end date of their funds' glide paths, and more than a third are unfamiliar with the "to" versus "through" decision. Sponsors evaluating target-date fund glide paths should make sure they understand five factors. Source: Plansponsor.com.
Study Finds Benefit Plans Key to Employer Talent Retention Strategies Bank of America Merrill Lynch released these findings from its Workplace Benefits Report, a new study focused on the role financial benefit plans play in employers' talent management strategies and the overall financial well-being of their employees. The study includes responses from 650 C-level executives, HR and benefit plan leaders and examines ways in which employers are helping to address the financial needs of perhaps the most demographically diverse workforce in history. Source: 401khelpcenter.com.
Improving the Auditing of Employee Benefit Plans The 2010 Employee Retirement Income Security Act Advisory Council recently issued a report, "Employee Benefit Plan Auditing and Financial Reporting Models." The report focused on retirement plans, given the many industry changes that have occurred since ERISA's audit requirements were enacted in 1974. More specifically, the Council zeroed in on three areas: the quality of plan audits and auditors, limited scope audits, and 403(b) plans. Source: IDG News Service.
Delivering DC Plan ERISA Disclosures: Why the Time Has Come to Prefer Electronic Delivery This 46 page white paper systematically evaluates the facts and law relevant to deciding when to favor electronic or paper delivery of notices for defined contribution plans. The paper offers the perspective of a law professor and former White House official who has written on information technology and Internet law and policy. Based on this experience and extensive research for this project, the paper concludes that the time has come for a major shift toward greater reliance on electronic delivery of defined contribution plan notices. Source: ASPPA
The Availability and Utilization of 401k Loans This research documents loan provisions in 401k savings plans and how participants use 401k loans. For example, research found that although only about 22% of savings plan participants who are allowed to borrow from their 401k have such a loan at any given point in time, almost half had used a 401k loan over a longer, seven-year horizon. Source: Yale University
How Does Your Retirement Program Stack Up? - 2011 Edition This report provides a comprehensive review of retirement plan benchmark data from a broad range of perspectives and financial effects. Includes perspectives and in-depth analysis on the current state of pension programs (pension health and materiality), risk management with regard to benefits earned and the assets backing them (volatility), delivery of future benefits and retirement program life cycles (sustainability), and management assumptions and decisions that drive accounting results. Source: Mercer.
Lack of Retirement Funds Is Americans' Biggest Financial Worry More Americans are worried about not having enough money for retirement (66%) than are worried about seven other financial matters Gallup asked about. Majorities of Americans, however, are also very or moderately worried about not being able to pay medical costs for a serious illness or accident and about not being able to maintain their standard of living. Source: Gallup.
Will Congress Slash Your 401k Tax Break? Is Congress getting ready to slash the tax deduction on retirement saving? This might be Washington's second most important retirement policy regulatory issue - coming right after the Department of Labor's preparations to add fiduciary responsibility to workplace retirement plan platform providers. Yet the odds look long for any immediate action on retirement savings deductibility. Still, the retirement industry is taking the matter seriously. Source: Reuters.
Seventh Circuit Requires 401k Plan Fiduciaries to Stand Trial The litigation was brought by participants of a 401k plan against the plan’s sponsor and various individuals affiliated with the plan sponsor, as well as the relevant corporate committee that was responsible for overseeing the plan. After earlier having certified the case as a class action, the district court thereafter ended the case in its entirety by granting summary judgment to all defendants. An appeal followed. A panel of the Seventh Circuit reversed the decision, in part, thereby setting the case on track for trial, unless further appeals are allowed or the case is resolved by the parties. Source: Goodwin Procter LLP.
VIDEO: Regulatory Update: 401k Fee Disclosure Retirement plan fee disclosure is a top priority for the U.S. Department of Labor but delays in the final regulations could put employers in a time crunch to communicate these updates to their plan participants. ASPPA's General Counsel and Director of Regulatory Affairs, Craig Hoffman explains what ASPPA is doing to raise the issue with the DOL. Source: ASPPA.
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
6.14.2011
BPP401k.com Newsletter June 15
A Good Time to Review 401(k) Options Opt-out features, auto-increases in contributions among ways to get most from retirement plans. Source: Investment News
The Top Four Things to Look for When Shopping for a 401k Whether you're a business owner thinking about starting your company's first 401k or already have a plan in-place and want to audit how it compares to others on the market, there are four critical things to look for that can help ensure you're getting the best value and performance. Source: Forbes.
401k Fees Can Shave Thousands From Nest Egg Millions of Americans save for retirement by using 401k accounts, employer-based retirement plans that help workers put a portion of their salary into mutual funds or other investments. But most of those plans have fees and hidden expenses. And as personal finance columnist Ron Lieber of The New York Times tells NPR's Linda Wertheimer, those fees can mean that an investor pays more than $1,000 annually. Source: NPR.
Retirement Plan Disqualification — Not Just a Threat Although the IRS can disqualify ongoing qualified retirement plans, the agency generally tries to avoid such draconian measures. But in two recent cases - Michael C. Hollen v. Commissioner and Christy & Swan Profit Sharing Plan v. Commissioner - the U.S. Tax Court upheld the IRS's disqualification of a retirement plan because of plan document and operational failures. Source: Towers Watson.
The DOL's 408(b)(2) Regulation: Impact on Investment Managers This alert discusses the impact on investment managers of the DOL's "interim final" regulation under ERISA §408(b)(2). Our reference to "investment managers" is intended to cover those investment advisers who have discretionary management authority over "plan assets" directly or through vehicles such as collective investment funds, hedge funds or partnerships that are deemed to hold plan assets. Source: Drinker Biddle & Reath LLP
401k Advisors Are Optimistic About Future Prospects in a Shifting Regulatory Landscape - Summary: New DOL rules issued under Section 408(b)(2) of ERISA will require providers and plan sponsors of defined contribution and defined pension plans subject to the act to clearly disclose services provided, explain fees, reveal conflicts of interest and indicate who is acting as a plan fiduciary. It's also likely to open doors for financial advisors interested in building a niche in 401k plan management for small- to midsize businesses. Source: Financial Advisor Magazine.
Schwab Plan Points Toward a Changing 401k Market Charles Schwab has long been a leader in low-cost retail investing. Now, it's gearing up for a run at the 401k market by hitching its wagon to two ideas whose time may have come: low-cost passive investing and investment advice for plan participants. Source: Reuters.com.
Four Misconceptions About Fiduciary Liability Insurance With the increasing spotlight on fiduciaries and their responsibilities for ERISA plans, many employers are asking themselves whether it's time to buy fiduciary liability insurance. But, if you are a fiduciary considering fiduciary liability insurance, here are four misconceptions that can get in the way of proper decision making. Source: Retirementplanblog.com.
Fiduciary Responsibility Checklist This fiduciary responsibility checklist is a handy tool for you to compare your plan against best practices. Completing the checklist may highlight areas where you should take further steps to help manage fiduciary liability associated with your plan. Source: Putnam Retirement Services
Offering Company Stock As an Investment Option in Retirement Plans Given the current wave of lawsuits over plummeting stock prices and retirement plan mismanagement relating to company stock, it is more important than ever to be aware of the risks of fiduciary liability associated with offering company stock in a retirement plan. Source: McKenna Long & Aldridge LLP
Study: The Impact of Deferring Retirement Age on Retirement Income Adequacy A new study released today by the nonpartisan Employee Benefit Research Institute (EBRI) finds that if Baby Boomers and Gen Xers delay their retirement past the age of 65, many of them still would not have adequate income to cover their basic retirement expenses and uninsured health care costs. Source: 401khelpcenter.com.
401k Participant Assets Finally Surpass Previous High From 2007 According to PLANSPONSOR's just-released annual recordkeeping survey, total assets for 401k and other defined contribution plans at the end of 2010 exceeded $4 trillion, well beyond the previous high of $3.72 trillion in 2007, and 14% higher than 2009's total. Source: 401khelpcenter.com.
White Paper Takes a Closer Look at ETFs and Index Mutual Funds in 401k's Lincoln Trust Company has released a white paper comparing the use of index mutual funds and ETFs in 401k plans. The white paper -- "401k Index Investing: Index Mutual Funds or ETFs" -- evaluates which investment product and accompanying variables may produce a higher account balance over varying time frames. Source: 401khelpcenter.com.
A Closer Look at Passive Investment Options for 401k Plans It's no surprise that many retirement plans tilt toward passive investment products. Historically this has meant passively-managed index mutual funds. Recently, however, many retirement plan providers have also made exchange-traded funds (ETFs) available. It is worth the effort for an advisor to evaluate these two investment vehicles and determine which may be a more advantageous option to incorporate in a retirement plan. Source: Lincoln Trust Company
ERISA Litigation Newsletter - June 2011 Leads with an article addressing the Supreme Court's decision in CIGNA Corp. v. Amara. The opinion provides useful guidance with respect to the content of plan documents, but the eventual impact of this decision on the scope of available ERISA equitable remedies remains uncertain. Also has article on a recent Seventh Circuit decision, Peabody v. Davis, that exposes potential risks for the fiduciaries of eligible individual account plans. Source: Proskauer Rose LLP.
Fiduciaries and the Attorney-Client Privilege Courts have consistently held that the attorney-client privilege should not be used as a shield against the parties who the fiduciaries are obligated to serve. Consequently, the 4th Circuit recently confirmed (in Solis v. Food Employers Labor Relations Ass'n) that the attorney-client privilege does not extend to communications between a plan fiduciary and legal counsel related to plan administration. Source: Employee Benefit News.
Do Your Plan Communications Mislead Participants? Plan fiduciaries and ERISA litigators got a few surprises in a recent United States Supreme Court decision on whether participants can be awarded benefits promised to them in plan communications, but not in the plan document. The decision, CIGNA v. Amara, has been described as a victory for plan sponsors by defense counsel. Source: Pensionsbenefitslaw.com.
Supreme Court Retools ERISA Remedies for Misleading Summary Plan Descriptions The Supreme Court's opinion provides insight into what equitable remedies may be available to participants under Section 502(a)(3) of ERISA. These remedies include judicial reformation of a plan's terms, so that it conforms to representations made to plan participants. Source: Pillsbury Winthrop Shaw Pittman LLP.
Court Grants Class Certification in First Horizon 401k Suit The U.S. District Court for the Western District of Tennessee has granted conditional class certification in a lawsuit concerning the 401k plan of First Horizon National Corporation (FHN). Source: Planadviser.com.
'In Plan' Roth Conversions and New Electronic Deposit Rules for Payment of Retirement Plan Withholding Taxes The IRS finalized regulations that, in general, require taxes withheld from retirement plan distributions to be deposited using the Electronic Federal Tax Payment System. Under the prior regulations, taxes withheld from retiree merit plan distributions could be deposited at an authorized financial institution using Form 8109, Federal Tax Deposit Coupon. However, effective January 1, 2011, taxes withheld from retirement plan distributions must be deposited using the EFTPS. Source: Wagner Law Group
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
6.06.2011
BPP401k.com Newsletter June 8
5 Characteristics of a Great 401(k) Plan If you had a choice, wouldn’t you want a Great 401(k) rather than just a just good one? Source: Forbes
How Wells Fargo Took 401K App Development from 70% Maintenance to 70% Innovation
Software tools help the Wells Fargo's retirement division conserve developers’ time and identify code that can be reused. Source: Bank Technology News
The Top 3 Myths of Financial Planning The fact is if you want to be financially secure in your golden years, you must take control of your investments today. Handing over your money to a broker and hoping someone else will look out for you is a recipe for disaster. Imagine saving and investing for 40-plus years, only to find out at age 65 or 70 that you don't have enough money to retire. It's a common scenario that happens every day. Source: Inside Self-Storage
The Problem With Living Too Long Longevity is one of the most serious issues facing workers today. When a person retires, his monthly paychecks stop, but most of his monthly expenses continue. As a practical matter, this effectively forces a retiree to turn his or her 401k account balance into a stream of monthly payments, taking into account life expectancy, withdrawal rates, investment returns and volatility, and inflation. The focus of this bulletin is on the first factor: life expectancy. Source: Drinker Biddle & Reath LLP (PDF File).
Plan Leakage Can be Less of an Issue Than Participation "Leakage" from defined contribution plans -- cash-outs from job changes, loan defaults, and hardship and non-hardship withdrawals -- has the potential to put a crimp in participants' retirement savings, if the leakage is a steady flow. However, while leakage can be vexing, participation rates pose a much bigger problem overall-one that plan sponsors should have high on their "punch list." Here's a look at the numbers. Source: Vanguard.
Selecting a QDIA is a Fiduciary Decision Since the Pension Protection Act of 2006 and the associated Qualified Default Investment Alternative (QDIA) Regulation were passed, many plan sponsors have added a QDIA option to their plans. Of the three choices for options, 1) age-based (target-date funds - TDFs), 2) risk-based (balanced funds), and 3) managed accounts, TDFs are the most popular to date by far. TDFs remain a work-in-progress and are but one of three choices for a QDIA. Making that choice is clearly a fiduciary decision and plan sponsors need to treat it as such. Source: Fi360.com.
Senate Bill Targets 401k Plan "Leakage" A Senate bill with bi-partisan support was recently introduced to minimize the leakage from 401k plans occurring as a result of plan loans and hardship withdrawals. Source: Benefitslink.com.
Shooting Towards Wider Acceptance of ETFs in 401ks Long-term investors have been looking into exchange traded funds as a possible instrument to plan for the golden years ahead, but the financial tool has not made significant headway into 401(k) plans. However, the ETF-based 401k landscape may likely experience significant changes in the years ahead. Source: ETFtrends.com.
Why You Need a Dynamic Investment Policy Statement A Dynamic Investment Policy Statement (IPS) can derisk your pension plan without your investment committee spending a great deal of time and missing opportunities to lessen risk. It's as simple as that. Source: Vanguard.
401k Eligibility Vs. 403(b) Universal Availability There is a distinct difference between when employees become eligible to participate in a 401k plan and a 403(b) plan. This article reviews the general distinctions. Source: WithumSmith+Brown PC.
Multiple Employer Plans: An Opportunity for Expanding Retirement Plan Coverage Multiple employer plans offer great potential as a savings option for small-business owners who want to provide their employees the same flexible features and benefits of a traditional 401k plan but may not have the internal expertise to manage a stand-alone plan. This paper provides an analysis and specific recommendations for the enhancement of defined contribution MEPs to facilitate their usage by employers who do not sponsor a retirement savings plan for their workers. Source: Transamerica Retirement Services (PDF File).
Report: Retirement Savings and Tax Expenditure Estimates To measure the correct value of the tax expenditure for retirement savings in a way that makes these provisions directly comparable to other tax expenditures, one should measure the present value of the tax benefits attributable to the current-year retirement saving contributions. This ASPPA report presents present-value tax expenditure estimates that measure the true tax benefits provided for contributions to defined contribution retirement plans, using an approach that captures the benefit of current contributions over the lifetime of the taxpayers who contribute. Source: ASPPA (PDF File).
Study Uncovers Behaviors That Help Americans Achieve Retirement Readiness Lincoln Financial Group offers a new way to help people take an optimistic approach to saving for retirement has identified an easy-to-use retirement planning score, giving people a simple way to understand and track their retirement readiness. Source: 401khelpcenter.com.
Supreme Court Rules on Available ERISA Remedies for Misrepresentations About Benefit Plan Changes On May 16, 2011, the U.S. Supreme Court issued an important decision in CIGNA Corp. v. Amara, holding: (a) that a summary plan description (SPD) is not a "plan" document under the Employee Retirement Income Security Act (ERISA); (b) that participants and beneficiaries may not sue under section 502(A)(1)(B) of ERISA to recover for a deficient SPD; and (c) that "appropriate equitable relief" under section 502(a)(3) of ERISA may be available to plan participants who are harmed by alleged misrepresentations made about upcoming changes to their pension plan benefits. Source: Littler Mendelson PC.
DOL to Make Fee Disclosure Rule Deadline Official The DOL published an interim final 408(b)(2) regulation on July 16, 2010, requiring retirement plan service providers to disclose comprehensive information about their fees and potential conflicts of interest to plan fiduciaries. The DOL previously announced its intention to extend the deadline to Jan. 1, 2012. Today's proposal, when finalized, would make the extension official. Source: 401khelpcenter.com.
SPARK Institute Urges DOL to Issue New Rules on Electronic Disclosure for Retirement Plans The SPARK Institute urged the DOL to act quickly to issue new rules that would permit widespread use of electronic media for required disclosures. They also recommended several changes to the current DOL safe harbor for electronic disclosure which are outlined here. Source: 401khelpcenter.com.
Borzi Provides an Update of Proposed Regulations Secretary Borzi of the Employee Benefits Security Administration (EBSA) addressed the Departments's work with fee disclosures, lifetime income, electronic disclosure, and the definition of fiduciary at a meeting of the International Foundation. There are still changes to be made to 408(b)(2), she said. Source: Planadviser.com.
Fight Heats Up Over DOL Definition of Fiduciary As federal regulators put the finishing touches on a broader definition of fiduciaries, legislators and lobbyists are increasing their efforts to send it back to the drawing board. Opponents pushing for status quo on issue of who is called a fiduciary Source: Pensions & Investments
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
How Wells Fargo Took 401K App Development from 70% Maintenance to 70% Innovation
Software tools help the Wells Fargo's retirement division conserve developers’ time and identify code that can be reused. Source: Bank Technology News
The Top 3 Myths of Financial Planning The fact is if you want to be financially secure in your golden years, you must take control of your investments today. Handing over your money to a broker and hoping someone else will look out for you is a recipe for disaster. Imagine saving and investing for 40-plus years, only to find out at age 65 or 70 that you don't have enough money to retire. It's a common scenario that happens every day. Source: Inside Self-Storage
The Problem With Living Too Long Longevity is one of the most serious issues facing workers today. When a person retires, his monthly paychecks stop, but most of his monthly expenses continue. As a practical matter, this effectively forces a retiree to turn his or her 401k account balance into a stream of monthly payments, taking into account life expectancy, withdrawal rates, investment returns and volatility, and inflation. The focus of this bulletin is on the first factor: life expectancy. Source: Drinker Biddle & Reath LLP (PDF File).
Plan Leakage Can be Less of an Issue Than Participation "Leakage" from defined contribution plans -- cash-outs from job changes, loan defaults, and hardship and non-hardship withdrawals -- has the potential to put a crimp in participants' retirement savings, if the leakage is a steady flow. However, while leakage can be vexing, participation rates pose a much bigger problem overall-one that plan sponsors should have high on their "punch list." Here's a look at the numbers. Source: Vanguard.
Selecting a QDIA is a Fiduciary Decision Since the Pension Protection Act of 2006 and the associated Qualified Default Investment Alternative (QDIA) Regulation were passed, many plan sponsors have added a QDIA option to their plans. Of the three choices for options, 1) age-based (target-date funds - TDFs), 2) risk-based (balanced funds), and 3) managed accounts, TDFs are the most popular to date by far. TDFs remain a work-in-progress and are but one of three choices for a QDIA. Making that choice is clearly a fiduciary decision and plan sponsors need to treat it as such. Source: Fi360.com.
Senate Bill Targets 401k Plan "Leakage" A Senate bill with bi-partisan support was recently introduced to minimize the leakage from 401k plans occurring as a result of plan loans and hardship withdrawals. Source: Benefitslink.com.
Shooting Towards Wider Acceptance of ETFs in 401ks Long-term investors have been looking into exchange traded funds as a possible instrument to plan for the golden years ahead, but the financial tool has not made significant headway into 401(k) plans. However, the ETF-based 401k landscape may likely experience significant changes in the years ahead. Source: ETFtrends.com.
Why You Need a Dynamic Investment Policy Statement A Dynamic Investment Policy Statement (IPS) can derisk your pension plan without your investment committee spending a great deal of time and missing opportunities to lessen risk. It's as simple as that. Source: Vanguard.
401k Eligibility Vs. 403(b) Universal Availability There is a distinct difference between when employees become eligible to participate in a 401k plan and a 403(b) plan. This article reviews the general distinctions. Source: WithumSmith+Brown PC.
Multiple Employer Plans: An Opportunity for Expanding Retirement Plan Coverage Multiple employer plans offer great potential as a savings option for small-business owners who want to provide their employees the same flexible features and benefits of a traditional 401k plan but may not have the internal expertise to manage a stand-alone plan. This paper provides an analysis and specific recommendations for the enhancement of defined contribution MEPs to facilitate their usage by employers who do not sponsor a retirement savings plan for their workers. Source: Transamerica Retirement Services (PDF File).
Report: Retirement Savings and Tax Expenditure Estimates To measure the correct value of the tax expenditure for retirement savings in a way that makes these provisions directly comparable to other tax expenditures, one should measure the present value of the tax benefits attributable to the current-year retirement saving contributions. This ASPPA report presents present-value tax expenditure estimates that measure the true tax benefits provided for contributions to defined contribution retirement plans, using an approach that captures the benefit of current contributions over the lifetime of the taxpayers who contribute. Source: ASPPA (PDF File).
Study Uncovers Behaviors That Help Americans Achieve Retirement Readiness Lincoln Financial Group offers a new way to help people take an optimistic approach to saving for retirement has identified an easy-to-use retirement planning score, giving people a simple way to understand and track their retirement readiness. Source: 401khelpcenter.com.
Supreme Court Rules on Available ERISA Remedies for Misrepresentations About Benefit Plan Changes On May 16, 2011, the U.S. Supreme Court issued an important decision in CIGNA Corp. v. Amara, holding: (a) that a summary plan description (SPD) is not a "plan" document under the Employee Retirement Income Security Act (ERISA); (b) that participants and beneficiaries may not sue under section 502(A)(1)(B) of ERISA to recover for a deficient SPD; and (c) that "appropriate equitable relief" under section 502(a)(3) of ERISA may be available to plan participants who are harmed by alleged misrepresentations made about upcoming changes to their pension plan benefits. Source: Littler Mendelson PC.
DOL to Make Fee Disclosure Rule Deadline Official The DOL published an interim final 408(b)(2) regulation on July 16, 2010, requiring retirement plan service providers to disclose comprehensive information about their fees and potential conflicts of interest to plan fiduciaries. The DOL previously announced its intention to extend the deadline to Jan. 1, 2012. Today's proposal, when finalized, would make the extension official. Source: 401khelpcenter.com.
SPARK Institute Urges DOL to Issue New Rules on Electronic Disclosure for Retirement Plans The SPARK Institute urged the DOL to act quickly to issue new rules that would permit widespread use of electronic media for required disclosures. They also recommended several changes to the current DOL safe harbor for electronic disclosure which are outlined here. Source: 401khelpcenter.com.
Borzi Provides an Update of Proposed Regulations Secretary Borzi of the Employee Benefits Security Administration (EBSA) addressed the Departments's work with fee disclosures, lifetime income, electronic disclosure, and the definition of fiduciary at a meeting of the International Foundation. There are still changes to be made to 408(b)(2), she said. Source: Planadviser.com.
Fight Heats Up Over DOL Definition of Fiduciary As federal regulators put the finishing touches on a broader definition of fiduciaries, legislators and lobbyists are increasing their efforts to send it back to the drawing board. Opponents pushing for status quo on issue of who is called a fiduciary Source: Pensions & Investments
For more information about custom retirement plan design and how Benefit Plans Plus can help make your business more successful visit www.bpp401k.com
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