8 in 10 Plans Overpaying on 401k Fees, Finds Form 5500 Analysis
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In This Issue
Fiduciary and Plan Governance 8 in 10 Plans Overpaying on 401k Fees, Finds Form 5500 Analysis Research by Abernathy Daley 401k Consultants reveals that nearly 80% of corporate retirement plans with over 100 employees are overpaying on administrative fees for 401k and 403b plans. This issue stems from a lack of regular compliance-related benchmarking, leading to potential compliance risks. The study analyzed Form 5500 filings from 6,566 companies, finding that 5,241 of them reported administrative costs exceeding the efficient baseline available in the market. Source: 401kspecialistmag.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, and Papers Half of New Retirement Plan Adopters Opt for Pooled Plans Transamerica's inaugural survey on pooled retirement plan adopters reveals that 47% of over 400 participating employers utilized a pooled plan to launch their first employee retirement plan. The findings highlight how these shared plans facilitate access to retirement savings, particularly for small to mid-sized organizations and startups that previously avoided offering retirement plans due to cost and administrative concerns. Source: 401kspecialistmag.com More than 6 in 10 Retire Earlier Than Expected: John Hancock A recent report from John Hancock Retirement reveals that 62% of U.S. retirees exited the workforce earlier than anticipated, which has led to a shorter savings period and prolonged retirement years. The findings are part of the John Hancock Financial Resilience and Longevity Report, based on a survey of U.S. retirement plan participants and retirees. Source: 401kspecialistmag.com 24 Facts That Illuminate Women's Precarious Retirement Prospects The article highlights 24 facts that underscore the challenges women face regarding retirement security. It discusses issues such as gender pay gaps, longer life expectancies, and caregiving responsibilities, which contribute to women's precarious financial situations in retirement. Key data points illustrate disparities in savings, income, and pension access. The findings aim to raise awareness about the unique hurdles women encounter and advocate for policy changes to improve their retirement prospects. Source: Transamericainstitute.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers and Other Service Providers Plan Sponsors Show Rising Interest for Consultancy Services Morgan Stanley's 2024 Retirement Plan Survey, which included nearly 200 plan sponsors with 401k plans worth at least $50 million, reveals a trend among employers to collaborate with plan consultants to enhance retirement benefits. Over 80% of respondents are currently working with a plan consultant, and there's an increase in the adoption of 3(38) relationships. Although 3(21) partnerships still dominate (55% vs. 27%), the gap is narrowing, with 48% of plan sponsors showing interest in partnering with a 3(38) investment manager. Source: 401kspecialistmag.com PIMCO DC Consultant Study: What's Trending, What's Challenging, What's New - Podcast For 18 years, PIMCO has conducted its annual U.S. Defined Contribution Consultant Study, making it one of the longest-running studies of its nature. The study seeks insights from leading retirement consultants covering 15,000 U.S. retirement plans and nearly $9 trillion in assets. In this recent episode of Revamping Retirement, hosts Matt Patrick and Peter Ruffel discuss current trends, challenges, and innovations in defined contributions with PIMCO's Vidur Mehra and Joseph Szalay, focusing on plan design and retirement income solutions. Source: Captrust.com Interest Still Strong in Retirement Plan Adviser Acquisitions The article discusses the ongoing interest in acquisitions within the retirement plan advisory sector. Despite economic challenges, such as market volatility and rising interest rates, firms remain eager to acquire other advisory businesses. Key reasons include the desire to expand client bases, acquire talent, and enhance service offerings. The trend reflects a strategic move to increase competitiveness and revenue in a growing market, as firms look to capitalize on the increasing importance of retirement planning for clients. Source: Planadviser.com ERISA Advisory Council Homes in on Four QDIA Recommendations The ERISA Advisory Council has made recommendations to enhance qualified default investment alternatives for retirement plans. Key suggestions include improving communication with participants about QDIAs, considering environmental, social, and governance factors, and ensuring that QDIAs align with participants' needs and preferences. Source: Planadviser.com Court and Legal ERISA Row Related to How Employers Use 401k Forfeitures Deepens Since last fall, plaintiffs have initiated over twenty ERISA class actions alleging breaches of fiduciary duties concerning 401k plan forfeitures. Despite existing guidance from the Treasury Department and the Department of Labor, this new legal theory is gaining traction. Two preliminary rulings have permitted these forfeiture claims to advance, further encouraging this trend. However, two recent decisions, one addressing fiduciary discretion and the other exploring the limits of ERISA, provide valuable insights and nuanced discussions on the issue. Source: Nixonpeabody.com "Flawed" Methodology, Comparisons Doom Excessive Fee Suit In a recent case (Matthew A. Miller v. Pfizer Inc. et al.), a federal court dismissed an excessive fee lawsuit against a retirement plan, citing flawed methodology in the comparisons used by the plaintiffs. The court found that the plaintiffs failed to adequately demonstrate that the fees in question were excessive by relying on inappropriate benchmarks. The decision underscores the importance of using correct methodologies when challenging fees in retirement plans, as the court emphasized the need for precise and relevant comparisons to support claims of excessive charges. This ruling highlights the challenges plaintiffs face in proving their cases in similar lawsuits. Source: Napa-net.org »» Click here for more Court and Other Legal Issues Cyber and Plan Security UC Schools Report Fraudulent Activity in Fidelity Retirement Accounts The University of California reported fraudulent activity related to Fidelity retirement accounts, revealing unauthorized transactions and breaches of account security. An internal investigation uncovered multiple instances of fraud, leading the university to implement stronger security measures. Affected individuals have been advised to closely monitor their accounts for suspicious activity. Fidelity is cooperating with the investigation to improve security and prevent future incidents. Source: Planadviser.com »» Click here for more on Cybersecurity Issues Compliance and Regulatory Forfeiture Accounts Hold More Than Nonvested Employer Contributions The article discusses the implications of forfeiture accounts in retirement plans, emphasizing that these accounts hold not only nonvested employer contributions but also other funds. It explains how forfeiture accounts can be used to benefit the plan and its participants, such as funding plan expenses or reinstating lost benefits. The piece also highlights regulations surrounding these accounts and the importance of proper management to ensure compliance and maximize their utility. Overall, it calls for careful attention to forfeiture accounts to enhance the value of retirement plans for participants. Source: Wagnerlawgroup.com Company's Retirement Philosophy and Distribution Options As qualified retirement plan sponsors consider the new distribution options from SECURE 2.0, they should reflect on their company's retirement philosophy. This foundational understanding will guide their decisions on potential plan changes. The article identifies three distinct philosophies observed among clients regarding the implementation of these new options. Source: Spotlightonbenefits.com How Long Must We Store our 401k Records? As regulatory complexities grow, maintaining detailed records for employee benefit plans is essential. The IRS and DOL have set guidelines for record retention, which apply directly to plan sponsors. While service providers may store some records, sponsors are still legally responsible for retaining all relevant documentation. Source: Dwc401k.com How to Calculate Years of Service in your Retirement Plan One of the most fundamental requirements in managing a qualified retirement plan is counting an employee's length of service. It is the basis for determining such items as plan eligibility, entitlement to company contributions, vesting, and even retirement itself. Although this seems like a straightforward task, the rules are quite complex and create traps for the unwary. Source: Dwc401k.com How to Determine Eligibility for Your 401k Plan Companies sponsoring retirement plans have considerable flexibility in defining eligibility criteria, but they must ensure that the plan documentation aligns with their goals. There are four key variables to consider. Each of these factors needs careful consideration and precise wording in the plan documents to effectively reflect company objectives. Source: Dwc401k.com »» Click here for more Compliance and Regulatory Material Marketplace News Agilis Launches Lifetime Income Tool PensionBuilder US Retirement & Benefits Partners Acquires Pension Planning Consultants Alera Group Announces Retirement Plan Services Expansions 2024 PenChecks Trust ASPPA Scholarship Winners Announced
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