Same-Sex Marriage Cases: Are Your Benefit Plans Prepared?
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Newsletter Sponsor BLAZE SSI PenEasy -- Qualified Plan Proposals – DB / DC / 401k
Court, Legislative and Washington DC Same-Sex Marriage Cases: Are Your Benefit Plans Prepared? Summary: News articles, social media, protests, and lunchroom conversation were all dedicated to the two cases before the U.S. Supreme Court this week. Hollingsworth v. Perry and Windsor v. United States could potentially transform the treatment of same-sex married couples in the United States. The Supreme Court's decision is expected in late June. In this advisory we summarize the cases and the issues that sponsors of employee benefit plans should be considering now in preparation for the decision. Source: Davis Wright Tremaine LLP It's Not lights Out for Edison's Investment Committee Summary: The recent Ninth Circuit opinion can assist counsel representing plan fiduciaries to know what evidence to present because had Edison made a showing that HFS the Plan's financial consultant engaged in a prudent process in considering share classes this might have been a different case. The Ninth Circuit found that Edison did not present evidence on this issue and therefore the Edison fiduciaries breached their duty of reasonable reliance upon their consultants' recommendation on class shares. Source: ERISA & Employee Benefits Litigation Blog Summary: The U.S. Court of Appeals for the Ninth Circuit affirmed a District Court's judgment that the fiduciaries of the Edison 401k Savings Plan breached their fiduciary duties by inadequately investigating the availability of institutional-class alternatives for three mutual funds offered as investment options. Source: Groom Law Group Judge Dismisses Lawsuits Over Morgan Stanley Retirement Plans Summary: A federal judge in Manhattan dismissed two lawsuits in which participants in Morgan Stanley's retirement plan accused the firm of mismanaging some plans by allowing participants' money to remain in its stock even as its performance faltered in 2008. U.S. District Judge Deborah Batts agreed with Morgan Stanley that continuing to offer its stock in the plans did not violate any duty of prudence. Source: Reuters.com
General Items How Do You Know What Works in a Plan? Summary: As the industry talks about moving away from traditional benchmarks; how do plan sponsors assess the effectiveness of their plans? Alison Cooke Mintzer, editor in chief of PLANSPONSOR and PLANADVISER, asked panelists at PLANADVISER's 2013 Top 100 Retirement Plan Advisers seminar to weigh in on outcome-based measurement. Source: Planadviser.com Two Types of Annuities for Retirement Income Summary: After all your hard work saving for retirement, you'll need to manage market risk and generate income that lasts. Annuities are one tool that can help -- particularly if you're seeking a stream of income that you know will be around as long as you are. There are two types of annuities we believe may be worth considering to generate income: immediate fixed annuities and variable annuities. Source: Schwab.com DC Plan Sponsors: Now's the Time to Get More From Bonds Summary: Is it time for DC plan sponsors to review their core lineups given equity levels at historical highs and interest rates at record lows? To better manage risks and generate returns, it's critical that plan members' investments have appropriate diversification and flexibility. While paring equity offerings may be one step, reviewing fixed income lineups is another consequential move. The inclusion of active strategies with global exposure or additional income opportunities could help participants achieve successful retirement outcomes. Inflation-hedging assets also are fundamental for retirement savers and deserve their own place in DC core lineups. Source: Pimco.com
Compliance and Regulatory Related DOL Smacks 401k Adviser for 12b-1 Fiduciary Breach. Plan Sponsors Next? Summary: Little more than seven months ago, the U.S. Department of Labor issued a press release it had reached a settlement with a Connecticut investment adviser for claims involved a breach of fiduciary duty. The August 23, 2012 release is entitled "USI Advisors of Glastonbury, Conn., agrees to pay $1.27 million to 13 defined benefit pension plans following US Labor Department investigation." At the time, except for a few industry rags and a local Connecticut newspaper, very little attention was paid to that DOL release. Last week changed all that. Source: Fiduciarynews.com Updated Employee Plans Compliance Resolution System: Impact on Employer-Sponsored Retirement Plans Summary: Revisions include changes and additional guidance with respect to correction methods as well as procedural changes for voluntary correction program submissions. This article discusses these changes with respect to qualified plans. Source: Drinkerbiddle.com Monitoring Service Provider Compensation is Continued Focus of Audits and Litigation Summary: Reports of increased DOL audit activity, increased penalty amounts, and increased staffing for audits have recently surfaced. The risk of audit is a real one. Although no amount of prevention and due diligence will prevent a plan or plan service provider from being selected for an audit, those who document and follow procedural prudence in their operations will reduce the financial risks associated with audits and litigation. Source: Buckconsultants.com International Issues Affecting Retirement Plans Summary: International issues, including international tax compliance by large corporations and high-wealth individuals, are an IRS-wide priority. The Office of Employee Plans is focused on addressing existing abuse and preventing abuse going forward. Source: IRS 11(g) Retroactive Corrective Amendments Summary: A plan sponsor with a coverage or nondiscrimination failure must resolve such failures under voluntary correction program and pay the appropriate filing fee to the IRS. However, practitioners should be aware that a coverage or nondiscrimination failure does not result in immediate disqualification. Source: Relius.net Summary: In a recent ASPPA/IRS conference, an IRS official responded to a question regarding which responses on the Form 5500 will increase the likelihood of audit. The IRS official identified four situations that on which they will take special notice. This article lists the four items together with analysis. Source: Relius.net
403(b) Plan Specific IRS Establishes Program for Pre-approved 403(b) Plans in Revenue Procedure 2013-22 Summary: The Internal Revenue Service (IRS) issued Revenue Procedure 2013-22, which establishes a program for the issuance of opinion and advisory letters for Internal Revenue Code (IRC) Section 403(b) pre-approved plans. Under this program, the IRS will accept applications for opinion and advisory letters for prototype and volume submitter plans under IRC Section 403(b) starting June 28, 2013. Source: Practicallaw.com
Fiduciary Material and Insight The Tibble Decision – Three Valuable Lessons for Plan Sponsors and Other Plan Fiduciaries Summary: The courts, regulators and plan fiduciaries need to understand that with regard to a plan's investment options, it is the quality of the investment options, in terms of the benefits provided to plan participants, not the quantity of the plan's investment options or their absolute fees, that truly matter under ERISA. Source: Prudent Investment Adviser Rules
Insights: Studies, Research and White Papers 401k Participants Who Use In-Plan Advice Have More Positive Retirement Outlooks Summary: Employees who say they use advisory services offered to them in their 401k plan have a distinctly more positive outlook about their future retirement versus those who do not, according to an analysis of data from the recent Mercer Workplace Survey. Nearly one-fifth (18%) of survey respondents say they engage with an online or in-person advisory service in their 401k plan. Source: 401khelpcenter.com The DC Trend Towards Daily Pricing and Trading: Has it Gone Too Far? Summary: This UK paper debates the pros and cons of daily liquid funds in DC plans. The reality is that this practice within DC plans effectively shuts the door on many alternative and less liquid asset or at least limits the availability of high-quality and efficient implementation vehicles. This means forfeiting both the investment efficiency that could otherwise be achieved through more effective diversification, as well as potentially additional sources of investment returns -- both aspects which many DB plans do take advantage of. Source: Towerswatson.com Summary: This paper finds that both the use of on-line calculators and seeking the advice of financial advisors result in estimated savings targets that not only increase the estimated probability of retirement income adequacy, but also result in double-digit percentage-point increases for many of the groups when analyzed by relative income quartiles and family/gender combinations. Source: EBRI.org Emerging From the Economic Storm: Retirement Plans in the United States, 2007-2012 Summary: This White Paper evaluates how American workers and company-sponsored retirement plans have fared during these past five difficult years, and brings to light opportunities to improve our current retirement system. Source: Transamericacenter.org
Items of Special Interest to Advisors 403(b) Plans: High Maintenance or Huge Opportunity? Summary: Many 401k plan financial professionals have already capitalized on the opportunity in the 403(b) market by leveraging their 401k plan skills, and being able to distinguish themselves by being savvy in the dynamics that make a 403(b) plan a little different. The market opportunities continue to exist for financial professionals. It pays to look past high maintenance impressions – you might like what you see on the retirement benefit menu. Source: Benefitnews.com Five Entrenched Ruts in Which Advisors Are Idling Summary: The same themes keep coming up in regard to self-inflicted wounds that hold back an advisors practice. Here they are, along with prescriptions for how to start fixing them right away — unless you are a procrastinator, which is on the list. Source: RIAbiz.com Fidelity-BlackRock Deal May Speed ETFs in 401k Plans Summary: The Fidelity Investments and BlackRock expanded partnership made waves in the exchange traded fund business, but it may also influence the retirement account market as well. The new deal could push more employers to work with Fidelity in including a self-directed brokerage option within their plans. Source: ETFtrends.com
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