PBS' Frontline to Critique 401k Plans
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General Items Frontline to Critique 401k Plans Summary: Public Television's well respected and Pulitzer Prize winning show "Frontline" is the latest media outlet to critique and raise questions about 401k plans and how Wall Street deals with them. One quote from the prevue, "This whole thing is a scam…." Source: 401khelpcenter.com The Dangers of a DIY Retirement Plan Summary: There are various levels of service available from the DIY retirement plan to a full service plan. What level of service is right for your plan? This is a summary of service levels available in the retirement plan space and the pros and cons of each option. Source: Benefit-Resources.com Are 401k Plans a Failed Experiment? Summary: Over the past decade, 401k plans have moved from a system of "democratic choice" to one of "democratic paternalism." Kevin Crain, head of institutional retirement and benefit services Bank of America Merrill Lynch explains what he means, and how the 401k system can be further strengthened. Source: Benefitnews.com 401k Plans: "Putting the Wrong Emphasis on the Wrong Syllable" Summary: Many plan sponsors are not emphasizing what really drives retirement plan success for participants. While much of the attention has understandably been on fees, the most important drivers are deferral rates and plan design. That's what the research is beginning to show. Source: Retirementplanblog.com
Compliance and Regulatory Related Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement Plans Summary: The 2012 ERISA Advisory Council studied current challenges and best practices concerning beneficiary designations in retirement and life insurance plans. The Council examined the issues surrounding attempts to pay the correct plan beneficiaries in a timely manner and to improve plan design and administrative practices to ensure that the participant's intent is carried out. In particular, the Council focused on steps that plans and service providers can take to ensure the proper beneficiary receives the intended benefit payment from the plan. Source: U.S. Department of Labor Retirement Plan Disqualification and the Tainted Assets Theory Summary: The disqualification of the plan by the IRS can result in serious tax consequences for both the employer and the participants. Many plan errors often are discovered by the IRS and practitioners years after they occur. This Technical Update reviews the rules on the statute of limitations with respect to a plan disqualification. Source: Relius.net Naming a Foreign 401k Beneficiary? Summary: It is increasingly common for family ties to stretch around the world. But leaving your retirement account, after your death, to a loved one who is a citizen of another country is very complicated, time consuming and expensive. Source: Marottaonmoney.com
Fiduciary Material and Insight Employee Benefit Plans - Parties in Interest and Prohibited Transactions Summary: The AICPA Employee Benefit Plan Audit Quality Center has developed this primer to provide a general understanding of employee benefit plan parties in interest and prohibited transactions under ERISA. Among other things, this primer discusses party in interest transactions that are prohibited under ERISA and administrative actions of the DOL, as well as statutory and administrative class and individual exemptions. Source: Jeffrey L. Offhaus CPA Broader "Fiduciary" Definition: Legal Update Summary: The DOL is in the process of proposing a new "investment advice fiduciary" definition. If the DOL stays on track with its proposal, many non-fiduciary advisors would become subject to the fiduciary standards under ERISA for the first time. Additionally, any advisors that do not want to become subject to the fiduciary requirements of ERISA would need to fess up to clients and make certain "in your face" disclaimers concerning their non-fiduciary status. Source: Byallaccounts.com
Insights: Studies, Research and White Papers Cash Balance Plan Growth Outpacing 401k's Summary: The rate of growth for cash balance plans is significantly higher than for 401k plans, according to Kravitz, Inc. Highlights from Kravitz's 2013 Cash Balance Research Report reveals the number of new cash balance plans added in 2011 was 1,097, for a national total of 7,927. Source: Plansponsor.com What's on the Investment Menu? A Recipe for a Better DC Design Summary: This paper seeks to provide a framework for designing DC menus to improve plan participant experiences and outcomes. First, it will review how menu design has evolved historically; then it will discuss the objectives and philosophies of various sponsors, and define menu construction frameworks for each philosophy. Finally, it presents considerations for creating an effective investment menu. Source: Defined Contribution Institutional Investment Association Advances in Automatic Savings Program Design Summary: Defined contribution plans have experienced significant growth in the adoption of automatic savings programs since the 2006 introduction of the Pension Protection Act. While these programs have generally delivered laudable results, their progress can be hindered by certain plan designs. This paper explores the solutions to these design issues. Source: Troweprice.com African American Optimistic About Financial Future, but Concerned About Retirement Summary: African American investors report high levels of confidence in their financial future, along with optimism about the political and economic future of the country, according to a recent Wells Fargo nationwide survey. Despite proactive planning and intentional cuts in spending, African American investors remain focused on day-to-day living expenses, with a large majority concerned about having enough money to retire. Source: 401khelpcenter.com
Items of Special Interest to Advisors The Only Five Trends Affecting the Advisor Sold Retirement Market You Need to Remember Summary: How can you keep up with what's really important? One way is to create categories or "buckets" to keep track of and analyze issues as they arise. Fred Barstein suggests these five and provides relevant issues within each trend: Fees, Funds, Fiduciary, Outcomes, and Opportunities/Threats. Source: NAPA.net Surprise! You've Just Taken Over a 401k Plan Summary: That's surprise not in the serendipity sense. Rather, you've just found out what's wrong with the plan once it's in the house. Better to find out before you take them over than after. Get your TPA involved sooner rather than later. Source: Benefitnews.com Passive Investments: Model Portfolio Fueled Growth Summary: Mutual funds based managed account services, including proprietary & third party funds, have been around for over a decade. Managed account offerings using ETFs are, however, relatively new. Given the focus on costs, transparency, institutional type diversification, asset allocation, fee based business and customized TDFs, the increased use of low cost index funds, institutional shares and ETFs in model portfolios will play a major role in the growth of passive investments. Source: Center for Due Diligence Why 408(b)(2) is a Flop for the 401k Business and How RIAs Can Turn It Around Summary: First proposed in 2007 by the DOL, Regulation 408(b)(2) was hailed as a game-changer for the 401k industry. The thought was that plan sponsors and participants who had for years been blind to the hidden costs of their retirement plans would suddenly see the light and that implementation of the regulation would result in a massive upheaval of the status quo. Fast-forward to 2013. 408(b)(2) went into effect last July and the 401k world looks radically ... the same. What happened to changing the game? Source: RIAbiz.com The Most Important and Overlooked Feature of Stable Value Funds Summary: It's tempting to focus entirely on portfolio yield, duration, and quality when evaluating and recommending a Stable Value fund to plan sponsor clients. While portfolio yield, duration, and quality are certainly important things to consider, there is one feature of Stable Value funds that is even more important: the fund's plan-level termination provision. Source: Benefitnews.com
Court, Legislative and Washington DC Obama Budget Targets Revenue With $3 Million IRA Cap Summary: President Barack Obama's latest plan to raise tax revenue from wealthy individuals would pinch tax- favored retirement accounts of some private-equity executives and self-employed professionals by capping them at $3 million. The proposal would raise $9 billion for the government over the next decade, according to the White House. Source: Bloomberg.com General Explanations of Certain Retirement Related Provisions of Obama's Budget Proposal Summary: This 11 page explanation of certain retirement related provisions of Obama's fiscal year 2014 budget proposal was prepared by the Department of the Treasury. Source: Sparkinstitute.org The Impact of a Retirement Savings Account Cap Summary: President Obama is expected to unveil his 2014 budget proposal and published reports indicate it will include a cap on retirement savings. An analysis based on the projected year-end 2012 account balances on all participants in the EBRI/ICI 401k database with account balances at year-end 2011 and contributions in that year finds that approximately 0.0041 percent of those 401k accounts had $3 million or more in assets by year end 2012. Source: Employee Benefit Research Institute Small Companies May Have to Offer IRAs Summary: Small companies could be required to set up individual retirement accounts funded by pre-tax deductions from participating employees’ pay, if the federal government gets its way. Several present and former finance chiefs contacted by CFO said they support the idea, though in some cases with reservations. Source: CFO.com
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