The Massive Failure of 401k Education
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General Items The Massive Failure of 401k Education Summary: 401ks aren't perfect; but not broken. It's the 401k operators -- employees -- who lack the understanding and motivation to use them successfully. Unless 401k education is fixed, 401ks will continue to provide too little retirement income to too many Americans. 401k education started wrong and changed little in 30 years. We need adult-education experts to help fix it. Source: Dennisackley.com Three Ways Employers Can Improve Benefits Communication Summary: Any employee benefit program will better meet its objectives if an employer communicates about it effectively. And perhaps no other employee benefit plan requires as much careful attention to employee communication as a 401k. The need to communicate effectively with employees regarding 401k plans is heightened by the fact that employees may react negatively to plan limitations and restrictions. So what can employers do to improve their benefits communication? Source: Thompson.com Why You Should Care About Your Employees' Retirement Plans Summary: Take a step back and look at your business's retirement plan -- is it doing everything you want it to do? If you feel employees are seeing it just as an "entitlement" maybe it's because you're treating it that way. Could you be doing more? Are you measuring it by the yardstick of how well the company is meeting its strategic and operation plan? Are you communicating and promoting the retirement plan? In this challenging economic environment, retirement plans have become the foundation in employee benefits. Taking the time to review and evaluate now can translate to success in the future. Source: Forbes.com
Compliance and Regulatory Related Render Painless DOL Retirement Plan Audits Summary: Employee retirement plans are heavily governed by the Department of Labor -- no surprise there. How can retirement plan sponsors prepare for an audit by the Department of Labor (DOL)? By reviewing their plans periodically so as to catch and correct red flags. Source: Society for Human Resource Management Do You Understand the Audit of Your Employee Benefit Plan? Summary: You may think that the plan audit is completed each year in order to satisfy your fiduciary responsibility to complete the plan's filing of Form 5500 with the Internal Revenue Service. Although that is one of the reasons, there are other more practical and beneficial reasons that sometimes get overlooked. Source: Schneiderdowns.com Beneficiary Designations Shouldn't Be Ignored Summary: Beneficiary payouts from either retirement or life insurance plans can get sticky. A new report by the 2012 ERISA Advisory Council looked at the challenges and best practices concerning beneficiary designations, focusing on steps that plans and service providers can take to ensure the proper beneficiary receives the intended benefit payment from the plan. Source: Benefitspro.com ERISA 408(b)(2) After Effects: Form 5500 Filings Summary: Advisors have an opportunity to help their clients with a Form 5500 reporting wrinkle that may catch plan sponsors and plan committees off-guard in their roles as ERISA administrative fiduciaries. Source: NAPA.net
403(b) Plans Clean Up the Clutter Legacy Assets Leave Behind Summary: These days 403(b) plan sponsors face the task of cleaning up the clutter of "legacy assets" that threaten to clog up their plan administration efforts. Legacy assets are essentially the plan assets left at prior providers which plan sponsors still have to account for. Finding the most efficient way to deal with these plan assets seems to be a recurring question lately. Source: Principal.com 403(b) Plans Correction Due to Loss of Tax-Exempt Status Summary: What happens if a tax-exempt organization becomes ineligible to sponsor a Section 403(b) Plan because it loses its exempt status under Internal Revenue Code Section 501(c)(3)? Source: Erisapracticecenter.com New Opinion and Advisory Program for Pre-Approved 403(b) Plans Summary: On March 28, the Internal Revenue Service issued Revenue Procedure 2013-22, which establishes long-awaited procedures for IRS pre-approval of Internal Revenue Code (IRC) section 403(b) plan documents. Under the new program established by Revenue Procedure 2013-22, 403(b) plan sponsors -- including mutual funds, insurance companies, and professional service firms or similar entities -- may obtain advance IRS approval of the form of their 403(b) plans. This article is a good review of the Revenue Procedure. Source: Morganlewis.com
Fiduciary Material and Insight How Safe Are ERISA 401k/404(c) Safe-Harbors? Summary: Liability exposure is due in large part to a misunderstanding regarding the protections offered by ERISA's 401k/404(c) so-called safe-harbors. It is the author's experience that plan sponsors confronted with potential liability claims immediately claim that they are absolutely immune from any liability due to said safe-harbors. The mood quickly changes when the truth about 401k/404(c) safe harbors is explained. Source: Prudent Investment Adviser Are Your 401k Plan's Target-Date Funds On Target? Summary: Most 401k plans that have qualified default investment funds have chosen target-date funds as their default investments. Despite their popularity, target-date funds are not well understood by either the fiduciaries who select them or the participants whose accounts are invested in them by default or by choice. Source: Pensionsbenefitslaw.com
Insights: Studies, Research and White Papers Study Finds 401k Plan Sponsors Favor RFP Process in Hiring Retirement Plan Advisors Summary: A recent report published by the Retirement Advisor Council shows plan sponsors turning to formal RFP searches to find the correct retirement plan advisor for their plan. Formal RFP searches have been firmly embraced by plan sponsors and are now the standard method for selecting a professional retirement plan advisor in many segments of the employer population. Source: 401khelpcenter.com PSCA's Fee Disclosure Snapshot Survey Results Summary: PSCA's snapshot survey on the impact of fee disclosure regulations on participants was conducted in October 2012, and received 176 responses from defined contribution plan sponsors. The fee disclosure information that participants received seems to have had little impact their behavior. Source: 5500audit.com DC Participants Ages 50 and Older Want Guaranteed Income Option Summary: According to a survey of defined contribution plan participants by Transamerica Retirement Solutions, 65 percent of participants age 50 or older are interested in having a guaranteed income option in their defined contribution plan; and 43 percent said if they had the choice, they would invest in one now. Source: 401khelpcenter.com Australia's Retirement System: Strengths, Weaknesses, and Reforms Summary: Australia's retirement income system is regarded by some as among the best in the world and is often pointed to as a model for 401k reforms. It has achieved high individual saving rates and broad coverage at reasonably low cost to the government, but the Australia system does have shortcomings. This white paper provides an overview of the system and recent reforms. The paper concludes that the recent reforms should strengthen Australia's system and provide lessons to other nations that increasingly depend on 401k-type individual accounts. Source: Center for Retirement Research
Items of Special Interest to Advisors Twitter: For the People You Want to Know Summary: There is still a perception among some that Twitter is for sharing pizza preferences and posting minute-by-minute updates on inconsequential subjects. While that does still happen, it is also a key space where business takes place, ideas are shared, and articles are re-tweeted. Here are some thoughts on why you should be on Twitter. Source: Napa-net.org Defined Contribution Consulting Support and Trends Survey Summary: PIMCO's DC Practice has prepared the 2013 Defined Contribution Consulting Support and Trends Survey to help understand the breadth of views and specific consulting services available within the DC marketplace. The 2013 survey captures data, trends and opinions from 51 consulting firms across the U.S. which serve over 6,500 clients with aggregate DC assets in excess of $2.4 trillion. Source: Center for Due Diligence
Court, Legislative and Washington DC OK, So ERISA Plan Terms Control, but to What Extent? Summary: There have been two important Supreme Court ERISA Litigation developments in the past two days. The Court issued its much anticipated decision in US Airways v. McCutchen, one day after accepting certiorari in the case of Heimeshoff v. Hartford Life & Accident Insurance Co. Both cases address the fundamental ERISA principle that plan terms control dispute resolution. Source: Seyfarth Shaw Fidelity is Targeted Again and This Time Regarding Its Own in House Plan Summary: Fidelity has been named as a defendant in a suit brought by a participant in its own in-house 401k plan. The chief allegation is that it was disloyal and a prohibited transaction to only offer Fidelity proprietary funds. It appears that this lawsuit has received little attention in the retirement community. Source: Fraplantools.com Summary: The American Society of Pension Professionals & Actuaries (ASPPA) submitted these comments to the Tax Reform Working Group on Pensions and Retirement. The letter contains a number of specific suggestions, charts, and details. Source: ASPPA ERIC Urges Caution on Any Tax Reform Changes to Employer Retirement System Summary: In a letter submitted today to the House Ways and Means Committee's Tax Reform Working Group on Pensions and Retirement, The ERISA Industry Committee (ERIC) urged the policymakers to proceed with caution when considering any possible changes to the nation's very successful voluntary employer-provided retirement system. Source: ERISA Industry Committee
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