More 401k Options Mean Worse Outcomes
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General Items More 401k Options Mean Worse Outcomes Summary: Mercer Bullard, a securities law specialist and University of Mississippi professor, reviewed an array of published research on the efficacy of defined contribution plan structures. He found plan sponsors have been protecting themselves from lawsuits by offering more 401k options, but at the expense of member participation and savings rates. Source: Ai-cio.com How Employers Can Foster Retirement Savings Summary: Employers have more influence than they probably realize in creating a secure financial future for their employees. Here are five key ways an employer can help foster a community of savers for retirement in their company. Source: 401khelpcenter.com 401k Match Thresholds and Default Rates Do Affect Savings Summary: Automatically enrolling employees into a 401k plan at a six percent salary default rate, rather than at the more common three percent default, means a higher savings rate for more people. In the end, a majority will be led to success or failure based on plan design. Source: Society for Human Resource Management Summary: The counsel of a trusted advisor has long been thought to be a valued addition to the process of retirement planning and, according to an analysis by the nonpartisan Employee Benefit Research Institute, that guidance can, in fact, be beneficial. Source: Employee Benefit Research Institute How to Reduce Employee Cravings for 401k Loans Summary: For many plan sponsors the revolving door of 401k loans is an all-too-familiar issue. As technology has evolved, initiating a participant loan is as easy as a few clicks of the mouse. I'm borrowing my own money and paying myself back the interest, no creditors calling me if I default ... how bad could it really be? But the opportunity cost of a 401k loan in many cases can be substantial even if employees pay it back. Plan sponsors should consider some options to limit the amounts of loans while still offering them. Source: Benefitnews.com Automatic 401k Saving Features No Fail-Safe to Retirement Success Summary: A growing number of employers are adding automatic features to these workplace retirement-savings vehicles, typically sweeping new hires into the plans and setting workers' contributions at 3% of pay. But the 3% default contribution rate favored by employers doesn't come close to the savings rate needed for a secure retirement. Source: Kiplinger.com
Compliance and Regulatory Related Employers Should Review How Plan Documents Define Spouse in Light of Recent Benefits Litigation Summary: Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes. Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act. Source: Employeebenefitsblog.com IRS to Focus on Safe Harbor 401k Plans, Other Concerns Highlighted in Questionnaire Summary: The Internal Revenue Service has identified an increasing number of small employers that maintain multiple tax-qualified retirement plans, an arrangement that is not a violation of tax code rules but that raises questions, an IRS official said May 13 during an agency-sponsored phone forum. Source: Bna.com IRS Makes Employers' Internal Controls a Priority in Employee Plan Audits Summary: For more than a decade, the Internal Revenue Service has been refining its approach to examining tax-qualified retirement plans, most recently by focusing on internal controls, according to BNA interviews with attorneys and auditors who help employers maintain their plans' tax-qualified status. Here is what the IRS is looking at. Source: Bna.com
403(b) Plans IRS Releases 403(b) Plan Approval Procedures and Sample Language Summary: Under this IRS program, sponsors of prototype and volume submitter plans may confirm in advance that a written 403(b) plan document satisfies requirements and regulations. The IRS will begin accepting applications for opinion and advisory letters regarding 403(b) plan documents on June 28, 2013. Employers with individually drafted 403(b) plans should review the IRS sample language to determine whether any plan amendments are necessary. Source: Towerswatson.com
Fiduciary Material and Insight 401k Plan Sponsors, Star Trek and Fiduciary Duty Summary: Much has been said about the inability of ordinary people -- whether they are 401k plan sponsors or investors -- to fully embrace the concept of "fiduciary standard" and why it's so important. Here it is explained simply. Source: Fiduciarynews.com Fiduciary Obligation to Select Appropriate Share Classes Summary: The practical consequence of Tibble v. Edison is that advisers should make recommendations based on the share classes available and must educate plan sponsors about the available share classes, including their costs, and plan sponsors must understand that multiple share classes may be available and must investigate which are best for their plan and participants. Source: Fredreish.com Why Retirement Plan Sponsors are Always on the Hook for Liability Summary: A plan sponsor's lack of diligence in reviewing what is going on with the plan has the unfortunate consequence of possibly resulting in potential liability for a breach of fiduciary duty. This article is about why plan sponsors are always on the hook for liability and what they need to avoid that hook at all costs. Source: Rosenbaum Law Firm Re-Thinking Target-Date: Fulfilling Fiduciary Responsibilities Summary: While historical risk and performance measures indicate how a strategy has performed in the past, they do not provide insight into the suitability of a strategy for specific participant populations. It is more important than ever for plan sponsors to conduct a detailed analysis of the target-date series they offer to ensure that the choice they have made is appropriate. This white paper discusses: The significance of target-date strategies, the dramatic differences among options available, and the importance of target-date analysis based on glide path suitability. Source: Psaretire.com
Insights: Studies, Research and White Papers Cogent Research: Plan Sponsors Embrace Social Media Summary: Nearly two-thirds (63%) of DC plan sponsors are using social media as a regular source of information for 401k plans and the providers that serve this market according to Cogent Research. Source: 401khelpcenter.com Employer Match Changes Not Widespread Summary: When you look at the big picture, defined contribution plan sponsors making changes to matching contributions was not a widespread reaction to the recession. An analysis of more than 9,000 retirement plans administered by Fidelity Investments found about three-quarters of companies (72%) maintained or added employer contributions over the past five years. Only 12% terminated and did not reinstate their matching contributions, and 5% suspended their match, but have reinstated it. Source: Plansponsor.com Roth Adoption and the New In-Plan Conversion Feature Summary: In this paper, authors Jean Young and Steve Utkus of Vanguard Center for Retirement Research take an in-depth look at Roth and the new American Taxpayer Relief Act of 2012 provision. They summarize current Roth adoption statistics, discuss considerations involved in making a conversion decision, and reveal why ATRA's expanded Roth conversion feature is likely to boost Roth adoption rates over time. Source: Vanguard.com
Items of Special Interest to Advisors Why the Industry Needs to Accept Some Blame for 'Flaws' in PBS Frontline's 'Retirement Gamble' Summary: After months of work and research, the Public Broadcasting Service aired the Frontline report, 'The Retirement Gamble' at the end of April, billing it as a special look into Americans preparing financially for retirement and focusing particularly on the problems with popular 401k products. The PBS report was slanted, simplistic and went in for shock value, say critics, but some in the industry say too-high fees are in fact the root of the problem. Source: Riabiz.com Asset Management and Social Media: A Guide to Social Marketing Summary: Paper focuses on how fund firms can optimize their social media presence on the most popular social networks: LinkedIn, Facebook, Twitter, YouTube and Google+. The guide describes the most valuable features and attributes on each social network to fund firms and highlights best in class strategies from industry leaders. The guide also provides recommendations for building out and improving your firm's social media properties. Source: Corporateinsight.com
Court, Legislative and Washington DC Fidelity 401k Lawsuit Filed in Federal Court Summary: Lori Bilewicz, a former employee of Fidelity Investments, has filed a class action lawsuit (Case No. 13-10636) in Boston federal court against Fidelity Investments asserting that Fidelity committed numerous violations of ERISA. Source: 401khelpcenter.com Presumption of Prudence Allows Stock Drop Case to Be Dismissed on Pleadings Summary: In this class action lawsuit, employees sought to recover losses they incurred in the employer stock fund offered by their employer's retirement savings plan. Those losses resulted when the employer's stock lost approximately 54% of its value from late 2006 through early 2010. While the plan document explicitly required that the plan include the stock fund under all circumstances, "no matter how dire," the employees claimed that plan fiduciaries violated their ERISA duty of prudence by continuing to offer the fund during that period. Source: Thomson Reuters/EBIA Plan to Cap Retirement Funds May Reach Beyond the Wealthy Summary: But the Employee Benefit Research Institute's analysis shows the administration's ceiling will affect more than wealthy Americans. Because the administration wants to pool all retirement plans for each saver, the Washington-based think tank says the proposal would affect 20 percent of Americans ages 25 to 64 with retirement plans. Source: Workforce.com
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