Plan Sponsor's Guide: Selecting and Supervising 3(38) Investment Managers
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Fiduciary Material and Insight Plan Sponsor's Guide: Selecting and Supervising 3(38) Investment Managers Summary: Delegating investment decisions to an ERISA 3(38) Investment Manager (EIM) can be a huge relief to retirement plan sponsors who are saturated with fiduciary responsibilities and their attendant liabilities. However, it is imperative to vigorously monitor the actions and recommendations of an EIM. In this article, plan fiduciaries will learn the how-to's, benefits and best practices of selecting and supervising EIMs. Source: Rolandcriss.com Plan Sponsor's Guide: Recordkeeping Made Simple Summary: An ERISA recordkeeper is one of the most heavily relied upon experts within a plan sponsor's vendor arsenal. Often, however, there is confusion about the breadth of a recordkeeper's responsibilities, as well as what to look for in selecting the right recordkeeper for a given retirement plan. In this article is a breakdown of the recordkeeping role, its significance to plan sponsors, and how to maximize efficiencies with this key fiduciary partner. Source: Rolandcriss.com Fiduciary Implications: Using Re-Enrollment to Improve Target-Date Fund Adoption Summary: In light of the benefit to participants of using TDFs and the fiduciary protections offered by the QDIA rules, fiduciaries are well advised to add TDFs to the investment line-up and to take steps to cause as many participants as possible to be invested in those funds. This white paper discusses legal principles and industry practices, and then illustrate the advantages of using the re-enrollment process to provide the greatest protection for plan fiduciaries. Source: Drinkerbiddle.com Is the Fiduciary Liability of Self-Directed Brokerage Options Too Great for 401k Plan Sponsors? Summary: Brokerage windows on 401k plans really give investors unlimited investment choice. But the verdict is still out on whether a plan sponsor is fulfilling their fiduciary duty with a brokerage window: it gives them cover because the plan is not limited to two dozen pre-selected assets, but opens them up to exposure if their participants are buying risky assets. Source: Fiduciarynews.com An Update on 401k Plan Investment Issues, and Revenue Sharing in Particular Summary: In the last year or so, there have been a lot of developments in the law relating to the investment of 401k plan assets. There have been several important cases, and the implementation of DOL regulations requiring the disclosure of detailed information on fees, both from third party providers to plan sponsors and from plan sponsors to participants. Here is a status report on some issues that should be of concern to a plan committee. Source: Shipmangoodwin.com
General Items Are 401k Loans a Really Bad Idea? Summary: 401k loans should only be used as a last resort and there is more to consider than the interest rate and monthly payment. But it can be tempting and occasionally wise to use 401k loans to pay down debts, purchase a home, or pay for unexpected emergencies like medical expenses. Source: Financialfinesse.com Canadian DB Plans: The Sky is Not Falling Summary: The real insight into the long-term health of the plan, and whether or not there is a need for structural change, comes from its going concern valuation. DB plans can be sustainable without gutting the DB promise, by a combination of modifying certain provisions to reduce risk and/or cost, and increasing member contributions to better balance the cost-sharing equation. Source: Benefitscanada.com
Compliance and Regulatory Related Paying Employee Benefit Plan Expenses Summary: This article describes the types of expenses that may and may not be paid from the assets of an employee benefit plan. It also explains the requirements that must be met before expenses can be paid from plan assets, the methods for allocating expenses between plans and among plan participants and the consequences of paying improper expenses from plan assets. Source: Groom.com Detroit Adviser Allegedly Stole $3M in Pension Funds Summary: The Securities and Exchange Commission charged Chauncey C. Mayfield with stealing nearly $3.1 million from a pension fund and using the money to buy strip malls. Mayfield's firm, MayfieldGentry Realty Advisors LLC, manages a pension fund for Detroit's police officers and firefighters. Source: Planadviser.com Automatic Enrollment Correction Summary: For a 401k plan with an automatic enrollment feature, the IRS has provided its method for correcting the failure of a 401k plan to automatically enroll an employee who has satisfied the plan's eligibility requirements. This article covers those correction methods. Source: McKay Hochman Puerto Rico Grants Additional Extension to Adopt Amendments and File Plans Summary: The Puerto Rico Treasury Department made public Circular Letter No. 13-02 formally extending the deadlines for: (i) the adoption of amendments to retirement plans, and (ii) the filing of retirement plans for both qualification under the 2011-PR Code and retroactive qualification under Section 1165(a). Source: Groom.com The Part-time Employee Exclusion Summary: In general, the IRS takes the position that a plan may not exclude part-time employees because such a classification is a "disguised" service condition and may result in the plan violating the maximum service condition. However, the IRS has provided guidance on how a plan may design a part-time employee exclusion. Plans that carefully follow the IRS guidance can minimize the negative impact of an early eligibility provision. Source: Relius.net SEC Proposes Money Market Fund Reforms Summary: On June 5, 2013, the SEC unanimously approved, and distributed for public comment, a proposal which set forth two proposed alternative frameworks for additional regulation of money market funds. In doing so, the SEC stated that its goal was to: (i) preserve the ability of money market funds to function as effective and efficient cash management tools for investors, (ii) provide funds with better tools to manage and mitigate potential contagion from high levels of redemptions, and (iii) increase the transparency of their risks. Source: Paul Hastings LLP Four Steps for Electronic Delivery of Retirement Plan Notices Summary: Plan information must be provided to all plan participants including current employees and former employees. The DOL has drafted some guidelines that allow for notices to be provided via electronic delivery. Here is a summary of the four steps required by the DOL Technical Release 2011-03. Source: Benefit-Resources.com
Insights: Studies, Research and White Papers The 401k Core Menu: What is It Good For? Summary: In today's DC plan marketplace, there has been a significant increased usage of target-date funds as the primary investment vehicle for most plan participants. As a result, many plan sponsors are looking at the role the asset-class fund menu plays. This paper discusses the role asset-class options can still play in the DC plans. Then it lays out a three-step plan for sponsors to consider. Source: Russell.com Redesigning Your 401k Plan's Core Menu Summary: In the paper, Russell makes the case for a "streamlined, redesigned, and white-labeled menu" and outlined the three steps you can take to get there. They answer some of the questions frequently hear in regards to building a strong core menu that benefits not only plan participants, but also plan sponsors, as they work to fulfill their fiduciary responsibilities. Source: Russell.com National Retirement Survey Finds Workers Would Strongly Welcome Help Summary: A nationwide poll conducted by J.P. Morgan Asset Management of more than 1,000 American workers participating in a 401k plan has found that the vast majority of savers are at a loss for how to manage retirement planning and acknowledge that they need professional help. Source: 401khelpcenter.com More 401k Plan Participants Benefiting from Professional Investment Management Help Summary: In 2012, 36% of all participants in 401k retirement plans at Vanguard invested their plan assets in a professionally managed investment option, dramatically improving their portfolio diversification and potentially making them more financially prepared for retirement compared with participants making investment choices on their own. Vanguard estimates that 55% of all participants will be entirely invested in a professionally managed investment option by 2017. Source: 401khelpcenter.com 2013 National Cash Balance Research Report Summary: Kravitz released the 2013 National Cash Balance Research Report, showing a 500% increase in new plans over the decade and a 12% increase for the most recent year. The growth of Cash Balance Plans continues to surpass all other sectors of the retirement plan market, including 401k plans, which declined 3% in the same period. Source: Cashbalancedesign.com
Items of Special Interest to Advisors Conflicted Revenue Capture: How Revenue Sharing as a Profit Center Can Affect You Summary: One practice which has garnered the focus of both plaintiffs' attorneys and the DOL is revenue sharing. Qualified plan service providers who keep disclosed or undisclosed mutual fund revenue sharing as a profit center create a conflict of interest between their firm's profit and the choice of investment options for the plan. This "Conflicted Revenue Capture" increases the likelihood of litigation and regulatory scrutiny for qualified defined contribution plans that utilize their services. Plan service providers who utilize Conflicted Revenue Capture create fiduciary traps for their clients, who are often lured by the promise of "free" or very low perceived cost plan recordkeeping. Source: Securian
Court, Legislative and Washington DC ERISA Imposes No Duty to Disclose Certain Information Summary: An appellate court has held that the Employee Retirement Income Security Act does not impose a duty to provide retirement plan participants with nonpublic information affecting the value of the company's stock. Source: Plansponsor.com Senate Introduces Lifetime Income Disclosure Act (S. 1145) Summary: Taking a cue from the Department of Labor, a bipartisan group of senators introduced a bill that would allow workers in retirement plans to receive an annual statement of how their lump-sum savings translate into a lifetime stream of monthly income. The Lifetime Income Disclosure Act was introduced by Sens. Johnny Isakson, R-Ga., Christopher Murphy, D-Conn., Tim Scott, R-S.C., Bill Nelson, D-Fla. and Elizabeth Warren, D-Mass. Source: Advisorone.com
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