Buyer Beware: Choosing a 3(16) Fiduciary
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Fiduciary Material and Insight Buyer Beware: Choosing a 3(16) Fiduciary Summary: Although a plan sponsor may hire various service providers, the sponsor typically retains primary responsibility for the management of the plan as a fiduciary under ERISA. However, a number of providers are now willing to accept certain plan management responsibilities as so-called "3(16) fiduciaries." This article examines the implication of this development. Source: Wagnerlawgroup.com SEC Harmonization of Rules Could Double Compliance Costs for Independent RIA's Summary: According to a Schwab Advisor Services survey of independent registered investment advisors (RIAs), harmonization of rules for broker-dealers and RIAs on average could more than double compliance costs for RIAs in the first year of implementation while providing very little positive benefit to their clients. Source: 401khelpcenter.com Understanding the Potential Burdens of a Uniform Fiduciary Standard of Care and Rule "Harmonization" Summary: Many of the SEC's assumptions, both about possible "harmonization" of broker-dealer and investment advisor rules, and about how to document compliance with a fiduciary duty of care, could impose substantial new duties on investment advisors. The SEC's assumptions would impose many current broker-dealer rules on investment advisors, and could require advisors of all sizes to develop written supervisory and compliance processes similar to those of Wall Street wirehouses. Source: Schwab.com
General Items Summary: Get answers about annual contribution limits, why company contributions can't be added to a Roth 401k, and how your company's match compares with others. Source: Morningstar.com How Employers Can Avoid Turning Their Retirement Plan Turn Into a HR Disaster Summary: While a retirement plan is an important employee benefit, the flip side is that a poorly run retirement plan can expose the plan sponsor to liability and become a human resources disaster. So this article is about how plan sponsors can avoid having their retirement plans become human relations disasters. Source: Rosenbaum Law Firm The Retirement Saver's Secret (as in "Under Appreciated") Weapon Summary: If only there was a more invigorating reason for employees to save through their 401k. Then they would have a greater interest in the wonders of pre-tax savings. Well, article suggests we just happened on just such a reason. Source: Fiduciarynews.com
Compliance and Regulatory Related DOL Issues Advisory Opinion on Revenue Sharing Payments as Plan Assets Summary: The DOL issued Advisory Opinion 2013-03A regarding whether revenue sharing payments received by an employee benefit plan's service provider in connection with the plan's investments are considered plan assets under ERISA. The DOL concludes that while it is possible that revenue sharing amounts received by the plan's service provider are assets of the plan, depending on the provider's arrangements and communications with the plan, nothing in the circumstances described in the Advisory Opinion require the DOL to conclude that the unsegregated revenue sharing payments recorded in the provider's bookkeeping account are plan assets before the plan actually receives them. Source: Practicallaw.com Summary: DOL's response to a request on behalf of the Principal Life Insurance Company for an advisory opinion regarding the status of certain revenue sharing payments Principal receives from third parties. Principal receives these payments in connection with investments by employee benefit plans for which Principal provides certain services. In particular, the question is whether the revenue sharing payments constitute "plan assets" of the client plans under ERISA. Source: U.S. Department of Labor Paying Casualty Losses From 401k Hardship Distributions Summary: For participants to be eligible for hardship distributions from their 401k plans, there must be an immediate and heavy financial need. An increase in natural disasters may lead to more requests for hardship distributions to cover the damages that result. The IRS outlines six safe harbor reasons that meet the hardship withdrawal requirements. This article focuses on the "casualty deduction" reason. Source: Badenrps.com SEC Proposed Money Market Reform: An Analysis of Fund Director Responsibilities Summary: The SEC proposed long awaited rule amendments to regulations that govern money market funds. Either of their two proposals, if adopted, would require significant involvement by a fund's board of directors. Moreover, each of the proposals will add significant costs to money market funds, which fund boards will need to consider in making strategic decisions for their funds. This article focuses on the board's role in the SEC's proposed money market reform. Source: Drinkerbiddle.com
Insights: Studies, Research and White Papers Summary: While employees are responsible to take advantage of the tremendous benefits a 401k offers to them, plan sponsors are responsible for prudently evaluating their ability to perform the duties outlined in ERISA. If a plan sponsor is not confident in their ability to make investment menu decisions on behalf of the participants, then hiring an Investment Fiduciary to help with the investment process is worth looking at. This article examines what options the plan sponsor has. Source: Regions.com How to Design Target-Date Funds Summary: The main purpose of this paper is to analyze and understand dynamic allocation in a target-date fund framework. It shows that the optimal exposure in the risky portfolio varies over time and is very sensitive to the parameters of both the market and the investor's. Paper then deduces with some practical guidelines to better design target-date funds for the asset management industry. Source: Social Science Electronic Publishing Who Uses the Roth 401k, and How Do They Use It? Summary: The Economic Growth and Tax Relief Reconciliation Act of 2001 allowed plan sponsors to add a Roth 401k option to defined contribution savings plans starting. Like contributions to a Roth IRA, employee contributions to a Roth 401k or 403(b) are not deductible from current taxable income, but withdrawals of principal, interest, and capital gains in retirement are tax-free. This paper describes the characteristics of employees who utilize the Roth 401k and also describes how employees use the Roth 401k. Source: NBER.org
Items of Special Interest to Advisors Survey Shows Large Opportunity in Small Plan 401k Market Summary: Financial professionals looking to expand their business see a large opportunity in the micro- to small-plan retirement market, according to a series of surveys conducted at Guardian Retirement Solutions. Survey identifies time and resource management as key challenges to participating in the multi-billion dollar micro- to small-plan retirement market. Source: 401khelpcenter.com Pension Advisers Talk Like CFOs Summary: CFOs have an edge if they can talk about finance in a way that's meaningful to key stakeholders who aren't finance people, like some board members and investors. And when they're on the receiving end of communications they're like anyone else: they're more responsive when the communicators speak a language they understand. That's what is behind a push by institutional investment managers to address CFOs of their client pension-plan sponsors in the language of corporate finance rather than overuse investment-industry jargon. Source: CFO.com
Court, Legislative and Washington DC DOMA Decision to Have Pervasive Impact on Plan Administration, Practitioners Say Summary: The U.S. Supreme Court decision striking down a key part of the Defense of Marriage Act expanded employee benefit rights and provided administrative relief for employee benefit managers in parts of the United States that recognize same-sex marriage, but for employers in other parts of the nation, the consequences of the decision will be challenging, a benefits attorney said in discussing the high court ruling. Source: Bna.com U.S. Supreme Court Rulings on Same-Sex Marriage Impact Retirement Plan Sponsors Summary: Many issues related to plan administration still require further guidance from the IRS. It is not clear how the DOMA ruling affects plan sponsors in states where same-sex marriages are not yet recognized. Nor is it clear how the ruling applies to same-sex couples who are legally married in a jurisdiction where such marriages are legal, but who reside in a state where they are not. Guidance is needed for national employers with retirement plans covering employees in multiple states with differing marriage laws. Source: Kravitzinc.com Taveras v. UBS: Court limits "Presumption of Prudence" in Stock Drop Cases Summary: The 1995 decision by the Third Circuit Court of Appeals in Moench v. Robertson is generally understood to provide a "presumption of prudence" with respect to company stock funds in certain defined contribution plans. The recent decision by the Second Circuit Court of Appeals in Taveras v. UBS limits that presumption. This article we review the Second Circuit's decision. Source: Octoberthree.com The Secure Annuities for Employee (SAFE) Retirement Act of 2013 Summary: In an attempt to address the public pension debt crisis and better secure retirement savings for millions of Americans, Finance Committee Ranking Member Orrin Hatch (R-Utah) unveiled the Secure Annuities for Employee (SAFE) Retirement Act of 2013. Official summary of bill. Source: Americanbenefitscouncil.org
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