The "Yale Professor Letters": What Sponsors Need to Know (and Do) Now
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General Items The "Yale Professor Letters": What Sponsors Need to Know (and Do) Now Summary: Over the past two weeks, a Yale Law School professor has sent letters to approximately 6,000 sponsors of 401k plans implying that they may have breached their fiduciary duties with respect to plan costs and investments. These letters and the professor's study findings will likely garner attention from lawmakers, plaintiff's attorneys, plan participants and the Department of Labor. In short, this issue should be taken seriously. Source: Drinkerbiddle.com A Plan Sponsor Guide to Advisor Selection Summary: As the complexity of fiduciary responsibility grows, reliance on an advisor as co-fiduciary becomes an increasingly desirable objective. The right partner for your plan can save you time and improve the retirement outcomes of all of the employees. It's an opportunity you shouldn't miss. Article reviews the process in selecting an advisor. Source: Rplaybook.com Why Women Business Owners Need a Retirement Plan Summary: For women who own their own businesses, there are many choices of company retirement plans available to contribute the maximum allowed by law, in addition to receiving substantial tax deductions for plan contributions. With so much tax assistance, it is almost costlier for a small business to NOT maintain some type of qualified retirement plan. Source: 401khelpcenter.com Professor Puts the Scare in Plan Sponsors Summary: Ian Ayres of Yale University has the 401k marketplace fuming. Using data provided to him by a firm that collects information on 401k plans, BrightScope, Professor Ayres has calculated the fees paid to plan providers by 46,875 companies. He has mailed letters to several thousand plan sponsors that have above-average costs in his study, warning them that he will publish this data in spring 2014. Now might be a good time for those companies to clean up their acts, he suggests. It's understandable that the 401k marketplace dislikes the letter's implicit threat. Source: Morningstar.com No Matter Your Age, Human Capital is an Important Asset Summary: When it comes to investing retirement assets, there are a couple of fundamental rules everyone knows: "Don't put all of your eggs in one basket," and "the closer you get to retirement, the more conservative you should become." There also is an important, but lesser known, economic principle that underlies both of these strategies. Source: Jsonline.com.
Compliance and Regulatory Related DOL Delays Obligation of 401k and 403(b) Plans to Distribute Annual Investment Related Information Summary: The DOL released Field Assistance Bulletin 2013-2 granting plan sponsors of participant-directed individual account plans (such as 401k and 403(b) plans) the ability to delay this year's disclosure of annual investment related information to plan participants and beneficiaries. Source: Ballardspahr.com DOL Tweaks 2013 Investment Disclosure Deadline Summary: The DOL announced in Field Assistance Bulletin 2013-02 that it was providing sponsors and administrators of participant-directed retirement plans with temporary relief from certain annual participant-disclosure requirements in the form of a one-time "re-set." Source: Shrm.org. Loans From Tax Qualified Retirement Plans Summary: This is a 19 page detailed review of the law around loans from tax qualified retirement plans including IRC Section 72(p) which provides guidance in designing and implementing a plan loan policy. Source: Wickenslaw.com Drafting Qualified Domestic Relations Orders Summary: What is the best way to divide a participant's pension benefits in a QDRO? How much can be given to an alternate payee through a QDRO? What are survivor benefits, and why should a QDRO take them into account? These are just a few of the questions discussed in this FAQ. Source: U.S. Department of Labor. Video: Forms 5500 and 5558 Filing Tips Summary: Here are five tips from the IRS office of Employee Plans to make filing Form 5500s and related returns, including extensions to file the Form 5500s, more efficient. Source: Tax.gov. Form 5500 Compliance Checks on the Rise Summary: Most sponsors of qualified retirement plans subject to ERISA also sponsor an ERISA group health plan. Some employers that have filed a Form 5500 for their defined benefit or defined contribution plan but not for a group health plan have received a "Request for Clarification" from the Department of Labor. Source: Towerswatson.com.
Fiduciary Material and Insight Eight Things to Know About Fiduciary Liability Summary: Regulators are soon expected to unveil a new fiduciary standard that will dramatically change how financial professionals do business. Because a stricter fiduciary standard will doubtlessly increase compliance costs, all agree that it's critical that advisors know the rules of the game. Amid all of the teeth-gnashing, here's a look at eight questions that are central to the debate. Source: Benefitspro.com 401k Fee Controversy Goes Viral: What Should Fiduciaries Really Be Looking At? Summary: The web was on fire this past week with reports from advisers whose clients had received some very unusual letters from a Yale law professor who doesn't teach an ERISA course. But has the professor used the right criteria to select his targets? Here are some of the shortcomings of the methodology. Source: Jdsupra.com
Insights: Studies, Research and White Papers Survey: Fee Disclosure Has Little Impact on 401k Participants Summary: New fee-disclosure regulations that took effect in August 2012 have had a negligible effect on workers participating in employer-sponsored retirement plans, according to a BMO Retirement Services survey of 416 plan sponsors. In the survey, 80 percent of participating organizations reported that the new rules mandating full disclosure of retirement plan fees and expenses had little or no effect on plan participant. Source: Shrm.org. Corporate America Anxious About Providing Pensions and Benefits Summary: The rising price tag of healthcare and the risks and costs associated with funding pension plans weigh heavily on corporate finances, according to "Balancing Costs, Risks, and Rewards: The Retirement and Employee Benefits Landscape in 2013," new research released by Prudential Financial. Source: 401khelpcenter.com Retirement a Growing Priority for Small Business Owners Summary: After weathering a recession that forced many to curb, cut and sometimes even tap into employee retirement savings plans, small business owners are offering and investing in 401k plans at rates considerably higher than five years ago, according to national survey by ShareBuilder 401k. Source: 401khelpcenter.com Shift Away From DB Expected to Accelerate Summary: The shift away from defined benefit to defined contribution may be accelerating. Nearly 60 percent of companies questioned have either frozen accruals for all participants or closed their defined benefit plans to new entrants and many more are likely to do the same within the next two years. Source: Benefitspro.com.
Items of Special Interest to Advisors Deadline for Service Provider Fee Disclosures Summary: The DOL just provided an extension to the required annual participant disclosures under regulation 404a-5. The question has been asked about how this relates to service provider fee disclosures under regulation 408b-2. Bottom-line, there is no extension for the service provider disclosures. This FAQ should clarify this point. Source: Relius.net. Not Your Ordinary TPA (Part 1) Summary: Although retirement services companies and TPA firms are often small firms, the principles of business are the same as very large businesses: (1) identify who you and your customers are, (2) listen to what they say and value, and (3) repeat (1) and (2) regularly. This article is Part One of a three-part series on how not to be an ordinary service provider. This part explores who you are and how to identify your customers. Source: Scs-consultants.com
Court, Legislative and Washington DC The Braden-Tibble-Tussey Trilogy -- The ERISA Excessive Fees and Revenue Sharing Playbook Summary: The recent decisions in the Braden-Tibble-Tussey trilogy suggest that a LaRue-like epiphany may be occurring to provide defined contribution participants with much-needed information to allow them to make the "fully informed investment decisions" promised to them as part of ERISA 404(c) plans, and to require plan sponsors and other plan fiduciaries to comply with their fiduciary duties of loyalty and prudence. Source: Prudent Investment Adviser Video Insight: Effects of DOMA on Plan Sponsors Summary: In this two-part video series, Groom Law Group's Mark Nielsen explains the most important issues plan sponsors and administrators should consider after the Supreme Court ruling that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. Source: Groom.com. Oregon Takes a Step Toward Retirement Security for All Summary: Oregon recently took a step forward in the movement to expand retirement savings for its workers. Oregon's state legislature passed House Bill 3436, which creates a task force to explore options for helping private-sector workers who lack access to a workplace retirement plan save for retirement. The bill is now awaiting the governor's signature. Source: Pensionrights.org
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