The Hidden Dangers for the 401k Plan Sponsor
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Newsletter Sponsor
General Items The Hidden Dangers for the 401k Plan Sponsor Summary: If managed correctly, a 401k plan is an effective retirement plan for the employer and employees. If not, well, this article is about the hidden dangers of a 401k plan and what steps plan sponsors can take to minimize that threat. Source: Jdsupra.com Three Myths Keeping Small Businesses From Starting a 401k Summary: While there are many sound reasons for small businesses to start a retirement plan, there are also some myths and pockets of misinformation clouding the picture. This article covers three of the most-commonly cited myths (along with the real facts) to be aware of. Source: Forbes.com Crafting a Well-Considered 401k Loan Policy Summary: For plan sponsors looking to help participants adequately prepare for retirement, one primary task is to craft plans that work best for each one's workforce. Revisiting loan policies in pursuit of those goals -- but with sufficient flexibility to encourage maximum participation in the first place -- is a good way to start. Article lays out some loan policies a plan sponsor might consider. Source: Retirementtownhall.com 401k Plans Adopt Participant-Friendly Features Summary: The use of 401k plan features such as automatic enrollment, automatic escalation, higher default salary-deferral rates and age-based investment advice all grew substantially during the past year, as employers sought to improve the retirement readiness and financial well-being of their employees, according to Bank of America Merrill Lynch's September 2013 401k Wellness Scorecard report. Source: Shrm.org
Compliance and Regulatory Related DOL Announces More Enforcements Summary: Word that the Department of Labor is stepping up its enforcement is being backed up by the number of actions being announced. The agency just announced three more cases in which it has initiated legal actions on behalf of retirement plan participants. Source: Plansponsor.com DOL Guidance Clarifies Action Steps for Puerto Rico Retirement Plan Sponsors Summary: Because Puerto Rico has its own version of the IRS Code -- and expressly does not recognize same-sex marriage (it has a "mini DOMA" law) -- Puerto Rico plan sponsors have been reluctant to take any action in this area. The U.S. Department of Labor's recent guidance clears the air on the key issues, as summarized here. Source: Groom.com ERISA Advisory Council to Recommend Updated Guidance on Finding Lost, Missing Participants Summary: The council intends to suggest that the DOL update Field Assistance Bulletin 2004-02 to clarify that it applies to locating missing plan beneficiaries, and not just plan participants, in terminated defined contribution plans. The council would also like the DOL to specify plan fiduciary obligations of plan sponsors in attempting to locate missing and non-responsive plan participants in active and frozen defined contribution plans. Source: Bna.com Borzi: Why Plan Sponsors Shouldn't Treat Their 401k Plans Like Cheap T-Shirts Summary: An interview with Phyllis C. Borzi, Assistant Secretary of Labor of the Employee Benefits Security Administration. Source: Fiduciarynews.com Many DC Plan Sponsors Must Annually "Notice" Their Participants Summary: Sponsors of defined contribution plans with certain features are required to provide annual notices to participants. As the 2013 plan year is nearing its end, it is important to look ahead at those notices that may need to be provided before the start of the 2014 plan year. This publication provides a summary of the annual notice requirements for those notices, including timing, recipients, contents, and method of delivery. Source: Prudential.com
403(b) Plans Excluding Part-Time Employees Under the 403(b) Universal Availability Rules Summary: This article discusses the application of the "fewer than 20 hours per week" rule to exclude part-time employees under Code section 403(b) "universal availability," for both plans subject to ERISA and not subject to ERISA. Application of this 20 hour rule has become a source of confusion for employers, third-party administrators, and other plan advisors, and has resulted in noncompliance. Source: Aon.com
Fiduciary Material and Insight Overcoming Fiduciary Fears: Understanding the Real Risks of Liability for Small Plan Sponsors Summary: Employers sponsoring micro- and small-sized defined contribution plans should have a healthy respect for ERISA. But in no event should small plan sponsors feel excessively fearful of ERISA's fiduciary requirements. By focusing on the key compliance issues outlined in this white paper, small plan sponsors can get a better appreciation of their real risks of fiduciary liability. Source: Wagnerlawgroup.com Pension Plan Fiduciaries Should Know Basics of "Responsible" Investing Summary: Working with investment managers on optimal asset mixes and maximizing returns long has been important for employer retirement plan sponsors and committees. But in recent years it also has become advisable for those overseeing fund managers to understand responsible investing principles -- at the same time they have become more important for many plan participants. Source: Thompson.com Video: Fidelity Bonding vs. Fiduciary Liability Insurance Summary: Short video deals with the differences between fidelity bonding and fiduciary liability insurance. Did you know that they are two entirely different concepts? Well, they are. Watch this ERISA Sunscreen video post to learn the key differences. Source: WithumSmith+Brown TPAs As 3(16) Plan Administrators -- Real Services or a Gimmick? Summary: As Department of Labor (DOL) opinions have made the "open multiple employer plan" structure somewhat more dubious, TPAs are looking for another and perhaps better way to assist business owners in administering their retirement plans. Many TPAs are considering taking over some or most of the responsibilities normally allocated to the plan sponsor under a retirement plan as the "plan administrator." Is this truly a viable option, and is it really of value to employers? Source: Drinkerbiddle.com
Insights: Studies, Research and White Papers Five Factors That Hurt Retirement Plans Summary: A recent report studied defined contribution plan design in several countries to try to determine the most effective design. While the report states that participants should be able to make their own decisions about their plans, it acknowledges that left to their own devices, few investors are able to actually make decisions that lead to good outcomes. Report outlines five factors that hurt retirement plans. Source: Thinkadvisor.com The Next Evolution in Defined Contribution Retirement Plan Design Summary: This paper is intended to help plan sponsor fiduciaries understand existing options and carry out their due diligence when studying retirement income solutions for DC retirement plans. It educates human resources and financial professionals at plan sponsors about the potential issues, solutions, and processes involved with implementing, administering, and communicating a retirement income program for their plan participants. Source: Iricouncil.org Top ETFs in America's 401k Plans -- 2013 Summary: ETFs, in terms of their distribution in 401k plans, have increased in prevalence over the past couple of years as plan sponsors begin to better understand the benefits of including them on plan menus. Here is a list of the Top 20 Exchange-Traded Funds Distribution for the 401k and defined contribution industry. Source: Brightscope.com
Items of Special Interest to Advisors A Refresher on the Requirements for Investment Advisers' Written Policies and Procedures Summary: Well-designed policies and procedures should allow the investment adviser to detect and promptly correct any violations that have occurred. Rule 206(4)-7 requires investment advisers to adopt their policies and procedures around identified areas of risk related to the investment adviser's practice and business model. Article lists issues that an adviser's policies and procedures should address, at a minimum. Source: Ria-compliance-consultants.com Advisors: What to Watch for From Washington Summary: According to IRI President and CEO Cathy Weatherford and general counsel Lee Covington, there are at least four major legislative and regulatory issues that advisors should be on the lookout for in the months ahead. Source: Onwallstreet.com
Court, Legislative and Washington DC Summary: In analyzing the case, the Third Circuit Court of Appeals noted that Danza asserts that Fidelity violated ERISA by entering into an agreement to charge allegedly excessive fees and for collecting such fees. Thus, the Court said, to determine if Plaintiff properly alleges violations of ERISA, Fidelity's conduct must be examined at two points: when it was negotiating for the fees and when it was collecting the fees. Source: Erisalawyerblog.com Plan Administrator Breached Fiduciary Duty Despite Participant Failure: Fifth Circuit Summary: The US Court of Appeals for the Fifth Circuit held a plan administrator liable for breach of fiduciary duty under ERISA for failing to produce plan documents even though the participant did not submit a written request for the documents. The court also declined to adopt a bright-line rule that discovery requests for plan documents in unrelated litigation proceedings constitute written requests for documents under ERISA. Source: Practicallaw.com Sixth Circuit Rules Service Provider Assessing a Fee Was a Fiduciary Summary: In the case of Pipefitters Local 636 Insurance Fund v. Blue Cross Blue Shield of Michigan, the 6th U.S. Circuit Court of Appeals ruled that the U.S. District Court for the Eastern District of Michigan was correct in ruling for the plaintiff. The appellate court found that a service provider that assessed a plan-related fee was considered a fiduciary. Source: Plansponsor.com
Marketplace News Aon Hewitt to Offer Missing Participant Locator Service Portico Launches Custom Fee Disclosure Analysis Franklin Templeton Hires DC Sales Head Reliance Trust Adds Two Industry Veterans Fidelity Adjusts Target-Date Fund Glide Paths Goldman to Acquire Stable Value Business From Deutsche
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