403(b) and 401k Comparison Chart
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403(b) Plans 403(b) and 401k Comparison Chart Summary: This chart is a comparison of code §403(b) and CODE §401(k) plans including features like eligible employers, eligibility, limitations on contributions, antidiscrimination, and distributions. Source: McKay Hochman Summary: Since qualified retirement plans are largely regulated by federal law, i.e., ERISA and the Internal Revenue Code, this guidance means that employers in states that do not recognize same-sex marriages will be required to recognize such marriages for qualified plan purposes. ERISA 403(b) plans are fully impacted while non-ERISA 403(b) plan are also impacted as is indicated in the list of spousal rights here. Source: McKay Hochman
Compliance and Regulatory Related Safe Harbor 401k Plan Design FAQ Summary: This FAQ covers five basic design questions on Safe Harbor 401k plans including: Should you design a safe harbor 401k plan with a forfeiture reallocation provision, even though all contributions are 100% vested? What are the requirements for providing a brand-new plan with a safe harbor notice? What about providing that notice to a brand-new employee? Source: McKay Hochman Using Forfeitures in EPCRS Corrections Summary: In recent years, the IRS has focused enforcement efforts on the proper allocation of forfeitures. Under EPCRS, the IRS permits an employer to use forfeitures to offset the employer contribution requirement. This article discusses the use of forfeitures under EPCRS. Source: Relius.net Coverage Testing -- Average Benefits Test Summary: The average benefits test is actually two tests, the nondiscriminatory classification test and the average benefits percentage test. Both parts of the average benefit test must be passed in order to satisfy coverage testing. This article is an overview of the average benefits testing process. Source: McKay Hochman What Does Nondiscrimination Testing Mean? Summary: One of the most commonly misunderstood or even sometimes ignored aspects of employee benefit plan administration relates to compliance and nondiscrimination testing. Certain tests are required to be performed annually to ensure that a plan is operating in accordance with the Internal Revenue Code (IRC). Often the plan's recordkeeper or third-party administrator will complete the testing, and so perhaps, the substance of the tests is not always fully understood. Source: Schneiderdowns.com
Fiduciary Related Material and Insight Six Things Employers Need to Know About Managing Their 401k Plans Summary: "Most service provider relationships do not shift fiduciary responsibility. These means you are on hook regardless of what your providers say in their pretty brochures." This is point one of six things employers need to know. Source: Fiduciaryplangovernance.com Fiduciary Management for Pension Plans Summary: The safety net concept attached to bringing a third party on board, combined with fiduciary fatigue, is reflected in the global growth of firms that describe themselves as fiduciary managers. While the retirement plan regulatory regime varies by country, the investment outsourcing model is gaining sway in the United States, the United Kingdom, the Netherlands and elsewhere. The undeniable trend to delegate merits discussion. Source: Pensionriskmatters.com The Smaller Stuff Creates the Biggest Liability Pitfalls for 401k Plan Sponsors Summary: Plan sponsors have their own game of Pitfall, but the problem is that unlike the video game version, the pitfalls are usually invisible and are actually small mistakes. This article is how the small stuff can create the greatest liability pitfalls for 401k plan sponsors. Source: Jdsupra.com Protecting Small Plan Fiduciaries From ERISA Liabilities Summary: Who can argue after all with separating plan sponsor from fiduciary functions in committee meetings, keeping c-suite folk of publicly traded companies off committees and setting up separate committees for administrative and investment responsibilities? The problem is this advice is not of much value to small employers who, for example, may not have enough staff for even one committee or will find it very hard to fathom what the difference is between a fiduciary responsibility or a settlor one or why it matters. Here is some advice for small employers. Source: Fiduciaryplangovernance.com
Insights: Studies, Research and White Papers Report Finds "80 is the New 60" Summary: UBS released its quarterly UBS Investor Watch report, revealing that many investors' do not feel "old" until they are 80, a significant shift from their parent's generation when "old" was perceived to be around age 60. The report found that only 16% consider retiring as a sign of being "old" and Americans define old as the loss of individual independence. Source: 401khelpcenter.com Middle Class Americans Face a Retirement Shutdown; 37% Say "I'll Never Retire" Summary: As U.S. lawmakers engage in an ongoing fight over how and when to pay the country's debts, more than half the middle class (59%) are very clear that their top day-to-day financial concern is "paying the monthly bills," an increase from 52% in 2012. Saving for retirement ranks a distant second place, with 13% calling it a "priority," as four in ten middle class Americans (42%) say saving and paying the bills is "not possible." Source: 401khelpcenter.com Survey: Majority of 401k Plan Participants Accumulate More Debt Than Retirement Savings Summary: New research released by HelloWallet finds that over 60% of workers participating in a DC Plan accumulated more debt than they contributed to retirement savings, a group that HelloWallet refers to as "debt savers." The study underscores the need for retirement plan sponsors to provide participants with holistic, independent financial guidance. Without that support, increases in 401k and other DC account balances will be off-set by growing liabilities on the other side of a participant's ledger. Source: 401khelpcenter.com A More Dynamic Approach to Spending for Investors in Retirement Summary: Of the many challenges investors face when deciding how to spend from their retirement savings, one of the most important is that of choosing a portfolio spending strategy that best balances investors' two competing goals: (1) maintaining their desired level of current spending; and (2) increasing or preserving their portfolios to support future spending. This paper reviews two of the most common spending strategies and introduces a third strategy. Source: Vanguard.com Canadian Pension Funds Under Invested in Alternatives Summary: Compared to their foreign counterparts, Canadian pension funds invest less in alternative assets largely because of a more cautious attitude, insufficient knowledge of the asset class and barriers to implementation. That was the main message of a Mercer roundtable on alternatives. Source: Benefitscanada.com 2013 Trends & Experience in Defined Contribution Plans: Report Highlights Summary: The employer-provided retirement system plays a critical role in helping participants meet their financial needs. This report, which highlights defined contribution plan design from over 400 plan sponsors employing more than 10 million workers, in plans that total nearly $500 billion in retirement assets -- finds that sponsors are strengthening their plans in seven ways. Source: Aon.com
Items of Special Interest to Advisors Target-Date Series Research Paper - 2013 Survey Summary: As the target-date industry continues to mature, it is displaying both predictable and surprising attributes. Its organic growth rate is slowing as target-date series have become established fixtures in defined-contribution plans. Fees in the series continue to fall as assets flow in, and post-2008 returns have been strong, reflecting broad market trends. This is a 69 page paper reviewing key findings. Source: Morningstar.com
Court, Legislative and Washington DC Ninth Circuit: Incorporation of SEC Filings by Reference in SPDs is Fiduciary Act Summary: A three-judge panel of the US Court of Appeals for the Ninth Circuit reissued its opinion in Harris v. Amgen, adding that the incorporation of SEC filings by reference in a summary plan description (SPD) qualifies as an act performed in a fiduciary capacity under the Employee Retirement Income Security Act. Source: Practicallaw.com Stock Drop Case Dismissed Because Purpose and Risk of Employer Stock Fund Made Clear Summary: This case illustrates that strong plan language setting forth the purpose and guidelines for an employer stock fund, coupled with repeated warnings to participants of the risks involved in investing in that fund, can be powerful defenses to a fiduciary breach claim. As a broader principle, carefully drafted plan language and full disclosure to participants can significantly decrease a plan sponsor's exposure to benefit plan claims and litigation. Source: Thomson Reuters/EBIA SunTrust Plan Participants' Stock-Drop Claims Tossed a Second Time Summary: A federal district court in Georgia recently dismissed a suit brought by participants in the SunTrust Bank 401k savings plan alleging fiduciary breaches based on defendants' decision to continue permitting investment in SunTrust stock while its value declined during the subprime mortgage crisis. The court had previously granted in part and denied in part SunTrust's motion to dismiss, and SunTrust appealed. Source: Erisapracticecenter.com
General Items Five Tips to Get Your Employees Ready for Retirement Summary: Most Americans aren't financially prepared to retire. To cite the data yet again is to beat a dead horse. Chances are this applies to some of your employees, and it has an impact on the financial wellness of your company. So how can employers and their employees work together toward real retirement readiness? Source: Forbes.com An 8-Step 401k Game Plan for Fall Open Enrollment Season Summary: Whether or not your employer reminds you to take a look at your 401k retirement account when you go through the arduous fall benefits open enrollment period, it can really pay to do so. That's why more employers are making it part of the process, according to Aon Hewitt. Source: Forbes.com Marketplace News Mutual of Omaha Joins LPL Financial Worksite Financial Solutions Platform IRI Launches New IRIonline.org Website 100th Contract Signed for Financial Engines' Income+ ERISA Advisory Council to Hold Open Meeting Nov. 4-5 LIMRA and LOMA Establish Secure Retirement Institute Fidelity Providing Advisor Access to "Succession Ready" Program Guardian Launches New Retirement Planning Website
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