Top Small-Cap Funds in America's 401k Plans
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Insights: Studies, Research and White Papers
Top Small-Cap Funds in America's 401k Plans Summary: This is the 2013 list of the top 12 small-cap funds held by 401k and defined contribution plans. Noteworthy findings since the last release of this list ion August 2011 include Vanguard Small Cap Index climbing from the number three spot on the list to take the top honors at number one this year. The previous #1 fund, Neuberger Berman Genesis, fell completely off the list.
Source: Brightscope.com
The Shape of 401k Plans to Come and Why They're Changing Summary: There's a good chance that employers will make some important changes over the next few years as the 401k industry ushers in changes aimed at getting workers to save more and do more planning for retirement. That's the key finding of a survey released last week reflecting the views of 55 401k experts who were asked to predict the ways workplace plans will evolve over the next five years.
Source: Reuters.com
These 401k "Benefits" May Actually Hurt Retirement Readiness Summary: A study of the 401k plan universe by the GAO showed loan defaults totaled only $670MM while post-separation distributions ($74B) and hardship withdrawals ($9B) accounted for a far greater portion of plan leakage. These 401k "benefits" end up hurting one's ability to achieve retirement readiness, yet there's no true consensus on the best policy regarding whether a plan sponsor should provide these perks within the plan design.
Source: Benefitspro.com
Survey Finds Self-Employed Struggle to Regularly Save for Retirement Summary: Being self-employed means more control over your working life, but it also means taking the reins on retirement planning. While the traditionally employed are being enrolled in company-sponsored 401ks with regular automatic contributions, nearly 70 percent of entrepreneurs, contractors and the like are often not saving for retirement on a regular basis -- if at all -- according to a new survey of self-employed Americans released by TD Ameritrade.
Source: 401khelpcenter.com
Cost Shifting and the Freezing of Corporate Pension Plans Summary: This paper establishes that firms that have frozen pension plans have reduced their costs of providing retirement benefits to workers even net of increases to 401k contributions over horizons ranging from one to ten years. Employees of these firms, on the other hand, have seen decreases in the net present value of their retirement benefits, again inclusive of increases to 401k plans. Furthermore, paper find that firms that have potentially more cost savings to gain by freezing plans are more likely to undertake pension freezes.
Source: Umich.edu
Myth Busting: It May Be Possible to Reach DB Plan Objectives Regardless of Interest Rates Summary: Plan sponsors of defined benefit plans have a tough job. With respect to asset allocation strategy, they have to accomplish two primary objectives that often seem mutually exclusive: Maximizing plan investment return, and controlling or limiting volatility of plan funded status. That's why creating an asset allocation strategy can seem like a tightrope act -- particularly when it comes to fixed income allocation. After all, fixed income allocation is tied closely to interest rates (not just where they are now but also where they are headed in the future).
Source: Principal.com
Improving Retirement Outcomes: Timing, Phasing and Benefit Claiming Choices Summary: The Society of Actuaries' Pension Section has made available this research report evaluating several of the more common retirement timing and claiming strategies using a retirement simulation model that incorporates investment, inflation, health and long-term care risks.
Source: Soa.org
General Items
What Are Some Changes Plan Sponsors Can Expect to See in 2014? Summary: As a plan sponsor, you're permitted to make voluntary changes to your retirement plan whenever you choose. Occasionally, changes within the regulatory environment require mandatory amendments to be adopted by plan sponsors. Fortunately, if you're a defined contribution (including 401k) plan sponsor, there are currently no required amendments for 2014 you need to be worried about. However, an amendment that may build some steam as time passes is related to Roth in-plan transfers or conversions.
Source: Deardrebit.com
Let's Operate 401k Plans as True Retirement Plans Summary: The long-term trend away from traditional defined benefit pension plans in favor of 401k and other defined contribution retirement plans has succeeded in its mission: improving companies' financial standing. It has also resulted in massive numbers of workers who are facing a retirement of meager means or will have to work years longer than they'd expected. It's time to shift how both workers and employers view retirement plans.
Source: Cfo.com
More 401k Plan Sponsors Opt for Roth Conversions Summary: Plan sponsor adoption of 401k Roth provisions has jumped in recent years, thanks in part to IRS rules that took effect last year. Those make it possible for retirement plan participants to convert existing 401k plan balances to Roth 401k plan balances, whether or not the participant was eligible for a distribution.
Source: Benefitnews.com
Fiduciary Related Material and Insight
Why ERISA Bonding is Nice but Not Enough Summary: ERISA bonds are required to be maintained under federal law for the benefit of employee benefit plan to which they relate. When a claim is made under an ERISA bond it is made by the plan and it can be made only for losses due solely to theft and dishonesty. A bond does not in any way provide protection to internal fiduciaries for their acts (or failure to act) in their capacities as plan fiduciaries.
Source: Fiduciaryplangovernance.com
Re-evaluating In-Plan Employer Stock Summary: Fiduciary risk issues surrounding publicly traded employer stock as an in-plan investment option have been hotly debated for decades. This debate came into sharp focus in 2001, however, with Enron's fall from solvency. At the time, nearly 58% of Enron's 401k plan assets were invested in company stock, which plummeted almost 99% in a very short period. This event spurred a fairly concentrated reevaluation of the prudence of offering employer stock to retirement plan participants.
Source: Psaretire.com
How Should the 401k Fiduciary Address "Leakage"? Summary: There's a growing concern some employees are abusing this privilege to withdraw prematurely from their 401k account for expenses other than retirement. These withdrawals can range from "hardship" withdrawals to simply taking the money out when employment is terminated. Every such transaction has the effect of delaying retirement readiness. Financial professionals call these transactions "leakage."
Source: Fiduciarynews.com
Items of Special Interest to Advisors
How Plan Providers Can Deal With Their Employees Summary: Keeping good employees isn't just about pay. Sometimes it's the little things that get employees upset. So aside from paying employees far more than they are probably worth, article lists some ideas on how to keep good employees -- including don't cheap out on the benefits.
Source: Jdsupra.com
SEC Investor Advisory Committee Approves Fiduciary, User-Fee Plans Summary: The Securities and Exchange Commission's Investor Advisory Committee approved Friday two of its subcommittee's recommendations: one on how the SEC should move forward on crafting a fiduciary rule for brokers, and a second proposal requesting that the SEC ask Congress to allow the agency to impose user fees on advisors to fund their exams.
Source: Thinkadvisor.com
Court, Legislative and Washington DC
Supreme Court Waiting Game Begins After DOL Submits Stock Drop Amicus Brief Summary: Since 1995, ERISA plan sponsors have had the so-called "Moench Presumption" to help defend against breach of fiduciary duty claims regarding company stock funds included in their retirement plans. The continued viability of the Moench Presumption may or may not be decided by the United States Supreme Court. As explained here, we are now in a waiting game to learn whether the court will vote to hear an appeal of a case where the Moench Presumption was not adopted.
Source: Fraplantools.com
Chesapeake Stock Drop Suit Dismissed Summary: A federal district court dismissed a class action complaint alleging Chesapeake Energy acted imprudently by offering company stock to retirement plan participants.
Source: Plansponsor.com
Compliance and Regulatory Related
Post-Windsor: Retirement Planning for Same-Sex Couples Summary: The Insured Retirement Institute released this new research providing a first look at same-sex couples' retirement planning attitudes and behaviors in the wake of the Supreme Court's decision striking down Section 3 of the federal Defense of Marriage Act (DOMA). As a result of the decision, which will lead to sweeping changes in retirement, estate and tax planning for same-sex couples, IRI found that four in 10 same-sex couples are motivated to make financial plans.
Source: Myirionline.org
SEC Committee Wants Additional Comments on TDF Glide Path Illustrations Summary: The SEC Investment Advisory Committee has asked for additional comments regarding standardized risk-based glide path illustrations for target-date funds. A glide path illustration based on an appropriate, standardized measure of fund risk would be more accurate and more flexible than a glide path illustration based on asset allocation alone, the committee found.
Source: Benefitspro.com
How Can I Make My Benefit Plan Audit a Smoother Process? Summary: If you understand what your auditors need, then it's possible to work together in a streamlined, non-invasive process. And that allows more time for your auditors to focus on ways to add value to your benefit plan. Here are a few things you can do to ensure your business is prepared for your audit.
Source: Deardrebit.com
Marketplace News Transamerica Announces Webinar on Greatest Challenges Facing Plan Sponsors
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