Risk Mitigation Starts With Retaining Demonstrated Experts
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Fiduciary and Plan Governance Material Risk Mitigation Starts With Retaining Demonstrated Experts Summary: It is widely understood that a plan sponsor that lacks expertise must seek the advice of qualified experts to assist them in their fiduciary duties. But to what extent can a plan sponsor rely on their expert's advice? According to Clark v. Feder Semo and Bard, P.C., reliance on an expert is consistent with a fiduciary's obligation to act with loyalty and prudence. While this case focused on reliance on legal counsel, it provides important direction for both plan sponsors and service providers. Source: Fraplantools.com Fiduciary Considerations in Controlling and Accounting for Plan Administration Fees Summary: This paper narrowly focuses on the fiduciary considerations regarding the treatment of plan expenses under an individual account-based, self-directed, defined contribution retirement plan such as a 401k, 403(b) or a 401(a) account. The hide and seek nature of revenue generated by asset managers under a proprietary or affiliated bundled service arrangement or under an open-architecture alphabet soup share class approach purposely or inadvertently confuses the fiduciary. Source: Chaoco.com A Retirement Plan Sponsor's Guide for Selecting Their Financial Advisor Summary: When it comes to your role as a retirement plan sponsor, outside of hiring a TPA, the most important plan provider that you need to hire is a financial advisor. This article is a guide on selecting a financial advisor for your retirement plan or to review the incumbent advisor as part of your fiduciary responsibility. Source: Jdsupra.com Expert Q&A on Outsourcing Fiduciary Investment Responsibilities Summary: As retirement plans have become more complex, plan fiduciaries have started to outsource responsibility for selecting and overseeing plan investments by retaining a professional investment service provider. Practical Law asked David Levine and Allison Tumilty of Groom Law Group to discuss issues employers should consider when outsourcing fiduciary investment responsibilities. Source: Groom.com Fiduciary Liability Where Employer Directs 401k PS Contribution Summary: A prospective client has a 401k plan. The investment of the plan's assets is directed by the participants with the exception of the employer profit sharing contribution. That is invested at the discretion of the employer. What is the employer's potential fiduciary liability with regard to the profit sharing source? Source: Tagdata.com Assessing the Liabilities of KSOP Structures in Light of ERISA Fiduciary Duties Summary: ESOPs are frequently offered by companies as an investment vehicle within 401ks that allow participants to invest in the employer's stock as an alternative to the standard fund offerings that are pooled investments. Participants may be unaware that the company stock option in their 401k is a plan within a plan. These combination plans are sometimes referred to as KSOPs. Although this investment vehicle seems innocuous, KSOPs generate considerable risk to both participants and sponsors that warrants serious consideration. Source: Natlawreview.com
Insight: Studies, Research and White Papers Most 401k Plan Fees Declining or Are Flat Summary: The study shows the small plan average investment expense went from 1.37% to 1.35%, while the large plan average investment expense bumped up from 1.00% to 1.01%. Source: 401khelpcenter.com Auto-Solutions Can More Than Double Retirement Savings Summary: While some in the retirement industry say that auto-features are too expensive for many plan sponsors to consider, especially in a tough job market, New York Life has found a great reception for auto-solutions among its plan sponsor clients. Seventy percent of New York Life RPS' clients auto-enroll and of that number, half auto-enroll into managed savings. This infographic shows the value of 401k plan auto-features. Source: 401khelpcenter.com One in Four Older Workers Have No Plan for Their DC Plan Assets Once Retired Summary: A new LIMRA Secure Retirement Institute study found that 27 percent of U.S. workers, ages 55-64, say they do not know how they will use their defined contribution plan savings after they retire. Women are much more likely than men not to have planned how they will use their DC assets (38 percent vs. 19 percent). Source: 401khelpcenter.com Debt Stops Canadians From Saving for Retirement Summary: As Canadians struggle with high levels of household debt, saving for retirement is taking a back seat for many employees -- yet, on average, Canadians expect about one-quarter of their retirement income to come from personal savings. This is according to the 2014 Sun Life Canadian Unretirement Index. Source: Benefitscanada.com 5,000 Big Plans Hold 71% of All 401k Assets Summary: Judy Diamond Associates released an analysis of the distribution of plan assets nationwide, revealing that the top 1% of plans hold 71.1% of all 401k assets. Source: 401khelpcenter.com Canadian Workers Worried About Retirement Summary: While Canadian workers feel their financial situation has improved in the last two years, a survey finds that financial security is still a top concern. According to the Towers Watson Global Benefits Attitude Survey, half of the respondents under the age of 50 are worried about their current and future financial states. Source: Benefitscanada.com
Items of Special Interest to Advisors Schwab's New 401k ETF Program Beat Tough Odds to Launch but Now Comes the Hard Part Summary: Schwab seems to have invented a better 401k mousetrap but now it needs to invent some appetizing cheese. Its new ETF platform promises low costs, high liquidity and decent transparency. But, does anyone care? Source: Riabiz.com Fiduciary Status Could Be Big Rollover Plus Summary: One of the biggest mysteries haunting the industry is the impact of the revised fiduciary rule on investment product marketing for IRA rollovers. The fear among product providers and their broker/dealer sales force is palpable. In fact, congressional opposition to the proposed rule is already lining up even before its contents have been announced. The fear appears to be justified. Source: Planadviser.com
Court, Legal, Legislative and Washington DC Plan Fee Litigation Burned Hot in 2013, But Some Decisions Baffling, Speakers Say Summary: Plan fee litigation had a big year in 2013, with divisive appellate court decisions affecting standards of judicial review, statutes of limitations and functional fiduciary status that may open the door for increased and novel litigation, employee benefits attorneys said during a conference panel presentation. Source: Bna.com Bankruptcy and Inherited Retirement Accounts Summary: Jenner & Block filed an amicus brief in the U.S. Supreme Court in the case of Brandon C. Clark and Heidi K. Heffron-Clark v. William J. Rameker, Trustee, et al. The Bankruptcy Code exempts a debtor's "retirement funds" from claims of creditors. In Clark, the Supreme Court will decide whether that exemption applies to a retirement account that a debtor has inherited from its original owner. The amicus brief, written on behalf of estate and tax expert Professor Seymour Goldberg, explains that the tax treatment of inherited retirement accounts differs substantially from accounts in the hands of their original owners. Source: Jenner.com Rewriting Retirement Readiness: Will the USA Retirement Funds Act Amend Your Plan? Summary: The USA Retirement Funds Act would have a significant impact because all employers with 10 or more employees would be required to offer a retirement plan with automatic enrollment and a lifetime income option. If Milliman's recordkeeping clients can be used as a representative sample, a quick look would tell us that only 2% of plans currently offer both features, which indicates the substantial majority of plans would be required to be amended if this core provision is enacted. Source: Retirementtownhall.com
Compliance and Regulatory Related The Completely Misunderstood ERISA Section 404(c) Summary: Section 404(c) has been in ERISA for 40 years. This amazing participant directed account gift to plan sponsors has been around for four decades and many still don't understand it. Article covers some misconceptions that are in need of correction. Source: Fiduciaryplangovernance.com Audits of Benefit Plan Financials -- What They Are and Are Not Summary: The purpose of an audit of the retirement plan financial statements is to allow an auditor to express an opinion as to whether the financial statements and related footnotes and supplemental schedules for a benefit plan are prepared in accordance with accounting principles. Article notes some of the areas an audit reviews. Source: Employeebenefitslawreport.com Compliance Testing; the Actual Deferral Percentage (ADP) Test Summary: Every year, plan sponsors of traditional 401k plans must perform non-discrimination testing. The testing is performed to ensure that the Highly Compensated Employees are not receiving contributions that are significantly greater than the Non-Highly Compensated Employees' contributions. One of the non-discrimination tests is referred to as the Actual Deferral Percentage (ADP) Test. This is an overview of the ADP Test. Source: Benefit-Resources.com Summary: Answers questions like, who must be bonded, what losses must an ERISA bond cover, is an ERISA fidelity bond the same thing as fiduciary liability insurance, and what are the Form 5500 reporting requirements. Source: Mhco.com
General Items Examining 401k Plan Loans' Upsides and Downsides Summary: Allowing 401k plan participants to take out loans against their account balances has always been a double-edged sword. Although 401k loan-takers are expected to pay the loan back with interest, chances are good those assets would have earned a higher return by being invested in the financial markets. Source: Shrm.org
Marketplace News USI Consulting Adds Retirement Services VP American Century Launches CIT That Incorporates Target-Date Portfolios Mutual of Omaha Names Four New Regional Sales Managers FRA PlanTools Unveils ERISA Matters Newsletter Series Invest N Retire Under the Bankruptcy Gun Greenspring Introduces the (k)larity Quotient Trust Builders Adds VP for Corporate Relations Prudential Adds Russell Target-Date Portfolios Argus Creates 401k for U.S. Spouses of Bermudians 14th Edition of the 401k Averages Book Released
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