'Myth' Understandings on Defined Benefit Plans
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In This Issue
General Items 'Myth' Understandings on Defined Benefit Plans Summary: A frequent criticism of the 401k design is that it was never designed to provide a full retirement benefit, unlike, as it's often stated or implied, the defined benefit plan. However, the data show that some of the common assumptions about defined benefit pensions are out of line with the realities. Source: Ebriorg.wordpress.com Employer Match Game: Lump Sum or Per Paycheck? Summary: How companies match employee contributions to their 401k accounts has gotten a lot of attention recently, thanks to AOL's public reversal of its plan to give workers an end-of-year lump-sum matching contribution. But, for companies with tight budgets, a year-end 401k contribution might be the right strategy to save money as well as keeping and rewarding talent. Source: Workforce.com
403(b) Plans Understanding the IRS Audit Process for Your 403(b) Plan Summary: The IRS is auditing 403(b) plans, especially in light of the changes made to the 403(b) regulations in the last few years. In this article, the author points out that with the right amount of planning and proper administration, plan sponsors can avoid audit pitfalls and provide for an employer-sponsored plan that effectively meets IRS guidance and regulations. Source: Ntsa-net.org
Fiduciary and Plan Governance Material Fiduciary Committee Best Practices -- Part I: The Basics Summary: Even in areas of law where the landscape of rules, regulations, and risks seems constantly to be changing, certain core concepts and basic principles hold fast. This article highlights five best practices that are recommended to any employer who maintains a retirement plan that is subject to ERISA. Source: Employeebenefitsupdate.com Why You Shouldn't Hire Your Friends or Family as Your Retirement Plan's Financial Advisor Summary: They often say that it doesn't matter what you know, it's who you know, but plan fiduciaries such as retirement plan sponsors could breach their fiduciary duty and/or commit a prohibited transaction by selecting plan providers just based on a previous relationship. This article is about why it's wrong for plan sponsors to hire plan providers just based on the fact they know you, rather than what they know. Source: Jdsupra.com
Items of Special Interest to Service Providers Top 100 Most Social Financial Advisors in the US Summary: This is the inaugural list of the Top 100 Most Social Financial Advisors in the United States, as ranked by BrightScope's Social Influence Rank. The Social Influence Rank aggregates information on advisors actively engaging with current and prospective clients using digital media channels and measures how their efforts stack up against their peers. Source: Brightscope.com SEC's Gallagher Terms Fiduciary Debate Biased Against Brokers Summary: The debate over whether the SEC should write a rule to put brokers under a fiduciary mandate is "not fair right now" because of a mismatch in exam data between brokers and advisors, SEC Commissioner Daniel Gallagher said this week. Source: Benefitspro.com
Target-Date Funds Common Fiduciary Considerations Related to Target-Date Options Summary: Given the variety of target-date options available in the marketplace today, how does a plan fiduciary determine which family is right for a specific plan? When evaluating target-date options, it is important to keep in mind that quantitative factors play an important role. However, there is much more to target-date options than a rating score or a performance track record over a single time period or environment. Source: Manning-Napier.com Does Your Approach to Monitoring and Communicating Your Target-Date Funds Need Rethinking? Summary: Although the use of TDFs has been blessed, the regulations require 401k fiduciaries to prudently select and then monitor the ones they choose. What should go into the selection and monitoring processes, however, is not spelled out in detail. This paper discusses these issues and provide suggestions for addressing them. Source: Investmenthorizons.com Study Finds Target-Date Funds Often Not Used as Intended, Negatively Impacting Returns Summary: A new study from Financial Engines and Aon Hewitt reveals that 401k participants who get professional investment help in the form of managed accounts, target-date funds or online advice, earned higher median annual returns than those who go it alone. However, the study also found that many workers investing in target-date funds are not using them as intended, ultimately lowering their investment returns. Source: 401khelpcenter.com
Plan Automation Seven Misconceptions About Retirement Plan Auto Features Summary: The evidence is clear that automatic enrollment, in which employees are enrolled in their company plan unless they opt out, is very effective at increasing participation rates. In spite of how effective auto features are, many sponsors are still holding back from adopting them due to misconceptions. Here are seven common misconceptions plan sponsors have. Source: Pension-Consultants.com Auto Enrollment Errors Are Expensive Summary: Auto enrollment is becoming more popular with employers that sponsor DC plans. This feature can help increase plan participation, enhance retirement outcomes among participants, and improve discrimination testing results. On the other hand, administrative oversights can prove costly. This article identifies two common errors administrators commit related to auto enrollment. Source: Retirementtownhall.com
Court, Legal, Legislative and Washington DC QDROs for Unmarried Cohabitants? Summary: A recent decision of the Supreme Court of Alaska concluded that a participant's pension benefit under a multiemployer pension plan was subject to division between the participant and the woman with whom he had cohabitated for sixteen years and with whom he had raised children. The two had never married. Source: Benefitsnotes.com U.S. Senator Rubio Unveils Proposal to Reform Retirement Policy Summary: U.S. Senator Marco Rubio, a likely Republican candidate for the White House, on Tuesday unveiled plans to give more Americans a way to save for retirement while raising the retirement age for younger workers. Source: Reuters.com
Compliance and Regulatory Related IRS Guidance Provides Penalty Relief and Establishes Pilot Program for Late Filers of Form 5500 Summary: The Internal Revenue Service issued Notice 2014-35 and Revenue Procedure 2014-32. Notice 2014-35 provides relief from certain IRS penalties for the late filing of a Form 5500 return. Revenue Procedure 2014-32 establishes a temporary relief program for the late filing of a Form 5500 return for non-Title I retirement plans. Source: Practicallaw.com Profit Sharing Allocation Methods - The Better Part of Discretion Summary: Most Profit Sharing/401k Plan sponsors have the basic understanding that the plan contributions must not discriminate in favor of the owners and other highly paid participants over non-owners and non-highly paid participants. But there is flexibility. Certain methods will better enable the business owner to control the cost of allocations to non-owners, while preserving desired allocations for owners and other executives. Source: Manning-Napier.com Disclaimers Can Be a Good Thing, Particularly in Benefit Notices Summary: With the requirement that retirement plan administrators provide statements to retirees of account balances and benefit levels on a regular basis, the concept of including a disclaimer on the notices can be overlooked. However, a recent case out of the northern part of Ohio suggests that disclaimers may be the very thing that protects a plan administrator from a claim for breach of duty if benefits have to be recalculated or adjusted. Source: Benefitnews.com Summary: The Internal Revenue Service issued final regulations clarifying that distributions by qualified retirement plans to pay for accident or health insurance are generally taxable distributions, effective for taxable years that begin on or after January 1, 2015. Source: Practicallaw.com
Marketplace News Ascensus Launches of Ascensus Consulting Eagle Asset Management Enters CIT Market ERISA Advisory Council to Meet June 17-19, 2014 Retirement Clearinghouse Introduces Missing Participant Service Fiduciary Investment Advisors Expands Consulting Team Lexington Compliance Offers RIA Registration Service NTSA Announces 2014 Strategic Partners
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