Competition Among DC Investment Managers Gets Hotter
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In This Issue
Items of Special Interest to Service Providers Competition Among DC Investment Managers Gets Hotter Summary: Defined contribution plan sponsors across all plan size segments are expanding their 401k plan investment menus -- not by adding new investment options, but by increasing the number of investment managers they use. While this trend signals an upsurge in competition for DC investment managers, it also points to opportunity for DC investment-only firms that don't offer their own recordkeeping platforms. Source: 401khelpcenter.com DOL Fee-Disclosure Guide Upsetting DC Recordkeepers Summary: Members of the defined contribution industry have had three months to try to digest a DOL proposed rule to create a fee-disclosure guide for DC plan clients, and many of them are choking on it. Some critics say this is a one-size-fits-all proposal that will mean extra cost and administrative work, but not extra value. Others criticize the Labor Department's rule-making process. Source: Pionline.com Recordkeeper Consolidation Would Not Mean Falling Skies Summary: Author writes, "[C]onsolidation within the recordkeeping industry should not be seen as a sky-is-falling development. Conscientious recordkeepers will continue their commitment to offering the best product they can, at a price that generates a reasonable profit, but is also fair to plans and their participants." Source: Ascensus
Fiduciary and Plan Governance Material Understanding Fiduciary Protection From Retirement Providers Summary: There are four levels of fiduciary support available from retirement plan providers in today's marketplace. Each offers a different level of support with regard to investment selection and monitoring. Here is a brief description of each in the order of lowest to highest fiduciary protection. Source: Financial-Planning.com Summary: While revenue sharing may be a legitimate way to pay for the costs of operating a plan, both US courts and the DOL have made it clear that plan sponsors have a significant responsibility as fiduciaries to fully understand, evaluate and monitor their revenue-sharing arrangements and determine whether they are reasonable. Therefore, the most prudent response for plan sponsors may be to rethink the practice of revenue sharing altogether. Source: Alliancebernstein.com ERISA Fiduciary Guidance - Fairness for Defined Contribution Fees Summary: There has been a tremendous amount of focus on participant-assessed fees in 401k and 403(b) plans over the last couple of years. Plan administrative committees who ignore this issues could find themselves busy as defendants in excessive fee lawsuits. Source: Bsk.com Summary: There is an increasing number of cases over the past decade where plan participants have successfully barred plan fiduciaries from asserting the attorney-client privilege under the "fiduciary exception." Therefore, employers who serve as ERISA fiduciaries should understand that not all communications with attorneys regarding employee benefit matters are privileged. Source: Metrocorpcounsel.com
Insight: Studies, Research and White Papers Over 57,000 401k Plans Failed Nondiscrimination Testing Summary: Judy Diamond Associates released a study revealing that 57,277 401k plans failed their most recent IRS nondiscrimination tests. These plans were required to return $794 million in 401k contributions to highly compensated employees, resulting in increased income taxes and lower retirement savings for the impacted participants. Source: 401khelpcenter.com Vanguard: 52% of Small Business 401k Participants Have Plan Investments Professionally Managed Summary: More than three-quarters of small businesses employees who participate in their firm's 401k plan have well-constructed, appropriately diversified investment portfolios, in many cases because their employer placed them in a professionally managed investment option, Vanguard researchers said. Source: 401khelpcenter.com Redefining What It Means to Retire, Survey Summary: The most recent retirement survey from State Street Global Advisors indicates that 50 percent of retirement plan participants no longer see retirement as a reason to leave the workforce. Many expect a much more gradual shift from full-time work to at least part-time work in retirement. This presents a challenge to employers who need to make adjustments to how they manage talent to accommodate a mature workforce. Source: 401khelpcenter.com
Target-Date Funds Latest Trends in Target-Date Funds Summary: BrightScope announced recent trends in target-date funds as a result of its examination of the lowest cost institutional share class for all target-date funds through December 2013. This includes 52 target-date series, composed of 479 distinct target-date funds from 39 different asset managers. Source: 401khelpcenter.com Unbundled TDFs Attract Sponsor Attention Summary: While the advantages of prepackaged TDFs are generally understood by sponsors, most overlook an important potential drag on proprietary TDF performance. Retirement plan advisers can deliver significant value by helping sponsor clients address the shortcomings of prepackaged TDF solutions, says Tara Mashack-Behney of Conrad Siegel Investment Advisors. Source: Planadviser.com
Court, Legal, Legislative and Washington DC Supreme Court Rejects the Moench Presumption, Vacates and Remands Fifth Third Case Summary: The Supreme Court ruled on June 25, 2014 that there is no presumption of prudence for fiduciaries of ESOPs or Employee Stock Ownership Plans. In other words, the "Moench Presumption" which has been adopted nearly unanimously by every Circuit Court in the country has been unequivocally rejected. The decision was unanimous. Source: Fraplantools.com Supreme Court Rejects Special "Presumption of Prudence" for Employer Stock Summary: The U.S. Supreme Court held that there is no special presumption of prudence applicable to fiduciaries with respect to employer stock. The Court has, however, provided a roadmap to the lower courts to use in evaluating whether a claim can proceed, the threshold for which may not be particularly easy for plaintiffs to meet. This roadmap also serves as guidance to plan fiduciaries in connection with employer stock investments. Source: Drinkerbiddle.com How Tax Reform for Retirement Plans Can Affect Risk and Compliance Summary: It is likely that tax reform will influence the retirement benefits industry in ways large and small just as much as direct attempts at systemic transformation. In this article we will examine both types of change. Any such proposals must balance the goals of increasing revenue and limiting expenditures with maintaining a retirement benefits system that provides effective incentives to save for retirement without undue administrative complexity. Source: Wagnerlawgroup.com
Compliance and Regulatory Related 401k Plans Remain EP Exam Priority, IRS Official Says Summary: 401k plans remain one of the top IRS examination priorities, according to Thomas Petit, Acting Director of IRS Employee Plans. Petit spoke on June 5, 2014 at the American Society of Pension Professionals & Actuaries Regional Conference in Chicago. Source: Wolterskluwerlb.com Multiple DOL/IRS Filings Needed to Avoid Penalties for Late Form 5500s Summary: So you thought you were all caught up on annual-report tasks when you filed your Delinquent Filer Voluntary Compliance Program form with the U.S. Department of Labor? Well, not exactly. Avoiding Form 5500 penalties for late filing is now a two-step process, one to satisfy DOL and another for the IRS. Source: Thompson.com
General Items Retirement Plan Communications: Compliance or Greatness? Summary: If you want your retirement plan to be great, you need to work at it. Identify needs and develop a thoughtful communications program to address them. Seek feedback from employees, measure improvements, and keep at it. Don't be afraid to seek professional help, as specialized skill sets can make a big difference in effectiveness. Source: Plansponsor.com 401ks Far From Failed Experiment, Says EBRI Summary: Critics of 401ks argue that they will not deliver on what they promised. But MSN Money reports that the Employee Benefits Research Institute has provided empirical evidence that their assessments may be very much off the mark. Source: Asppa.org 403(b) Lessons: What 401k's Can Learn From These Plans Summary: As the corporate retirement plan landscape is shifting and new trends emerge for 401k's, the sponsors for these plans may be looking to 403(b)'s for insight. Many nonprofit organizations have never offered a defined benefit plan to employees, says Tim Walsh, managing director for Institutional Investment Product at TIAA-CREF in Boston. "Now that 401k's are the core plan for the corporate sector, companies are looking to 403(b)'s for best practices." Source: Plansponsor.com
Marketplace News Pam Popp Named President of Lockton Retirement Services Northwestern Mutual Agrees to Sell Russell Investments OneAmerica to Acquire City National's Retirement Division Jemstep to Power Redhawk Online Advisor Pentegra Retirement Augments OCIO Services With Hire Voya Expands Social Media Support for Affiliated Advisors PensionPro Hires Director of Marketing and Product Management Hancock Hires Midwest Regional VP Transamerica White Paper Touts Its Retirement Plan Exchange Guardian Retirement and LPL Integrate Platforms
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