Investment Policy Statements
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In This Issue
Fiduciary and Plan Governance Material Summary: An investment policy statement defines the processes that a company has adopted to make investment-related decisions with respect to the assets of an ERISA 403(b) and 401k plan. While the law does not require that a plan adopt an IPS, it may be the single most important task that a fiduciary performs. Here's an overview of how to construct one. Source: Strategicbenefitservices.com Changing Employee Benefit Plan Vendors? Tips for a Smooth Transition Summary: Regardless of the reason you seek to change your plan's recordkeeper, trustee, or custodian, you face an increased risk of error if the change isn't managed properly. As a result, if you're debating a change in vendors for your benefit plan, it's important to consider the potential risks to both the plan and its participants. Source: Mossadams.com ERISA's Service Provider Disclosure Rules and How to Comply With Them Summary: If you're an employee benefit plan fiduciary, you're likely familiar with ERISA Section 408(b)(2). These regulations, which became effective in 2012, address what most of us know as service provider disclosures. So what steps can you take to fulfill your duties and avoid penalties? Here are four best practices that can help you demonstrate compliance. Source: Mossadams.com Why a 401k Fiduciary Must Convince Retirement Investors to Avoid Thinking in Lump Sum Terms Summary: Without a sophisticated financial calculator, it's hard for the professional, let alone the average person, to know when a lump sum is adequate to fund retirement. By looking at a monthly payout figure, people can more easily determine if it can cover their monthly expenses. Source: Fiduciarynews.com Letter to RMS About Dispelling the 3(16) Myth Summary: The majority of plans will be using outsourced 3(16) services within a decade. Service providers that don't offer or provide due diligence on these services will lose business. MEPs and aggregated solutions are the easiest way to access 3(16) services today. Source: Linkedin.com
Insight: Studies, Research and White Papers GAO Questions Advantages of Managed Accounts Summary: A lack of information and consistent standards makes it difficult for 401k plan sponsors to gauge whether managed account services truly benefit participants over the long term, says a new report. Source: Plansponsor.com Improvements Can Be Made to Better Protect 401k Participants in Managed Accounts Summary: GAO examined (1) how providers structure managed accounts, (2) their advantages and disadvantages for participants, and (3) challenges sponsors face in selecting and overseeing providers. Among other things, GAO recommends that DOL consider provider fiduciary roles, require disclosure of performance and benchmarking information to plan sponsors and participants, and provide guidance to help sponsors better select and oversee managed account providers. Source: Gao.gov What Does Consistent Participation in 401k Plans Generate? Summary: At year-end 2012, the average account balance among consistent participants was 67 percent higher than the average account balance among all participants in the EBRI/ICI 401k database. The consistent group's median balance was almost three times the median balance across all participants at year-end 2012. Source: Ebri.org DC Plans Work When Backed by Social Security Summary: A new study of brand-new retirees with such plans finds they are, indeed, faring well, but only thanks to an additional big lift from Social Security income and a willingness to economize. Source: Onwallstreet.com
Items of Special Interest to Service Providers PPA Document Restatement Fees Survey Result Summary: A total of 57 TPA business owners or managers responded to this survey, conducted online from late June through mid-July. Nearly half of all respondent firms report serving >500 plans; the average was 650. Article reviews the survey results. Source: Tparesources.com
Target-Date Funds Target-Date Funds: Adviser's Checklist Summary: Target-date funds should be a panacea for investors and advisers. Professional management, coupled with a preprogrammed asset allocation glide path to accommodate investors' changing wealth, risk tolerance and liquidity needs, should make investing for retirement easier and more reliable. But a creative concept with clever packaging does not automatically produce a sound investment. By being mistaken for a retirement solution in a box for plan fiduciaries and participants, TDFs pose serious risks for both. Source: Investmentnews.com (free registration may be required) GAO to Look at TDFs, Other QDIAs Summary: Following up on its calls for stricter oversight of managed account providers to 401k plans, the Government Accountability Office is undertaking a review of qualified default investment alternatives in 401k plans. Source: Benefitspro.com
Plan Automation Can the Enrollment Experience Improve Participant Outcomes? Summary: Although automatic enrollment has been a boon for plan participation and encourages steady savings habits, more needs to be done. Automatic enrollment may not be a universal answer. Fidelity embarked on extensive employee research and testing to determine if a simplified, streamlined enrollment process could improve participation outcomes. This 12 page paper reviews the results. Source: Fidelity.com
Compliance and Regulatory Related Plan Language and Administration Can Clarify Beneficiary Designation Issues Summary: Determining the beneficiary of a qualified retirement plan after a participant's death has legal ramifications. Plan sponsors should ensure that a plan's benefit distribution language and plan administration meet federal requirements. Source: Milliman.com Safe Harbor 401k Establishment Deadlines 2014 Summary: Although the greatest burden imposed on a plan sponsor who elects a safe harbor 401k plan design feature is usually perceived to be the funding of the safe harbor contribution, there are many other administrative requirements that must be satisfied in order to qualify for the ADP / ACP exemption. One such requirement relates to the plan year of a safe harbor 401k plan. Source: Legacyrsllc.com Time to Restate 401k Prototype and Volume Submitter Plans Summary: In Announcement 2014-16, the IRS announced the opening of the PPA restatement window for defined contribution, including 401k, prototype and volume submitter plan documents. The PPA restatement documents must be adopted by April 30, 2016. Failure to complete the restatement by the April 30, 2016 deadline will jeopardize a plan's tax-qualified status. The IRS also announced that it will begin to accept individual determination letter applications for the PPA restatement documents from May 1, 2014, through April 30, 2016. Source: Truckerhuss.com Video: Establishing Written Daily Tasks Summary: Watch this video to learn one, sure-fire way to have constant improvement for your Employee Benefit Plan's operations. Source: Erisasunscreen.com New Requirements for Delinquent Retirement Plan Form 5500 Filers Summary: The IRS recently issued Notice 2014-35, which provides that Form 5500s filed under the Department of Labor's Delinquent Filer Voluntary Compliance program since January 1, 2010 can file a late Form 8955-SSA without a penalty. Therefore, if an employer has failed to submit its paper Form 8955-SSA as required, now is the time to send it in. Source: Sgrlaw.com
General Items "Robin Hood" of Fees Takes Aim at 401k's Summary: Those worried about hidden fees in their retirement accounts might want to investigate FeeX, a service that was launched in the U.S. this spring. Free at the moment, eventually the company plans to introduce optional premium services for which it will charge. Source: Thinkadvisor.com
Marketplace News NFP Integrate 401k Advisors Retirement Tools DOL's ERISA Advisory Council to Hold Public Meeting Aug. 19-21
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