Five Changes Ushered in by ERISA
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In This Issue
General Items
Five Changes Ushered in by ERISA Summary: There's no shortage of debate about whether ERISA is meeting the retirement challenges now facing baby boomers and generations to follow. But there's no debating that the law ushered in some monumental changes, enhancing, if not revolutionizing, the concept of retirement as the country knows it today. Here are the top five changes ERISA has brought us.
Source: Lifehealthpro.com
The Shift From Defined Benefit Plans to Defined Contribution Plans Summary: Article explains the shift in private-sector employer-provided retirement plans from defined benefit plans to defined contribution plans. This article also examines the reasons for the proliferation of Section 401k plans and outlines the consequences of the shift on the retirement readiness of American workers.
Source: Practicallaw.com
403(b) Plans
Nondiscrimination Rules for 403(b) Plans Summary: Suppose an employer provides 100% vesting in its 403(b) plan. There is a 60-day wait for the employer match (100%, up to 4%), and an employee needs to work 20 hours per week to qualify for the match. The employer has no highly compensated employees. What type of plan setup could the employer pursue, and what are the possible ramifications at Form 5500 filing time?
Source: Ntsa-net.org
Insight: Studies, Research and White Papers
Women Showing Greater Commitment to Retirement Savings Summary: Women have long trailed men when it comes to retirement savings but new data from MassMutual Retirement Services shows that women are responding to the challenge and are closing the gap.
Source: 401khelpcenter.com
Fed Report Finds Participation Flat, Retirement Balances Up "Substantially" Summary: A new report from the Federal Reserve finds that while retirement plan participation remained relatively flat over the past three years, the median and average value of those retirement plan accounts rose "substantially," according to the report. Article reviews the trends noted in the report.
Source: Napa-net.org
The Changing Nature of Retirement Summary: The trend to later retirements and increased work for pay during retirement have been explained by longer life expectancies, better health at older ages, and declining pension coverage. Retirement surveys show current workers continue to push back retirement plans and increasing numbers plan to work for pay in retirement. Yet the fraction or retirees working for pay is substantially lower, and the age of retirement notably younger, than suggested by surveys. This paper explores the issue.
Source: Pensionresearchcouncil.org
Are Retirees Falling Short? Reconciling the Conflicting Evidence Summary: A fundamental question in the retirement area is whether people will have adequate retirement income to maintain their pre-retirement standard of living. Existing studies offer conflicting assessments; some indicate a serious problem while others present an optimistic view. This paper attempts to explain why the assessments differ.
Source: Pensionresearchcouncil.org
Fiduciary and Plan Governance Material
These Four Quick Fixes for ERISA Can Reduce 401k Fiduciary Stress Summary: For all the structural problems of ERISA and its attendant IRS and DOL regulations, there are opportunities to address some issues. Article relays the views from retirement specialists across the nation on some fixes that could be made with little or no effort.
Source: Fiduciarynews.com
White Labeling DC Plan Investments May Offer Advantages Summary: Among approximately 75 large employers, nearly one-quarter (24%) are currently using a white label approach to naming defined contribution plan investment options, Aon Hewitt finds.
Source: Planadviser.com
Items of Special Interest to Service Providers
RIA M&A Activity Solid So Far in 2014 Summary: Merger and acquisition activity remained healthy in the registered investment adviser industry during the first half of 2014, according to research from Schwab Advisor Services. Schwab says the first half of 2014 saw 29 completed M&A deals totaling $32.6 billion in assets under management.
Source: Planadviser.com
What's Next for ETFs and the 401k Business? Summary: There's lots of talk about the growth of assets in ETFs outpacing that of other financial products. While that storyline is mostly true, ETFs have low penetration in the multi-trillion retirement plan marketplace, where they're a virtual no-show.
Source: Thinkadvisor.com
Plan Automation
Automatic Features in Defined Contribution Plans Summary: Offered in conjunction with automatic escalation, automatic enrollment can positively impact participant behavior and improve retirement readiness. This article examines some best practices to be considered when implementing automatic features in DC plans that can produce greater results per dollar of employer cost.
Source: Strategicbenefitservices.com
Issues Around Lifetime Income
In-Plan Retirement Income Solutions: Landscape Overview and Obstacles to Adoption Summary: As an increasing number of participants are planning for retirement in a DC plan framework, without the guaranteed retirement benefit payouts that were provided by DB plans, it can be argued that the solutions that would be most beneficial to DC plan participants are those that offer a lifetime income guarantee. However, many plan fiduciaries perceive that there may be a fiduciary risk to offering guaranteed income products within their plan. This eight page article provides an overview of available product types and risks.
Source: Porteval.com
Court, Legal, Legislative and Washington DC
Would've, Could've, Should've: Tatum v. RJR Nabisco Investment Committee Summary: Had the RJR fiduciaries simply (i) performed a thorough investigation of the alternatives, (ii) made a reasoned decision based on their investigation, and (iii) documented the basis for their decision, no breach of duty would have occurred in the first place even though, with hindsight, the decision may have been different.
Source: Benefitsbryancave.com
Compliance and Regulatory Related
Many DC Plan Sponsors Must Annually "Notice" Their Participants Summary: Sponsors of DC plans with certain features are required to provide annual notices to participants. Generally, these annual notices are in addition to any initial notices the plan sponsor may be required to provide on or before an employee's eligibility date for the plan feature. This publication provides a summary of the annual requirements for those notices, including timing, recipients, contents, and method of delivery.
Source: Prudential.com
Limitations on Mid-Plan Year Amendments to Safe Harbor 401k Plans Summary: There are currently very few amendments that can confidently be made to a safe harbor 401k without potentially running afoul of this restrictive IRS position. This article briefly discusses the limited, formally documented exceptions to the general "do not amend" rule otherwise espoused by the IRS.
Source: Legacyrsllc.com
Understanding ADP and ACP Testing Summary: The IRS requires plan sponsors to perform various tests each year to ensure that 401k plans are not discriminating in favor of business owners or other high paid employees. Two of the required tests are the Actual Deferral Percentage and Actual Contribution Percentage (ADP/ACP) tests. These tests are often administered by an independent party due to the complicated nature of the testing, and to ensure neutrality.
Source: Consultrms.com Summary: Once you reach a certain age, the IRS requires you to withdraw a minimum amount of money, called a required minimum distribution, from many retirement accounts, including traditional IRAs, SIMPLE IRAs and most employer-sponsored retirement plans. The rules around RMDs are complex, but this short article reviews the basics.
Source: Schwab.com Summary: Every plan sponsor should understand what can and cannot be paid from plan assets. If you make these kinds of decisions and do not know how to differentiate between things that can and things that cannot be paid for by the plan, you need to get educated.
Source: Ferenczypaul.com
More Retirement Plans May Invest in CITs Summary: Revenue Ruling 2014-24 modifies the rules regarding 81-100 group trusts by stating that certain retirement plans qualified under the Puerto Rico Code may invest in 81-100 group trusts even if the plan is not also qualified under the Internal Revenue Code. It also clarifies that assets held by insurance company separate accounts may be invested in 81-100 group trusts under some circumstances.
Source: Plansponsor.com
Marketplace News CAPTRUST and Minneapolis Based DCAdvisors Merge Berkshire Hathaway Releases Statement on DB/DC Lawsuit Brian Bruzda, CFA, Joins Arthur J. Gallagher & Co. Hancock Launches Online Tool to Simplify 401k Plan Management Sibson Consulting Expands Retirement Practice Pentegra Introduces Publication to Promote Greater Retirement Readiness Securian Adds to Large Plan Retirement Sales Staff Retired Rear Admiral Steve Branham Joins 3ethos MassMutual Names New Head of Institutional Investments for Retirement Plans Great-West Rebranding Its Retirement Businesses Unified Trust to Implement AXIS Retirement Analytics Platform OneAmerica Completes Acquisition of City National's Retirement Division Coldstream Announces New Chief Investment Officer Great-West Completes Acquisition of JP Morgan Retirement Plan Services
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