3(16)s: Prudent Course or Invitation for Mischief?
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In This Issue
Fiduciary and Plan Governance Material 3(16)s: Prudent Course or Invitation for Mischief? Summary: Plan sponsors for years have shared fiduciary duty by outsourcing to a 3(21), meaning someone who recommends a menu of investment choices. They also can hand over investment selection and management duties by using a 3(38) service provider. Now, increasingly, sponsors are turning to 3(16) services to offload the job of selecting and monitoring trustees and other service providers, investments, as well as the investment adviser to their plans. It's, like, the ultimate sponsor solution -- if done right. Source: Benefitspro.com The Fiduciary Duty to Hire Expert Advisers Summary: This 34 page article in the Journal of Deferred Compensation by Fidelity's Tom Peller explains when fiduciaries must hire experts and the three steps courts expect fiduciaries to follow when using expert assistance. Source: Fidelity.com Farewell to Company Stock, or Not? Summary: This article deals with DC litigation around company stock and the potential effect of the recent Supreme Court decision in Fifth Third Bancorp v. Dudenhoefferon. It suggests that the risk to plan sponsors of offering company stock may be slightly higher given the Court's rejection of the presumption of prudence and explains that simply "hardwiring" company stock into a DC plan document and then following the document without more process will not be sufficient. Source: Pimco.com Hiring an ERISA 3(38) Investment Manager Summary: In recent years, several high-profile lawsuits have alleged that employers violated their fiduciary duty to prudently select and monitor the investment options offered in their 401k plans. These lawsuits have targeted larger plans, but the fiduciary standards cited apply equally to both large and small business retirement plans. Because employers want to avoid 401k litigation, hiring an ERISA 3(38) Investment Manager can be the simplest way to limit 401k investment liability. Source: Employeefiduciary.com
403(b) Plans More 403(b) Plan Sponsors Adopting Industry Best Practices Summary: Higher education retirement plan sponsors have made great strides in 2013 and 2014 toward enhancing their retirement plan designs in order to increase participant success, lessen their administrative burden, and minimize fiduciary risk, according to the fourth edition of the 'Higher Education Retirement Plan Survey' from Cammack Retirement Group. Source: 401khelpcenter.com
Insight: Studies, Research and White Papers Canada's Retirement Income System Ranks High Summary: Canada's retirement income system maintained its 'B' grade in the 2014 edition of the Melbourne Mercer Global Pension Index (MMGPI), reinforcing its position as one of the leading retirement income systems in the world. While Canada's ranking fell from sixth to seventh after the addition of five new countries, Canada's overall score in the index increased slightly from 67.9 to 69.1. Source: Benefitscanada.com 2014 Guardian Workplace Benefits Study Summary: This 70 page study examines five key issues from both the employer and employee perspectives. It also examines additional issues related to how this changing benefits environment is affecting American workers. Findings in this study suggest that while there may be changes in how benefits are offered and administered in the coming years, employee benefits continue to play a vital role in workforce financial and general well-being, as well as being an important element in attracting and retaining employees. Source: Guardianworkplace.com Are Employees Getting What They Need From Their Workplace Benefits? Summary: Seventy-four percent of middle-income employees derive the majority of their financial security from the benefits they receive at the workplace, according to the 2014 Guardian Workplace Benefits StudySM. Despite the importance of benefits, only one in four employees finds their company's communications helpful in choosing what's right for them. Source: 401khelpcenter.com
Items of Special Interest to Service Providers End of "Amateur Hour" Sharpens the Focus of DCIO Sales Efforts Summary: "Amateur hour is over, we're now fighting for every dollar," this is how a defined contribution investment-only sales leader from a large global asset manager recently described the DCIO business. Research just released takes an in-depth look at DCIO distribution benchmarks and strategy. Source: 401khelpcenter.com Pursuing Rollovers in an Evolving Regulatory Landscape Summary: The current regulatory environment can present challenges to advisors who provide services to retirement plans or retirement plan participants. Paper identifies steps for advisors to consider in light of the current regulatory environment and anticipated developments pertaining to capturing rollovers. Source: Pershing.com (free registration may be required) Managed Services Help Recordkeepers Evolve Their Operations & Grow Revenue Summary: Both technology and operational issues make it difficult for retirement administrators to tame back-office complexity, reduce costs, deliver new products and services, and communicate over new channels. Managed services, including IT outsourcing and business process outsourcing, can help retirement administrators overcome these challenges. Source: Sungard.com New Rules for IRA Rollovers Coming Summary: The Department of Labor is likely to hold broker-dealers who chase IRA rollovers to the same fiduciary standards that retirement advisors must meet. That was the prediction offered Friday by ERISA attorney Fred Reish, who noted that, with an estimated $2 trillion in the 401k accounts of baby boomers at stake, regulators are "taking it all very seriously." Source: Benefitspro.com
Court, Legal, Legislative and Washington DC Court Dismisses Stock Drop Case Against UBS Summary: A federal district court judge has found a participant in the UBS Savings and Investment Plan lacks standing to sue regarding the offering of UBS company stock in the plan's investment lineup. Source: Plansponsor.com
Compliance and Regulatory Related Information on Brokerage Windows Requested by DOL Summary: The DOL recently released a request for information concerning brokerage windows in 401k plans. The RFI includes 39 questions covering definitional issues, plan offerings, participation, selection, information available to fiduciaries, costs, disclosure, the role of advisors, fiduciary duties and reporting. This article begins by reviewing the brokerage window issue and then discusses the DOL's RFI. Source: Octoberthree.com IRS Drafting New Form for Qualified Longevity Annuity Contracts Summary: The IRS is drafting a new form to be used to report the status of Qualified Longevity Annuity Contracts held in retirement plan accounts and IRAs. The new form, not yet released by the IRS, is Form 5498-A, Qualified Longevity Annuity Contract Information. Source: Ascensus.com Payments to 401k Following Misappropriation Are Restorative, Not Plan Contributions Summary: In a private letter ruling, the IRS has concluded that an employer's proposed payments to a 401k plan to replace losses resulting from fraudulent activity will constitute restorative payments, not plan contributions. The proposal followed a DOL investigation that uncovered misappropriation of plan funds and related false statements (in violation of ERISA) over a period of nearly five years by an individual employed by a plan service provider, ultimately leading to criminal charges against the individual. Source: Ebia.com
Marketplace News Principal Unveils Personalized Retirement Wellness Score Voya Shakes up Leadership in Retirement Solutions Business Newport Group and Verisight Announce Merger Ringquist Is New EVP for Sales & Marketing at RCH MassMutual Enhances Small Market 401k Offering Kidder to Offer ERISA 3(16) Fiduciary Services ADP Delivers Enhanced Self-Directed Brokerage Option Securian Builds Digital and Acquisition Strategies Team Pentegra Retirement Services Launches New Website Sage and JULY Join Forces on Cash Balance Solutions Abigail Johnson Named Fidelity's CEO
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