Mitigating the Many Risks in DC Retirement Plans
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In This Issue
Fiduciary and Plan Governance Material
Mitigating the Many Risks in DC Retirement Plans Summary: Organizations that have adopted DC plans to shift investment risk to plan participants are in for a surprise. Employers are not off the hook. In fact, plan sponsors are subject to multiple levels of risk, including vendor-management, financial, administration and compliance, plan design and reputational risk. This article examines these risks and how they might negatively affect an organization's DC plan and the retirement readiness of its employees.
Source: Sibson.com
The Uninsured Fiduciary: Have You Read the Fine Print in Your Policy? Summary: If you are a plan fiduciary and your company has purchased fiduciary liability insurance, you and your board may have simply assumed that the policy would cover any fiduciary breach. A decision just issued by a Pennsylvania court denying coverage to CIGNA is a wakeup call to carefully review such policies to determine what they do and do not cover.
Source: Pensionsbenefitslaw.com
Evaluating 401k Providers: Separating Commodity From Value-Added Services Summary: Selecting competent service providers is one of the most important fiduciary duties of a 401k plan sponsor, and it can appear daunting at first glance. Fortunately, this process can be made much simpler by understanding each service that makes up a 401k plan and applying appropriate benchmarks to those services to measure their value.
Source: Employeefiduciary.com
Seven Qualitative Factors for Evaluating Investments Summary: Due diligence is the heart and soul of investment selection. A good due diligence process objectively whittles down the universe of available funds to just those that meet your high standards for inclusion in an investment portfolio. Here are seven qualitative factors that a fiduciary should consider implementing into their due diligence process.
Source: Fi360.com
Insight: Studies, Research and White Papers
401k Loans: A Temporary Band-Aid? Summary: Study data implies that the high rate of 401k plan loan defaults could be for reasons of low financial literacy, impatience, or inattention. Many employees were surprised by the effect of an unanticipated job change on an outstanding 401k plan loan. Author suggests we need more and better financial education in the workplace.
Source: Retirementplanblog.com
Nine in 10 Canadian DC Plan Sponsors Meet Their CAP Goals Summary: Ninety-seven per cent of defined contribution plan sponsors and 90 per cent of registered retirement savings plan sponsors say their plans are meeting their original Capital Accumulation Plan (CAP) objectives, reveals the Great-West Life study, 2014 CAP Benchmark Report.
Source: 401khelpcenter.com
Defined Contribution Plan Participants Activities, First Three Quarters of 2014 Summary: Key findings include: (1) DC plan withdrawal activity in the first three quarters of 2014 remained low and was similar to the activity observed in 2013. (2) The commitment to contribution activity in the first three quarters of 2014 continued at the high rate observed 2013. (3) Most DC plan participants stayed the course with their asset allocations. (4) DC plan participants' loan activity remains elevated compared with six years ago.
Source: Ici.org
Failing 401k Sponsors Cling to Their Own Stock Summary: Companies with high levels of their own stock in their retirement plans often fail to scale back their exposure even when they're heading into financial straits, according to a new study. The result, the study said, can lead to significant losses to participants' retirement savings, suggesting a need for limits on how much such stock should be held by a company plan.
Source: Benefitspro.com
Items of Special Interest to Service Providers
The Future of Outsourcing 3(16) Fiduciary Services Summary: With the popularity of fiduciary outsourcing there has been a significant wave of new companies who will take on these delegated rolls, and recently, there has been a surge in the 3(16) Plan Administrative space. The focus of this article is on the 3(16) Plan Administrative fiduciary.
Source: Tparesources.com
Target-Date Funds
Are Target-Date Funds a Ticking Time Bomb? Summary: SEC Commissioner Luis Aguilar believes target-date funds should be given the same treatment as cigarettes, they both should come with dire warning labels. Aguilar feels "The relentless growth in target-date funds is troubling because studies have shown that investors, and industry professionals alike, do not fully appreciate the risks these funds present."
Source: Fiduciarynews.com
Legislative and Washington DC
Bill Introduced to Create Oregon Retirement Savings Fund Board Summary: SB 615 creates the Oregon Retirement Savings Fund Board, which will include legislative oversight, support from the office of the State Treasurer, and representation from investors, employers, workers, and retirees. The Board will create a retirement savings plan and present it to the 2016 Oregon Legislature.
Source: 401khelpcenter.com
Compliance and Regulatory Related
2015 Key Administrative Dates and Deadlines for Calendar-Year DC Retirement Plans Summary: Milliman has published this 2015 retirement plan calendars for defined contribution plans. The calendar provides key administrative dates and deadlines.
Source: Milliman.com
Depositing Company Matching Contributions, Timing Is Everything Summary: For years now, we have been hearing from the DOL about the importance of depositing employee 401k deferrals and loan payments as quickly as possible. While that continues to be the case, it seems that there is not nearly as much commentary about when to deposit company matching or profit sharing contributions. This article reviews the issue.
Source: Markleyactuarial.com
Required Minimum Distributions for 5% Owners Summary: The required beginning date for 5% owners to begin taking RMDs is April 1 of the year after they reach age 70 1/2, regardless of whether they are still working. This article contains an explanation of the current rules for 5% owners, as well as some examples that outline how ownership changes can affect RMD requirements.
Source: Unitedretirement.com
Qualified Plan Internal Controls Summary: Having sound and effective procedures in place to prevent and detect plan errors is an IRS requirement that will be checked in any IRS plan audit. Article reviews some internal controls that a plan sponsor should have.
Source: Ekonbenefits.com
Puerto Rico Treasury Announces 2015 Retirement Plan Limits Summary: In Tax Policy Circular Letter 14-05, the Puerto Rico Treasury announced 2015 benefit limits for retirement plans qualified in Puerto Rico. Sponsors of dual-qualified plans (those qualified in both the U.S. and Puerto Rico) and plans qualified solely in Puerto Rico that wish to take advantage of the increased limits should review their plan documents and summary plan descriptions to determine whether any amendments are needed
Source: Towerswatson.com
Marketplace News Nominations Open for 2015 NTSA Elite Advisor Award Redhawk Launches 403(b) Managed Account Solution Voya Adds Retirement Income Option to Recordkeeping Platform
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