Newsletter for January 28, 2019
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In This Issue
Insight: Studies, Research, and White Papers
Plan Enhancements Drive Record Retirement Savings Rates
Abstract: Research from the Plan Sponsor of America finds that employers are making significant plan design enhancements that are likely driving the record contribution rates. The increases in retirement contributions from both plan participants and plan sponsors confirm the positive impact of company-sponsored retirement savings plans. The survey also finds that a larger percentage of eligible employees are participating in their plan. The percentage of eligible employees with an account balance has increased by more than six percentage points in the last 10 years.
Source: Psca.org
Deferred Income Annuities Enhance Retirement Readiness
Abstract: The Employee Benefit Research Institute has found that Deferred Income Annuities can provide an effective hedge against outliving retirement savings. Many Baby Boomers and Gen Xers face the grim prospect of outliving their retirement nest eggs, yet only a small percentage of defined contribution and individual retirement account balances are annuitized, and a significant percentage of defined benefit accruals are taken as lump-sum distributions when the option is available.
Source: Ebri.org
Hispanic Retirement Outlook Gets Worse
Abstract: One thing really stood out in a recent study: the deterioration in Hispanics' retirement prospects since the 2008-2009 recession. Workers' success at saving for retirement is becoming increasingly important to their financial security in old age. This puts Hispanic households at a clear disadvantage: they earn half as much as white households, which makes it that much more challenging to build retirement wealth by buying a house or saving more in their 401ks. Two-thirds of Hispanic workers don't even participate in an employer 401k.
Source: Bc.edu
»» Click here for More Studies, Research, and White Papers
General Items
Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2019
Abstract: Many employers are debating how to most efficiently take advantage of the DC limit increase to $56,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.
Source: Consultrms.com
Auto Drawdown on Way to Becoming New 401k Mainstay
Abstract: Auto enrollment. Auto escalation. The two have worked hand in glove as 401k plan sponsors tried to entice participants to save for retirement. While the twin auto features are mainstays in 401(k) plans, the popular duo soon might be sharing the spotlight with a new rising star: the automatic drawdown.
Source: Pionline.com
Items of Special Interest to Service Providers
What Type of Fiduciary Should Retirement Plan Advisers Be?
Abstract: For many 401k plan advisers, the Department of Labor fiduciary rule was a nonevent. The question for advisers was not whether they would act as a fiduciary, but what kind: a 3(21) or 3(38) fiduciary? Now that the DOL rule has been vacated, advisers are trying to answer that question, as are the plan sponsors that hire them.
Source: Investmentnews.com (registration may be required)
Nevada Proposes Sweeping Fiduciary Regulation
Abstract: On January 18, the Nevada Securities Division released its long-awaited proposed draft regulation. Under the proposed regulation, a broker-dealer and sales representative are presumed to owe a fiduciary duty to the client.
Source: Fiduciarygovernanceblog.com
How Advisers Can Help 401k Clients With Auto-Rollovers
Abstract: Retirement advisers looking to make positive changes in 2019 should resolve to help 401k clients arrange for mandatory distributions to rollover IRAs. Advisers can help plan sponsors trim their administrative costs, reduce fiduciary risks and provide potential wealth benefits to former plan participants by instituting a process to automatically distribute small account balances of departing employees into individual retirement accounts.
Source: Investmentnews.com (registration may be required)
Plan Communications
Retirement Expectation Versus Reality: Communication Opportunities at the Crossroads
Abstract: By communicating with employees in a way that recognizes both the perceptions and the realities, employers can smooth the transition from worker to retiree. With this disconnect in mind, it's important for employers to pay attention to key areas where worker expectations and retirement reality part ways. They may then be able to direct their communication efforts where they could truly make a difference.
Source: Tra401k.com
Effectively Communicating Your Retirement Plan Message
Abstract: Communicating with employees is one of the most important aspects of any retirement plan. A plan may be carefully designed to help participants achieve their retirement objectives, but if the plan sponsor does not effectively communicate the key information, the participants may not have the understanding they need to succeed in reaching their goals. For communication to be effective, it needs to be delivered in an appealing format with a message that resonates with the individual. While it is impossible to control all the potential variables in pushing the meaning and importance of a communication piece through to their employees, there are some steps which a plan sponsor can take to help.
Source: Cammackretirement.com
»» Click here for more on Plan Education and Communications
Court and Legal
Putnam Asks Supreme Court to Weigh in on Fund Comparisons in ERISA Cases
Abstract: Putnam Investments has filed a petition for writ of certiorari with the U.S. Supreme Court asking it to settle questions in a case in which it was accused of engaging in self-dealing by including high-expense, underperforming proprietary funds in its own 401k plan.
Source: Planadviser.com
American Century Wins 401k Lawsuit Over In-House Funds
Abstract: American Century Investments won a class-action lawsuit alleging the asset manager profited from its company 401k plan at the expense of employees by loading the retirement plan with in-house funds. Judge Greg Kays of the U.S. District Court for the Western District of Missouri found in favor of American Century on all counts, saying plaintiffs failed to prove that American Century had breached its fiduciary duty to plan participants.
Source: Investmentnews.com (registration may be required)
»» Click here for more Court and Other Legal Issues
Legislative and Washington DC
Is the Partial Government Shutdown Affecting Your Benefit Plans?
Abstract: Benefit professionals need to be very careful about how they respond to the partial government shutdown. Potential areas of concern include, but are not limited to, the six covered in this article.
Source: Wagnerlawgroup.com
»» Click here for more on Legislative and Washington Actions
Compliance and Regulatory
Painless 401k Compliance in 2019? Avoid These Five Mistakes
Abstract: In a study of over 350 companies nationwide, the average company makes 53 payroll mistakes each year. If left unfixed, these mistakes can have some big ramifications, both in terms of compliance risk, as well as needless work during your annual audit. This article will walk you through five of the biggest 401k compliance mistakes.
Source: Forusall.com
Strategies to Manage Retirement Plan Loans
Abstract: While the retirement plan industry is primarily focused on helping participants invest more money, it is equally important to prevent them from taking out loans or hardship withdrawals. A well-crafted loan policy statement can help plan sponsor clients take control of leakage and excess early withdrawals, and, like any stated compliance policy, what is written must be followed.
Source: Planadviser.com
Plan Fiduciaries Pay $538,248 for Failure to Timely Remit Contributions
Abstract: Plan Fiduciaries withheld tens of thousands of dollars from employees' paychecks, but did not forward these employee contributions to the plans, or did not forward them in a timely manner. The DOL also alleged in a lawsuit that fiduciaries to two retirement plans failed to administer the plans, leaving participants unable to gain information about their funds or gain access to their plan accounts.
Source: Planadviser.com
»» Click here for more Compliance and Regulatory Material
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