Some "Truths" About The Retirement Plan Business
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Newsletter Sponsor Are all $5,000,000 401k Plans Created Equal? The findings might surprise you. This visually appealing infographic was created by using data from the 401k Averages Book to compare the average costs of two $5,000,000 401k plan benchmarks. Click here to receive a copy of the infographic and see what we found out. In This Issue
General Items Some "Truths" About The Retirement Plan Business Abstract: There are many "truths" out there in the retirement plan industry that plan providers may not be aware of and some plan providers who don't want to know about these "truths." According to the author, "This article is going to reveal some 'truths' that many plan providers like you don't or don't want to know about." Source: Jdsupra.com Fiduciary and Plan Governance Reducing Exposure to 401k Plan Class Action Litigation Abstract: If the board of directors adopts a 401k plan, the plan document does not name the company plan sponsor as a named fiduciary but instead names, for example, a benefits committee (comprising subject matter expert employees), and the board exercises no discretion regarding the membership of the committee, the administration of the plan or its investments, then the board has best positioned itself to argue that it is not a plan fiduciary subject to a claim of a breach of fiduciary duties. Not only that, but it has prudently set into motion the best governance practices for the plan. Source: Pillsburylaw.com Four Pitfalls to Avoid When Replacing 401k Plan Investments Abstract: With more than $5 trillion held in 401k plans, watching over retirement savings is no small task for plan sponsors and advisors. Maintaining these plans involves several duties: choosing and changing investments, communicating these changes to employees, and more. Additionally, this fiduciary responsibility includes acting in the best interest of plan participants. Because the tasks of monitoring and making changes to a plan's investment menu can be complicated, it's important for 401k plan sponsors and advisors to do their best to avoid a few common pitfalls. Source: Morningstar.com The Hidden Danger of Over-Diversification in 401k Plans Abstract: Aristotle said, "The virtue of justice consists in moderation, as regulated by wisdom." Nowhere is this adage more appropriate than in selecting investments from a 401k menu. Plan sponsors might feel their job is done once a robust plan menu is provided to employees, but it's really only the beginning. One of the most overlooked plan menu perils is what's known as "over-diversification." Source: Fiduciarynews.com 401k Fiduciary Responsibility and Mutual Fund Fees Abstract: Fiduciaries often are aware of administrative and disclosure requirements, but sometimes become negligent when choosing funds with reasonable fees. Even those who are aware can inadvertently fail to select the best mutual fund. While 401k fees have decreased in recent years because of litigation and various DOL regulations, mutual funds can still charge indirect fees that DOL would deem unreasonable. Unfortunately, fiduciaries with little knowledge regarding fee structures may authorize a plan to charge fees, decreasing participant balances. Source: Forbes.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers More Employers are Adopting Lifetime Income Solutions for DC Retirement Plans Abstract: Amid heightened concern over an aging workforce, increasing longevity and the financial health of their workers, a growing number of U.S. employers are adding lifetime income solutions to their defined contribution retirement plans, according to the 2019 Lifetime Income Solutions Survey by Willis Towers Watson. Source: Willistowerswatson.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers 2019 Top DC Wholesalers Announced Abstract: NAPA announces the sixth annual list of Top 100 Defined Contribution Wholesalers, as selected by the nation's leading retirement plan advisors. We call them "Wingmen" because if they are doing their job, they have your back. Source: Napa-net.org 403b Plans NTSA Unveils 403b Plan Enhancement Guide Abstract: The NTSA has unveiled the "403b Plan Enhancement Guide," a new white paper that highlights opportunities that can help increase participation and savings for the nation's public education professionals. The new white paper builds on the NTSA's 2018 survey of public education 403b retirement plans and offers suggestions on how to further improve the 403b. Source: Ntsa-net.org »» Click here for More 403b Material Target-Date Funds Target-Date Funds May Not Play Well With Others in Defined-Contribution Plans Abstract: Target-date funds are designed to simplify investing for participants in defined-contribution plans, especially in plans that use them as the default investment. However, participants sometimes combine target-date funds with other investment-plan options, thus becoming what's known as mixed target-date fund investors. While combining target-date funds with other investments may not seem problematic at first glance, it can diminish -- or even eliminate -- the target-date fund's potential benefit. Source: Morningstar.com »» Click here for more on Target-Date Funds Court and Legal Group Sides With Intel in "Actual Knowledge" Case Abstract: A group has filed a brief of amici curiae in the case of Intel Corporation Investment Policy Committee v. Sulyma, asking the Supreme Court to reverse a decision made by the 9th U.S. Circuit Court of Appeals. They argue that the appellate court decision undermines the value of retirement plan disclosures. Source: Planadviser.com Abigail Johnson of Fidelity Reaches Deal to Avoid Testifying at 401k Trial Abstract: Abigail Johnson, chairman and chief executive of Fidelity Investments, will not have to testify at an upcoming trial regarding the Massachusetts Institute of Technology 401k plan, marking a stark de-escalation of tensions that had flared in recent weeks amid allegations the executive was engaged in a quid pro quo arrangement with the university's retirement plan. Source: Investmentnews.com (registration may be required) »» Click here for more Court and Other Legal Issues Multiple Employer Plans (MEP) MEPmentum Continues: DOL Issues Guidance on 'Open' MEPs Abstract: Many members of the retirement community have long advocated for expanding the availability of multiple employer plans as a way to encourage more small employers to sponsor retirement plans. However, certain requirements under ERISA and the Internal Revenue Code limit the availability of MEPs for most employers. MEP initiatives have gained steam in recent months as the two federal agencies most directly responsible for administering ERISA and its related provisions under the Code have issued guidance intended to expand access to MEPs, while even more dramatic changes at the regulatory and legislative level may be forthcoming. Source: Groom.com »» Click here for more on Multiple Employer Plans State-Based Private-Sector Retirement Programs CalSavers: Employers Should Remain Compliance-Ready, Despite Court Challenges Abstract: How do business owners count employees in order to determine their applicable CalSavers effective date? What is the impact, if any, of being part of a "controlled group" of businesses, or of using a staffing or payroll agency? What about out-of-state employers, or California-based employers with out-of-state employees? This article does a "deep dive" on these and other CalSavers employer coverage issues. Source: Eforerisa.wordpress.com Compliance and Regulatory Avoid These Common Plan Sponsor Mistakes Abstract: Once you've done the tough work of creating and implementing a retirement plan for your organization, you might assume that it'll be smooth sailing from this point on. But the ongoing management of a well-functioning retirement plan can be far more challenging than it may seem. With so many different moving parts, it's not unusual for things to fall through the cracks, even for the most meticulous plan sponsors. Learn more about some of the most common plan sponsor mistakes and how to avoid them. Source: Planpilot.com RMDs Are Not Just a Participant Headache Abstract: The employer is charged with the duty to know to whom and when an RMD must be paid and to make sure they get correctly calculated and paid out in a timely fashion. Moreover, depending on plan language, employers may take on even greater responsibilities than their statutory ones. The failure to correctly calculate or timely pay RMD payments to the proper recipients may cause an operational failure that puts a plan's qualified status in jeopardy and could well expose the employer and other fiduciaries to fiduciary duty violations and complicated Form 5500 reporting issues. Source: Boutwellfay.com IRS Expands Its Correction Program (EPCRS) for Qualified Plans Abstract: Recently the IRS expanded the EPCRS (Rev. Proc. 2019-19) in large measure to facilitate additional self-correction (i.e., correction without IRS approval) for certain types of failures, including for the first time in the history of the program, certain plan loan violations which are common errors that plan sponsors routinely face. This article, in F&Q format, is a summary of the changes to the program. Source: Groom.com »» Click here for more Compliance and Regulatory Material
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