Five Biggest Worries of 401k Plan Sponsors and What to Do About Them
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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
Insight: Studies, Research, and White Papers The Five Biggest Worries of 401k Plan Sponsors and What to Do About Them It might seem odd that 401k plan sponsors continue to have worries about their role in the retirement savings plan universe. But they do. Here are the five biggest worries of 401k plan sponsors and what they might do to relieve that anxiety. Source: Fiduciarynews.com 2019 DC Survey: Plan Benchmarking The reality is that sponsors do not always think about their DC plan in broad terms. The result of having a basic or minimalist plan can be employees working longer than expected and employers, at times, carrying the burden for this. Employees who fail to retire on time for insufficient financial assets will tend to have greater health care and disability claims and generate more workers' compensation claims. These things, in turn, can negatively affect an employer's balance sheet. Sponsors can see by benchmarking that yesterday's solutions may not be effective today. Every year PLANSPONSOR has conducted a survey of defined contribution plan sponsors around the country. This is the latest findings for benchmarking a plan against its peers or just gleaning some new solutions. Source: Plansponsor.com Expanded 401k Menu May Nudge Participants Toward Better Outcomes While past studies of DC plan designs suggest that smaller core menus improve participation rates and outcomes by reducing choice overload, a new study questions that wisdom. In fact, the Morningstar white paper concludes that plan sponsors should be doing the opposite, asserting that a bigger lineup is actually better. Source: Napa-net.org How Core Investment Menu Size Impacts Participant Investment Decisions in DC Plans Research has shown that employers' ability to automatically enroll workers into investment defaults within DC plans led to a significant increase in participation rates and a reduction in self-directing participants. However, many studies that plan sponsors, consultants, and investment advisors use to identify best practices for participants were conducted prior to the introduction of the PPA. The potential impact of smaller core investment menus may not have the same effect when most participants are ending up in the default investment option today. The paper explores the relationship between core investment menu size and two key participant investment decisions: the acceptance of the plan's default-investment option, and the efficiency of portfolios among participants who were self-directing their accounts. Source: Morningstar.com Facts About Women's Retirement Outlook Today's women are better educated and enjoy career opportunities that were unimaginable 50 years ago. Despite this progress, women continue to lag behind men in terms of saving and planning for retirement. A woman's path to a secure retirement is filled with obstacles, such as lower pay and time out of the workforce for parenting or caregiving, which can negatively impact her long-term financial situation. The goal of this research is two-fold: 1) to raise awareness of the retirement risks that women are facing, and 2) highlight opportunities for women to take greater control of their finances and their future. Source: Transamericacenter.org Some 401k Participants May Be Exposed to Unnecessary Risk Even though 401k participants are increasingly leveraging target-date funds to keep their asset allocations on track, a new analysis by Fidelity suggests that many had stock allocations higher than those recommended for their age group. Source: Napa-net.org »» Click here for More Studies, Research, and White Papers General Items The Evolution of Retirement Savings to Retirement Income Sponsors looking to make the transition to providing income solutions can choose from plan design features or additional products aimed at income creation. Recordkeepers, asset managers, and insurance companies are developing new creative solutions to expand the options that are available today. As with most plan sponsor decisions, there is not a "one size fits all" answer; each solution carries its benefits and shortcomings. In general, there are five key areas to consider when evaluating income solutions. Source: Fiallc.com Fiduciary and Plan Governance Key Components of an Effective Retirement Plan Committee Many organizations choose to form a committee to manage their retirement plan, as having a diverse range of perspectives often leads to better results versus one individual managing all the duties and decision-making. There is no one-size-fits-all approach to building a retirement plan committee. Creating your committee depends on the size and demographics of the plan and employee population. However, to achieve the most cohesive and efficient committee possible, plan sponsors should look to a couple of key components. Source: Planpilot.com »» Click here for more Fiduciary and Plan Governance Material Items of Special Interest to Service Providers The SEC's Office of Compliance Inspections and Examinations published a Risk Alert highlighting the most often cited deficiencies and weaknesses observed in recent examinations of registered investment companies, including as related to national examination initiatives focusing on money market funds and target-date funds. The observations resulted from nearly 300 fund examinations over a two-year period, as well as from 70 money market fund exams and exams of 30 target-date funds. Source: Dorsey.com Court and Legal Prudential's GoalMaker Offering Targeted in New Excessive Fee Suit A new participant lawsuit claims that an asset allocation program "was not a model of asset allocation but a model of plan mismanagement." The plaintiffs in the case are participants in the AutoZone 401k plan, which has some $545 million in assets and approximately 15,000 participants, according to the suit. While they raise a number of issues in common with this genre of excessive fee lawsuits, they devote most of their focus on Prudential's GoalMaker offering, which had been established as the plan's default investment option. Source: Napa-net.org Are 401k Plans in Danger of Not Being Green Enough? As the broad world of investors has embraced a more climate-friendly lens, 401k plans have lagged behind. But are 401k plan sponsors exposing themselves to legal trouble as a result? A 24-year-old Australian environmental scientist sued his A$57 billion ($39 billion) retirement fund in federal court for not adequately disclosing or assessing the impact of climate change on its investments. Source: Investmentnews.com (registration may be required) »» Click here for more Court and Other Legal Issues Compliance and Regulatory Time to Review Your Plan's Hardship Distributions: Understanding 2020 Hardship Changes On September 19, the IRS released final hardship regulations that were previously issued in proposed form on November 9, 2018. The final regulations contained substantive changes to the previously issued proposed regulations. This article provides an overview of some of the changes set forth in the proposed regulations that were retained in the final regulations and become effective beginning in 2020. Source: Hallbenefitslaw.com DOL Proposes a More Practical Rule for Electronic ERISA Disclosures The DOL released a proposed rule for the electronic delivery of ERISA disclosures. Although the DOL already allows for electronic delivery under the 2002 Electronic Safe Harbor, its availability is limited, and technology quickly outpaced its usefulness. The proposed rule creates a new, additional safe harbor the DOL calls the "Notice and Access" safe harbor that will allow for electronic delivery as a default method of delivery for certain ERISA Title I disclosures. At this point, the safe harbor applies only to ERISA-governed retirement plans and does not reach health and welfare benefit plans. Source: Employeebenefitslawreport.com Year-End Compliance Issues for Single-employer Retirement Plans By year-end 2019, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with the statutory and regulatory requirements of ERISA and the tax code. This article looks at key areas -- including administrative compliance issues -- that defined benefit and/or defined contribution plan sponsors should address by Dec. 31, 2019. Source: Milliman.com IRS Proposes Updated Life Expectancy Tables for Required Minimum Distributions IRS proposed changes to the required minimum distribution rules, updating the life expectancy tables to be used in calculating required distributions. The new tables significantly increase the applicable life expectancy assumptions and, consequently, reduce required distribution amounts. This article briefly reviews the IRS's proposal. Source: Octoberthree.com »» Click here for more Compliance and Regulatory Material Marketplace News Schwab to Launch TDF-Managed Account Hybrid for 401ks »» Click here for More Marketplace News
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