DC Trends Survey Highlights Plans' Focus for 2020
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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 DC Trends Survey Highlights Plans' Focus for 2020 Defined contribution plan sponsors continue to make fees a main priority, according to Callan's 2020 Defined Contribution Trends Survey, but they are also focused on communicating with participants and plan to highlight the topic of financial wellness in 2020. Source: Callan.com Six Key Industry Trends to Watch The Plan Sponsor Council of America recently released its 62nd Annual Survey of Profit-Sharing and 401k Plans, documenting a record high rate of savings, alongside an uptick in Roth contributions and other trends. However, sometimes the things that do not change can be just as telling. Here are six. Source: Napa-net.org Here's Why Americans Are Contributing More to Their 401k Plans 401k savers are stockpiling an average of 12.9% of their salaries annually. Retirement experts typically recommend a total savings rate of between 10% and 15%. The interesting thing is employers -- not the workers -- appear to be the primary cause for the overall savings increase. Source: Cnbc.com »» Click here for More Studies, Research, and White Papers Target-Date Funds Target-Date Funds: Blend Is the Trend Over a third of defined contribution plan sponsors offer both active and passive funds on their core menus, representing 52% of total DC core menu assets. Yet, target-date funds that blend the two have historically garnered limited attention, not due to lack of interest, but because of limited product offerings. However, that is changing. Source: Pimco.com »» Click here for more on Target-Date Funds Plan Communications Retirement Plan Terms to Avoid Common retirement plan terms used by many advisors and plan sponsors score terribly when deployed in participant communications. They are just "mumbo-jumbo" to most plan participants. Here are some of the worst fairing terms in regard to participant engagement. Source: Cammackretirement.com »» Click here for more on Plan Education and Communications Court and Legal Lawsuit Against Trade Association's 401k Plan Moves Forward National Rural Electric Cooperative Association is facing a lawsuit regarding excessive fees and prohibited transactions. U.S. District Judge Liam O'Grady of the U.S. District Court for the Eastern District of Virginia has found that a lawsuit alleging prohibited transactions against fiduciaries of a trade association's 401k plan "contains sufficient well-pleaded facts to survive a motion to dismiss." Source: Plansponsor.com Chemical Distributor Faces Excessive Fee Suit Against 401k Plan An ERISA lawsuit has been filed against chemical distributor Brenntag North America Inc. alleging the company and other fiduciaries of the Brenntag USA Profit Sharing Plan failed to take measures to ensure reasonable investment and recordkeeping fees. The plaintiffs say defendants failed to utilize the lowest cost share class for many of the mutual funds within the plan and failed to consider collective trusts, commingled accounts, or separate accounts as alternatives to the mutual funds in the plan, despite their lower fees. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC SECURE Act's Impact on Large Employer Retirement Plans The SECURE Act, signed into law on Dec. 20, 2019, contains various provisions that may impact large employer-sponsored retirement plans. In effect, the act will usher in the need for plan sponsors to reevaluate plan features, and some of the act's provisions will require plan sponsors to amend their plans and administrative processes. This article summarizes the changes that could apply to large employer-sponsored 401k and other retirement plans. Source: Jdsupra.com SECURE Act and Guaranteed Income Fred Reish believes that there are two parts of the SECURE Act that will have the greatest impact on plan sponsors and service providers. The first part includes the provisions on retirement income. This article discusses the fiduciary safe harbor for selecting the provider for a guaranteed retirement income product. Source: Fredreish.com Details of the SECURE Act: Provisions Related to Attainment of Age 70 1/2 Prior to the SECURE Act, Internal Revenue Code Section 219(d)(1) prohibited individuals who attained age 70 1/2 by the end of the taxable year from contributing to a traditional tax-deductible IRA. However, the SECURE Act repeals this provision of the Code, allowing individuals who are 70 1/2 or older to contribute to a traditional IRA. This change now makes traditional IRAs accessible to older individuals, the same as Roth IRAs and 401ks, which do not have an age limit on contributions. Source: Consultrms.com Details of the SECURE Act: Covering Long-Term Part-Time Workers Under prior law, an employee who never worked 1,000 hours or more in a 12-month eligibility computation period could be excluded from an employer-sponsored 401k plan for all purposes. Under the new SECURE Act requirement, an employee must be allowed to make elective contributions to the 401k portion of a plan after he meets the EARLIER of (a) the plan's normal eligibility requirements OR (b) the close of the first period of 3 consecutive 12-month periods during each of which the employee has completed at least 500 hours of service. Source: Consultrms.com SECURE Act Provisions and Their Effective Dates The SECURE Act makes numerous changes (including a variety of enhancements) affecting qualified retirement plans, 403b and 457b plans, individual retirement accounts, and other employee benefits. Employers should understand these changes to prepare themselves for the resulting effect on retirement plan administration and financial planning. This article provides an overview of the most relevant provisions and their effective dates. Source: Spencerfane.com »» Click here for more on Legislative and Washington Actions Multiple Employer Plans (MEP) A Basic Comparison Glossary for MEPS and MEP Types After the SECURE Act "Aggregating" plans has now taken center stage with the passage of the SECURE Act. We now often find ourselves a bit muddled by the new array of terms with which we now need to deal. Keep this as a handy glossary to guide when you find yourself caught in the middle of a conversation about Multiple Employer Plans and need to quickly summarize the different MEP types. Source: Businessofbenefits.com »» Click here for more on Multiple Employer Plans Compliance and Regulatory 2020 ERISA Plan Compliance Calendar Being a retirement plan sponsor involves juggling many tasks including making sure your plan complies with all pertinent federal and local regulations. This compliance calendar will help you keeps track of your company's required filings, their due dates, and related details so you can avoid incurring any fines or other penalties for late filings or missing information. Source: Plansponsor.com Failing to File Form 5500 Just Became More Costly Form 5500 is the information return that must be filed by most employee benefit plans subject to ERISA (unless an exception applies), and failure to file this annual return for a plan can result in an assessment of penalties by both the IRS and DOL. Recently, the SECURE Act has given the IRS more teeth by increasing the maximum permitted penalties tenfold, but it still remains the case that the DOL penalties are more severe. Source: Graydon.law »» Click here for more Compliance and Regulatory Material
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