Why Are Administrative Policies Important?
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Click Here for Our Resource Page on Retirement Plans and the Coronavirus PandemicNewsletter Sponsor 401k Averages Book 20th Edition Infographic With the release of the 401k Averages Book 20th Edition, we have updated our infographic "Are all $5,000,000 401k Plans Created Equal?" …and the findings might surprise you. The infographic compares 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
Fiduciary and Plan Governance Why Are Administrative Policies Important? Once a plan sponsor sets up a retirement plan for their company they are subject to ERISA. This law was put in place to protect American workers by ensuring that retirement plans are not discriminatory in favor of owners and highly compensated employees. These laws can be intimidating and confusing but a well-thought-out administrative policy can relieve some of the anxiety of plan administration by aiding the plan sponsor in making decisions that comply with ERISA rules and regulations. Source: Consultrms.com Establishing a Retirement Plan Committee Plan sponsors need to establish who will be responsible for plan administration and plan and investment decisions. Committees aren't legally required, but if plan sponsors appoint a committee as a "named fiduciary," they will not only see it pay more careful attention to plan issues, but a company's owner or board of directors will be relieved of most responsibilities for the plan. Having a committee or committees can also greatly help with defense if a plan or plan sponsor is sued. Source: Plansponsor.com Final Regulations Substantially Alter DOL's Proxy Voting Guidance The DOL has issued final regulations establishing standards for determining whether and how to exercise shareholder rights, including the right to vote proxies, for stock held by ERISA-covered plans (including 401k plans). The principles-based approach of the final regulations will allow the rules to adapt to the circumstances and avoid substantial burdens and risks raised by the original proposal. Source: Thomsonreuters.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Retirement Plan Trends to Watch in 2021 With the holiday season upon us and the New Year fast approaching, this piece will consider what 2021 may bring for retirement plan sponsors. Source: Cammackretirement.com Plan Design Decisions Can Reduce Overconcentration in Company Stock A recent analysis from Vanguard explores the gradual abandonment of company stock in DC plans. The Vanguard analysis found demographic characteristics such as age, income, education, job tenure, and nonretirement wealth, while statistically significant, are not strongly related to the percentage of company stock in a participant's account balance. The researchers found plan sponsor design decisions have the strongest relationship to the proportion of participant holdings in employer stock. Source: Plansponsor.com Are Employers Measuring the Effectiveness of Retirement Plan Improvements? Employers work continuously to improve their retirement plans. Whether through refining the plan menu, enhancing the default option, or adding auto-enroll or auto-escalation features, employers strive to keep retirement plans evolving in ways that benefit their employees. But are employers measuring the effectiveness of the plan to see if these improvements are working? Source: Newportgroup.com Most 401k Plans Weathered 2020 Without Reducing Employer Contributions In contrast to the response during the 2008-09 financial crisis, more than 90 percent of employers will make their retirement plan contributions this year, though smaller organizations are more likely to have suspended or reduced employer-matching contributions in the wake of the COVID-19 pandemic. Although the overall share of organizations that reduced 401k plan contributions were relatively small -- around 8 percent -- that still represented nearly 46,000 plans throughout the U.S. Source: Shrm.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL Unwraps New Fiduciary Standard as a PTE The Department of Labor has rolled out a new prohibited transaction exemption for offering investment advice, and some good news on rollover advice, but it may be short-lived. Less than 24 hours after the release from review by the Office of Management and Budget, the DOL has unwrapped a new exemption, one that is slated to become effective 60 days after it is published in the Federal Register and yes, that would fall after Jan. 20, when it could be reviewed by the incoming Biden administration. Source: Asppa.org DOL Publishes Final Fiduciary Prohibited Transaction Exemption The DOL has published the final version of a new prohibited transaction exemption. The text of the exemption notice stretches to nearly 300 pages, so it will naturally take some time for the full implications to be realized. However, the final rule confirms the reinstatement of the traditional five-part test for determining fiduciary status, though it does not definitively state that advice regarding IRA rollovers necessarily triggers fiduciary status. Source: Planadviser.com Legislative and Washington DC Congress Looking to Change or Even Abolish Key 401k Provision The SECURE Act, which was signed into law last December, included a provision that pushed up the age for mandatory retirement plan distributions from 70 to 72. Now, lawmakers are hoping to pass another retirement bill that's being informally called SECURE Act 2.0 by early next year. A provision in the bill would push distributions up even further, to age 75. Source: Yahoo.com Legislation Would Mandate ESG Policies Among Retirement Plans, Advisors Unhappy with the Department of Labor's regulatory efforts to curtail environmental, social and governance investing, a group of House Democrats introduced two bills requiring retirement plan fiduciaries and investment advisors to adopt sustainable investment policies. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Cyber and Plan Security DOL Stepping Up Cybersecurity Focus There's been increasing awareness -- and litigation -- regarding cybersecurity and participant accounts and the DOL has taken notice. Sources say that DOL plan audits are now asking to see employers' written cybersecurity policies and procedures and asking about cybersecurity attacks, and the responses to them. Source: Napa-net.org »» Click here for more on Cybersecurity Issues Compliance and Regulatory Calendar of Key Dates and Deadlines This is a list of the most common recurring plan events and filing deadlines for a 401k plan operating on a calendar year basis. Your plan may have additional requirements; therefore, you should consult with a qualified plan consultant for more information. Source: Pensionmark.com Chart: Required Participant Disclosures Plan sponsors are required to provide certain disclosure documents and notices to plan participants (including terminated participants and alternate payees with a balance). This chart is designed to help you understand and meet these requirements. Source: Pensionmark.com SECURE Act Update: IRS Issues Guidance With Respect to Safe Harbor Plans On December 9, 2020, the IRS issued Notice 2020-86 which provides guidance relating to certain changes to the safe harbor rules that apply to 401k plans made by the SECURE Act. The IRS Notice interprets the SECURE Act's provisions to apply to some, but not all, aspects of the rules regarding safe harbor plans, limiting the applicability of the recent liberalizations to the safe harbor rules. Source: Pbwt.com Defaulting 401k Plan Borrowers in the Time of COVID The focus of this article is what happens when someone has borrowed from a 401k plan within the limits, terminates employment, and then defaults on the loan. In particular, changes made by the CARES Act and a 2017 change to the tax law, which are helpful to the large number of people who may find themselves in this situation during the pandemic. Source: Blankrome.com »» Click here for more Compliance and Regulatory Material
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