Way Too Much Risk in 401k Target-Date Fund Glide Paths: Morningstar
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Target-Date Funds Way Too Much Risk in 401k Target-Date Fund Glide Paths: Morningstar The Morningstar Center for Retirement & Policy Studies found that target-date fund sponsors may expose individual investors to increased risk by not tailoring plan glide paths to their behavior. The center reports that 58% of DC plan assets are invested in off-the-shelf TDFs, many of which are designed for participants to stay in the plan through their retirement, even in cases when they are likely to roll their money out of the plan at retirement. This mismatch could leave participants overly exposed to equities later in their careers. Source: 401kspecialistmag.com »» Click here for more on Target-Date Funds Fiduciary and Plan Governance Plan Sponsors' Fiduciary Duty for DC Plan Compliance Testing As fiduciaries, defined contribution plan sponsors must act in the best interest of all participants and ensure that the plan itself does not cater to one person or group over another. To make sure this rule is being followed, ERISA requires that plans undergo annual compliance tests. To help prevent any potential issues, plan sponsors need to understand the testing requirements and communicate with service providers regarding any changes to the plan. This article presents ways a plan sponsor can potentially avoid testing issues and correct them when they arise. Source: Bdo.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers How to Think About Recent Trends in the Average Retirement Age? After a century of decline, work activity among older men stabilized in the 1980s and began to rise in the 1990s. This turnaround reflected changes in Social Security, retirement plans, the nature of work, education levels, and health coverage. In response, the average retirement age for men has risen by about three years. The goal of this 10-page paper is to put this three-year increase in context. Source: Bc.edu Retirement Savings Rates Up, but Confidence Down: BlackRock We've got a classic good news/bad news scenario coming out of BlackRock's just-released seventh annual retirement survey. The annual survey of plan participants and sponsors finds double-digit deferrals, but inflation curtails confidence in retirement readiness. Source: 401kspecialistmag.com Growing Inclusion of Alts in DC Plans Defined contribution retirement plans are incorporating alternative investments in custom target-date funds, and access to alternatives has increased thanks to white-label funds. Source: Plansponsor.com The annual PLANSPONSOR Recordkeeping Survey was conducted in June via an online questionnaire. Recordkeepers of DC plans participated in the survey and provided the information outlined on the subsequent pages. The charts and profiles are aggregated and ranked by reported total assets, plans and participants. Specifically, the profiles offer a look into a breakdown of sponsor service offerings, participant services, and related offerings. Source: Plansponsor.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL's Rules on Rollover Advice Now in Effect While aspects of the rule were already in effect, now advisors must also provide the mandated written explanation to rollover clients of the specific reasons as to why the investment professional and/or financial institution believes that the rollover is in the client's best interest, or else face substantial potential liability. This exposure is likely to trigger coverage under professional liability policies, as opposed to fiduciary liability policies which protect plan sponsors. Source: Wtwco.com 403b Plans With all of the current focus on unique programs designed to enhance the attractiveness to participants and fiduciaries of adopting lifetime income programs under defined contribution plans, there is little discussion about how all of this plays out in the 403b market. Source: Businessofbenefits.com »» Click here for More 403b Material Court and Legal 401k Legal Battles Set to Surge in Second Half of Year The wheels of justice may turn slowly, but the action in retirement plan lawsuits should ramp up in the second half of 2022 after a pair of big court decisions. There have been 42 Employee Retirement Income Security Act class-action suits filed since the start of this year that allege the mismanagement of 401k and 403b defined-contribution retirement plans. If the rate ticks up slightly, the industry may eclipse 100 lawsuits in 2022, making it the highest year ever. In 2021 there were 54 cases, a nearly 45% drop from 2020's record tally of 97. Source: Investmentnews.com Sixth Circuit Issues a Mixed Opinion in 401k Plan Investment Litigation The Sixth Circuit recently issued a mixed opinion in a 401k plan investment litigation. The Court upheld the dismissal of the plaintiffs' fiduciary-breach claims relating to the investment management fees and performance of several of the plan's investment options but reinstated a claim for breach of fiduciary duty based solely on the plan fiduciaries' alleged failure to offer less expensive institutional share classes of mutual funds. Source: Erisapracticecenter.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Temporary Waiver of RMDs Proposed in House Representative Warren Davidson has introduced HR 8331, a bill that would provide for a suspension of required minimum distributions from retirement plans and IRAs for the 2022 calendar year. Source: Futureplan.com »» Click here for more on Legislative and Washington Actions Cyber and Plan Security Another Cybertheft Lawsuit Spotlights 401k Recordkeeper Procedures Several lawsuits have been filed against plan sponsors and their recordkeepers, including Estee Lauder, Abbott Laboratories, and recordkeeper Alight, as a result of the theft of plan participant assets. Those cases have not resulted in final decisions clearly defining the responsibilities of fiduciaries and service providers, but a newly filed lawsuit against Colgate-Palmolive and Alight provides another opportunity to do so. Source: Cohenbuckmann.com »» Click here for more on Cybersecurity Issues Compliance and Regulatory Handling Undocumented Workers Who Participate in ERISA Plans Undocumented workers are increasingly participating in and accruing benefits in ERISA plans, which presents challenges for employers. ERISA does not specifically exclude these employees from participation in ERISA-governed plans. Although the federal government has explicitly stated that other federal laws protect undocumented workers, it also has not stated that ERISA protects undocumented workers. Likewise, court decisions have been inconsistent in their treatment of undocumented workers under ERISA. The lack of clear guidance combined with inconsistent court decisions can lead to confusion and differing approaches from employers dealing with undocumented workers. Source: Hallbenefitslaw.com An important deadline fast approaches for many plans, the Form 5500 is due to be filed by July 31. Plan sponsors of calendar-year plans must file their Form 5500 series returns by the last day of the seventh month after the plan year ends, which for calendar year plans is July 31 of the year after the end of the previous plan year. So plan sponsors of calendar-year plans must file by July 31, 2022, concerning the 2021 plan year. Source: Asppa.org IRS Updates Determination Letter Forms for Move to Mandatory Electronic Filing As of June 2022, the IRS updated two of its forms and related instructions in connection with its determination letter program for qualified retirement plans, including 401k plans. The updates are required as of July 1, 2022, due to the move to the required all-electronic filing of Form 5300, which the IRS announced on May 25, 2022. Source: Compliancedashboard.net Five Administrative Policies Every 401k Plan Needs 401k plans are required to maintain some of these policies either by ERISA or under DOL guidance, and others, while not necessarily required by law, are helpful in the event of a DOL audit or participant litigation. Having clear policies and procedures in place also helps employees involved in plan administration do their job more efficiently by mapping out appropriate steps to take when various situations arise. This article takes a look at five policies or procedures that are important for proper 401k plan administration. Source: Foley.com »» Click here for more Compliance and Regulatory Material Marketplace News BPAS Announces Financial Planning Tool Update Two Tech-Focused Firms Team to Streamline 401k Business Alera Group Acquires $500 Million Retirement Plan Adviser
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