INDUSTRY AND REGULATORY NEWS YOU CAN USE

Read recent articles and other information of interest to employers, plan sponsors, participants and industry professionals. 

05 Jul 2015 00:29:12 Z

"[A]utomatic enrollment is associated with a higher proportion of workers included in DC plans; however, automatically enrolled workers are less likely to contribute to their DC plans than voluntarily enrolled workers. Auto enrollment is also associated with lower employee contribution amounts and rates. However, the employers of auto-enrolled workers are more likely to contribute to their employees' accounts than are the employers of voluntarily enrolled workers. Additionally, employer contribution amounts and rates are higher among workers who are automatically enrolled. Even so, the combined effect is that the retirement accounts of automatically enrolled older workers receive, on average, $900 less in combined annual contributions and have contribution rates that are 1.6 percentage points lower than those of voluntarily enrolled workers." (Center for Retirement Research at Boston College)

05 Jul 2015 00:29:12 Z

"[According to a recent study,] 20 percent of people at any one time have loans outstanding from their 401(k) plans, while nearly 40 percent have borrowed at some time or other within the past five years.... In addition, 10 percent of 401(k) loans are not repaid, usually because the borrower has moved on to a new employer.... The study's authors estimated that loan default leakage from retirement plans adds up to $6 billion every year." (BenefitsPro)

05 Jul 2015 00:29:12 Z

"For nearly all workers, income correlated to their willingness to contribute to a 401(k) plan; among Millennials, the average earnings of savers ($57,000) was more than double that of non-savers ($28,000).... Millennials were also the most likely to say they would increase their DC plan contributions if they got a raise, with 61% of that age cohort saying they would, compared with 40% of Baby Boomers. Four in 10 Millennials also said they had increased their 401(k) contribution amounts over the past year, compared with 21% of Boomers." (National Association of Plan Advisors [NAPA])

05 Jul 2015 00:29:12 Z

This report shows the change in average 401(k) account balances, grouped by age and tenure, from January 1, 2014 through July 1, 2015, counting only those participants who had an account balance at the end of 2013. (Employee Benefit Research Institute [EBRI])

05 Jul 2015 00:29:12 Z

"This [report] looks at the growth in the prevalence and at selected characteristics of employer-provided savings and thrift plans in private industry in the United States.... Eligibility requirements ... Vesting requirements ... Rollovers to employee's savings and thrift plans ... Loans from an employee's savings and thrift plans ... Methods of retirement benefit distribution." (U.S. Bureau of Labor Statistics [BLS])

05 Jul 2015 00:29:12 Z

"In 2013 DC plan participants allocated 82 percent of their entire equity allocation to U.S. stocks ... That's a full 33 percentage points over the market weight of U.S. equities based on global stock market capitalizations.... By offering a more balanced menu of U.S. and international equity options, along with target-date funds, plan sponsors can help participants invest across the global equity opportunity set, which would position their portfolios for greater potential long-term gains." (Institutional Investor)

05 Jul 2015 00:29:12 Z

"Retirement assets accounted for 36 percent of all household financial assets in the United States at the end of the first quarter of 2015.... Assets in individual retirement accounts (IRAs) totaled $7.6 trillion at the end of the first quarter of 2015, an increase of 2.1 percent from the end of the fourth quarter. Defined contribution (DC) plan assets rose 1.8 percent in the first quarter to $6.8 trillion. Government defined benefit (DB) plans-- including federal, state, and local government plans -- held $5.1 trillion in assets as of the end of March, a 0.5 percent decrease from the end of December. Private-sector DB plans held $3.2 trillion in assets at the end of the first quarter of 2015[.]" (Investment Company Institute [ICI])

05 Jul 2015 00:29:12 Z

11 pages. "Most participant communications are sales hype rather than materials designed to help participants develop realistic expectations for, and understand the strengths and limitations of, the investment option into which they were, more often than not, defaulted ... Both mainstream and social media continually bombard participants with coverage of the dismal retirement prospects facing the average American worker. This harsh reality is forcing 401(k) fiduciaries, consultants, and vendors to recognize that retirement outcomes, rather than participation and contribution rates, are the only realistic criteria for measuring a 401(k) plan's success." (Investment Horizons, Inc.)

05 Jul 2015 00:29:12 Z

"One study found that 68% of respondents ... acknowledged they were saving too little; 24% said they would save in the next six months, but only 2% did ... Tiny changes can be huge ... Make investing as simple as possible for your clients, even if it means filling out forms for them to sign ... Target-date funds are going to be an increasingly critical component of effectively automating clients' retirement savings." (On Wall Street)

05 Jul 2015 00:29:12 Z

6 pages. "There is still a considerable amount of debate over the meaning and impact of the Proposal, and a key area of uncertainty is exactly how the rollover provisions in the proposal are intended to operate. As a high-level summary, this [article] does not address all of the literally hundreds of issues being discussed, but it does provide a general overview of the expanded definition and the key prohibited transaction class exemption, the Best Interest Contract Exemption (BICE)." (U.S. Chamber of Commerce)

05 Jul 2015 00:29:12 Z

"Sixteen percent of Vanguard plans offer a self-directed brokerage option. Larger plans are somewhat more likely to offer the feature. In 2014, 28% of Vanguard plan participants had access to the option. Few participants use the self-directed brokerage feature -- only 1% of participants whose plans offered it in 2014." (Vanguard)

05 Jul 2015 00:29:12 Z

" 'You know what I've learned in this business is that most people, especially the small saver, their needs are simple,' Mr. Perez said at the Brookings Institution in Washington on Tuesday. 'Their needs are served by simple investments. Variable annuities are not the answer for so many people. The reason they become the answer, inappropriately for so many people, is because the system is misaligned.' " (Investment News)

05 Jul 2015 00:29:12 Z

"[W]hen it comes to retirement planning, Gen Y (age 18-34) may be more conservative than older generations in their outlook, with only 56 percent saying they are counting on Social Security to provide income in their retirement, compared to 76 percent of 35- to 44-year-olds and 73 percent of 45- to 54-year-olds. And with the memory of the financial crisis still strong for many younger adults, this group also is more concerned about market turbulence. Thirty-four percent say if they could choose one primary goal for their retirement plan, it would be to ensure that their savings are safe, no matter what happens in the market -- a marked increase from older generations." [Also available: tabular summary of survey results and Infographic.] (TIAA-CREF)

05 Jul 2015 00:29:12 Z

"Administrators of participant-directed plans such as 401(k)s must furnish detailed information to every participant and beneficiary regarding the plan and its available investment alternatives. [DOL] regulations require these participant-level disclosures be made 'on or before the date on which a participant or beneficiary can first direct his or her investments and at least annually thereafter.' ... [T]he DOL issued a direct final rule, which took effect on June 17, 2015. The rule changes the definition of 'at least annually thereafter' to mean at least once in any 14-month period instead of once in a 12-month period." (International Foundation of Employee Benefit Plans [IFEBP])

05 Jul 2015 00:29:12 Z

"For auto-enroll, the concerns are complaints from employees, extra work and the fear of appearing too paternalistic. But almost every plan sponsor ... that uses auto-enrollment has reported very few employees complaining (less than 1%) and less work, not more. And paternalism is a hollow excuse -- not only do most employees welcome auto-enrollment, some even expect it." (National Association of Plan Advisors [NAPA])

05 Jul 2015 00:29:12 Z

37 presentation slides. Topics include: [1] Components of Nondiscrimination Testing (NDT); [2] Common NDT Gotchas: Compensation; Frozen Benefits; Benefits, Rights or Features; and Tiered Contribution Formulas; [3] Safe Harbor Plan Designs; [4] Prior Year v. Current Year Testing; [5] Leased Employee Coverage Issues; and [6] Prototype v. Individually Designed Plans. (Wilkins Finston Friedman Law Group LLP)

05 Jul 2015 00:29:12 Z

"[1] Do we really need to have all these funds on the menu? ... [2] Are there less expensive share classes available for the funds on our investment menu?... [3] How much are our participants paying for this plan?... [4] What services are we buying with those fees?... [5] Do we all need to be on this committee?... [6] Who's taking notes?" (Nevin Adams, for National Association of Plan Advisors [NAPA])

05 Jul 2015 00:29:12 Z

"Never, ever try to time the markets.... Never trade a 401(k) plan account.... Ignore the newsletters and their co-workers.... Never buy or sell a mutual fund for emotional reasons." (Lawton Retirement Plan Consultants)

05 Jul 2015 00:29:12 Z

"Last month, [Greg] Smith joined Blooom, an Overland Park, Kansas-based firm ... [and] will serve as the firm's president.... Blooom's main offering is a service that, for $15 a month, will take control of your 401(k) and manage it for you. (The fee drops to $1 a month for 401(k) accounts of less than $20,000.) The company uses a computer program to devise an asset allocation (bonds vs. stocks, for example) for each of its clients. It then looks at the investment options in your 401(k) plan, deciphers what they are, and separates those choices into categories. Blooom then, essentially, picks out the fund in each category with the lowest fees and puts your money there. Blooom's investing algorithm doesn't seem to take into account how those particular investments have performed." (Fortune)

05 Jul 2015 00:29:12 Z

"60% of new contributions to 401(k) plans will be invested in TDFs within a few years. In 2008, the typical 2010 fund -- a fund intended for someone about to retire -- lost 30% of its value because of a high allocation to equities.... The objective of a TDF is to preserve a participant's assets as retirement approaches, not to increase the account's value to make up for inadequate savings. Every TDF should have a statement of investment policy." (Ron Surz, in benefits Magazine, published by the International Foundation of Employee Benefit Plans [IFEBP])

05 Jul 2015 00:29:12 Z

"A fiduciary who chooses to use one or more of the target date fund evaluation tools available today is obligated to understand how the tool works, how it compares to its peers, and whether its design will serve the needs of the plan participants." (Manning & Napier)

05 Jul 2015 00:29:12 Z

"[T]hanks to technological advancements and a plan design inspired by the latest behavioral finance research, a 401(k) plan is now within the reach of a local hair salon, small manufacturing firm or start-up tech company.... The ForUsAll plan automatically enrolls employees at a 6% salary deferral rate (double the typical initial contribution rate) with an automatic escalation of 1% per year up to the federal maximum of 15%. Employees are automatically defaulted into a Vanguard target date fund appropriate for their age but can customize their investments from a broad selection of Vanguard index funds." (Investment News)

05 Jul 2015 00:29:12 Z

"A recent analysis of [SEC] 401(k) data from 1998 to 2009 ... found that there is significant favoritism toward affiliated funds in 401(k) plans.... [W]hen a 401(k) plan deletes an affiliated fund, there's a 96 percent chance a new affiliated fund is added to the plan during the same year. When an unaffiliated fund is removed from the plan, there's only a 43 percent chance that it will be replaced with a new fund from the same service provider." (U.S. News & World Report)

05 Jul 2015 00:29:12 Z

31 pages; this single PDF document includes Publication 7335, Form 9002, and Form 9417. Excerpt: "The purpose of Worksheet Number 12 (Form 9002) and this explanation is to identify major problems that relate to plans that include a cash or deferred arrangement." (Internal Revenue Service [IRS])

05 Jul 2015 00:29:12 Z

20 pages; this single PDF document includes Publication 7334, Form 8799, and Form 9416. Excerpt: "The purpose of Worksheet Number 11 (Form 8799) and this explanation is to identify major problems that relate to plans providing for employee and/or matching contributions (a '401(m) plan)." (Internal Revenue Service [IRS])

05 Jul 2015 00:29:12 Z

"Plan sponsors of the larger plans (greater than $200 million) continue to adopt automatic enrollment, with 62% of survey respondents indicating that they utilize this feature, compared to just 44% in 2010.... Thirty percent of plans with automatic enrollment reported a savings level of at least 10%, whereas only 18% of plans without automatic enrollment have savings levels of 10% or more.... 30% of [large plans] that do not have automatic enrollment reported that the cost of matching is an obstacle ... 30% of [small plans] plans that do not have automatic enrollment said it is unnecessary because participation is already high." (Defined Contribution Institutional Investment Association [DCIIA])

05 Jul 2015 00:29:12 Z

"Plan participants constitute a ready-made class of individuals, creating the potential for large damage awards for any drop in stock price.... ERISA is a personal liability statute.... [T]he first two steps all corporations should take to reduce the risk of potential liability to their officers and directors are: [1] Remove from the plan fiduciary committee all Section 16 officers and others who tend to receive inside information; and [2] Cause the company's directors or compensation committee members to delegate away as much fiduciary authority (and potential liability) as possible." (Winston & Strawn LLP)

05 Jul 2015 00:29:12 Z

"A majority of plan sponsors (75%) consider helping ensure that employees have a financially secure retirement to be a highly important goal.... [A] preponderance (74%) also feel a somewhat to very high level of responsibility for employees' overall financial wellness (up from 59% in 2013).... [T]he percentage of participants with account balances on track to replace 80% of final salary in retirement, while definitely growing in importance, is currently ranked last among a variety of plan success criteria." (J.P. Morgan Asset Management)

05 Jul 2015 00:29:12 Z

"[I]ndividuals are likely to increase (decrease) their risky share when they have lower (higher) equity exposure than their coworkers in the last period. The effect is especially strong when the difference in equity exposure is substantial.... [P]eer behavior and peer outcome influences investment decisions, inducing individuals with substantially lower equity exposure than their coworkers to increase their risky share when coworkers also earned higher returns." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

05 Jul 2015 00:29:12 Z

"[P]lan sponsors should consider an investment re-enrollment, an action that requires little effort from participants and can improve their long-term prospects.... [The authors] provide four case studies that demonstrate how plan sponsors have success fully re-enrolled participants to help improve their investment allocations." (Capital Group, for Defined Contribution Institutional Investment Association [DCIIA])

05 Jul 2015 00:29:12 Z

"In its latest newsletter to employers, the IRS acknowledged that self-certification is an acceptable means of showing that a plan distribution was the sole way to alleviate the hardship. However, the Service also noted that the plan participant may leave his or her employment at a future date. In that situation, self-certification cannot be relied upon to show the nature of the hardship in the event of a plan audit in the future. As a result, the IRS is urging plan sponsors to retain their documentation and distribution records in paper or electronic format." (EisnerAmper)

05 Jul 2015 00:29:12 Z

['Conflict of interest' questions, in the form of a letter to a financial consultant.] "Can you answer these questions for me? Also, can you put your answers in writing? ... [1] Do you possess the legal obligation to act in my 'best interests'? ... [2] With respect to each conflict of interest you may possess ... please explain to me how you have, in the past, ensured that you have observed [listed] procedures to properly manage each conflict of interest in order to ensure that no harm comes to me: ... [3] With respect to each conflict of interest you may possess ... is each transaction you recommended that I undertake ... also 'substantively fair' to me, as is required under a true fiduciary 'best interests' standard? ... [4] What are the total fees and costs associated with each investment product I have purchased as a result of your recommendations.... [5] Please set forth the compensation received by your firm as a result of any recommendation from you which I have implemented.... [6] Please also set forth whether you received any material compensation as a result of your recommendations to me." (Ron Rhoades)

05 Jul 2015 00:29:12 Z

"[T]he Supreme Court's decision -- that a fiduciary's duties cover not only the selection of investments, but also their regular review -- is likely to have added to fiduciaries' uneasiness. Not because of the requirement to monitor: if I'd asked a random fiduciary last week whether they thought they had an obligation to keep an eye on their investments, I don't think many would have said 'no', or even 'only until the Statute of Limitations kicks in'. Rather, it's that here is one more aspect of the fiduciary's role which is now in a state of flux: it will take some time to lock down exactly what the required review process is expected to involve." (Russell Investments)

05 Jul 2015 00:29:12 Z

"[We] cannot -- in any way -- make it harder for workers, retirees, and small business owners to receive the financial advice they may need. Yet that is precisely what this regulatory proposal would do. Offering some of the most basic assistance would be prohibited, such as advice on rolling over funds from a 401(k) to an IRA. Financial advisors would no longer be able to assist individuals in how to manage their funds upon retirement. And small business owners would be denied help in selecting the right investment options for their workforce, which will lead to fewer employees enrolled in a retirement plan." (Committee on Education and the Workforce, U.S. House of Representatives)

05 Jul 2015 00:29:12 Z

"Small business owners, through SEP and SIMPLE-type IRA plans, provide roughly $472 billion in retirement savings to their employees. But DOL's proposal does not treat small business retirement plans the same relative to large employer plans, putting them at a disadvantage and making it harder for small business owners to do the right thing for their employees.... Because DOL has included advisors to small businesses in its fiduciary definition, many small business employees trying to save for retirement will no longer enjoy access to low-cost investment assistance.... DOL itself has estimated that access to professional investment advice saves more than $100 billion per year in preventable financial mistakes. That is more than five times the amount that DOL says it will save people by finalizing its new regulation." (U.S. Chamber of Commerce)

05 Jul 2015 00:29:12 Z

"The DOL justifies its proposed rule by claiming that this market suffers from a 'substantial' market failure, resulting in serious harm for retirement savers who invest through broker-dealers. But the Department's assertions do not stand up when tested against actual experience and data. Even worse, the DOL's proposal could actually have a significant net societal harm." (Investment Company Institute [ICI])

05 Jul 2015 00:29:12 Z

"The problem with the BICE is that it fails to disincentivize financial advisors from including high-cost, actively managed funds in a retirement plan -- in other words, the types of funds that get challenged in excessive 401k fee lawsuits. That make the BICE a dangerous proposition for plan sponsors who have personal liability in these lawsuits.... A clean rule would make it easier for 401k sponsors to select and monitor financial advisors obligated to put the interests of their participants first.... [P]lan sponsors have an incredibly important job as fiduciaries -- protecting the best interests of plan participants. Regulations should make that job easier and not harder." (Employee Fiduciary)

05 Jul 2015 00:29:12 Z

"Plan Administrators [should] retain the following records with respect to hardship withdrawal requests: [1] Documentation of the hardship application or request including your review and/or approval of the request. [2] Financial information or documentation that substantiates the employee's immediate and heavy financial need. This may include insurance bills, escrow paperwork, funeral expenses, bank statements, etc. [3] Documentation to support that the hardship was made properly and in accordance with the plan provisions and the IRS regulations. [4] Evidence that the payment was made to the participant and reported on Form 1099R." (Benefit Resources, Inc.)

05 Jul 2015 00:29:12 Z

"In 2014, the average Vanguard plan offered 27.3 investment options ... Yet the average participants used only 2.9 options (two options for the median participant). In reality, nearly half of participants (48%) used just one fund. That, of course, is a direct result of the emergence of target-date funds as the predominant investment vehicle in DC plans." (Money Management Intelligence)

05 Jul 2015 00:29:12 Z

"Notice is hereby given that [EBSA] will hold a public hearing on August 10, 11, and 12, and continuing through August 13, 2015 (if necessary) to consider issues attendant to adopting a regulation concerning its proposed conflict of interest rule and related proposed prohibited transaction exemptions. The Department also is extending the date by which comments may be submitted on the proposed rule and proposed new and amended exemptions. Public comments on the proposals may now be submitted to the Department on or before July 21, 2015." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

05 Jul 2015 00:29:12 Z

"Given the confusion and lack of understanding in the marketplace, it is clear that disclosure alone is not enough.... The current rules were basically adopted before individual account plans like 401k-type plans and IRAs were in existence. Most Americans with retirement savings now rely on individual account plans, and therefore the responsibility for investing the plan assets falls on the individual. The rules must be updated to respond to this change, and to ensure that all retirement plan advisers act in the 'best interest' of the individual investor. Failure to act will continue to cost Americans billions of dollars each year out of their retirement savings -- money that they cannot afford to lose." (Fiduciary News)

05 Jul 2015 00:29:12 Z

"Withdrawals from 401(k) plans are now exceeding new contributions as baby boomers age, a shift that could have profound implications for the U.S. retirement industry. Investors pulled a net $11.4 billion from tax-deferred savings plans in 2013 ... ending decades of expansion.... The movement out of 401(k)s is expected to accelerate in the coming decade as more baby boomers retire, squeezing large money-management firms that rely on fees charged to employers and investors as a chief profit engine ... Asset managers hope they can replace the outflows with a new surge from millennials ... One industry data provider said most funds leaving 401(k)-style plans are migrating to IRAs." (The Wall Street Journal; subscription may be required)

05 Jul 2015 00:29:12 Z

5 pages. "New SEC money market funds rules that go into effect in 2016 will impact nearly every retirement plan that uses such funds as investment options or to facilitate plan administration. The new rules change how money market funds will be invested, priced, operated and act when financial markets are under stress. Plan sponsors, investment committees, those who advise them (investment fiduciaries) and plan administrators should understand the upcoming changes in order to determine what steps, if any, that will be required or may be beneficial to take regarding such funds, and to consider their alternatives." (Reliance Trust)

05 Jul 2015 00:29:12 Z

"GAO was asked to examine issues related to frequent and collective trading in 401(k) plans. This report examines [1] the types of trading restrictions 401(k) participants typically face, [2] what is known about frequent or collective trading by plan participants and the effect of such trading on plan costs, and [3] how stakeholders view current regulation of a participant's ability to manage their retirement accounts and the duties of plan fiduciaries and obligations of mutual funds." (U.S. Government Accountability Office [GAO])

05 Jul 2015 00:29:12 Z

"401(k) plans permit their participants to withdraw 100 percent of their account balance if they choose, and many allow participants to make partial withdrawals, but some barriers exist that can prevent plans that want to offer a diverse selection of lifetime income options from doing so.... GAO is reaching out to DC plan sponsors to help us to better understand their use of these policies. This survey will help to inform our report to Congress and help us to ensure that it provides accurate, balanced information on this topic." [This survey asks about the advantages and disadvantages of these options, education about them, and barriers that might limit their adoption. GAO estimates the survey will take about 15-20 minutes to complete; responses will be accepted until July 24th.] (U.S. Government Accountability Office [GAO])

05 Jul 2015 00:29:12 Z

"[T]here are a few specific cases when it's better to leave your retirement savings in a former employer's 401(k) plan. [1] You are between ages 55 and 59.... [2]You plan to work past age 70-1/2.... [3] You have company stock in your 401(k) plan.... [4] Your 401(k) plan has especially low fees.... [5] You haven't had time to carefully evaluate your options." (U.S. News & World Report)

05 Jul 2015 00:29:12 Z

"BrightScope launched Fund Pages, which provides inflow and outflow information. But in addition, and ... unlike Morningstar, it will list the retirement plans that are most heavily invested in each mutual fund. Which retirement plans are invested in which funds is important information that's not been available to advisors for free before ... BrightScope's new offering is a scorecard laying out each fund's flows, manager turnover, fees and additional information[.]" (RIABiz)

05 Jul 2015 00:29:12 Z

"Under current regulations, testing failures are required to be corrected within 12 months after the close of the plan year.... [The IRS] provides a self-correction program that can be used within 36 months of the close of the plan year, but the costs can be significantly more than if the failure is corrected timely." (Retirement Management Services)

05 Jul 2015 00:29:12 Z

"Until Rev. Proc. 2015-28 ... participants who were not automatically enrolled would get their full paycheck, plus an employer-paid deferral deposit that was essentially a windfall. Under the new rules, the employer does not have to deposit the QNEC if the deferrals begin by the earlier of: [1] The first payroll on or after October 15 of the following year for calendar year plans, or the equivalent 9-1/2 month period for fiscal year plans; [2] If the participant notifies the plan sponsor of the failure, the first payroll on or after the last day of the month following the month of such notification; [provided] the sponsor provides a notice to the affected participants no later than 45 days after the date deferrals begin." (Belfint Lyons & Shuman, CPAs)

05 Jul 2015 00:29:12 Z

"The rate of change and the materiality of any changes should logically influence the frequency, duration and specificity of investment committee meetings and whether other groups such as Human Resources, Legal and Operations should be involved. Similarly, the frequency of issuing a Request for Proposal (RFP) to potentially hire a new vendor is a function of what is happening with a plan and its sponsor. Tumult in the investment environment is another consideration." (Susan Mangiero, via Bloomberg BNA Pension & Benefits Daily)

05 Jul 2015 00:29:12 Z

"The study painted a picture of the retirement plan marketplace which is incomplete and incorrect. As a lobbying tool for the brokerage industry, this study will likely be cited often. As an educational piece to help small business owners understand the implications of the proposed regulations, it can be disregarded.... Small businessmen, I have some news for you. Your existing brokerage firm partner in your retirement plan has not been a good friend. Aside from the sad fact that they aren't fiduciaries already, and have lobbied hard for years not to be, they appear arrogant enough to assume that you don't have other, better solutions available in the marketplace. You do." (Lawton Retirement Plan Consultants)

05 Jul 2015 00:29:12 Z

"It took nearly two decades for asset allocation to go from a 'well, OK' endorsement from the DOL to the nearly de facto industry standard. Rather than a gradual movement, the use of asset allocation accelerated like a rocket following the [misinterpretation] of a famous research paper.... There's a greater issue with [that study], one which calls into question its (accurately stated) conclusion." (Fiduciary News)

05 Jul 2015 00:29:12 Z

110 pages. "As we look to the future, the main concerns affecting retirement savings plans remain largely the same-- improving plan participation and contribution rates and enhancing portfolio diversification -- although increasingly these changes are occurring through plan and investment menu design decisions made by sponsors, rather than by participants' own decisions.... The plan participation rate was 77% in 2014. The average deferral rate was 6.9% and the median was unchanged at 6.0%. However, average deferral rates have declined slightly from their peak of 7.3% in 2007.... The adoption of automatic enrollment has grown by 50% since year-end 2009." (Vanguard)

05 Jul 2015 00:29:12 Z

"The data show increasing participation rates among younger employees, new hires and lower-earning workers over the past four years. Participation in [401(k) plans] among millennials has reached 55% compared to 45% in 2011. For newly hired eligible employees (meaning those who have reached the one year mark of employment), participation has increased from 36% four years ago to 48% in 2015. In addition, employees in a pay range of $20,000 to $40,000 in salary are participating at a rate of 59% versus 47% four years ago." (Wells Fargo)

05 Jul 2015 00:29:12 Z

13 pages. "Small business owners, through SEP and SIMPLE-type IRA plans, provide roughly $472 billion in retirement savings for over 9 million U.S. households.... The DOL is proposing broad new regulations that would impose significant new compliance costs and legal liabilities on advisors to SEP and SIMPLE IRAs, costs that will be passed on to these small business plans and employees. Many small businesses cannot offer 401(k) or similar 'traditional' retirement plans because of administrative complexity, costs, or eligibility requirements, and instead offer simplified, basic retirement plans built around IRAs." (U.S. Chamber of Commerce)

05 Jul 2015 00:29:12 Z

"T. Rowe Price spokesman Edward Giltenan declined to comment on the lawsuit, which was filed on behalf of GRQ Investment Management of Plano, Texas ... It comes amid a continuing debate about which business methods and abstract ideas should be patentable -- and about the potential cost to businesses of so-called patent trolls that buy up patents not to use them but to seek licensing fees or settlements through litigation.... The patents involved here mostly relate to design work by Brian Tarbox, an investment and retirement-plan specialist who died 10 years ago of cancer at age 55. The patents were issued after his death, in some cases with additional work by co-inventor Mark Greenstein, an attorney who is a pension-law specialist at the U.S. Labor Department." (The Wall Street Journal; subscription may be required)

05 Jul 2015 00:29:12 Z

"[A]n attorney for Mr. Ellis formed CST Investments, LLC (CST), to engage in the business of used automobile sales ... The operating agreement contemplated that Mr. Ellis's IRA would provide an initial capital contribution of $319,500 in exchange for a 98 percent ownership in CST ... Mr. Ellis's IRA did not exist at the time CST was formed.... [H]e received [the funds] from a 401(k) that he had established with his previous employer, and he deposited the amount in his IRA.... To compensate him for his services as general manager, CST paid Mr. Ellis a salary of $9,754 in 2005 and $29,263 in 2006.... If a disqualified person engages in a prohibited transaction with an IRA, the plan loses its status as an individual retirement account under Section 408(a), and its fair market value as of the first day of the taxable year is deemed distributed and included in the disqualified person's gross income.... The tax court properly found that Mr. Ellis engaged in a prohibited transaction by directing CST to pay him a salary[.]" [Ellis v. Comm'r of Internal Revenue, No. 14-1310 (8th Cir. June 5 2015)] (U.S. Court of Appeals for the Eighth Circuit)

05 Jul 2015 00:29:12 Z

"In a few key respects, borrowing from a 401(k) beats other forms of emergency financing, such as credit card debt or even a home-equity line of credit. After all, the interest rate on a 401(k) loan may be lower than other types of financing. And even more important, you pay that interest back to yourself rather than to a third party.... But numerous respondents in a recent Morningstar.com Discuss Forum conversation said they're positively allergic to borrowing from a 401(k)." (Morningstar)

05 Jul 2015 00:29:12 Z

5 pages. "While these new preapproved methods should reduce correction costs, they impose additional conditions on correction. And they are only available for errors that are caught and corrected within a specified period of time.... [F]ailures relating to missed deferrals that have recently been discovered may be eligible for correction under the new rules. If one of the new correction methods is used, plan sponsors should keep in mind the 45-day deadline for notifying the affected participants of the correction." (Groom Law Group via Bloomberg BNA Pension & Benefits Daily)

05 Jul 2015 00:29:12 Z

"The court's opinion and strong dissent represent dramatically different interpretations of Dudenhoeffer and conflicting views about the information that plan fiduciaries must disclose to be in compliance with ERISA and securities law. As other courts weigh in, a split among the circuits seems possible, and -- as predicted by the dissenting judge -- the Supreme Court may well have the last word." [Harris v. Amgen, No. 10-56014 (9th Cir. May 26, 2015)] (Thomson Reuters / EBIA)

Verisight: truthful insight.
"Veri" stems from veritas, Latin for truth.
"Sight" derived from "insight", the ability to perceive clearly and deeply.


WHAT'S NEW?

June 1, 2015
Mobile App Now Available! Verisight has launched Verisight Anytime Mobile for plan participants. The app is available for iPhone® and Android™ phones in their respective app stores. Verisight Anytime Mobile is a new way for participants to access their retirement account while on the go.

   

November 18, 2014
Verisight, Inc., a recognized leader in comprehensive retirement plan services and consulting solutions, announced today that Laura Ramanis will join the organization’s leadership team as Chief Operating Officer, effective November 17, 2014. Read the full release.

October 24, 2014
The 2015 Cost of Living Adjustments have been released by the Internal Revenue Service. Each year, the IRS is required to review and adjust the dollar limitations on benefits and contributions under qualified retirement plans to account for cost of living increases. Some limitations will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment. However, other limitations will increase for 2015. View the 2015 limits.

October 23, 2014
Verisight will be hosting a series of 401(k) Boot Camps in November for our 401(k) plan sponsor clients.  Invitations to this 3 part series can be downloaded here.

This program will provide tools to help in-house plan sponsor staff operate their retirement plan correctly. Over the course of 3 webcasts, Verisight will cover basic in-house 401(k) operations from the employer’s perspective to give your team information to help avoid common operational errors.