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SEI Agrees to Pay $6.8 Million to Settle Self-Dealing Suit

"According to the Settlement Agreement, the defendants will pay $6.8 million to a Qualified Settlement Fund. In addition, SEI agrees that ... [1] Defendants shall retain the services of an unaffiliated investment consultant to provide an evaluation of the design of the plan’s investment lineup and to review the plan’s investment policy statement; [2] SEI shall continue to pay all recordkeeping fees associated with the plan that it is currently paying and that would otherwise be payable from plan assets; and [3] SEI shall ensure that all of the plan’s investment committee members will participate in a training session on ERISA’s fiduciary duties."

ERISA Self-Dealing Lawsuit Calls SEI Plan 'Captive Customer'

"According to the lead plaintiff, the DC plan in question offers only investment options that generate fees for SEI and its affiliates and treat the plan as a captive customer.... The complaint makes a variety of claims about widespread conflicts of interest in the DC plan industry, suggesting that financial services companies such as SEI deserve extra scrutiny.... [T]he lead plaintiff says defendants did not meet their fiduciary obligations to regularly evaluate each investment option within the plan on its merits relative to alternative available options."

IRS Issue Snapshot: Calculation of Plan Compensation for Sole Proprietorships

"If nonelective contributions ... on behalf of a sole proprietor (the SEI) are determined under a plan's formula as a percentage of the sole proprietor's Earned Income, then the Earned Income calculation is dependent on the SEI's contribution, but the SEI's contribution is also dependent on the Earned Income."

Controlling Pension Funding Volatility The Top Priority For Third Year In A Row

For the third consecutive year, an SEI Quick Poll found that pension plan sponsors view controlling funded status volatility as the top priority for their organizations. Not far behind, plan sponsors identified the need to improve the funded status of their pension plans as the second most important priority this year.

New Mortality Tables Released for Retirement Plans

"The change to the new table, from RP-2006 to Pri-2012, will impact liabilities generally within +/-1%.... Blue-collar workers may see decreases for females and older males (up to 1.5%) and increases for younger males (up to 1.7%). White-collar may see decreases (up to 1%) and larger decreases for the older population. Those with no-collar may see increases for younger participants (males up to 1% and females up to 0.3%) and decreases for older (over age 75) participants."

Survey Results: Multiemployer Pension Plan Sponsors

"Nearly half (44%) of those polled plans' current funded status is 'endangered' or worse. Trustees with plans currently in the red zone status are not entirely confident the plan will meet the targets in its rehabilitation plan.... 62% of trustees polled are increasing contributions to alternative investment classes in an effort to improve overall health of the plan"

Redesign of DC Plans Focuses on Building the Right Oversight Process Moving Forward (PDF)

17 pages. "As plan trustees seek to offer the best possible investment approach, more are decoupling asset management from recordkeeping, virtually ending the bundled experience of 'all things in one place.' ... [T]he need for more effective plans requires more accountability and oversight. This requires a thorough process for monitoring the plan and making timely decisions about changes to the plan and investments."

DC Plan Sponsors Can Build Better Lineups and Reduce Fiduciary Risks through a Discretionary Investment Approach

"Factors like investment complexity, increased fee pressure, litigation and the increased reliance on DC plans as the primary retirement savings vehicle, place tremendous pressure on plan sponsors.... [S]imply choosing brand-name funds, passively managed funds or funds provided by recordkeepers are no longer automatically safe choices.... [P]lan sponsors and committees are often understaffed, stretched for time or simply lack the expertise to effectively manage and monitor complex investment portfolios."

Defined Contribution Plan Sponsors Embracing Non-Recordkeeper Target Date Funds

"[N]on-recordkeeper or off-platform target date funds (TDFs) continue to grow in popularity among plan sponsors. While ninety percent of survey respondents said they currently offer TDFs as an investment option in their plan, the use of recordkeeper TDFs and non-recordkeeper TDFs is essentially split evenly. Those plans with over $1 billion in assets ... are leading the way with 64 percent offering non-recordkeeper TDFs."

Pension Strategy in Today's Market Environment (PDF)

"Given the market volatility in Q1 and industry reports highlighting an overall decrease in funded status of corporate pensions, should plan sponsors be reacting by de-risking their pension plans? ... Are there other contributing factors that make initiating a de-risking strategy not necessarily conducive to the current market environment? ... Are there certain scenarios where plans should be de-risking? ... If a plan sponsor doesn't necessarily meet the profiles mentioned above, what strategies should they be considering in the current environment?"

Do DC Plans Need to Be Redesigned? (PDF)

16 pages. "DC plan core lineups, not including target-date series, continue to offer a significant number of funds.... A significant use of non-recordkeeper funds is a sign that the unbundling of asset management and recordkeeping is underway.... Quality of investment options and how they perform are the foremost priorities of plan sponsors, more so than costs or fees and risk of litigation.... The revision of DC plans will come down to how proactive plan sponsors are in creating a sophisticated retirement plan that can be used by participants to adequately save for retirement."

Pension Accounting Disclosure Assumptions for 2016

"99 percent of plan sponsors decreased their discount rates last year to a level that is unlikely to be reversed in 2015, due to the small change in yield curves through Nov. 30.... In looking at year-end 2014 [return on asset (ROA)] assumptions, most (62 percent) of plan sponsors had ROAs between 7.00 percent and 8.25 percent, as with year-end 2013. More than 90 percent of the plan sponsors had ROAs between 5.52 percent and 8.25 percent, which is the same range as last year."

Pension Accounting Research Series 2015 (Updated for 2014 Disclosures)

12 pages. "What Discount Rate Should Plan Sponsors Use for Year-end 2014? ... Looking Back at 2013: Discount Rate Changes from 2012 Disclosure to 2013 Disclosure ... Impact on 2015 Pension Expense ... What Return on Assets (ROA) Assumption Should Plan Sponsors Use for 2015?"

Lump Sum Term-Vested Payouts from DB Plans: Is Now the Time?

8 pages. "While lumping out term-vested plan participants is perhaps the lowest cost strategy for reducing pension plan risk, it is one component of an overall de-risking strategy.... A plan engaged in an asset optimization strategy is to some degree undermining its own strategy by reducing assets under management, and giving up the potential for positive investment returns. This is particularly the case for plan sponsors delaying de-risking strategies based on anticipated increase in interest rates. Under the current low interest rate environment, costs of settling benefits now may turn out to be relatively high."

Highway and Transportation Funding Act Provides Pension Funding Relief in 2014 (PDF)

"The new rates appear to increase discount rates and decrease liabilities significantly, although not as much as with MAP-21. [The authors] expect the effective rates to increase approximately 35 bps for 2013 and approximately 65-70 bps for 2014 ... [F]or a $100 million plan with duration of 12, an increase in effective rates of 67 bps would lower the liability by approximately $8 million, reducing the deficit (shortfall) by this same amount. This $8 million translates to approximately $1.3 million reduction in contributions for the 2014 Plan Year."

Advisors Must View Succession Planning as Growth Strategy, Not Just Retirement Strategy

"With 99 percent of independent financial services and advisory practices going out of business when their founder retires, firms must increasingly view succession planning as a growth strategy not a retirement strategy ... Beyond succession planning, less than half (45 percent) of advisors polled have a continuity plan in place in the event of an unexpected departure or leave of absence.... Of those without a business continuity plan, nearly three-quarters (69 percent) plan to implement one over the next few years."

Sponsors Focus on Simplifying Investment Lineups for Participants (PDF)

"A vast majority of defined contribution participants must choose from an investment menu with anywhere from 16 to over 36 funds being offered. In the next 18 months, plan sponsors are likely to make changes that could include consolidating the number of funds in the core lineup, adding exposure to non-traditional asset classes and changing to custom multi-manager funds. Plan sponsors are considering delegating investment management selection and oversight to a discretionary 3(38) provider when making these changes."

De-Risking Considerations for Pension Plans (PDF)

"Despite the roller coaster ride plan sponsors have experienced over the past 12 years ... plan sponsors continue to execute portfolios that more closely resemble asset-optimized strategies rather than liability driven investing (LDI) ones. Why are pension committees not reallocating their asset portfolios to better hedge their liabilities? Are pension committees positioning themselves for another 2013, or for another 2008? What are the concerns or considerations that might lead a plan sponsor to delay a more aggressive LDI implementation? [Here] are some potential reasons -- and why they should be reconsidered."

DC Plan Sponsors Evaluate Whether Current Investment Options Achieve Participant Retirement Income Needs

"Of those plan sponsors already offering TDFs, 12 percent currently use custom funds rather than proprietary or pre-packaged options. [A recent] poll suggests that percentage is rising as more than a third (37 percent) of those surveyed said their organization is likely or somewhat likely to implement or revise custom target date solutions in the next 18 months."

What Investment Managers Need to Know as FATCA Deadlines Loom

"More than 48% of respondents said they did not know the deadline by which FFIs are required to have a Global Intermediary Identification Number (GIIN).... Managers are underestimating the costs of FATCA compliance ... Most of the managers expect the fund to pay a large portion of the expenses.... Managers are behind the curve on FATCA-related preparations ... Managers can use the following timeline to help better prepare for FATCA."