Retirement Plans Newsletter

April 24, 2015

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ERISA/Qualified Plan Attorney
Wiggin and Dana LLP
in CT

Director of Sales (Retirement)
Principal Financial Group
in CA

Daily Valuation Specialist
Howard Simon & Associates
in IL

401k Client Relationship Manager
Burnham Gibson Financial Group
in CA

Senior Operations Specialist
Charles Schwab
in TX

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Webcasts and Conferences



[Guidance Overview]

DOL's Re-Proposed Fiduciary Definition Widely Prohibits Personalized Investment Assistance Even If the Assistance Is in Customer's Best Interest
7 pages. "The framework set up by the DOL could work conceptually, but in its current form, it would have the same effects as the original 2010 proposal -- cutting off the option for low and middle-income individuals and small businesses to receive personalized investment assistance.... The re-proposal [includes] an exemption from the prohibited transaction rules that could, if it worked correctly, preserve access to investment assistance. But the exemption does not work: it is extremely narrow, is not principle-based, and includes such impractical conditions that it is unusable." (Davis & Harman LLP)  


[Advert.]

2015 SPARK National Conference -- June 7-9, Washington DC

Sponsored by SPARK

The retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda is designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Third Party Administrators.



[Guidance Overview]

The New Fiduciary Regulation Proposal, Part I: All It Was Cracked Up to Be? (PDF)
"The DOL refers to the participants, beneficiaries, and IRA holders who will continue to receive conflicted advice under the Proposal as 'the investors [that] are particularly vulnerable to abuse.' The DOL also notes in the preamble to the Proposal that these consumers of advice services 'often do not read the legal documents.' Yet, the proposed exemption would leave these individuals to depend most substantially on the first two mechanisms to protect them: disclosure (which the DOL says they will not read) and integrity (which the DOL clearly believes investment advisors do not have ... at least, not in large enough measure).... The big difference is the ability of the DOL to get involved[.]" (Ferenczy Benefits Law Center LLP)  

Fidelity Asks IRS to Modify or Withdraw Guidance on Hardship Withdrawal Documentation
"While Fidelity said the new IRS newsletter article 'may be indicative of the position the IRS is likely to take when reviewing plan procedures,' it said the agency's position 'does not appear to be supported by IRS regulations and is contrary to recent indications from IRS representatives suggesting that such documentation is not required.' " (Thompson's HR Compliance Expert)  

DOL Not Budging on Fiduciary Rule Comment Period
"Labor Secretary Thomas Perez indicated Thursday that his department will not extend further the 75-day comment period for its redraft to amend the definition of fiduciary under [ERISA]. When asked ... if DOL would honor the Tuesday request by industry trade groups to extend the comment period another 45 days, Perez reiterated DOL's previously stated comment guidelines." (ThinkAdvisor)  

Execs See Fiduciary Proposal as Complicated, Costly
"Early assessments of the Department of Labor's fiduciary proposal find the new rules will be complicated to implement and costly for the industry, according to wealth management executives.... [A]nalysts at investment banking firm Keefe, Bruyette & Woods ... estimated that the DOL's proposal could be a 2% drag on Morgan's earnings, which the authors described as modest. For Raymond James, the analysts estimated 'roughly $2,400-$4,800 in increased compliance and litigation cost per advisor which equates to roughly $15 million to $30 million of incremental expenses.' " (On Wall Street)  

This Retirement Investing Tool Actually Might Be Working
"With 10 years of history, there's now enough of a track record to judge just how well investors are doing in target-date funds. The average per-year return over the past decade was 5 percent ... Stock funds were up an annual 7.5 percent over the past decade, while bond funds were up an average 4.4 percent.... But target-date funds have one big advantage over other kinds of mutual funds ... The average mutual fund has a flaw, which is that the average investor ... tend[s] to jump in and out of funds at the wrong time.... Investors in target-date funds, at least so far, seem to have avoided this curse." (Bloomberg)  

Fund Fees Plunge! Thank the Investors
"Fund expenses are coming down, but don't thank the financial services industry -- pat yourself on the back.... [I]nvestors have overwhelmingly favored low-cost index funds and exchange-traded funds over the past five years -- index funds, for the most part, but low-cost actively managed funds, too. All but 5 percent of the money going into funds went to products with expenses in the lowest 20 percent of the fund universe." (Bloomberg)  

[Opinion]

Congressional Brief: Retirement Accounts and Policy Recommendations (PDF)
"[L]onger lifespans -- and the need to draw from retirement savings for more years -- increase the risk of outliving one's retirement savings. Encouraging 401(k) plans to offer a lifetime annuity as the default payout option at retirement would go a long way toward addressing this potential problem.... We need a level playing field that treats all savers equally.... Simplify and unify the many retirement savings vehicles by creating universal Roth IRA." (National Center for Policy Analysis [NCPA])  

Benefits in General; Executive Compensation

[Official Guidance]

Text of FASB Proposed Accounting Standards Updates: Pension Plans and Health & Welfare Benefit Plans
96 pages. Updates to three accounting standards: [1] Plan Accounting: Defined Benefit Pension Plans (Topic 960); [2] Defined Contribution Pension Plans (Topic 962); and [3] Health and Welfare Benefit Plans (Topic 965). These updates cover: Fully Benefit-Responsive Investment Contracts (File Reference No. EITF-15C-I), Plan Investment Disclosures (File Reference No. EITF-15C-II) and Measurement Date Practical Expedient (File Reference No. EITF-15C-III). (Financial Accounting Standards Board [FASB])  

Sixth Circuit: Employer Breached Fiduciary Duty by Issuing Inaccurate SPD and Disability Insurer Breached Its Duty by Denying Benefits Described in It
"[The Sixth Circuit] ruled that the employer (i) functioned as an ERISA fiduciary when it prepared and furnished the LTD plan's SPD to participants, and (ii) breached its fiduciary duty by furnishing the participant with a misleading SPD.... [T]he court confirmed that the insurer had a fiduciary duty to the plaintiff ... [and] had breached its fiduciary duty by interpreting the plan in a manner that served its own financial interests and was contrary to the representations made in the SPD. " [Stiso v. International Steel Group, No. 13-3503 (6th Cir. Mar. 25, 2015)] (The Wagner Law Group)  

Press Releases

Launch of Enhanced Public Plans Data Website
National Association of State Retirement Administrators

Court Orders Chico, California Steel Fabrication Company to Restore More Than $27,000 to 401(k) Plan
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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