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News Items, by Subject

401(k) plans

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[Official Guidance] Text of IRS Instructions for 2018 Forms 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (PDF)
25 pages. "What's New: ... [1] A conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA.... [2] Special rules apply to retirement plan distributions made to employees affected by certain natural disasters that occurred in 2016 and 2017." (Internal Revenue Service [IRS])
Retirement Bills in Congress Could Alter 401(k) Plans
"Lawmakers are starting with a bipartisan bill that would encourage more small employers to offer retirement savings plans and make it easier for companies to offer annuities that turn workers' savings into a guaranteed annual income. If passed, the measures would comprise the most significant alterations to 401(k) plans since 2006"[.] (The Wall Street Journal; subscription may be required)
Hardship Withdrawals After the Bipartisan Budget Act of 2018
"While there is no change to current rules for 2018, the rules with respect to hardship distributions are going to change significantly beginning in 2019. Beginning in 2019, participants may legally take hardship distributions from QNECs and QMACs and earnings on 401(k) contributions, QNECs and QMACs, if the plan permits them to. Sponsors will want to review their hardship distribution policy and consider whether they wish to extend it to these amounts. There will also be new rules (of some sort) for determining whether a participant has a hardship." (October Three Consulting)
Efforts to Discourage Participant Loans
"More than six in ten (63.6%) [respondents] said their retirement plan uses education or plan design features to discourage participants from taking loans, while 36.4% said it does not. More than one-quarter (27.3%) indicated their plans do not offer a loan feature ... More than four in ten (40.9%) reported that the number of loans outstanding is limited to one, 13.6% said loans are limited to only certain accounts, such as employee deferrals, and 4.5% said loans can only be taken for reasons of substantial hardship." (PLANSPONSOR)
Checksmart Wins Dismissal of 401(k) Excessive Fee Lawsuit
"The proposed class action, filed two years ago by Checksmart employee Enrique Bernaola, made waves in the financial industry for being one of the first to challenge alleged excessive fees in a smaller 401(k) plan.... [The federal district court judge ruled that the participant's] claims were barred by ERISA's statute of limitations because the expense ratios for the various investment options offered by the plan were disclosed to him three years before he filed his lawsuit." [Bernaola v. Checksmart Financial LLC, No. 16-684 (S.D. Ohio July 12, 2018)] (Bloomberg BNA)
[Guidance Overview] Tax Code Changes Require Examination of Hardship Withdrawal Provisions
"[P]lan sponsors that have limited their hardship distributions to the safe harbors now must change their hardship distribution processes for casualty-related home repair expenses, due to an indirect change in Code section 165. These hardship distributions are now limited to home repair expenses caused by presidentially declared disasters only." (Kilpatrick Townsend)
Participants Should Watch for Late 401(k) Deposits
"One thing participants do not review often enough is contribution deposit dates. Reviewing this information not only ensures that your employer is timely depositing your contributions, but also that any late contributions include an extra lost opportunity contribution in accordance with the [DOL] rules." (Slott Report)
Alight Solutions 401(k) Index(tm): June 2018 Observations
"Only one day of above-normal trading activity in June. Continued movement away from equities, with 13 of 21 days favoring fixed income funds. On average, 0.013% of balances were traded daily." (Alight Solutions)
401(k) Fee Levelization Can Make Revenue Sharing Worse
"In effect, fee levelization permits a 401(k) plan to pay direct-like provider fees using revenue sharing. However, the process requires complicated recordkeeping to properly refund revenue sharing. So why do 401(k) providers do it when they could simply charge 100% direct fees in the first place? The reason is simple -- the process can make high 401(k) fees easier to overlook." (Employee Fiduciary)
IRS Confirms that Safe Harbor Hardship Distributions Cannot Be Taken for Repayment of Student Loans
"The IRS confirmed in [Information Letter 2018-1] that because a safe harbor hardship distribution may be made only for the prospective payment of education expenses, it cannot be made for the repayment of student loans. The IRS suggested that as an alternative to taking a hardship distribution, the participant may be able to get a loan from the plan." (Drinker Biddle)
[Guidance Overview] Changes to Retirement Plan Loan Rollover Distribution Rules May Necessitate Updates to Special Tax Notices
"Due to the extension of the period for rolling over plan loan offsets, several references in the special tax notices to a 60-day rollover period are no longer accurate with respect to rollovers of plan loan offsets. If a plan administrator distributes the 2014 [IRS model] notice, a participant would likely not be aware that he or she has several months to repay the loan and complete the rollover to avoid taxation on the defaulted loan." (Ogletree Deakins)
Why Plan Participant Education is Essential
"Only through educated engagement with their retirement plans can participants maximize the value they derive from participating in an employer-sponsored retirement savings plan. In turn, this success boosts employee confidence and increases the value of the plan as a recruiting and retention tool.... [1] Identify areas of need ... [2] Outline ongoing, systematic educational techniques ... [3] Follow up individually." (PlanPILOT)
[Opinion] Plan Sponsors Should Protect 401(k) Participant Loans from Default
"The problem is not loans per se, the real risk is when loans default. Yet many plan sponsors remain unaware of the size and scope of loan defaults each year (over $6 billion a year and counting) or, even more worrisome, their fiduciary obligation to address them.... Some plan sponsors are beginning to experiment with post-separation repayments, but so far employees without a job aren't rushing to sign up." (Employee Benefit Adviser)
[Opinion] Yesterday's 401(k) Is Not the Same as Tomorrow's 401(k)
"[T]here is no solution for workers who do not have retirement preparation as a priority. There is no retirement preparation solution for those who suffer repeated employment, financial, medical or other setbacks throughout their working careers.... [T]he 401(k)'s past is not its future [and] most of the academic and media criticism of individual account retirement savings plans is based on what retirement professionals see in their rear view mirror." (Plan Sponsor Council of America [PSCA])
Changes to DOL Late Deferral Remittance Enforcement Procedure
"The threatening tone of the new version of this DOL correspondence is undeniable.... It remains to be seen how the DOL reacts to recipients of the letter who do not proceed with formal VFCP correction of late deferral remittance issues.... [P]lan sponsors now have additional motivation to pursue formal correction of these issues under VFCP in order to avoid potential DOL enforcement actions." (Legacy Retirement Solutions)
[Guidance Overview] 401(k) Plan Sponsors: Time to Revisit Your Hardship Withdrawal Provisions
"Will a plan be treated as satisfying the regulatory safe harbor if it retains the 6-month suspension period for purposes of making elective deferrals and employee contributions? What happens to participants whose 6-month suspension period has not yet expired when the change to eliminate the suspension period becomes effective? Will a plan be treated as satisfying the regulatory safe harbor if it retains the requirement that a participant must first obtain any available plan loan before taking a hardship withdrawal?" (Verrill Dana LLP)
Creating the Ideal 401(k) Plan, Part 1
"Deferrals would start at 5% and escalate to 10% automatically over 5 years.... As plans become 'healthier,' employers get greater safe harbor protection and lower liability. Measures could include participation and deferral rates -- and ultimately, income replacement ratios.... Default would be TDFs with risk based and managed accounts for those willing to fill out online surveys, along with do-it-yourself options.... Transparent, unbundled pricing with level comp paid by participants paid using flat, fee-per-head charges for participants with account balances over a certain size; ... Focus on financial literacy," (National Association of Plan Advisors [NAPA])
401(k) Plan and Participant Outcomes Improved Again in 2017 (PDF)
55 pages. "The 6% default deferral rate for auto-enrollment plans surpassed the 3% industry standard for the first time by a small amount: 32.4% of plans had a 6% default deferral compared with 31.9% with a 3% default.... The average employee pretax deferral rate reaches 8.3% -- the highest in 10 years ... [T]arget date products now account for the largest percentage of plan assets under management, surpassing all other investment types in nearly every category.... Loan usage decreased to 23.4%, but a greater number of participants age 50+ have outstanding loans." (T. Rowe Price)
Proposed Securities Legislation Could Affect 401(k) Participants' Rights
"The proposed legislation's goal is to federalize securities fraud actions by preempting any and all state laws that even indirectly touch on securities fraud. The result would be that all securities fraud litigation and enforcement would need to take place at the federal level.... [In addition,] the SEC is considering allowing companies to adopt mandatory arbitration clauses for shareholders -- an idea which is opposed by most 401(k) participant advocates on the grounds that it would effectively kill recovery chances for most 401(k) plan participants alleging securities fraud violations." (Compliance Dashboard)
[Opinion] Should 401(k) Plans Embrace Alternative Investments?
"Rocket Dollar 401(k) plans enable their owners to buy cryptocurrency, rental properties, and venture-capital funds.... Often ... the extra costs of exotic securities fully consume their advantages.... [E]ven if Rocket Dollar's customers have access to appropriately priced options ... they won't necessarily be positioned to make sound investment decisions.... [M]ost employees ... did not seek greater complexity.... [E]mployees voted with their feet to do less with their 401(k) plan, not more, by gravitating toward target-date funds." (John Rekenthaler, in Morningstar Advisor)
Less Is Not More: Information Presentation Complexity and 401(k) Planning Choices (PDF)
40 pages. "The hypothesis is that providing concise information with helpful recommendations would improve choices over providing lengthy and detailed information.... [C]ontrolling for demographic and other factors, this hypothesis was not supported by the data, for either the new employees or the business school students.... [S]implifying the presentation of retirement-plan information to employees is unlikely to result in vastly improved retirement-planning choices." (Eric Cardella, Charlene M. Kalenkoski, and Michael Parent, for IZA Institute of Labor Economics)
Four Ways To Rebalance Your 401(k)
"[1] Rebalance according to the calendar ... [2] Percentage of portfolio rebalancing ... [3] Constant proportion portfolio insurance (CPPI) ... [4] Rebalance with future contributions." (Financial Finesse)
Top Fiduciary Questions to Ask Your Plan's Financial Professional
"How do I protect myself from being sued due to my position as a fiduciary on the 401k? ... What is a fiduciary, and how do you know if your advisor will fulfill that role? ... How does automated investing fit in with the traditional advisory model? ... . Who does our investment professional represent? ... What is this product's true track record over the long run? ... What exactly is a financial 'conflict of interest'? ... How do you get paid?" (Fiduciary News)
Do Young Adults with Student Debt Save Less for Retirement? (PDF)
"On the participation side, student debt appears to have little effect ... On the accumulation side, ... student debt does appear to affect the graduate group -- those with debt have much lower 401(k) assets by age 30 than those without debt. This result holds whether the loans are large or small, suggesting that the presence of the loan may be more important than the size of the payments." (Center for Retirement Research at Boston College)
[Opinion] Having Too Much Employer Stock in Your 401(k) Is Dangerous -- Just Look at GE
"[A] large holding in employer stock doubles your risk: If your company runs into major problems, you may lose your job and your retirement security.... At the center of the problem is federal pension law, which establishes a 10 percent limit on employer stock in defined benefit plans, but not in defined contribution plans such as 401(k) plans." (Robert C. Pozen and Ming Liu, via The Brookings Institution)
[Official Guidance] Text of IRS Form 14568-E: Model VCP Compliance Statement -- Schedule 5: Plan Loan Failures (PDF)
"The plan identified above did not comply with the requirements of Section 72(p)(2) of the Internal Revenue Code (IRC). (Note: The conditions of IRC Section 72(p)(2) must be satisfied for a participant loan to be exempt from being treated as a distribution to the participant under IRC Section 72(p)(1).) The failure occurred for the following reason(s) (check applicable boxes and provide the information requested)." [Rev. June 2018] (Internal Revenue Service [IRS])
[Opinion] DOL Publishes Comments on Proposed MHPAEA FAQs Part 39
The DOL has begun posting comments on the proposed MHPAEA FAQs published in April of 2018. As of this date, 38 comments have been posted. The comment period ended June 22. (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Opinion] DOL Publishes Comments on Proposed MHPAEA Model Disclosure Request Form
The DOL has begun posting comments on the revised Model Disclosure Template published in April of 2018. As of this date, 5 comments have been posted. The comment period ended June 22. (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Optimizing Your Company's Retirement Plan
"[F]ocus on four key elements: [1] getting employees into the plan; [2] getting them to save an adequate amount of money toward their retirement goals; [3] getting them invested appropriately based upon their specific circumstances; and [4] getting plan participants engaged in the saving, investing, and, ultimately, retirement planning process." (CAPTRUST Financial Advisors)
The Differences Between 403(b) and 401(k) Pricing
"[T]he recordkeeping fees for 401(k) plans are generally less expensive than those for 403(b) plans of the same asset size.... Assets in 403(b) plans typically reside in multiple contacts ... many will be individual in nature, where the plan sponsor will have little say.... [Annuities are] offered as an option in 68% of 403(b) plans.... Annuities are more difficult to recordkeep, particularly in the daily-valued environment that dominates retirement plans today ... 401(k)s rarely utilize more than one recordkeeper, where it is not unusual for a 403(b) plan to have multiple recordkeepers." (Cammack Retirement Group)
Plan Sponsors Need to Give Special Tax Notice Update for 401(k)s
"[T]he TCJA has changed the time period for making eligible rollover loan offsets for 401(k)s, which will require a notification for plan participants to understand the changes.... [As] of yet, the IRS has not issued any model notices based on TCJA changes to comply with Section 402(f). Therefore, plan sponsors will have to provide notice to plan participants about how the tax law changes will affect their plans." (Butterfield Schechter LLP)
Qualified Plan Loans -- Evil or Essential?
"Done right, plan loans should always be preferred over taxable payments -- including a hardship withdrawal while working or a pre-retirement, post-separation distribution. As a plan sponsor, your focus should be on ensuring: [1] Participants are well informed about plan loans -- con's and pro's, and [2] Plan provisions and service provider processes use current, 21st Century functionality, to do everything possible to ensure repayment." (Plan Sponsor Council of America [PSCA])
[Opinion] ARA Calls for Electronic Delivery Update to 401(k) Disclosure Default
"Current regulations requiring paper delivery of participant 401(k) information can cost investors between $350-500 million per year, which can reduce the average account balance by 2.4% over a 40-year work life.... E-delivery improves access for the visually impaired and others with disabilities.... E-delivery improves access and the quality of information for those who speak English as a second language.... Internet access -- especially among DC account holders -- is nearly universal." (American Retirement Association)
A Look at 401(k) Testing Corrections
"To correct a failed [ADP] test using the distribution option includes some extra steps that can be very confusing. This article discusses the process[.]" (Benefit Resources Inc.)
[Opinion] DCIIA Testimony Before the ERISA Advisory Council: Lifetime Income Solutions as a QDIA -- Focus on Decumulation and Rollovers (PDF)
24 pages. "Those in QDIAs near retirement are more likely to have shorter tenures, lower balances and potentially lower salaries ... The idea of long-tenured participants retiring and utilizing the LTI features in a QDIA may be less common than initially anticipated. As LTI solutions continue to develop, it is important to consider these demographics when assessing their effectiveness." (Defined Contribution Institutional Investment Association [DCIIA])
Who Is Eligible to Make 401(k) Plan Catch-Up Contributions?
"[T]he plan document is not required to allow catch-up contributions; however, if catch up contributions are permitted, it must be so stated.... A plan participant is deemed to be age 50 any time during the calendar year in which he turns 50. Thus, in a non-calendar year plan, a participant is permitted to make catch-up contributions even if he will not turn age 50 until the next plan year." (EisnerAmper)
The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2017 (PDF)
32 pages. "In 2017, the average expense ratio for equity mutual funds offered in the United States was 1.25 percent. 401(k) plan participants who invested in equity mutual funds, however, paid less than half that amount -- 0.45 percent -- on average.... The average expense ratio that 401(k) plan participants incurred for investing in equity mutual funds fell from 0.48 percent in 2016 to 0.45 percent in 2017. The average expense ratio that 401(k) plan participants incurred for investing in hybrid mutual funds fell from 0.53 percent in 2016 to 0.51 percent in 2017.... Employers and employees generally share the costs of operating 401(k) plans." (Investment Company Institute [ICI])
Alight Solutions 401(k) Index: May 2018 Observations
"May was a slow month for trading activity in defined contribution plans, ... with one day of above-normal trading activity for the month. When 401(k) investors made trades, they tended to favor fixed income funds over equities. May observations: [1] Continued movement away from equities, with 13 of 22 days favoring fixed income funds; [2] On average, 0.14% of balances were traded daily." (Alight Solutions)
New Hardship Withdrawal Rules Effective in 2019
"The new rules ... seem intended to make it easier for participants to take premature distributions from plan while eliminating some of the consequences.... Increased distributions mean more money will be subject to full taxation and the 10% early distribution penalty. Also, increased hardship distributions do nothing to help you accumulate the cash you need to fund your retirement income which, after all, is what these plans are all about." (Frenkel Benefits)
[Guidance Overview] TCJA's Defaulted Loan Extended Rollover Rules Have a Serious Technical Glitch
"Effective January 1 of this year was the right of participants to an extended period to rollover their defaulted loan amount, if the default arose following unemployment or the termination of a plan. The statute has a fundamental flaw: it confuses the rules related to the taxation of the loan with the distribution rules related to defaulted loans. The practical effect of this confusion is that it is virtually impossible to effectively use." (Business of Benefits)
401(k) Matching Contributions: What Employers Need to Know
"[N]onelective contributions may be the superior alternative when trying to meet the following 401(k) goals: [1] Provide a base retirement benefit to low wage workers that can't afford to save themselves [2] Maximize business owner contributions with the least possible expense -- often, a new comparability profit sharing contribution is less expensive than a matching contribution in meeting this goal." (Employee Fiduciary)
401(k) Deferrals: How Much Should Employees Be Contributing?
"We are back-loading contributions into our accounts rather than front-loading, contributing a lot at the end of our careers and very little at the beginning. As a result, we are missing out on all of that compounding that takes place over time. So we end up with a 401k account balance that is way too low." (Lawton Retirement Plan Consultants)
[Opinion] ARA Letter to EBSA Protesting Letters to Plan Sponsors Threatening 'Alternative Enforcement Measures' (PDF)
"[R]ecent letters to plan sponsors from Chris Davis, Associate Regional Director of the Chicago Regional Office of the [DOL] ... threaten 'alternative enforcement measures' against plan fiduciaries who choose to correct the late deposit of employee contributions outside of the Voluntary Fiduciary Correction Prog ram (VFCP). Such threats are inappropriate and clearly are intended to scare plan sponsors into participating in what is supposed to be a voluntary program.... ARA respectfully requests that DOL immediately cease using such threats as a means to increase VFCP filings." (American Retirement Association [ARA])
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 93
"In its Regulatory Notice, FINRA points to a number of factors to be considered [by a broken recommending a rollover distribution], including the investments, services, and fees and expenses in the plan. A broker-dealer will need to gather information in order to evaluate those factors . . . and then compare them to the services, expenses, and investments in the proposed rollover IRA. That analysis must be done in light of the financial needs, circumstances and preferences of the participant." (
Tax Reform Makes Now a Good Time for a 401(k) Plan Compensation Definition Audit
"Improper treatment of various elements is a common operational error of 401(k) plan administration, and a common focus of both [IRS] and [DOL] audit programs. If the plan documents and payroll system do not match, it can be a time-consuming and expensive error to correct. But in the wake of major tax reform legislation, a compensation self-audit can be vital to avoiding costly administrative errors and corrections." (Kilpatrick Townsend)
TDF Investor Behavior Improves, But Allocation Mistakes Remain Common
"Vanguard reports that more than half of 401(k) participants are now invested in a single target-date fund (TDF), compared to only 13% just a decade years ago.... Vanguard researchers estimate that 77% of the participants on the firm's recordkeeping platform will be invested in a single TDF by 2022.... [W]hen constructing their own retirement portfolios, about 10% of participants still tend to hold extreme allocations -- defined here as holding either 0% or 100% equities in a retirement-focused portfolio." (planadviser)
Reviewing Your 401(k) Record Keeper Service Agreement
"If you are like many plan fiduciaries, you haven't looked at your agreements since you signed them. However, the provisions in your agreements that set forth the responsibilities of the provider and the employer are not written in stone, and you may now have the opportunity to negotiate a better deal. There's a focus on fees and competition in the market today, and size matters. If your plan has grown, you now have more bargaining power to negotiate lower fees." (401kTV)
Budget Act Means Plan Sponsors Must Analyze 401(k) Plan Administration
"The Budget Act's changes included easing some hardship distribution requirements and extending to victims of certain wildfire disasters the favorable distribution options that TCJA had given to hurricane victims. As a result of these changes, many 401(k) plans may need plan amendments to either bring them into compliance with TCJA and the Budget Act, offer the distribution opportunities now permitted following this legislation, or comply with regulations implementing these provisions that have yet to be written. The deadline for adopting these amendments may not be until December 31, 2019, or later and some plans may not require amendments at all." (HR Daily Advisor)
Proposed Legislation Could Allow Small Plans to Duck Fiduciary Responsibility
"H.R. 4523 -- also known as the Automatic Retirement Plan Act of 2017 -- was introduced by Rep. Richie Neal (D-MA) last December. Among other elements (including requiring all employers above a certain size to offer a retirement plan with specific conditions), employers with fewer than 100 employees who participate in a new type of multiple employer plan (MEP) would basically be absolved of all fiduciary responsibility -- including no responsibility for the selection and monitoring of the Pooled Plan Provider (PEP)." (National Association of Plan Advisors [NAPA])
Edison Executives Beat Latest Challenge to Stock Losses in 401(k)
"The worker's second amended lawsuit failed to state a valid claim of fiduciary breach under [ERISA] against two Edison executives ... Judge John A. Kronstadt ... held ... The worker again failed to allege a sufficient alternative action the executives could have taken other than continuing to hold the stock as an investment option in the plan[.]" [Wilson v. Edison Int'l Inc., No. 15-9139 (C.D. Cal. May 29, 2018)] (Bloomberg BNA)
Separately Managed 401(k) Accounts Pose Risks to Plan Sponsors, But Certain Steps Can Reduce Liability
"Employees who can best take advantage of separately managed accounts generally are near retirement and have in excess of $500,000 in retirement assets.... [S]electing and monitoring individual investment advisers for separately managed accounts should be undertaken in the same manner plan sponsors address all their fiduciary functions.... [P]lan sponsors can reduce their liability by placing the bulk of this selection process on the shoulders of the employees." (Fiduciary News)
[Guidance Overview] Unallocated Forfeitures Now Can Be Used to Fund QMACs and QNECs, IRS Says
"[A]mounts that are in the plan as forfeitures from other employer contributions can now be used to fund an employer's QNECs or QMACs ... [The IRS recently issued two] 'Issue Snapshots' ... [which] dealt with QMACs and QNECs and permitted taxpayers to rely on these Issue Snapshots currently.... Plan sponsors that may want to be able to correct ADP/ACP nondiscrimination testing by using forfeitures to fund QNECs or QMACs [need to] determine how the plan documents may need to be changed to permit use of forfeitures to fund such corrective contribution allocations. This is an amendment that would need to be in place during the plan year to which it applies[.]" (Winstead PC)
[Guidance Overview] IRS Publishes New Employee Plans 'Issue Snapshots'
The IRS Tax Exempt and Government Entities (TE/GE) Knowledge Management team periodically issues research summaries called 'Issue Snapshots' on tax-related issues for practitioners. Recently the IRS added these summaries of employee plans issues: (Internal Revenue Service [IRS])
[Guidance Overview] Tax Reform Requires Plan Sponsors to Update 401(k) Plan Special Tax Notices
"In several places in the 2009 IRS model 402(f) special tax notice ... references are made to the 60-day rollover requirement and consequences that flow from failing to make a rollover within that time. Because TCJA creates an exception to these consequences, the model special tax notice ... needs to be updated ... [T]he plan administrator is ultimately responsible for making the required special tax notice disclosure to the participant, and could face a potential breach of fiduciary duty suit under [ERISA] to the extent a participant relied on any inaccurate or misleading statements." (Kilpatrick Townsend)
Have You Checked Your Plan's Definition of Compensation Lately?
"While many plan sponsors rely on the expertise of the vendors and assume they will properly carry over the terms of the plan, many times there are errors in carrying over provisions when a plan changes providers or is restated. It is the plan sponsor's responsibility to ensure that the document states what they want it to state before they sign the document making it the legal document governing the terms of the plan. It is imperative that a plan sponsor thoroughly review a plan document before executing it or even better ask counsel to review it to ensure everything was carried over correctly." (Graydon)
[Opinion] The Dirty Little Secret of Auto-Enrollment?
"[A]uto-enrollment is not a panacea. For example, it has negatively impacted the average account balance size of many plans, particularly where there is high turnover; and smaller average account balances equals higher fees.... [If] we are forcing people to save their earnings via auto-enrollment, this earnings reduction can only be offset by either increasing earnings, reducing expenses or incurring debt for something the earnings would have normally been used to finance." (Cammack Retirement Group)
The Complete Guide to 401(k) Corrective Distributions
"Why corrective distributions are necessary ... How to make corrective distributions ... Corrective distribution deadlines and penalties ... Fixing a failed nondiscrimination test without corrective distributions ... Safe harbor: avoid corrective distributions with this plan design ... Affordable ways to avoid making corrective distributions." (ForUsAll)
Can a Company Freeze a 401(k) Account If an Employee Is Suspected of Stealing from the Company?
"This is one of the very rare instances when there is a clear-cut answer, and it is a resounding 'no.' ... One of the unique features of company-sponsored retirement plans is that they are protected from legal judgments and bankruptcies. They also cannot be used as collateral and cannot be assigned to another individual. There are a few exceptions, but they are very narrow and specific." (DWC)
What Plan Sponsors Can Learn from the Thrift Savings Plan
"While the TSP excels in its simplicity, the plan's few investment categories impacts performance, for better or worse, at various points in time. The TSP's core menu includes an S&P 500 index tracker, a small-cap stock index fund that tracks the Dow Jones U.S. Completion Total Stock Market Index, an international-stock fund that tracks the MSCI EAFE Index, and a Bloomberg Barclays U.S. Aggregate Bond Index tracker. As solid as this lineup is, it misses exposure in a couple of worthwhile areas, such as emerging markets and inflation-protected bonds." (Morningstar Advisor)
Common Compliance Issues in 401(k) Plans
"Compiled from lists published by the IRS and plan auditors, here are 10 items to check and review to make sure your 401(k) plan is operating in line with IRS expectations ... [1] Failure to understand and follow the plan's definition of compensation ... [2] Late or erratic contribution of employee deferrals ... [3] Failure to amend the plan document for tax law changes ... [4] Misunderstanding of eligibility and vesting rules ... [5] Growing forfeiture accounts ... [6] Impermissible in-service withdrawals." (QBI)
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