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401(k) plans

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[Discussion]Allocable Share of Qualified Plan Deduction
"A partnership sponsors a 401(k) Plan. Partnership consists of multiple partners receiving a K-1. Three of the partners in the partnership are winding down their practices. They are still considered equity partners but are paid a percentage of their collections (reported on their K-1s). Due to some of the partners winding down their practices, the ownership shares have changed mid-year. For determination of the allocable share of qualified plan deductions for each partner, should I use the beginning percentage or ending percentage found in Part II, Box J?" (BenefitsLink Message Boards)
The Influence of DC Plan Design on Retirement Outcomes (PDF)
16 pages. "Using actual incomes, savings rates, account balances and asset allocations, DCIIA's project seeks to project how different groups of participants may fare in achieving the means to generate or finance an adequate retirement income.... [1] Automatic plan features work ... [2] The current system can do better, even without additional legislative or regulatory action ... [3] Limiting asset 'leakage' works.... [4] Today's older workers are especially vulnerable." (Defined Contribution Institutional Investment Association [DCIIA])
2017 Defined Contribution Plan Sponsor Survey Findings
"A shift is taking place among plan sponsors in their view point on driving participant decisions. Now, more say they focus on proactively placing participants on a solid saving and investing path (vs. having participants make their own choices).... Despite many positive trends identified in this year's survey, one measure remains unchanged from 2015 -- many plan sponsors are not aware of their fiduciary status." (J.P. Morgan Asset Management)
Switching from a SEP to a 401(k)
"While a SEP may be the perfect plan type for some situations, many employers who start with a SEP later realize that a 401(k) plan may actually help the owners better meet their objective of maximizing contributions to themselves at a lower contribution obligation for the employees.... A SEP may be terminated at any time and all funding can stop once the plan is terminated.... No notice has to be provided to the IRS about the SEP termination. Employees may take a distribution from the SEP or may roll their SEP account into the new 401(k) plan or into an IRA." (Retirement Management Services)
[Discussion]How to correct an overpayment, using EPCRS 2016-51
"I've got a participant who was overpaid by about $1,000 in an individual account (i.e. on a platform) 401(k) plan (erroneous deposit combined with immediate distribution - every TPA's nightmare). I started with Appendix B, Section 2.05 "Correction of Other Overpayment Failures". That says that for a DC plan, I go to Appendix B, Section 2.04(2)(a)(iii). Flipping back a few pages, I find that section is headed "Return of Overpayment Correction Method" and is generally talking about a 415(c) refund, but it directs me to Section 6.06(3). 6.06(3) is "Correction of Overpayment (defined benefit plans)" - !?!? That's a little odd, since 6.06(4) is the same section for defined contribution & 403(b) plans. I'm sure the IRS wouldn't make a typo, though, so I'll stick with 6.06(3). This kicks me back to Appendix B, Section 2.04(1), keeping in mind that I might want to consider Section 4.05 (correction via plan amendment - no, I don't want that), and also keeping in mind that I don't violate Section 6.02 (general correction rules, like don't favor HCEs, etc.). Appendix B, Section 2.04(1) talks about "Failures Relating to a 415(b) Excess". Again, we're back to 415 violations, and the examples are all DB-esque. This is the worst "Choose Your Own Adventure" book ever. Can anyone help me make sense of this? Or point me to something that makes the steps to correct this clearer?" (BenefitsLink Message Boards)
Major Behavioral Determinant of 401(k) Saving Success
"54 percent of participants with a written plan increased their 401k contributions in the past year, compared with only 33 percent of those without a written plan. Fully half of those with a written plan have rebalanced their 401k portfolio, while only 24 percent of those without a plan did." (401K Specialist)
[Discussion]match true-up question
"We have a 401(k) plan that provides for matching contributions made on a per-payroll period basis (50% match on up to 6% of eligible comp), with HCEs subject to an $3,000 annual limit on the match. We have certain HCEs who front-load their deferrals so that they don't get the benefit of the entire $3,000 match for the year. Our TPA suggested that we implement a true-up provision for the HCEs. It seems like there would be a discrimination issue if we allowed a match to be allocated on a plan year basis only for HCEs. Any thoughts?" (BenefitsLink Message Boards)
The Risk of 3(38) Fiduciary 'Flexibility'
"[A] good 3(38) investment manager should provide the plan sponsor, and the plan advisor, with the necessary deliverables to make monitoring of that fiduciary a matter of periodic although definitely not pro forma protocol.... While a prudent process does not necessarily ensure successful investment outcomes, the prudent process that your 3(38) employs can be critical to the ultimate success, or lack thereof, in the participants' ability to accumulate the necessary assets to retire." (401K Specialist)
[Opinion] Four Ways to Cut Fat 401(k) Retirement Fees
"Most Americans are paying too much when it comes to retirement fund management.... What's the best way to avoid these fees? [1] Always work with a 'no-load' fund company.... [2] Don't go with 'house' funds.... [3] Always read your fund disclosures.... [4] Make a move if you're getting gouged." (John Wasik in Forbes)
The 401(k) Match Is Back, and It's Getting Bigger
"Company matches in 401(k)s are on track to hit 4.7 percent of employee salaries this year, up from 3.9 percent in 2015 and way up compared to 3 percent in 2009[.]" (The Washington Post; subscription may be required)
Sears Hit with 401(k) Class Action Over Company Stock
"The company stock had been 'predictably declining since 2010,' but plan fiduciaries continued acquiring and holding Sears stock, according to a lawsuit filed July 14 in the U.S. District Court for the Northern District of Illinois." (Bloomberg BNA)
21st Century 401(k) Plan Design
"[The plan's] LifeStage funds are for all purposes Enhanced Balanced Portfolios that are similar to Target Risk Funds (TRF) in that they offer a single, balanced solution for one to diversify their retirement account investments and tailor it specifically to their desired risk level.... [T]he participant could make a decision if they understood what their stomach for risk was without worrying about the additional complexities of glide paths or the significant variations that can exist between funds with the same target dates ... [T]he 4 core options bordered on the purposefully ordinary so that anyone from any background could easily understand and feel comfortable knowing what they were choosing." (Fiduciary News)
Why Participants Should Avoid Active Trading of 401(k) Investments
"For the year 2016, the S&P 500 produced a total return of 11.96% while the average mutual fund investor earned just 7.26%. The same was true in 2015 when the S&P 500 returned 1.38% compared to -2.28% for investors in equity funds.... So if investors sell equity funds when the market dips and fail to reinvest as the market rebounds, the investor's returns will lag those of a fund that earned those returns over the entire period. The same pattern emerges over longer periods." (ForUsAll)
A New Format for Plaintiffs' Complaints in ERISA Fiduciary Breach/Excessive Fee Cases?
"The investment industry is quick to try to defend a fiduciary's selection of actively managed mutual funds on the argument that ERISA does not require that a plan fiduciary only select the cheapest investment options.... [The Restatement of the Law (Third) of Trusts indicates] that a fiduciary still has a duty to select only those actively managed funds that provide a plan and plan participants with benefits that are commensurate with the added costs and risks resulting from the actively managed funds.... [T]he Restatement provides plan participants and their counsel with the perfect blueprint of providing the courts with an applicable fiduciary standard and proof to defeat any motion to dismiss." (The Prudent Investment Adviser Rules)
Does the New Fiduciary Rule Apply to Plan Sponsors and Committees?
"[As] a plan fiduciary, you are responsible for monitoring those people and you need them to be compliant. In addition, you need to know whether your providers are cutting back on their services in order to avoid being classified as fiduciaries under the new Rule or whether they are required to put your participants' interests first. The Rule can even affect your own HR employees, who could become fiduciaries if they give advice to participants. Here is a short action list of steps for plan fiduciaries to take[.]" (Cohen & Buckmann, P.C., via 401kTV)
Catch 22 Situations With Retirement Plan Distributions
"Sometimes you need a particular form of distribution to achieve a certain tax result, but the retirement plan doesn't allow it. Or sometimes the tax law seems to say opposite things about the same distribution.... Retiring between age 55 and age 59 1/2.... 401(k) hardship distribution subject to the 10% penalty.... Estate wants to use the five-year payout." (Natalie Choate, in Morningstar Advisor)
[Discussion] 401(k) Plans for Household Employees
"Can a household employer establish a 401(k) plan on behalf of the household employees & be exempt from the 4972 10% excise tax on nondeductible contributions if the plan restricts contributions to only elective deferrals?" (BenefitsLink Message Boards)
Aon Eliminates Company Stock Fund from 401(k) Plan
"The Aon Savings Plan ... had $5.3 billion in assets as of Dec. 31 ... Aon's company stock accounted for $238.3 million. The 11-K statement gave no reason for dropping the fund ... Effective Dec. 1, 2017, the stock fund will be liquidated and removed from the plan." (Pensions & Investments)
Making Sure 401(k) and 403(b) Fees Are 'Necessary' and 'Reasonable'
"[A scoring system] adds an objectivity that cannot be as easily affected by the really skilled sales people you'll be talking with and listening to.... It's very likely that by the time you've finished with interviews, scoring and group discussion your choice will have emerged. If it hasn't, identify what further information you need to get to a decision.... Plan on your conversion taking 90 and 120 days from the date on which you sign on the dotted line, usually a letter of intent, until assets move." (Fiduciary Plan Governance, LLC)
[Discussion] Employer Stock Dividend Payouts and Hardships
"Sponsor of 401(k) plan with employer stock as an investment option which pays quarterly dividends has elected to give the participants the option to either receive dividends as a cash payment or to reinvest back into the plan. Dividend payouts are being counted as normal distributions so, for any participant with employer stock in a Hardship eligible source who has elected the cash payout option for dividends, the amount available for Hardship is reduced for each dividend payout the participant receives. Is this correct? It seems to me that, since dividends are classified as earnings if they are reinvested, payouts should be considered a distribution of earnings and not principal and shouldn't have an effect on the Hardship calculation." (BenefitsLink Message Boards)
Latest Wave of 401(k) Suits Yields Big Wins, and Big Losses, for Plaintiffs
"Since 2006, plaintiffs' firms have filed more than 90 lawsuits against employers and other parties alleging excessive fees in 401(k)-style retirement plans ... Last year alone, firms representing 401(k) participants filed more than 25 such cases -- a record annual number. Many of the latest suits target companies -- including a number of financial-services firms -- for using their own investments in their retirement plans." (The Wall Street Journal; subscription may be required)
[Discussion] 5500 Reporting for 'New' 401(k) Plan After Asset Transfer
"Potential client started up a typical 401(k) plan with safe-harbor match and profit sharing as of 1/1/2012. Plan number: 001. In 2015 they moved their money to John Hancock and got a new document with an effective date of 1/1/15 and when 5500-SF forms were done for 2015 there was a final one for 2015 under 001 showing assets transferred to a new plan (002) and a first one for 002. Plan 001 listed an asset transfer and not payouts and question 13a on whether there was a resolution to terminate the plan was answered 'no'. Questions: [1] Is this proper? [2] Would there be an issue with the mandatory waiting period after terminating a 401(k) plan? [3] How would you proceed? Amend 2015 filing for 001 and continue filing under 001 or go ahead with 2016 filing under 002?" (BenefitsLink Message Boards)
[Guidance Overview] 401(k) Plan Fix-It Guide Updated for Changes to EPCRS
"The Guide helps plan sponsors find, fix, and avoid common 401(k) plan compliance errors by providing a table of 12 common mistakes ... and links to detailed discussions of each mistake. The discussions provide examples, explanations of available correction programs, and links to IRS guidance. In addition to the latest EPCRS changes, the updated Guide incorporates recent guidance on determination letters and other revisions." (Thomson Reuters / EBIA)
[Discussion] Correcting Deferral from Voided Paycheck
"A 401k Plan Sponsor sent a payroll file with deferrals for a participant whose check was later voided. So bottom line he had a deferral deposited into the plan assets on money he did not receive. What is the BEST way to handle this as far as correcting the error? It's a small amount -- $9.75, but the platform wants $100 to correct it (move it to the administration account)." (BenefitsLink Message Boards)
More Court Victories for 401(k) and 403(b) Fiduciaries
"One of the trendy current claims is that it is always a fiduciary breach to have a money market fund as the cash equivalent investment rather than a stable value fund, though stable value funds can have transfer and withdrawal restrictions. And some of the basics of litigation -- such as standing and causation -- have also been found to be missing in these suits. The complaints put forth an oversimplified view of the law, and some judges have seen through it." (Cohen & Buckmann, P.C.)
[Discussion] Coverage Testing Fails Minimum Coverage Test Because of Religious Objection by Some Employees
"I have a plan that does not pass coverage due to the Amish being eligible but who decline to receive a benefit due to religious and moral beliefs. How can the plan sponsor provide a contribution for an Amish employee when he will not accept participation? Will the plan, if audited, be safe?" (BenefitsLink Message Boards)
[Discussion] Aggregation Issues for Governmental 403(b) Plan Sponsor with Subsidiary That Sponsors 401(k) Plan
"Employer sponsors a governmental 403(b) plan, and recently bought a company (i.e., it's now in a parent-subsidiary relationship) in the process of establishing a 401(k) safe harbor plan. For testing purposes, will the 403(b) plan become subject to 410(b) and 411 testing? Any other testing issues or coverage issues that need to be addressed?" (BenefitsLink Message Boards)
American Airlines Inks $22M Deal in 401(k) Funds Challenge
"The proposed class action targeted the American Beacon funds in the airline's 401(k) plan, which participants said were overly expensive and 'complete failures in the marketplace.' These funds earned fees for the airline's corporate family and caused the plan to lose tens of millions of dollars in excessive fees and lost earnings, the lawsuit alleged... This $22 million deal ... dwarfs recent settlements in lawsuits against employers that include affiliated investment funds in their 401(k) plans." (Bloomberg BNA)
The Folly of Risk and the 401(k) Fiduciary
"[F]inancial professionals are like engineers in the sense they cannot mislead when it comes to the mathematics of investment returns, cash flow analysis, and other material and measurable statistics. Yet this is precisely what the industry has been doing for decades -- and with both implicit academic and direct regulatory support.... What's the one thing 401k plan sponsors can do right now to make sure employee participants don't fall prey to the folly of risk? The easiest thing to do is to remove all reference to 'risk' in the most basic educational materials." (Fiduciary News)
Roth 401(k) Contributions May Be Better Than Traditional Pre-Tax 401(k)
"Assume one participant makes 10% traditional pre-tax contributions and another makes 10% Roth 401k contributions for their entire careers. Also, assume that they invest in the same funds and have the same earnings experience. Let's say they both end up with $1 million at retirement. The Roth 401k plan participant truly has $1 million, however, the traditional 401k plan participant has $1 million minus state and federal taxes. A huge difference." (Lawton Retirement Plan Consultants)
[Discussion] Late Corrective Distributions for ADP Failure
"We brought in a new plan in April 2016 and found out in March 2017 that the 2015 ADP refunds were not distributed. In lieu of QNEC, I think the one-to-one correction method (refunding excess contributions too) is going to be the cheapest route for fixing. I cannot find any language in EPCRS language or in the ERISA Outline Book that this is also a QNEC deposit. The EOB just says 'corrected with a contribution.' This correcting contribution is a QNEC, right?" (BenefitsLink Message Boards)
[Discussion] Government DB Plan Wants to Extend DROP Period
"Governmental defined benefit plan contains a provision that allows certain employees to extend their DROP periods using accrued annual leave. Employees have the option to cash out leave or use the hours to extend their DROP period. This looks like a CODA to me because the employees have the option to cash out or us leave hours to extend DROP. Am I wrong on this?" (BenefitsLink Message Boards)
Evansville Woman Sentenced in Federal Court for Bankruptcy and Wire Fraud Scheme Involving Husband's 401(k)
"[Patricia Bippus-Allen] was convicted of wire fraud stemming from her transferring money from her husband's 401(k) account into her own personal bank accounts without his consent, knowledge, or authorization. Bippus-Allen made multiple calls to the 401(k) service center purporting to be her husband while also faxing supporting documentation to the service center for a 401(k) hardship withdrawal. In sum, Bippus-Allen made multiple unauthorized withdrawals from her husband's 401(k) account for a total of over $24,000. Bippus-Allen also took out over $16,000 in loans on her husband's 401(k) account without his consent, knowledge, or authorization." (Office of the Solicitor, U.S. Department of Labor)
Americans Trust in Their 401(k) Plans
"Ninety percent of DC-owning households agree that their DC plan account helps them think about the long term, not just their current needs ... 91 percent agree that payroll deduction makes it easier to save; and 44 percent agree that they probably wouldn't save for retirement if they didn't have their DC plan at work. These results highlight the important role that employers play in promoting retirement saving." (Investment Company Institute [ICI])
Retirement Plans Are Leaking Money. Here's Why Employers Should Care
"If their retirement accounts are dwindling, older employees may not be able to retire when they want to. How problematic that is depends on the employer and its workforce management philosophy.... [If] an employer wants workers to stay until normal retirement age, pass along their knowledge and skills, and then leave so younger workers can move up, early withdrawals become more problematic." (Society for Human Resource Management [SHRM])
Here's How Much You Should Have Saved for Retirement at Every Age
"By the time you reach your 30s, you should try to have the equivalent of your annual salary saved for retirement.... By age 40 ... you should have around three times your annual salary saved.... By age 50, you should have about six times your annual salary saved.... By age 60, you should have about eight times your annual salary saved." (Motley Fool)
[Discussion] Use of Too-High Compensation Amounts in Calculating Profit Sharing Allocation
"Plan compensation is W-2 plus deferrals and excludes fringe. The Employer decided to do a profit sharing for 2016 and calculated the profit sharing on the gross compensation. Most of the 300 participants received the correct profit sharing because their W-2 pay plus deferrals was in fact their gross compensation. About 60 participants had fringe benefits that shouldn't have been counted, so they got a little more than they should have. Trouble? How to fix?" (BenefitsLink Message Boards)
The Top Five Mistakes Made by 401(k) Plan Sponsors
"[T]he most common mistakes ... as well as ways for plan advisers to guide their clients away from those mistakes.... [1] Not remitting payroll in a timely manner ... [2] Not following the plan document correctly ... [3] Not benchmarking plan fees ... [4] Not selecting a quality auditor ... [5] Not documenting the reason for changes." (InvestmentNews)
Making Sure 401(k) and 403(b) Fees Are 'Necessary' and 'Reasonable'
"You should create a master list of items you want to see addressed by each respondent. This can, essentially, be the items in your RFP. You'll want to create a fairly detailed spreadsheet to analyze the fee component of the proposals." [The authors provide a list of items to consider.] (Fiduciary Plan Governance, LLC)
The Importance of Retirement Investing Over Saving for Older Employees
"Let's say I am a mid-to-late career employee who has a $1 million account balance.... If my $1 million has a modest annual return rate of 5%, I will earn $50,000 on it in the coming year. That greatly exceeds the maximum annual amount of $24,000 (presuming I am over age 50) that I can save in my 401(k)/403(b). In addition, due to the time-value of money, that $24,000 maximum contribution has less time to compound, and becomes an even smaller portion of my $1 million+ account balance in future years. At this point, therefore, how I invest becomes far more critical than how much I save." (Cammack Retirement Group)
Pioneer Natural Resources Participant Suit Alleges Unreasonably Expensive Investment Options in 401(k) Plan
" 'Instead of leveraging the plan's bargaining power to benefit participants and beneficiaries, the Pioneer defendants chose inappropriate, higher-cost mutual fund shares classes,' said the June 28 complaint filed in U.S. District Court in Denver ... These actions 'caused the plan to pay unreasonable and excessive fees for record keeping and other administrative services.' The complaint said the Pioneer Natural Resources USA Inc. 401(k) and Matching Plan had $500.2 million in assets as of Dec. 31, 2015." (Pensions & Investments)
[Opinion] Raising the Cap on 401(k)s Won't Solve Retirement Crisis
"Certainly, some people would contribute more to their 401(k)s or IRAs if they were able, but the evidence suggests that the people who would do that are those with incomes above $100,000 per year. Very few people with incomes below that level are contributing the maximum amount at the current levels. It seems very unlikely that they would suddenly increase their contributions above the current levels just because they would be able to." (National Public Pension Coalition)
Safe Harbor 401(k) Establishment Deadline Fast Approaching
"It is critical that the accounts are open -- and remember that it takes 4 to 6 weeks to get this done because enrollment meetings must be scheduled and participants must be able to defer income by the first payroll in October. You can't just adopt the document by the October 1 deadline and do all the account details later -- it all must be done by this decisive October 1st deadline." (QBI)
Should Looming Tax Reform Drive 401(k) Prefunding?
"The concept behind 401(k) prefunding is straight-forward: increase the contribution(s) in a high-tax-rate year and decrease them when tax rates are lower.... The increased contributions would be allocated to employee accounts just like regular 401(k) contributions.... The 401(k) contributions for Year 1 can be deducted for Year 1 if they are made before the corporate tax deadline in Year 2.This deadline could be as late as mid-September for a calendar-year tax entity." (CFO)
401(k) Self-Dealing Suit Filed Against Waddell & Reed
"The complaint alleges that, instead of acting for the exclusive benefit of the 401(k) plan and its participants and beneficiaries, the defendants ... [forced] the plan nearly exclusively into investments managed by WR Financial or an affiliated entity, which charged excessive fees ... and which performed worse than comparable available options. The lawsuit says the defendants could have chosen nonproprietary, less costly, better-performing investment options for the plan." (planadviser)
Nationwide Accused of Charging Excessive 401(k) Fees
"The lawsuit, filed June 27 by a participant in a small 401(k) plan sponsored by Andrus Wagstaff PC, says Nationwide's practice of charging a flat, 1 percent fee for administrative services allowed the company to collect fees that were nearly 10 times the median fee throughout the industry." (Bloomberg BNA)
Benefit Plan Self-Audits
"There are certain mistakes ... that regulatory authorities say cause the most compliance issues. To manage your resources wisely, consider focusing on the following high-risk areas. [1] Timeliness of deposits ... [2] Not following plan provisions ... [3] Over-Reliance on Service Providers ... If you do all of these steps in your self-audit, document it in an Excel spreadsheet and save the information in the retirement plan file. If you ever do get audited you can show the IRS or DOL the steps you performed and this will show them you are trying to do everything you can to ensure compliance." (Belfint Lyons & Shuman, CPAs)
[Discussion] Should We Hire a Consultant to Lead the RFP for a 401(k) Record Keeper?
"What is the the prevalence of hiring an outside consultant to lead 401(k) recordkeeping RFPs? Some folks in my company are pushing pretty hard to do it internally, but I have reservations in terms of our in-house availability and expertise. Our plan has approximately 5,000 participants, and the trust is in the 'large' asset category ($200M -- $1B). The plan is safe harbor and fairly vanilla otherwise." (BenefitsLink Message Boards)
How America Saves 2017: Small Business Edition
36 pages. "Vanguard Retirement Plan Access (VRPA) is a comprehensive service for retirement plans with up to $20-plus million in assets.... In 2016, 1 in 5 (21%) VRPA plans allowed employees to make voluntary contributions immediately after they joined their employer ... 41% of plan sponsors required eligible employees to have one year of service before they could make employee-elective contributions to their plans.... Forty-four percent of VRPA plans provided only a matching contribution in 2016 ... Two-thirds of VRPA plans with an employer contribution had adopted a safe harbor design." (Vanguard)
[Discussion] Reporting Roth 401(k) on a Schedule K-1
"Anyone know how a CPA should be reporting Roth 401(k) contributions on a Schedule K-1 for IRS Form 1065? I am concerned that the partners are doing Roth 401(k) but there doesn't seem to be a coding mechanism as on Form W-2, to clarify what was Roth and what was pre-tax." (BenefitsLink Message Boards)
[Discussion] Adding Safe Harbor Non-Elective and Deferrals to Profit Sharing Plan Mid-Year
"Profit sharing plan's year ends Dec. 31. Boss wants to convert the plan to add deferrals and a safe harbor non-elective 3% employer contribution. I know the regs treat this as a new plan for ADP/ACP and notice purposes. The deferrals will go into effect on August 1, but Boss wants the safe harbor provisions to be effective as of Jan. 1, 2017 so the employer can make the 3% contribution for 2017, using it as an offset for the profit sharing piece. I know the compensation computation period can exclude pre-participation comp, but something about this doesn't sit right with me. Is there a rule that would preclude safe harbor treatment prior to August 1 because nobody will have been able to defer during that period?" (BenefitsLink Message Boards)
[Discussion] Incorrect Refund of Deferrals Due to Mistaken Belief as to Failure of ADP Test
"Employer gave incorrect payroll data by essentially putting back the deferrals twice, thus overstating comp for many participants. The mistake caused one person to be treated an HCE, who then caused a failure of the ADP test, so refunds to HCEs were paid out! Can this be corrected as a valid self-correction under Rev. Proc. 2016-51, Section 6.06(4), by notifying the affected participants and giving them the option to repay or not? Other solutions?" (BenefitsLink Message Boards)
The Power of Simplicity: Improving the Rate of Saving by Participants
"One way to combat decision fatigue is to take away the need for a decision in the first place. Make a choice 'automatic.' ... Retirement plan investors who received a personalized 'Save More' message with a one-click option to take action on their Vanguard account homepage were 139% more likely to increase their savings rate than those who didn't get the savings nudge. A different message, sent to participants who weren't saving enough to obtain their employer's full matching contributions, had an even stronger impact." (Vanguard)
[Discussion] Safe Harbor Plan Merges Into Non-Safe Harbor Plan Mid-Year
"Both plans, run by corporations, operate on a calendar year basis. Corporation A has a safe harbor 401(k) plan. Corporation B has a non-safe harbor 401(k) plan. B buys A's assets, and all of A's employees come to work for B. Corporation B wants to assume the assets and liabilities of A's plan, and merge A's plan into its own plan while still preserving the safe harbor status of A's plan for the year. Is there any way to do this? I think corporation A's plan could be TERMINATED, and thus preserve safe harbor status, but I don't see how it would work in a merger of the plans." (BenefitsLink Message Boards)
'Auto' Features Beat Inertia But May Generate Exhaust
"Beneficiary designations -- improperly completed or not made at all -- can be a consequence of automatic enrollment ... The plan document should provide guidance regarding how to resolve beneficiary disputes, so plan sponsors are encouraged to proactively review issues relating to beneficiary designations ... Consider amending plan to have contesting parties first use the plan's administrative claims procedures.... Consider enhancing participant communication campaigns, using real life examples of how their intended beneficiaries might incur legal challenges." (American Society of Pension Professionals & Actuaries [ASPPA])
[Discussion] Terminating a ROBS 401(k), Then Rollover to an IRA
"Individual bought a franchise using a Rollover-as-Business-Startup 401(k) plan and now wants to terminate it. Can the stock be rolled over to his IRA? If it could, there would be seem to be no such thing as a ROBS -- you would just start a company using an IRA. I thought the whole point was to take advantage of the employer securities exemptions available in a 401(k) plan." (BenefitsLink Message Boards)
Financial Communications and Asset Allocation Decisions
"Communication media and format have large effects on reading style, which can affect comprehension. Print encourages a more systematic, deeper reading style compared to an online format. Charts attract visual attention. Comprehension and individual differences (especially risk tolerance and financial self-confidence) have large effects on asset mix decisions." (TIAA Institute)
Putting the Pension Back in 401(k) Plans
"[Lifetime Income Annuities (LIAs)] are most beneficial to plan participants who optimally commit 8% to 15% of their plan balances at age 65 to an LIA that starts payments at age 85. Plan sponsors can integrate LIAs as defaults in their plans by converting as little as 10% to 15% of retiree plan assets." (TIAA Institute)
Millennials Make Greatest Gains in 401(k) Plan Participation
"Millennials have demonstrated the biggest gains in the percentage of those participating in their 401(k) plans over the last five years, with an increase of 13.3%. They're also the most-diversified generation, with 83% meeting Wells Fargo's minimum diversification goal.... In addition, 30% of millennials contribute enough to maximize their full employer match when one is offered." (Wells Fargo)
[Discussion] Canadian Company Considers Starting a 401(k) Plan for U.S.-Based Employees
"Canadian based company has a few U.S.-based employees who are salespeople in various locations. The company would like to provide benefits to these employees that are basically the same as those provided already to their Canadian employees, and is considering starting a 401(k) plan, which of course would be fairly small. Assuming the company has an EIN, is this feasible?" (BenefitsLink Message Boards)

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