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Retirement, LLC
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SMI Pensions
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ftwilliam.com / Wolters Kluwer
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[Official Guidance]

Text of PBGC Interest Rate Update for April and Second Quarter 2016
"The second quarter 2016 interest assumptions under the allocation regulation will be 2.77 percent for the first 20 years following the valuation date and 2.86 percent thereafter. In comparison with the interest assumptions in effect for the first quarter of 2016, these interest assumptions represent no change in the select period ... a decrease of 0.05 percent in the select rate, and a decrease of 0.09 percent in the ultimate rate ... The April 2016 interest assumptions under the benefit payments regulation will be 1.00 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for March 2016, these interest assumptions represent a decrease of 0.25 percent in the immediate annuity rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])  

[Advert.]

Register for P&I's 401(k) Investment Lineup Summit

Simplify DC Complexity: Register for this FREE 1-day event to learn how to build a diversified plan while maintaining a simple investment lineup that increases employee engagement and clearly communicates what's included in the plan.

[Guidance Overview]

ADP/ACP Safe Harbor Compensation Compliance Confusion (PDF)
16 pages. "ADP and ACP safe harbor plans require that a nondiscriminatory definition of compensation be used to determine safe harbor matching contributions. However, the plethora of permitted compensation definitions, and the rules surrounding them, can create compliance issues, particularly if the plan document, payroll, and record keeping are not properly coordinated." (Aon Hewitt, via Journal of Pension Planning & Compliance)  

Auto Enrollment in 401(k) and 403(b) Plans (PDF)
"Automatic enrollment has been around for many years. It continues to gain popularity and legislative support, because it is increasingly seen as a solution to a national retirement savings problem and is designed to overcome employee inertia. Many employees find it hard to make financial decisions and tend to underestimate how much and how long they need to save. Currently about half of firms do not offer auto enroll as an option." (The Paragon Alliance Group)  

One in Three Americans Has $0 Saved for Retirement
"One-third of Americans report they have no retirement savings. 23 percent have less than $10,000 saved.... After 'less than $10K,' the most common balance Americans have saved for retirement is '$300K or more.' A significant 13 percent of Americans' retirement savings balances are in the top bracket.... Women are 27 percent more likely than men to say they have no retirement savings. Two-thirds of women (63 percent) say they have no savings or less than $10,000 in retirement savings, compared with just over half (52 percent) of men." (GOBankingRates)  

You Get What You Pay For: Guaranteed Returns in Retirement Saving Accounts
14 pages. "A variety of recent proposals would offer guarantees for new types of savings plans including some state-sponsored retirement savings plans for small businesses.... [This paper] discusses [1] basic design elements ... [2] guarantees that exist in other countries and in certain United States plans, as well as recent policy proposals ... [3] the determinants of the level and allocation of economic costs of the guarantees ... [and] [4] reviews recent estimates of these costs." (The Brookings Institution)  

[Advert.]

Form 5500 Reporting Update

March 17 - This webinar explains the new reportable event definitions under the PBGC regulations that went into effect January 1, 2016. BenefitsLink discount.

Retirement Readiness and Plan Reports
"Just because the provider defines retirement readiness as an 80% replacement ratio does not mean that figure will be suitable for all employees. For instance, some people with projected replacement ratios of less than 80% may still easily meet their retirement needs.... The retirement readiness report thus tends to reflect how well the current retirement plan is operating, assuming that participants only work for the one employer, regardless of the age at which they were hired.... An employer cannot be expected to fund a person's entire retirement, and have them on track toward meeting their replacement ratio targets, unless that person has worked for that employer for a significant portion of their career, typically twenty-five years or more." (Cammack Retirement Group)  

Forget Everything You Knew About Retirement
"Do you know the recommended percentage of preretirement income someone will need to be comfortable after he or she stops working? The preretirement savings goal required to provide that income? A safe withdrawal rate from retirement savings? ... [Frederick] Vettese, since 1991 the chief actuary for ... Morneau Shepell, systematically and yet succinctly questions, disputes and demolishes these notions." (Institutional Investor)  

Fiduciary Rule: Why RIAs Should Be Wary
"[N]early three-quarters of RIAs see 'moderate or no impact to their business' as a result of the new DOL Investment Advice rule ... Half the RIAs surveyed didn't think the proposed rule, expected to be released in March, would have a negative impact on their business, and only slightly more (55%) thought they would have to spend more time on compliance as a result of the new DOL investment advice rule." (On Wall Street)  

Advisers Must Brace for DOL Fiduciary by Ramping Up Technology Enhancements
"Advisers will have to provide recommendations that completely align with the client's interests -- this can be done with software that helps advisers better understand their clients through account aggregation, online collaboration and accurate risk profiling. Technology also will support the adviser's fiduciary position by documenting everything the adviser does for his or her client. And a successful technology framework will keep advisers' expenses low." (InvestmentNews)  

Problematic Connecticut Coverage Proposal Withdrawn
"[T]he proposal would have extended the retirement coverage mandate to all employers, even those who already sponsored an ERISA qualified retirement plan to employees not required to be covered under ERISA, including employees 19 years of age or older, employees employed for at least 120 days, and employees who either are reasonably expected to complete 1,000 hours of service in a calendar year; or have completed at least 500 hours of service for the employer in the past two consecutive calendar years." (National Association of Plan Advisors [NAPA])  

The Retirement and Social Security Benefit Claiming of U.S. Military Retirees
"[A]ccess to a consistent source of income may encourage earlier retirement through a standard income effect, but the military pension may also increase a retiree's post-military job search, allowing for a greater wage and improved job satisfaction due to a better employer-employee match. Access to a steady source of pension income may also reduce short-term liquidity constraints, encouraging military retirees to delay claiming their Social Security benefit in order to benefit from delayed retirement." (Michigan Retirement Research Center [MRRC])  

[Opinion]

It's Time to Teach
"The average saver isn't educated or trained to understand a financial statement, balance sheets or the complexities of financial markets. Yet we keep passing rules and regulations forcing them to grapple with these issues. With so many complex options to choose from and no understanding of how to evaluate them, more and more workers are simply opting out of the retirement savings process, leaving their futures -- and the American economy -- in peril." (PenChecks)  

National Retirement Planning Week 2016 Announced
Insured Retirement Institute [IRI]

Securian’s Fiduciary Friendly 401(k) Practices Verified by CEFEX
Securian Financial Group

Ropes & Gray Publishes ERISA Compliance Handbook as Resource for Asset Managers
Ropes & Gray

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