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[Guidance Overview]

The New DOL Fiduciary Rule and Your 401(k) Plan: What You Need to Know (PDF)
33 presentation slides. Topics include: [1] The new fiduciary rule: big picture; [2] Phased implementation; [3]What's changed since 1975? [4] Replacing the five-part test: the new broader fiduciary standard; [5] Definition of investment advice: [a] Is the communication in an investment advice category? [b] Is the communication a recommendation? [c] Does the communication fall under a safe harbor exception? [7] The best interest contract: [a] No actual contract required for ERISA plans; [b] Required financial institution disclosures; [c] Streamlined approach for level fees. (ABD Insurance & Financial Services)  


401(k) Answer Book, 2016 Edition

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When participants, sponsors, or service providers ask you questions, this book has the answers. Covers 401(k) plan design, testing, reporting and disclosure, plan termination, investment topics and regulatory guidance. Use code BENEFIT20 for 20% discount.

[Guidance Overview]

The DOL's 2016 Final Fiduciary and Conflict of Interest Regs: The New Fiduciary Standard
"In a welcome and much needed clarification, the Department also said that a consultant or advisor does not become a fiduciary by advertising investment advice or investment management services or by responding to an RFP.... [An] adviser can recommend that a retirement investor enter into an advisory relationship with the adviser without acting as a fiduciary. When the adviser recommends that the investor pull money out of a plan or invest in a particular fund, however, that advice is given in a fiduciary capacity even if it is part of a marketing pitch or RFP." (Mintz Levin)  

[Guidance Overview]

PBGC Proposed Regs Lower Penalties for Late Payment of Premiums
"The proposed regulations would cut the rates and caps in half (to 1/2% with a 25% cap and 2-1/2% with a 50% cap, respectively) and eliminate the floor on penalty assessments (so if the penalty assessment is less than $25, it will not be automatically inflated to the floor amount)." (Wolters Kluwer Law & Business)  

PBGC to Double Penalties for Failing to Give Notices
"[T]he new maximum amount for noncompliance with the Section 4071 requirements will nearly double, from the current $1,100-per-day penalty to $2,063. The penalty under ERISA Section 4302 will increase from $110 per day to a $275 daily assessment.... A PBGC official ... [said] on May 12 that these penalties are rarely assessed." (Bloomberg BNA)  

Fifth Circuit Decision Includes Important Holdings for ESOP Fiduciaries
"Among the court's key rulings were the following: [1] ESOP participants may bring claims on behalf of the ESOP without proceeding as a class action, at least in cases where the U.S. Secretary of Labor also participates.... [2] An ESOP trustee who is also the seller in an ESOP transaction may be found to have breached his fiduciary duties, even if he abstains from voting on the transaction.... [3] [A violation of ERISA's fiduciary duties] can occur even if the ESOP fortuitously paid no more than adequate consideration.... [4] The burden of proving that an ESOP stock purchase meets the requirements for exemption from the ERISA prohibited transaction rules falls squarely on the plan fiduciaries[.]" [Perez v. Bruister, No. 14-60811 (5th Cir. May 3, 2016)] (Holland & Knight)  


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Fiduciary Responsibilities of Retirement Plan Sponsors When Hiring Service Providers
"[Conflicts of interest] can readily be identified by asking two questions: [1] Will the candidate perform more than one service? For example, a recordkeeper who also offers investment products would likely have an incentive to promote those products rather than others, presenting a conflict of interest. [2] Does the provider have the ability to increase its income without your consent? This means you need to carefully examine how service providers get paid." (Fiduciary Plan Governance, LLC)  

Retirement Plan Fees Are Falling ... Right? (PDF)
"In comparing the cost data from 2015 to the previous year ... the net investment expense decreased ... [T]his is most likely due to consumer demand for lower cost funds.... Another common trend ... is increasing revenue sharing expenses. Except in the scenarios with more than 1,000 participants and $50,000 average account balances, revenue sharing expense increased ... For the small plan scenarios with fewer than 25 participants and $250,000 or less in total assets, revenue sharing expense increased more than 0.10% of plan assets, on average." (Ekon Benefits)  

How DOL's Fiduciary Rule Disrupts the Rise of Robo-Advisors
"The most likely outcome may be for the companies to simply raise their fees, and eliminate their proprietary-product-based profitability, to ensure they're operating as Level Fee Fiduciaries. But doing so will throw a significant wrench in the growth of robo-advisors that were being cultivated specifically as a distribution channel for ETFs. On the plus side, though, it means the DOL's fiduciary rule may be more effective at limiting proprietary products than was initially believed!" (Michael Kitces in Nerd's Eye View)  

Threatened Pensions Safe -- for Now
"The Central States decision forestalls pension cuts that would have taken effect this summer, but it does not resolve the problem. Plan administrators say it could be insolvent within a decade.... But the Treasury decision does not settle the matter. The plan could still refile its application to make cuts.... The Obama administration's 2017 budget proposes to solve the problem by raising $15 billion in higher [PBGC] premiums for multiemployer plans, and by giving PBGC the power to set rates without congressional approval." (Mark Miller, via Reuters)  

Just How Little Have Americans Saved for Retirement?
"[O]ne third of Americans simply have not been able or willing to save for their retirements.... [A]nother 23% of respondents reported having less than $10,000 saved.... [As] pensions and employer match programs decline, many employees may perceive that their employer's matching contribution isn't sufficient enough to sustain a sizeable retirement plan.... As frequent job-hopping moves from a trend to a generational norm, financial experts suggest that employees are less likely to feel that employer-sponsored 401(k) plans -- which need to be rolled over for each job change -- are worth the hassle." (Investopedia)  

How 'Catch Up' Contributions Boost Retirement Savings
"[T]he hypothetical 50-year old 401(k) saver [with a $200,000 account balance] who makes catch-up contributions could have a $1.07 million nest egg at age 65 vs. $925,000 if he or she contributes at the maximum level for younger workers. Continuing catch-up contributions to age 70 could boost that sum to $1.58 million." (The Wall Street Journal; subscription may be required)  

How Many IRAs Should You Have?
"If you have a Roth IRA and a traditional IRA, they obviously must be in separate accounts. If you own an IRA you established for yourself and an inherited IRA, those cannot be combined. In fact, you cannot combine an IRA you inherited from one decedent with an IRA you inherited from another decedent. If you have a business that contributes to a SEP-IRA, the SEP-IRA must be separate from your other traditional IRAs.... There are three reasons offered for keeping your rollover IRAs 'pure' and uncontaminated by 'regular' contributions -- but only one of those reasons is valid! ... There is an unlimited bankruptcy exemption for (noninherited) rollover IRAs. The exemption for 'contributory' IRAs is very generous but not unlimited." (Natalie Choate, in Morningstar Advisor)  

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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