Retirement Plans Newsletter

August 19, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Employee Benefits Jobs

401(k) Consultant
Creative Retirement Systems
in OH, Telecommute

Distribution Representative
Professional Capital Services
in PA

Sr. Client Services Manager
Arthur J Gallagher
in TX

Defined Benefit Analyst
OneAmerica Financial Partners
in IN, Telecommute

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Webcasts and Conferences

Everything You Always Wanted to Know About Social Security, But Were Afraid to Ask
September 15, 2016 WEBCAST
Worldwide Employee Benefits Network [WEB] - New York Chapter

Affordable Care Act Compliance Workshop
September 16, 2016 WEBCAST
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Excel 401(k): The Advisorsí Conference
October 2, 2016 in NV
Rekon Event Management

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Fix Billion-Dollar Church Plan Standoff, Groups Tell SCOTUS
"In briefs filed with the Supreme Court on Aug. 12 and 15, five religious liberty and health groups are urging the justices to undo these decisions and definitively rule that church-affiliated hospitals can sponsor 'church plans' exempt from [ERISA].... [T]hese lawsuits allege that 247,000-plus hospital employees are facing a $3.5 billion shortfall in their pensions because the hospitals haven't adequately funded the plans. Even more, the lawsuits could trigger 'billions of dollars in penalties' against the hospitals, according to [one] brief."
Bloomberg BNA


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SunTrust's 401(k) Plan Participants Get OK for Class Action
"Judge Richard W. Story of the U.S. District Court for the Northern District of Georgia Aug. 17 granted the participants' motion to certify a class that could include thousands of members. However, Story streamlined the participants' lawsuit by granting partial summary judgment to SunTrust in relation to the claims raised by five participants who released their claims in a severance agreement they signed with the bank." [In re SunTrust Banks, Inc. ERISA Litig., No. 08-3384 (N.D. Ga. Aug. 17, 2016)]
Bloomberg BNA

'To' Versus 'Through' -- The Great Glidepath Debate
11 pages. " ['Through retirement'] glidepaths, more commonly used in the industry, represent the most effective solution for those wishing to save for retirement, and for those wishing to save for and withdraw income during retirement using target-date funds.... [W]hile 'to retirement' glidepaths may offer the potential for more effective downside risk protection, they fall short in addressing longevity risk, or the risk of outliving savings during retirement[.]"
TIAA Global Asset Management, via Nuveen Asset Management

More Employers Are Worried About Screwing Up Your 401(k)
"A new survey of small and midsize plans showed that 38 percent of them are concerned about the risk of being dragged into court, vs. 24 percent a year ago.... [T]his year was the first time it came in as a top reason plan sponsors are turning to retirement advisers ... The number of companies looking to change advisers hit 23 percent in the study, a new high. Almost 70 percent of plans cited the willingness of an adviser to 'take on a formal fiduciary role' as important."

The End of Choice Overload
"It's still common today to talk about DC menu options in terms of choice overload. Yet, we'd argue that the time has come to retire the concept, given the growth of automatic enrollment and target-date funds in DC plans.... Automatic enrollment is increasingly common, and the most prevalent choice of a default fund for automatically enrolled participants is a target-date option. Because of inertia, participants stick with that option."


Section 409A: Structuring Compliant Plans and Avoiding Pitfalls

Sponsored by Lorman and BenefitsLink

August 31 webinar. Provides a good foundation for identifying arrangements that are subject to Section 409A and for designing and administering these nonqualified deferred compensation plans in a legally compliant manner.

Might 'Auto Portability' Reduce 401(k) 'Leakage'?
"About 37 percent of job-changing workers cash out because they need the money, while the remaining 63 percent who take money out of their retirement accounts do so because 'it's the easiest path available,' despite the penalty and taxes they will have to pay ... The large majority of job changers go to a new employer that also offers a 401(k) plan.... The essence of the auto portability approach ... is to create a mechanism of electronic records-matching for individuals between their former employer's retirement plan and the new employer's plan so that their retirement savings are automatically transferred."
Society for Human Resource Management [SHRM]

Non-Profit Employers and Employees Are Both Doing More to Save More
"The eighth annual benchmarking survey of 403(b) plans ... shows upward trends in deferral rates, employer matches and adoption of automatic enrollment."
Plan Sponsor Council of America [PSCA]

Plan Expenses Becoming Larger Focus for 403(b) Plans
"The percentage of 403(b) plan executives re-evaluating how plan expenses should be allocated surged to 26% last year from 16.8% in 2014 ... 19% of all plans offered auto enrollment last year, up from 16.2% in 2014. Auto enrollment was most frequently offered (30.8%) last year among plans with more than 1,000 participants."
Pensions & Investments

Excessive Fee Litigation Hits 403(b) Plans: What Nonprofit Fiduciaries Need to Know
"Commentators have predicted the 403(b) plan market would be vulnerable to similar lawsuits, given that 403(b) plans have traditionally carried higher costs than 401(k) plans.... There is nothing inherently wrong with offering higher-cost actively managed funds (or higher-cost third party administrators). The 401(k) cases have shown that if there is a problem, it is often the lack of a fiduciary process to monitor and benchmark fees against available alternatives."
Davis Wright Tremaine LLP

Is the DOL Fiduciary Rule the End of Solicitor Arrangements?
"Effective April 10, 2017, the solicitor arrangement will no longer operate with the same benefits FAs have enjoyed in the past. Instead, any FA that refers an RIA to a retirement plan or IRA investor (i.e., a retirement investor) will become a fiduciary as that term is defined under ERISA. More specifically, any FA that refers an RIA to a retirement investor in exchange for compensation is a fiduciary.... This also means the FA has an obligation to monitor the RIA to ensure the RIA continues to execute the investment mandate as promised."
Fiduciary Matters Blog


The Legal Conflict at the Heart of U.S. Retirement Plans
"These suits are sending shock waves through the world of private retirement plans. And with good reason: They betray the nation's unresolved confusion over the historic change that's occurred in how most people save for retirement.... As pensions were gradually replaced by defined-contribution savings plans that asked employees to make their own investment choices, a profound tension was born: Did employers still have a fiduciary duty to their employees, and if so, what was it? Despite periodic efforts to resolve this tension, the ambiguity remains, opening the door to these lawsuits."

Benefits in General

Insights for Optimizing Your Employee Benefits Program (PDF)
12 pages. "Benefits optimization is an approach to designing a portfolio of employee benefits that maximizes desired workforce outcomes against a given benefits budget.... Further enabling employers to refine their approach to benefits optimization is the increased availability of data and analytics, which represents a powerful tool that employers can use to learn more about the employee base, gain a better understanding of the types of benefits employees need at various life stages, and predict financial behaviors. These capabilities can be harnessed to design benefit plans, educational programs, and communications materials to drive desired employee behaviors and outcomes."

Press Releases

DOL Sues Blue Bell, Pennsylvania, Employee Benefit Plan Service Provider for Mismanaging Multiple 401(k) Plans
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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David Rhett Baker, J.D., Editor and Publisher
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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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