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April 19, 2017 logo logo
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[Guidance Overview]

Puerto Rico Modifies Requirements for Qualified Retirement Plans
"Several of the modifications create new disparities between rules under the Puerto Rico and U.S. tax codes, such as those for identifying highly compensated employees (HCEs) for nondiscrimination testing, which could complicate plan administration. The act, by its terms, takes effect immediately although Hacienda (the Puerto Rico Treasury Department) will need to address how the changes apply in various situations, such as when determining HCE status for purposes of 2017 testing and where the nominal effective date is other than the start of a plan year."
Willis Towers Watson


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New Comparability 401(k) Plans: Are They Right for Your Small Business?
"[C]ompanies with older business owners are typically the best candidates for new comparability contributions. A spread of 10+ years often does the trick, allowing the plan sponsor to maximize owner contribution while allocating just the 'gateway minimum' contribution to non-HCEs."
Employee Fiduciary

The Challenges of Forgotten Retirement Accounts
"To help prevent lost retirement accounts, employers should adopt a 'You matter to us' approach with all new employees. Within the first few days, have human resources ask the employee if they left behind a retirement account.... To avoid the problems with uncashed checks, employers can take a proactive role by requesting an annual accounting of all uncashed checks from the plan."

Interesting Angles on the DOL's Fiduciary Rule, Part 43
"[W]hile the explicit compensation requirement of the [Impartial Conduct Standards] is that advisers and Financial Institutions cannot receive more than reasonable compensation, the DOL is saying that a Financial Institution's compensation structures cannot promote investment recommendations that are not in the best interest of the investor.... One possible interpretation is that, even though the compensation of the adviser can vary, both for similar products (e.g., mutual funds) and among product categories (e.g., mutual funds vs. variable annuities), the variation cannot be so great as to unreasonably promote advice that is inconsistent with the best interest standard of care."

Direct Real Estate Can Improve Returns and Reduce Risk for Target Date Funds (PDF)
"[D]irect real estate has offered returns competitive to equities and REITs, with significantly lower volatility (as measured by standard deviation) for the 20-year period, 1997-2016.... Direct real estate's less frequent transactions don't necessarily pose a challenge to maintaining target allocations. Net cash flows from regular plan contributions can be used for monthly rebalancing. Investments in high-quality 'core' property markets potentially can be sold if necessary."


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Dynamic Programming Methods in Retirement Planning
"Ultimately, it's still not clear that there's one 'right' way to do retirement planning. Whether it is Monte Carlo versus historical ... goals-based versus cash flow-based ... or dynamic programming versus non-optimizing approaches ... all can provide different insights, which in turn can help guide decision for clients given the risks and sheer uncertainty they face in planning for retirement. But in the end, if the whole point of doing financial planning is at least in part to come up with an actual plan for how to handle an uncertain future, dynamic programming provides a unique toolset that isn't available in today's traditional financial planning software solutions ... at least, not yet!"
Nerd's Eye View

Fifteenth Union Plan Files for Approval of Pension Reductions
"The Southwest Ohio Regional Council of Carpenters Pension Plan out of Austintown, OH just became the fifteenth multiemployer (union) plan to file for benefit cuts under MPRA in an attempt to avoid insolvency."

Vanguard Growing Faster Than Everybody Else Combined
"In the last three calendar years, investors sank $823 billion into Vanguard funds, the company says. The scale of that inflow becomes clear when it is compared with the rest of the mutual fund industry -- more than 4,000 firms in total. All of them combined took in just a net $97 billion during that period, Morningstar data shows. Vanguard, in other words, scooped up about 8.5 times as much money as all of its competitors."
The New York Times; subscription may be required


Oregon's State Retirement Savings Plan Infringes on ERISA
"Oregon will require large employers who already provide a retirement plan to complete paperwork every three years [in order] to be exempt from the state mandate. Large employers who operate in multiple states and provide valuable retirement benefits to their employees should not be subject to additional compliance tasks for providing a benefit that the state programs are attempting to mandate ... Future rulemaking at the state level should not impose any burden on employers who are already satisfying the intent behind these state laws."
The ERISA Industry Committee [ERIC]


DCIIA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
"[DCIIA] members have reported sightings of billboard signs soliciting plaintiffs only by reason of their participating in a 401(k) plan and have witnessed broad-scale social media campaigns to solicit 401(k) plan plaintiffs.... DCIIA requests that the [DOL] conduct research to examine the impact of increased litigation on promoting innovation and the successful implementation of defined contribution plans ... [including] an assessment of potential harm to plan participants resulting from lack of access to products and services that can improve their ability to save effectively for retirement but that plan fiduciaries may be reluctant to offer due to the potential threat of litigation."
Defined Contribution Institutional Investment Association [DCIIA]


Market Synergy Group Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
35 pages. "The rule should be withdrawn in its entirety. It is anathema to the Administration's articulated policies ... [A]ny potential gains to retirement investors that the rule supposedly would achieve have been overstated. The Department's earlier estimates of potential investor gains were based on outdated, methodologically flawed data, extrapolations, and assumptions."
Market Synergy Group, Inc.


TIAA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "Recommendations concerning subsequent investment or use of Required Minimum Distributions (RMD) payments should not be fiduciary advice.... The education exclusion should be expanded to include a service provider's recommendations about enrolling in or contributing to a plan ... The definition of 'Best Interest' should mirror ERISA's 'prudent man standard of care' under ERISA Section 404(a) for all retirement investors.... The BIC Exemption should be expanded to accommodate advice to participants of the advice provider's own employer sponsored plans."


IRI Calls on DOL to Delay Entire Fiduciary Rule, Establish Workable Alternative
Requiring all financial professionals to operate as ERISA fiduciaries is inconsistent with the statutory text of ERISA and will cause significant dislocations or disruptions within the retirement services industry.... In adopting the Rule, the Department failed to adequately consider ... the Rule's impact on retirement savers' access to financial assistance, products and services; job losses likely to result from the Rule; the Rule's adverse impact on annuities; viable alternatives to the Rule; and comments provided by other regulators."
Insured Retirement Institute [IRI]


ACLI Comment Letter to DOL on Examination of the Final Fiduciary Rule
50 pages. "The Regulation dislocates and disrupts consumer access to retirement products and services. It has begun to create an advice gap with the abandonment by service providers of small and medium retirement account holders while, without substantiation, the [DOL] relies on computer generated asset allocation platforms (a.k.a. Robo-Advisers) as the option for small investors who lose access to financial assistance."
American Council of Life Insurers [ACLI]


To Protect Retirement Savers, House Committee Members Urge DOL to Further Delay Flawed Fiduciary Rule
"Republican members of the House Committee on Education and the Workforce ... are urging the [DOL] to further delay implementation of the fiduciary rule, which would force low- and middle-income families to pay more for retirement advice and make it harder for small businesses to offer their workers retirement options.... The members expressed concerns over the accuracy of the Obama administration's analysis of its rule[.]"
Committee on Education and the Workforce, U.S. House of Representatives

Benefits in General

Effective Employee Communication: The Benefits of Best Practices
"[M]any employers who spend millions of dollars to offer a benefit or workplace style only spend a surprisingly small amount to ensure that employees understand and appreciate it. Communications -- what you say, how you say it, when you say it, who you say it to -- is vital to inform and influence how employees think about their benefits, workplace, and employer.... Five best practices: [1] Plan before you launch.... [2] Don't sugarcoat bad news.... [3] Stick to your message.... [4] Make sure the managers and supervisors are on board.... [5] Rinse and repeat."

Press Releases

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017, 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 those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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