Retirement Plans Newsletter

May 30, 2017

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[Guidance Overview]

ERISA's Fiduciary Rule Not Dead Yet, Not Dead ... Ever?
"In situations in which there is sufficient concern that a provider is making a recommendation, it may be appropriate to consider whether it can satisfy the conditions of an applicable exception.... For those providers that are dealing with the investment of the assets of non-ERISA IRAs, and who take the position that they are not providing covered recommendations, it should be understood, in analyzing the applicable risks, that the IRA (and its owner) will have no claim against the provider under the Fiduciary Rule[.]"
Dechert

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[Guidance Overview]

Are You Computing Your Maximum Participant Loan Amount Correctly (or in the Best Interest of Your Plan Participants)?
"The reason for adjusting the maximum by the repayment amount is to prevent an employee from effectively maintaining a permanent outstanding $50,000 loan balance. The question is how to compute the amount of the highest outstanding balance within one year of the request for a new loan.... Until the recent IRS Memorandum, the answer was not clear."
Jackson Lewis P.C.

401(k) Loan Program: How to Make Yours State-of-the-Art
"Using hardship criteria to qualify loan applications helps employers manage the application process.... [P]ermit only one outstanding participant loan at a time.... [R]efer potential borrowers to [an] Employee Assistance Program (EAP) for financial counseling before they are allowed to apply for a loan.... [L]imit 401k loans to participant contribution accounts and the earnings in those accounts.... Higher loan fees tend to dissuade participants from taking a loan and often reduce the average loan amount requested.... Make sure your recordkeeper has a pop-up screen that displays a warning message when participants reduce their 401k contributions below the maximum matching contribution level."
Lawton Retirement Plan Consultants

Wells Fargo Scores Rare Win in 401(k) Fee Litigation Series
"The allegations of high fees and poor performance failed, a federal judge ruled ... because the investors didn't provide a meaningful benchmark for comparing the Wells Fargo funds. The investors pointed to lower-fee funds offered by Vanguard, but the judge rejected this comparison after finding that the Vanguard funds had a different investment strategy than the Wells Fargo target-date funds. The judge also said Wells Fargo can't be held liable for 'failing to choose the cheapest fund.' " [Meiners v. Wells Fargo & Co., No. 16-3981 (D. Minn. May 25, 2017]
Bloomberg BNA

The Investor Revolution: A 'Best Interests' Checklist for Investors and Fiduciaries
"[In] too many cases financial advisers are not meeting their 'best interests' obligations to their customers, both individual investors and pension plan sponsors.... An example using two of the mutual funds in [one 401(k)] plan will hopefully point out the challenges investors and plan sponsors face in assessing the prudence of an actively managed mutual fund."
The Prudent Investment Adviser Rules

[Advert.]

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Managers of Defined Contribution Benefits Regain Steam in 2016
"Defined contribution money managers posted record assets under management last year of $5.95 trillion, up 8.6% from 2015 ... DC plan assets managed internally by the managers rose to $5.25 trillion, an increase of 9.5%.... [M]oney managers that gained the most did so thanks to their arsenals of passively managed funds, which have become attractive to sponsors in search of lower-cost alternatives to actively managed investments. Target-date funds also boosted AUM among money managers."
Pensions & Investments

State Pension Depletion Dates: Kansas Stands Alone
"Of the 50 systems there is only one (Kansas) with positive cash flow. Of the others all are projected to go bust."
Burypensions

[Opinion]

The Pension Prescription: Good Governance and a Willingness by Plan Sponsors to Share the Risk
"There is a misconception that allocating to external private equity and hedge fund managers is a waste of time and money and that these pensions can improve their funded status by removing these funds from their asset mix ... Sure, in some cases, it makes sense to cut external managers ... But cutting all allocations to private equity isn't wise, nor in the best interests of pension plan beneficiaries. These programs have added significant added value to most US public pensions, net of all fees."
Pension Pulse

[Opinion]

Normal Retirement Ages Simply Must Rise as We All Live Longer
"The tensions between 30 or 40 year working lives and 30 or 40 year retirements mean that we simply cannot in fact do that. Well, not unless we're going to all be very much poorer than we can or should be. Note that this is nothing at all to do with how a pension is funded. This is true of government pensions and private ones. Increasing lifespans really do mean that the pension age should be rising."
Tim Worstall, in Forbes

[Opinion]

Who Killed Retirement Security? If You Look Closely, It Wasn't the 401(k)
"In 1947, total savings in employer-sponsored retirement plans equaled 27 percent of gross domestic product (GDP). By 1975, when participation in traditional pension plans peaked, savings had risen to 57 percent of GDP. But in the four decades since 401(k)s were introduced, total retirement savings nearly tripled to 157 percent of GDP."
Andrew G. Biggs, in The Hill

Benefits in General

Democrats Introduce Bill to Test Benefits for Gig Workers
"The Portable Benefits Pilot Program Act would create a $20 million Labor Department grant program for states, local governments, and nonprofits to experiment with portable benefits for gig workers.... The federal legislation comes as lawmakers in states including Washington, New York, and New Jersey are considering measures to provide benefits for gig economy workers. It also comes amid calls for the federal government to tweak employment tax and worker classification laws."
Bloomberg BNA

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017 BenefitsLink.com, 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 BenefitsLink.com, 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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