Retirement Plans Newsletter

May 17, 2018 logo logo
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Retirement Plan Advisor
Carlson Capital Management
in MN

401(k) Retirement Plan Administrator
Alliance Pension Consultants, LLC
in IL

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Webcasts, Conferences

Missing Participants & Uncashed Checks - Problems Never Anticipated
June 13, 2018 in CA
Western Pension & Benefits Council - Orange County Chapter

Effective Communication Across the Organization
June 13, 2018 in TX
Worldwide Employee Benefits Network [WEB] - Houston Chapter

10th Annual Qualified Plan Fiduciary Summit
June 15, 2018 in KS
Qualified Plan Advisors

Form 5500 Update: New Issues and Best Practices for the 2017 Filing Season
June 21, 2018 in NY
Worldwide Employee Benefits Network [WEB] - New York Chapter

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The Unpredictable Fate of the DOL's Fiduciary Rule

"For the most part, service providers can continue the compliance approach they have been taking since June 2017. For those service providers who have not adopted an approach, they should ... [determine whether] they continue to qualify as a fiduciary ... and, if so, whether they should comply with one of the two exemptions ... or find a different, existing exemption. For plan sponsors, ... [if] you or your investment committee has modified the policies or procedures for your plan(s) based on the Fiduciary Rule, you may want to revisit these documents[.]"
Nelson Mullins

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States Again Ask Fifth Circuit for Review of DOL Rule Overturn

"California, New York and Oregon filed a last-minute, long-shot appeal for a court to reconsider its request for a full review of its decision to toss the [DOL] fiduciary rule. The Fifth Circuit Court of Appeals had denied the states' request for appeal in a May 2 decision."

Philips North America Agrees to Pay $17 Million, Make 401(k) Reforms to Settle Fiduciary Breach Case

"Among the non-monetary terms, Philips will: [1] Hire a consultant to review the 401(k) plan investment lineup to recommend if the plan should keep the money market fund or add a stable value 'or comparable fund.' [2] Issue an RFP within 18 months of the settlement for a record keeper.... [T]he fee for basic record keeping shall not be based on a percentage of plan assets.... [3] Consider offering collective investment trusts ... and consider offering the lowest-cost share class available for any mutual fund considered for inclusion in the plan."
Pensions & Investments

Excessive Fee Suit Targets TIAA Arrangement

"[T]he defendant university fiduciaries are alleged to have failed to take advantage of their size and clout as a 'jumbo' plan to negotiate for 'low-cost high-quality administrative services.' The plaintiff here notes that in addition, the defendants failed to 'properly inform participants of the fees they were paying to TIAA as required by law, and most importantly, to act prudently with such information.' " [D'Amore v. Univ. of Rochester, No. 18-6357 (W.D.N.Y., complaint filed May 11, 2018)]
National Association of Plan Advisors [NAPA]

House Subcommittee Seeks Bipartisan Solutions to Update Retirement Plan Administration

"Subcommittee members and witnesses discussed four bipartisan proposals that would amend ERISA: ... [1] H.R. 4604, the Increasing Access to a Secure Retirement Act of 2017 ... [amends] ERISA to clarify existing rules that provide a fiduciary safe harbor when selecting an annuity provider. [2] H.R. 4158, the Retirement Plan Modernization Act, increases the automatic cash-out limit for retirement plans from $5,000 to $7,600, and defrays some of the costs of retirement plan administration for small employers. [3] H.R. 854, the Retirement Security for American Workers Act, eliminates ... the 'common nexus' requirement that prevents adoption of open multiple-employer plans (MEPs) ... and the 'one bad apple' rule that punishes all employers in a plan for the failure of one employer to meet the plan's requirements. [4] H.R. 4610, the Receiving Electronic Statements to Improve Retiree Earnings Act, authorizes the electronic disclosure of retirement plan information so that plan participants may access their plan information online."
Committee on Education and the Workforce, U.S. House of Representatives


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Why Plan Sponsors Should Regularly Benchmark Retirement Plan Investments

"Benchmarking can provide access to a wealth of data beyond just fee statistics. Information like overall plan growth relative-to-market, average account balances and average income replacement ratios at retirement can be invaluable for plan providers looking to maximize the value derived from their offerings."

Choice Architecture and Participant Investment Decisions (PDF)

"By 2017, the average participant had 65% of his or her account balance invested in index options.... Voluntarily enrolled participants directed 81% of contributions toward index target-date funds ... While the index contribution allocation of new plan entrants rose from 59% to 85% over the ten-year period, the index contribution allocation of longer-tenured participants increased much more slowly, from 38% to 46%, because of inertia."

Using a Snapshot of Retirement Plan Account Balances to Analyze Plan Health

"[A] 'big and small' analysis ... uses a quick snapshot of the big ($200,000+) and small (under $10,000) account balances to determine a plan's health. Typically the ratio of big to small account balances is 10% to 40%. If a plan is fairly mature (i.e., it has been around for 40 years or more) and there are more than 10% with big balances and less than 40% with small balances, it is relatively safe to assume that it is a healthy retirement plan.... [W]hat conclusions can we draw regarding a plan's health when, for example, fewer than 5% of employees have account balances of $200,000 or greater and more than 50% of employees have balances of $10,000 or less?"
Cammack Retirement Group

Target Date Funds and Managed Accounts Produce Better Returns for Participants

"Over a 10-year period through Dec. 31, 2016, ... the average annualized return for participants consistently using managed accounts was 3.66%; the average annualized return for 'consistent full' target-date fund was 3.65%; and the average for consistent non-users was 3.39%[.]"
Pensions & Investments


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Defined Contribution Plan Participants' Activities, 2017 (PDF)

"In 2017, [1] 3.4 percent of DC plan participants took withdrawals, compared with 3.3 percent in 2016. Levels of hardship withdrawal activity also remained low.... [2] 2.7 percent of DC plan participants stopped contributing, the same share as in 2016.... [3] 9.3 percent of DC plan participants changed the asset allocation of their account balances and 5.5 percent changed the asset allocation of their contributions.... At the end of December 2017, 16.7 percent of DC plan participants had loans outstanding, compared with 17.0 percent at year-end 2016."
Investment Company Institute [ICI]

Incentives to Delay Retirement Help Both Employers and Employees

"While 4 in 10 current workers expect to work in retirement... [o]nly 17 percent of retirees are still working for pay, and only 13 percent of retirees not currently doing so say it's possible they will return to work.... [If] employers start using incentives, more employees are likely to stay working. Working longer can have significant financial benefits: retirement delays of as little as 3-6 months have the same impact on standards of living in retirement as saving an additional 1 percentage point of income over 30 years."

Projected Impact of Pending Insolvency on 115 'Critical and Declining' Multiemployer Pension Plans, Their Participants and Contributing Employers

"The authors project that 107 plans will run out of assets over the next 20 years, affecting over 11,000 contributing employers and roughly 875,000 participants.... The estimated 2018 unfunded liability for these 115 plans, as measured on a minimum funding basis, is $57 billion. When measured at 2.90%, it is $108 billion.... The timing of solvency can be sensitive to investment returns.... In 2018, 81 of the plans have annual negative net cash flow that is 10% or more of their assets. In other words, unless these plans' assets earn at least 10% per year, the assets will decline.... Pending insolvencies are largely a function of existing liabilities for benefits that have already been accrued."
Society of Actuaries

CalPERS Unveils Direct Investment Model for Private Equity

"CalPERS Direct would be governed by a separate, independent board to advise on allocation and longer-term capital market perspectives. It would consist of two separate funds. One would focus on late-stage investments in technology, life sciences, and healthcare, and the other on long-term investments in established companies. These would operate alongside CalPERS' existing private equity structure that typically invests in co-mingled private equity funds."


Colorado Makes Changes to Public Pensions

"The original legislation introduced by Republican legislators in the state senate would have expanded the choice of a defined contribution (DC) plan for all PERA members, a dangerous first step toward eliminating the defined benefit structure of the plan.... [T]he alternate version of the legislation introduced in the state house did not include expansion of DC plan choice. The house-passed legislation also maintained the principle of 'shared sacrifice' more fully than the Senate-passed version."
National Public Pension Coalition

Benefits in General

A Persona-Based Approach Can Make a Big Impact on Your Organization

"When you develop 'real-life' personas, you're better prepared to: [1] Assess the impact and likely reactions of employees to your total rewards offering -- and any changes you're considering; [2] Identify which programs are likely to be 'sticky' with different groups of employees; [3] Develop a multi-media approach to communication with the right mix for each target persona; [4] Support a culture of inclusion within your organization where employees feel valued and respected."

Executive Compensation
and Nonqualified Plans

Gap Between Equity Comp Aspiration and Action Shows Need for Employee Education and Financial Advice

"[O]nly 24% of [survey participants] have actually exercised employee stock options or sold shares acquired from equity comp. Among the rest, 34% admit to being worried about selling in adverse market conditions, and another 34% say they fear the tax consequences of making an uninformed or bad decision. These findings are all the more remarkable because over a third of the participants (36%) actually report that stock comp was one of the reasons why they took their current job to begin with."

Selected Discussions
on the BenefitsLink Message Boards

Why Must a Plan Sponsor Follow the Terms in the Plan Document?

I need something pretty basic on this topic to give to the top decision-maker of my firm. She tends to know how she wants things done regardless of what the plan document says. Our TPA seems to be okay with what's being done even though we aren't following the terms in the plan document.
BenefitsLink Message Boards

Plan Termination But Client Doesn't Want to Apply for a Determination Letter

We are assisting a client with terminating their plan. The plan is small (just over 100 participants). They are trying to decide whether or not to seek an IRS determination letter with the termination. They are confident their plan document and administration of the plan is in order -- the last determination letter received was 2012. Does anyone have experience with clients that do not seek a determination letter and if so, does this increase the likelihood of a PBGC or IRS audit?
BenefitsLink Message Boards

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Press Releases

HERO Hires Mary Imboden as Membership Manager and Research Associate
Health Enhancement Research Organization [HERO]

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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2018, 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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