Retirement Plans Newsletter

July 6, 2018

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On-Site Retirement Educator
Milliman
in TX

Qualified Retirement Plan Investment Advisor
Nadler Financial Group, Inc.
in IL

Retirement Plan Administrator
Means & Associates
in CA

Plan Administrator-DC Specialist
AimPoint Pension
Telecommute

Pension Plan Administrator
Actuaries Unlimited, Inc.
in CA

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Less Is Not More: Information Presentation Complexity and 401(k) Planning Choices (PDF)

40 pages. "The hypothesis is that providing concise information with helpful recommendations would improve choices over providing lengthy and detailed information.... [C]ontrolling for demographic and other factors, this hypothesis was not supported by the data, for either the new employees or the business school students.... [S]implifying the presentation of retirement-plan information to employees is unlikely to result in vastly improved retirement-planning choices."
Eric Cardella, Charlene M. Kalenkoski, and Michael Parent, for IZA Institute of Labor Economics

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401(k) Plan and Participant Outcomes Improved Again in 2017 (PDF)

55 pages. "The 6% default deferral rate for auto-enrollment plans surpassed the 3% industry standard for the first time by a small amount: 32.4% of plans had a 6% default deferral compared with 31.9% with a 3% default.... The average employee pretax deferral rate reaches 8.3% -- the highest in 10 years ... [T]arget date products now account for the largest percentage of plan assets under management, surpassing all other investment types in nearly every category.... Loan usage decreased to 23.4%, but a greater number of participants age 50+ have outstanding loans."
T. Rowe Price

Global Investor Study: Saving for a Comfortable Retirement (PDF)

22 pages. "People aged 55+ expect to need more income to live comfortably in retirement than retirees actually receive.... The cost of living in retirement takes up more income than expected.... The majority of retired people consider their income to be sufficient, but most could do with more.... On retirement, people allocated more of their financial resources to investments than non-retired people expect to.... Globally, people feel they should be saving more of their income for retirement."
Schroders

Four Ways To Rebalance Your 401(k)

"[1] Rebalance according to the calendar ... [2] Percentage of portfolio rebalancing ... [3] Constant proportion portfolio insurance (CPPI) ... [4] Rebalance with future contributions."
Financial Finesse

Proposed Securities Legislation Could Affect 401(k) Participants' Rights

"The proposed legislation's goal is to federalize securities fraud actions by preempting any and all state laws that even indirectly touch on securities fraud. The result would be that all securities fraud litigation and enforcement would need to take place at the federal level.... [In addition,] the SEC is considering allowing companies to adopt mandatory arbitration clauses for shareholders -- an idea which is opposed by most 401(k) participant advocates on the grounds that it would effectively kill recovery chances for most 401(k) plan participants alleging securities fraud violations."
Compliance Dashboard

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New ERISA Regulations for Disability Claims and Appeals

Sponsored by Lorman and BenefitsLink

August 13 webinar will explain what new practices to follow, how to change past practices to become compliant with the new regulations, and the risks of non-compliance. Discount for BenefitsLink readers.


Lawsuit Alleges Fraud by Matrix Trust in Connection with Theft by TPA

"[P]laintiffs claim that [Matrix Trust Company, custodian for the plans administered by Vantage Benefits,] 'fraudulently transferred at least three million dollars from the Section 403(b) plan accounts in its custody ... The plaintiffs say that these 'unsanctioned' transfers were taken from at least five 403(b) plans and deposited into a private Bank of America business account maintained by Vantage or its agents."
National Tax-Deferred Savings Association [NTSA]

The Appropriateness of the Current Assumptions Used for Funding Multiemployer Pension Plans (PDF)

"[T]he possibility of using more conservative interest rates for valuing multiemployer plan liabilities has been raised.... [T]he increase in the necessary contributions to meet current funding standards would not be sustainable for either of the plans studied, both of which are currently considered healthy. In fact, a change to a considerably lower discount rate would create a much greater pension crisis than the one that already exists."
Segal Consulting

NCEO Employee Ownership Index Doubles S&P Performance for Its First Year

"[T[he Employee Ownership Index [includes] 28 publicly traded companies that had both broad-based employee ownership and had won one of three major national employer rating awards ... For the first year, the Employee Ownership Index has a 30.3% return; the S&P 500 had a 15.5% return. The index was expanded to 30 companies this June."
Blue Ridge ESOP Associates

[Opinion]

Should 401(k) Plans Embrace Alternative Investments?

"Rocket Dollar 401(k) plans enable their owners to buy cryptocurrency, rental properties, and venture-capital funds.... Often ... the extra costs of exotic securities fully consume their advantages.... [E]ven if Rocket Dollar's customers have access to appropriately priced options ... they won't necessarily be positioned to make sound investment decisions.... [M]ost employees ... did not seek greater complexity.... [E]mployees voted with their feet to do less with their 401(k) plan, not more, by gravitating toward target-date funds."
John Rekenthaler, in Morningstar Advisor

Selected Discussions
on the BenefitsLink Message Boards

Value of Employer-Paid Pet Insurance: Part of Plan 'Compensation'?

A plan sponsor provides pet insurance to its employees as a benefit. The employer pays the premiums and the employees are taxed on them. Their plan excludes "Fringe Benefits" from the definition of plan compensation. Does anyone know if this "income" should be excluded form plan comp or included in plan comp?
BenefitsLink Message Boards

Can a NQDC Plan Be Spun Off?

We have a management company that runs a Nonqualified Deferred Compensation plan. The management company is wholly owned by A, and A also wholly owns B. B also participates in the NQDC plan. The management company is going to be removed and replace with a different management company. Under the NQDC plan this does not trigger a change of control payment. But we have employees at B that are participants in the NQDC Plan. We have two options. First is to just start a new plan for the B employees. They will still have their account under the old plan, but now they will have another account at a new plan. Second, and what we'd like to do, is move the accounts for B employees to a new plan, sponsored by either B or A. Is that possible?
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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2018 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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