401(k) Fees' Disclosure Rule May Spur Additional Creative Charges
"[An industry veteran has] warned that the mutual fund industry will come back and say they are burdened with extra administration charge because the Department of Labor is now creating this 'onerous administrative task' for them that they have to put on to the 401(k) plan participants, and they are going to charge more." (International Business Times)
[Guidance Overview] New Tax Guidance on Use of Annuities in Retirement Plans (PDF)
"The Obama Administration has in a number of ways previously evinced its intent to facilitate lifetime income solutions in defined contribution plans. This guidance package, which Treasury announced in a press release and which was accompanied by a White House statement, a fact sheet and a report, constitutes a meaningful contribution to that effort. The fact sheet notes that Treasury and the Department of Labor expect to issue further retirement income guidance later this year." (Sutherland)
BofA Merrill Lynch Sees Increased 401(k) Savings in Q4 and 2011
"Bank of America Merrill Lynch said that it saw increased 401(k) participation through its plan sponsors both in the fourth quarter and 2011 year, signaling a positive outlook for the tweaks it has made to its offerings and confidence in the overall economy." (On Wall Street)
2nd Circuit Should Rehear 401(k) 'Stock Drop' Cases,DOL Argues in Recent Brief
"Last fall, a divided three-judge panel of the 2nd Circuit ruled that fiduciary decisions to offer company stock as a 401(k) investment option are entitled to a presumption of prudence and should be reviewed only for an abuse of discretion ? not held to a stricter standard. Though the so-called 'Moench presumption' has been adopted by five appeals courts, it finds no support in ERISA and 'leads to absurd results,' DOL asserts." (Mercer)
The IRS 401(k) Compliance Check Questionnaire Interim Report
The target page provides links to Highlights of Findings; the 65-page Interim Report; Comments from Monika Templeman, Director of EP Examinations; FAQs regarding the Interim Report; the Phone Forum's March 6, 2012, session about the Interim Report. (U.S. Internal Revenue Service)
[Guidance Overview] 408(b)(2) Disclosure Regulations Delayed to July 1, 2012
"The rule, was previously slated to go into effect on April 1, 2012, requires service providers to disclose to plan sponsors information about:(1) the services to be performed; and (2) the fees and compensation to be received for performing those services." (Cambridge Investment Research, Inc.)
Are Custom Target Date Funds Right for Your Plan? (PDF)
"Currently, a large percentage of plan sponsors use TDFs that are pre-packaged vendor products, commonly offered by an investment management firm that may also serve as the plan recordkeeper in bundled situations. These products typically use the vendor's proprietary funds as their component investment options. There is often little overlap between the funds underlying the target date fund and those in the plan's core lineup." (Aon Corporation)
[Guidance Overview] DOL's Final Fiduciary Disclosure Regulations and Extension of Effective Date
"The [DOL] has published the highly anticipated, and slightly overdue, final regulation imposing new obligations for fiduciaries of retirement plans subject to [ERISA]. The obligations pertain to the collection and evaluation of disclosure information from plan service providers and include several minor modifications." (Ballard Spahr LLP)
[Guidance Overview] Deadline for New 401(k) Plan Disclosures Postponed to August 30 (PDF)
"The new effective date is a direct result of the Department's issuance of revised regulations under ERISA Section 408(b)(2) requiring service providers to provide more detailed disclosures concerning their fees to qualified retirement plans . . . ." (Seyfarth Shaw LLP)
Issue with 401(k) Fund Is Subpar Performance, not Expenses
"Let's hope that your employer will start to realize that using match dollars to compensate for poor fund performance isn't what matching dollars were meant to do. If your plan has a brokerage window alternative, you may be able to create a better option for yourself by using a lower-cost index fund or exchange-traded fund alternative. This would allow you to capture the match and have a better investment option, too." (Los Angeles Newspaper group)
Feds Push New 401(k) Option: A Convenient Way to Get Income for Life
"The federal government has issued new regulations designed to encourage two important changes: Allow 401(k) plan participants to easily convert a portion of their assets to an annuity. Create an option within 401(k) plans for deferred annuities, also known as longevity insurance, which some see as a silver bullet." (Time Inc.)
IRS Interim Report on the Section 401(k) Compliance Check Questionnaire Responses (PDF)
"The 401(k) Questionnaire requested information in the following areas: demographics, plan participation, employer and employee contributions, top-heavy and nondiscrimination rules, distributions and plan loans, other plan operations, designated Roth features, IRS voluntary compliance and correction programs, and plan administration." (U.S. Internal Revenue Service)
401(k) Plan Sponsors Less Confident That Employees Will Be Financially Prepared for Retirement (PDF)
"84 percent of polled executives responsible for [401(k)] plans say only some or very few employees will be financially prepared for retirement, a new Deloitte survey reveals. . . . To encourage plan participants to make better use of their 401(k), nearly half of plan sponsors (49 percent) are offering features that automatically increase participants' contribution levels. However, nearly two-thirds (64 percent) of plan sponsors report that fewer than 10 percent of participants take advantage of this opportunity." (Deloitte; International Foundation of Employee Benefit Plans; International Society of Certified Employee Benefit Specialists)
Deloitte's 2011 401(k) Benchmarking Survey (PDF)
68 pages. 'While plan sponsors and fiduciaries are generally aware of the fees charged for the administration of their plans, the possibility exists that many will be surprised by the sum total of costs." (Deloitte)
[Opinion] A Closer Look at the Braden v. Wal-Mart Case: How Not to Run a 401(k) Plan
"The Wal-Mart case is the poster child for the way in which a 401(k) plan should not be run: plan investment options bearing excessive and entirely unnecessary costs, undisclosed conflicts of interest, lack of meaningful disclosure of costs to plan participants (which was actually part of the agreement between plan fiduciaries), and, I'd argue, an apparent absence of any serious fiduciary mindset on the part of the plan sponsor fiduciary and the trustee fiduciary." (Morningstar Advisor)
[Guidance Overview] DOL Finalizes, Delays 401(k) Fee Disclosure Rules
"The final regulations 'strongly encourage' service providers to offer plan fiduciaries a 'guide' or summary of their disclosures. The DOL included a sample guide as an appendix to the final rule. Debate about whether to require such a summary disclosure is rumored to have delayed the release of the final rules. For now, the summary is voluntary, but the DOL strongly hinted that it may make the summary mandatory in future regulations." (Benefits in Brief)
[Guidance Overview] Final ERISA Section 408(b)(2) Regulations Include Significant Differences from Interim Rules
"These regulations make several significant changes . . . including: [1] Excluding certain frozen IRC Section 403(b) plans issued before January 1, 2009 from coverage under the regulations; [2] Enhancing the information relating to 'indirect compensation' required to be disclosed; [3] Adding certain investment-related disclosures to facilitate compliance with DOL regulations under ERISA Section 404(a); [4] Extending the effective date to July 1, 2012. This has the effect of delaying the effective date of most participant-level disclosures under ERISA Section 404(a) to August 30, 2012." (Practical Law Company)
New Treasury Rules Ease Purchase of Annuity With 401(k)
"J. Mark Iwry, an official at the Treasury department, said the department hoped in particular to foster a workplace market for 'longevity insurance,' something much discussed in policy circles but that employers rarely make available to workers when they retire." (New York Times; free registration required)
New 401(k) Policies Are a Mixed Bag
"Most workers won't see their companies offering annuities anytime soon, concedes David Wray of the Plan Sponsor Council of America, an employer group. He said employers would be concerned about choosing solid insurance companies and reasonably priced annuities for their workers." (Reuters)
[Official Guidance] Proposed IRS Regs on Longevity Annuity Contracts
"This document contains proposed regulations relating to the purchase of longevity annuity contracts under tax-qualified defined contribution plans under section 401(a) of the Internal Revenue Code (Code), section 403(b) plans, individual retirement annuities and accounts (IRAs) under section 408, and eligible governmental section 457 plans. These regulations will provide the public with guidance necessary to comply with the required minimum distribution rules under section 401(a)(9). The regulations will affect individuals for whom a longevity annuity contract is purchased under these plans and IRAs (and their beneficiaries), sponsors and administrators of these plans, trustees and custodians of these IRAs, and insurance companies that issue longevity annuity contracts under these plans and IRAs." (U.S. Internal Revenue Service)
[Opinion] 401(k) Plan Leakage: Blame Hardship Distributions, Not Loans
"Based on 30-plus years of plan sponsor experience, I believe negative press about 401(k) loans are aimed at the wrong target. Rather, hardship withdrawals should be in the crosshairs, not loans." (Employee Benefit News)
Unraveling The Mystery of 401(k) Disclosures
"Sponsors will be required to present information about the investment options in the retirement plan in a chart that allows plan participants to compare fees and expenses . . . . Plan sponsors can use a model chart developed by the Labor Department or they can develop their own." (MarketWatch)
How to Calculate 401(k) 'Tax Expenditures'
"[The favorable treatment provided by the Internal Revenue Code for 401(k) plans] costs the Treasury money. The question is how much? The calculation involves comparing the present discounted value of taxes collected from saving within a 401(k) plan to how much would have been collected if the saving were done outside." (SmartMoney)
[Opinion] The Savings Crisis of Working Americans: The Retirement Industry Call to Action
"[I]f our society does not acknowledge and address the coming retirement savings shortfall, the American dream of retirement will most certainly become a nightmare. . . . Americans must save more for their retirement." (Legg Mason Retirement Advisory Council)
[Guidance Overview] IRS to Hold Phone Forum March 6: '401(k) Questionnaire Interim Report'
"The 401(k) Questionnaire Interim Report, its next steps, and current issues found in 401(k) audits will be discussed by Monika Templeman, Director of Employee Plans Examinations, along with IRS staff members Janice Gore and Rhonda Migdail. Email specific issues that you would like addressed to ep.phoneforum@irs.gov by February 17." (U.S. Internal Revenue Service)
Pushback from Disclosure of Costs to Participants: Too Much 401(k) Sunshine?
"[R]ecord keepers for some plans are already experimenting with new ways to explain fees to retirement savers. And in at least one case, those disclosures are raising more questions than employers or investment advisers want to answer." (Wall Street Journal)
Retirement Income in DC Plans: What Our Experience with DB Plans Tells Us (PDF)
"The potential for improvement in DC plans' ability to provide a steady stream of income has caught the eye of the financial services industry. While the marketplace races to deliver an array of possible solutions, employers and regulators are grappling with how these products fit within qualified retirement plans." (Institutional Retirement Income Council)
[Guidance Overview] Practitioners' Forum Discussion: Loomis v. Exelon Corp.
"[T]he Seventh Circuit affirmed a lower court's holding that the plan fiduciary did not breach its duties under ERISA . . . by offering retail mutual funds as part of the investment options in a participant-directed defined contribution plan." (Compensation Planning Journal via The Bureau of National Affairs, Inc.)
Four Retirement Plan Features Employers Need to Emphasize
"Employees are in need of simple, straightforward guidance regarding their retirement plans, a survey . . . by State Street Global Advisors found." (BenefitsPro)
A Primer on 401(k) Plan Design Alternatives (PDF)
"Many times a Plan Sponsor simply wants to make a 401(k) plan available toemployees so that the employees have the ability to do personal salary deferrals on either a Roth or traditional pre-tax basis. This might be necessary because employees are demanding it or the company needs the 401(k) plan for recruiting purposes." (Plan Design Consultants, Inc.)
What Should You Do with 401(k) Funds at Retirement?
"Retirees who want to keep investments sheltered from paying current taxes will essentially have two options. Savings can be left in a company retirement plan, where retirees can keep their money in a lineup of funds chosen by the company. Or the assets can be rolled over into another tax-favored account, generally an individual retirement account, which provides investors with control over investment choices and makes it easier to work with a financial adviser." (The Wall Street Journal)
Readers Rate Their 401(k) Plans
"In assessing the quality of their plans, the investment lineup was the biggest determinant of participant satisfaction." (Morningstar, Inc.)
Learn to Make Market Swings Work for Your Retirement Investments
"[A new book, '401k Day Trading,']tells investors how to take control of their own future through easy-to-implement retirement strategies. 'The overlying philosophy relates to how you can use market volatility to your advantage,' . . . . 'In the past 10 years, you've been able to do 25 percent better than the market,' through this process. Put simply, '401k day trading comes down to buying low and selling high every day,' . . . ." (The NASDAQ Stock Market, Inc.)
Stable-Value Funds Are Shaky 401(k) Options
"Stable-value funds are available only in 401(k) and other types of retirement savings plans. These are non-public funds -- meaning the investor typically has a hard time researching them -- that are supposed to hold a high-quality diversified, fixed-income portfolio which protects against interest-rate volatility." (MarketWatch, Inc.)
How to Take Advantage of New 401(k) Fee Disclosures
"With this new information about the 401(k) fees you are paying, you will have an opportunity to reduce the costs of your retirement investments." (U.S. News & World Report LP)
Many Defined Contribution Plan Executives Unclear on Plan Data
"A review by Pensions & Investments . . . of recent surveys on DC plan management, behavior and governance shows the percentages of 'don't know' or 'not sure' answers from financial and human resources executives can reach high double digits." (Business Insurance)
The Best Way 401(k) Plan Sponsors Can Benchmark Their Plans
"We've established the concept of creating a Fiduciary Report Card to facilitate this process. Now comes the question of exactly what kinds of structures and procedures should a 401k plan sponsor invoke to benchmark their plans." (Fiduciary News)
How Much Do 401(k)s Cost the Treasury?
"What's a reasonable number? Our estimate . . . is between $50 and $70 billion." (Dow Jones & Company, Inc.)
Starting and Maintaining a 401(k) Made Easy
"The No. 1 thing to remember, as financial professionals remind us, is to diversify. That helps mitigate risk, which can erode investment returns." (TheStreet, Inc.)
America's Commitment to Retirement Security: Investor Attitudes and Actions (PDF)
"With millions of U.S. households personally directing their retirement savings, [ICI] has sought to track retirement savers' actions and sentiment over time. This report, our fourth annual update, summarizes results from two surveys covering 2011 data -- a survey of U.S. households and a survey of defined contribution (DC) plan recordkeepers." (Investment Company Institute)
6 Critical Trends for Retirement Plans in 2012
"The six megatrends Lincoln Trust sees in 2012: New 401(k) Fee Disclosure Rules by DOL . . . 'C Suite' Sticker Shock' . . . A Refined Fiduciary Standard . . . Models vs. Target-Date Funds . . . The Rise of 401(k) Evaluation Services . . . A Call for Investment Expense Transparency." (AdvisorOne)
[Opinion] Public Pension Propaganda: The Lie
"NCPERS averaged 216 [public pension plan sponsor] responders to a survey who happened to have a funded ratio of 76.1% and Fitch ratings says 70% or above is adequate. . . . Who's to argue? Me." (Burypensions Blog)
[Opinion] Public Pension Propaganda: What They Got Right
"[On Thursday, Jan. 19, 2011] the National Public Pension Coalition held a press conference looking to influence anyone within earshot that public pensions should not be cut and are, in fact, affordable. In this series I will debunk some of their propaganda but, to start off, there is one area where this cabal got it absolutely right: . . . 401(k) plans are a scam perpetrated by employers to avoid obligations and the investment industry looking to siphon off fees. They are certainly inadequate as retirement vehicles." (Burypensions Blog)
Study Reveals Wide Range of 401(k) Plan Fees
"The average total plan cost for a small retirement plan (100 participants) for all expenses bundled together, including investment fees deducted from participants' assets and administrative/recordkeeping expenses and trustee fees, paid by the plan sponsor or passed along to participants, was 1.3 percent of assets under management in 2011." (Society for Human Resource Management)
401(k) Plan Design Solutions for Firms with High Turnover or Disparate Compensation Levels (PDF)
"Here is how it works. If no HCEs are covered under the plan, there is no required testing of minimum coverage or nondiscrimination. As a full carve-out plan of Section 1-410(b)-2(b)(6), the minimum coverage requirements are satisfied 'if and only if the plan benefits no highly compensated employees for the plan year." (Lockton Retirement Services)
A 401k Menu for Today's Investing Reality
"In the following Q&A, Mr. Dunteman outlines how 'globalizing' a portfolio by including investments such as foreign bonds can help investors reduce risk and reach their retirement goals." (401khelpcenter.com, LLC)
[Opinion] A Retirement Policy Reform Proposal
"[Jane White has] created a retirement reform proposal with the input of leading pension actuaries that makes 401(k) plans walk, talk and quack like pensions by making them more generous, immediate and portable." (Retirement Solutions, LLC)
What's the Tax Advantage of 401(k)s?
"Although the conventional and Roth 401(k)s may sound quite different, in fact they offer virtually identical tax benefits." (Dow Jones & Company, Inc.)
American Express Company: Creating a Separate Index Tier for a DC Plan
"This case study explores how the company created a separate, index-only core tier for its defined contribution plan and communicated the new options in a clear, streamlined fashion." (The Vanguard Group, Inc.)
[Guidance Overview] Plan Sponsors and Committees Can Now Help Plan Participants Allocate Their Retirement Funds
"Under the new rules, investment advice from a 'fiduciary adviser' is no longer prohibited if the advice is provided by computer modeling or a level-fee arrangement and meets several other requirements, such as sufficient auditing and disclosure. . . . The final regulations apply to transactions occurring on or after December 27, 2011." (CFO Publishing LLC)
A 401(k) Menu for Today's Investing Reality
"Globalizing your portfolio is about increasing your portfolio's exposure to non-domestic companies and alternative asset classes in order to take advantage of structural shifts, both economically and politically, taking place on a global scale, resulting in faster economic growth occurring outside the United States." (401khelpcenter.com, LLC)
[Guidance Overview] New DOL Regs Offer More Investment Advisers the Opportunity to Provide Advice to Participants in 401(k) Plans and IRAs
"Under the New Regulations, relief is provided for investment advice arrangements qualifying as fee-leveling arrangements, 'certified' computer model programs, or both." (Kilpatrick Townsend & Stockton LLP)
Options for 401(k) Plans Get More Affordable
"As employers prepare for new federal rules requiring them to explain how fees affect 401(k) returns, industry providers are rolling out better, lower-cost plans." (USA TODAY)
Capping 401(k) Plan Deferral Limit Wouldn't Do Much to Fix Budget Deficit
"Researchers with the National Tax Association estimated the long-term effect on tax expenditures of limiting the maximum total deferrals to 401(k)-type plans to $10,000, and found that even at high rates of return, doing so would only decrease the cost of the tax expenditure by at most $33 billion or 2% of the current $1.5 trillion deficit." (PLANSPONSOR.COM)
The Qualified Deferred Investment Account Acts as a Fiduciary 'Get Out of Liability Free' Card
"ERISA section 404(c) and the corresponding DOL regulations define how a plan sponsor can establish protective relief as a fiduciary for investment decisions made by employees in participant-directed 401(k) plans. As introduced in the Pension Protection Act of 2006 and effective Dec. 24, 2007, plan sponsors have the option to designate a default fund, qualifying as a QDIA. If the plan complies with the requirements of the regulation, the fiduciary will not be liable for losses that result from investments in the QDIA (your fiduciary 'get out of liability free' card)." (BusinessWest)
Taking Aim at 401(k) Fees
"As regulators focus more on the fees participants pay for their 401(k)s, Charles Schwab is launching a 401(k) plan that offers only index mutual funds, which are often much less expensive than actively managed funds." (Treasury & Risk)
Class Certification Requirements in 401k Fee Litigation (PDF)
"The basis for granting certification has frequently been the offhand observation that the class was complaining of the plan's structure as a whole. [The Spano and Kraft cases] indicate that, while class certification remains possible in cases involving 401k plans, the potential conflict between various categories of plan participants requires narrower definitions of the class that align." (401(k) Advisor via The Wagner Law Group)
[Guidance Overview] Anti-Alienation Rule Did Not Prevent Participant from Enforcing Judgment Against Plan
"The award of funds that were erroneously removed from a participant's 401(k) account and credited to his former spouse incident to a marital dissolution would not violate ERISA's anti-alienation rule, even if the plan has not yet recovered the funds from the spouse, according to the U.S. Court of Appeals in New York . . . . The anti-alienation rule, the court advised, does not prevent plan funds from being used to satisfy a judgment against the plan." (Wolters Kluwer Law & Business / CCH)
Collective Investment Trusts: An Investment Vehicle for 401(k) Plans?
"With the new [fee] transparency, some plan sponsors will probably start looking for lower-cost investment options, and CITs may fit the bill." (U.S. News & World Report LP)
Secrets of the 401(k) Millionaires
"'The one characteristic that differentiates the winners from the non-winners here is contribution rate -- a high percentage of those million-dollar savers had constant participation and high contribution rates.'" (The Wall Street Journal)
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