Experts in Personalized Retirement Plan Design & Administration Newsletter June 29

Why Retirement Plan Sponsors Shouldn’t Only Focus on Low Fees While paying unreasonable plan expenses is a breach of fiduciary duty, picking providers solely or mainly because they are low in fees can also breach the fiduciary duty. The duty of prudence requires the selection of competent plan providers and selecting an incompetent provider is a certain breach of that duty. So a plan provider needs to select competent plan providers, not just the lowest cost vendor. Source: The Rosenbaum Law Firm.

The 401k Auditor’s Wish List As we approach the audit deadline for employee benefit audit plans, hopefully things are already in motion with your plan auditors. You have received the list of items they need to complete the audit, documents have been exchanged and meetings are planned. But what else can you do to make this year’s audit more efficient, less painful and – dare we say – more enjoyable than last year? Source: Employee Benefit News.

Nowhere to Hide on Hidden 401k Fees Under ERISA, CFOs and other retirement-plan fiduciaries are required to understand the fees and expenses charged and the services provided to the plan. With plan participants increasingly litigious, plan sponsors must take care that investment and administration expenses are “reasonable.” Source: CFO Magazine.
Gender Gap in Financial Literacy Perhaps due to the economic recovery, the gender gap in financial literacy narrowed significantly after widening in 2010 — with women gaining ground in virtually all areas of financial planning. Young women under 30, in particular, gained the most ground on their male counterparts. Source: Financial Finesse

Do Investment Committee Leadership Styles Matter? Vanguard examined the impact of various leadership styles on investment committee decision-making. Results of this survey reinforce the presumption that there will always be powerful situational determinants that drive leadership effectiveness. This reality should serve as a reminder to all investment committee leaders to focus on what they can control. Source: Vanguard 

The Pros and Cons of Taking a 401k Loan As banks have scaled back on consumer lending, Americans are increasingly borrowing from their 401k retirement accounts. It can make good sense to borrow from a 401k. Still, there are risks to taking out such a loan. Source:

The 2011 Higher Education Retirement Confidence Survey The college and university workforce is more confident regarding its prospects for a financially secure retirement than are American workers in general. Twenty-five percent of higher education employees are very confident in their retirement income prospects and 50% are somewhat confident, compared with 13% and 36%, respectively, for U.S. workers. Source: TIAA-CREF Institute 

Some Fiduciary Services Are More Equal Than Others With the increased focus by the Department of Labor on the fiduciary aspects of 401k plans, the market place has responded. 401k providers offer services allowing fiduciaries to delegate some or all of their responsibility for plan investments. But some fiduciary services are more equal than others. Source:

Why Fees Matter for 401k Plan Fiduciaries, But Not DB Pension Plans It’s okay with the DOL if plan sponsors spend money foolishly on the administration and management of defined benefit pension plans. However, DOL balks at similar behavior for defined contribution plans. To understand the difference, let’s look at who bears the risks in providing for plan participants’ retirement. Source: Smart Investor.

Fiduciary Safe Harbor Protection and the Duty to Share The Sixth Circuit recently affirmed the decision of a trial court. The case appears to serve as a cautionary tale for participants to choose and monitor their investment advisors more carefully given the protections that the 404(c) safe harbor provides for plan fiduciaries. A closer look at the trial court’s decision sheds light on this as the trial court specifically notes that while a plan fiduciary cannot conceal material nonpublic facts from plan participants, ERISA does not require a fiduciary to guarantee that all material facts are shared with participants. Source:

Research Finds That Written Retirement Income Plans Can Help Drive Business Growth for Advisors The Fidelity survey of more than 500 financial advisors and 500 pre-retirees and retirees reveals that advisors who provide comprehensive retirement income planning — specifically, written, detailed plans — generally receive higher satisfaction, referrals and, ultimately, higher concentrations of client assets. Source:

Advisers to Hedge Funds Must Register with SEC The Securities and Exchange Commission adopted rules that require advisers to hedge funds and other private funds to register with the SEC. The rules also establish new exemptions from SEC registration and reporting requirements for certain advisers, and reallocate regulatory responsibility for advisers between the SEC and states. Source:

Vanguard Finds More 401k Participants Getting Professional Investment Help The portfolios of nearly 30% of participants in 401k retirement plans at Vanguard are in automatic professionally managed investment programs, which particularly benefit individuals who lack the skills to invest properly on their own, according to Vanguard’s How America Saves 2011. Source:

How America Saves 2011: A Report on Vanguard 2010 Defined Contribution Plan Data  This 92 page report, now in its 10th edition, is widely used as a barometer of retirement planning trends. Along with a look at the overall patterns of Vanguard’s three million-plus participants, How America Saves this year includes supplemental reports with analyses of participant behavior in the defined contribution retirement plans of eight specific industries. Source: Vanguard

Study Shows Gen-Xers Fear Bleak Retirement Only about one in ten so-called Generation-Xers is very confident of being be able to maintain their current standard of living when they retire, and 82 percent cannot say they are well along their path to planning a successful retirement, the study revealed. Source:
Helping Improve the Retirement Outlook for the Unemployed In order to gauge the impact on the retirement outlook on these displaced workers, Transamerica Retirement conducted a survey among 668 Americans who are either unemployed or underemployed. Not surprising, two-thirds (67 percent) of these un/underemployed workers are less confident in their ability to achieve a financially secure retirement since the recession began. Many have tapped their savings, gone into debt, and taken withdrawals from their retirement accounts to cover expenses during their unemployment or underemployment. Source: Transamerica Retirement Services

Retirement Account Balances (Updated 6/11) The retirement savings of American households took a big hit when the stock market crashed in 2008. Recently, however, a good portion of these losses has been reversed. This fact sheet follows trends in retirement account balances since the beginning of 2005. Source: Urban Institute.

IASB Adopts International Accounting Rule on Employee Benefits The International Accounting Standards Board (IASB) has released an amended version of its Financial Reporting Standard IAS 19 Employee Benefits, completing its project to “improve” the accounting for pensions and other post-employment benefits. For U.S. employers that will be required to comply with this standard, the effective date is for fiscal years beginning on or after January 1, 2013. Source: Milliman.

IRS and Treasury Officials Provide Informal Views on 401k Plan Topics The Joint Committee on Employee Benefits (JCEB) of the American Bar Association has reported on its May 2011 Q&A session with IRS and Treasury officials. Highlights include unofficial, nonbinding remarks about a number of issues, reviewed in this article, affecting 401k plans. Source: Thomson Reuters/EBIA.

IRS Extends the Deadline for Filing the 2009 and 2010 Form 8955-SSA In an IRS Employee Plans Newsletter released on June 21, 2011, the IRS announced that it will shortly be releasing guidance extending the filing due date for the 2009 and 2010 Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits. Source: Sungard/Relius.

IRS Releases 2009 Form 8955-SSA The IRS has released the final version of the 2009 Form 8955-SSA and its instructions. The Service has not released the 2010 version or the updated Form 5558 extension request. Employers have the option of using the 2009 to list all persons that the employer would otherwise list on the 2010 form. Such a form would still include a 2009 date. Source: Sungard/Relius.

IRS Employee Plans News Issue Number 2011-5 – June 22, 2011 Topics include: 2009 Form 8955-SSA and 2010 Form 5500-EZ Released, Form 5500 Special Extensions of Time to File, Employee Plans Rulings & Agreements Priority Items, Are SEP IRA Contributions Deductible if a Return is Filed Late, How to calculate RMDs for employees, retirees and beneficiaries , Form 5300 Applications for Employee Stock Ownership Plans, Completing a Power of Attorney Form for Form 5330, What’s on the Employee Plans Compliance Unit’s Radar Screen and Tax Relief in Disaster Situations. Source: IRS

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