Posts in Retirement Plans
National Retirement Security Week

According to Employee Benefit Research Institute, only two-thirds of U.S. workers are saving for retirement. The first National Retirement Savings Week (NRSW) occurred in 2006 when two Senators introduced the resolution establishing National Save for Retirement Week. The goal is that this week will spark a national conversation about the importance of saving for retirement. The National Association of Government Defined Contribution Administrators encourages business to provide resources and educate their employees on saving for retirement. For additional information, visit NAGDA’s official NRSW website.

IRS Issues 2018 Version of Form 1099-R for Retirement Plan Distributions

“The IRS has released the 2018 version of Form 1099-R and its instructions. Retirement plan administrators (including administrators of 401(k) plans) are required to report plan distributions on Form 1099-R, which they file with the IRS and deliver to the plan participant or beneficiary. While the 2018 form and instructions largely mirror the 2017 version, there are a few changes.”  Click here to learn more!

Source: Thomson Reuters

The Economics of Providing 401(k) Plans: Services, Fees and Expenses

Take a look at an in-depth analysis of what has happened with 401(k) plans in 2017. Investment Company Institute explains why:

  • Employers offering 401(k) plans
  • Paying for 401(k) Services
  • Fees and expenses of mutual funds
  • Trends in funds and share classes

See how a 401(k) plan is a cost effective investment for many American workers.

Click here to read more.

Source: Investment Company Institute

Who is Eligible To Make 401(k) Plan Catch-up Contributions

"A catch-up contribution is an elective deferral made by a participant age 50 or older that exceeds a statutory limit, a plan-imposed limit, or the actual deferral percentage test limit for highly compensated employees."

This piece offers a concise discussion as to which parties are eligible to make a catch-up contribution to a 401(k) plan.

Click here to learn more about catch-up contributions and rules on eligibility.

Source: EisnerAmper

Reflections on a Dramatic Year for Retirement Plan Regulation

This article dives into the implications of the "Department of Labor (DOL) fiduciary rule being vacated by the 5th U.S. Circuit Court of Appeals." This decision has brought a sense of confusion among retirement plan sponsors as they attempt to manage and maintain relationships with their service providers.

Furthermore, this article concludes on the subject of missing participants and mentions how "they often find plan sponsors at fault for not making a good faith effort to locate them."

Click here to learn more about what's happening in retirement plan regulation.


University of Chicago Settles Excessive Fee Law Suit

"In addition to the monetary settlement, the university has agreed to “retain certain structural changes to the Plans that will further benefit the Plans and their participants,” including agreeing “not to increase per-participant recordkeeping fees for three years from the date of Final Approval of the Settlement, and to use commercially reasonable best efforts to continue to attempt to reduce recordkeeping fees.”

Click here to read more.


Colorado Public Plan Coalition (CPPC) Annual Conference

The Colorado Public Plan Coalition (CPPC) is a 501c(6) nonprofit organization which provides education, networking opportunities for administrators of Colorado public plans, and powerful advocacy for public employee benefit plans. CPPC trains public plan trustees on their fiduciary responsibilities and Colorado laws affecting public plans. Innovest and its professionals have been directly involved in CPPC for more than 20 years. Wendy Dominguez, Innovest’s president and co-founder, served as the chair of the organization at its inception. More than 80 public sector plans attend the conference regularly. Innovest is a regular contributor and volunteer to the educational programs, delivering presentations on plan benchmarking, investing, fiduciary responsibility, and participant communication.

CPPC is an excellent resource for public plan sponsors. Please join us at CPPC’s annual conference from August 28 to 31 in Beaver Creek, Colorado. Click here to see the agenda for this year's conference and to register. CPE credits are being offered for the first time.


11 Tips to Reduce Litigation Risk

11 Tips to Reduce Litigation Risk

Gordon Tewell, CFA, CPC, ERPA | Principal, Innovest Portfolio Solutions

While retirement plans with billions of dollars dominate the plan litigation headlines, smaller plans have the opportunity to learn from the suits filed against their larger plan peers and hopefully avoid possible litigation.  

Until recently, the fee-based claims against retirement plan fiduciaries targeted “mega-plans” – e.g., Verizon ($30B); Chevron ($19B); Intel ($15B); Oracle ($11B); American Airlines ($9B) – but two cases may indicate an extension of fee based claims into the small/mid-size plan market: CheckSmart ($25M) and LaMettry’s Collision ($9M).

There is no doubt that litigators have been busy. We are seeing new approaches to court cases -whether an attack on revenue sharing, continued focus on company stock, or new inquiries into stable value, fee structures, or custom target-date funds (TDFs)—litigation doesn’t show signs of letting up. The suits attack plan sponsors, recordkeepers and, in some cases, investment managers. Recent cases bring a number of new attorney names into the litigation world as new entrants in the plaintiff attorney world continues to grow. The pace is unlikely to slow as cases are quickly duplicated.

Unfortunately, we are in a world where every action can be put under the microscope.

Committees should feel confident that, if they follow fiduciary best practices and due diligence, they have a strong defense. A prudent process and documentation is more essential than ever. There’s no time like the present to make sure you and your investment committee have a strong fiduciary file and continue to try to raise the bar.

While the fees, penalties and settlements of the cases mentioned above amount to huge sums, the actions that prompted these lawsuits are not unique to the handful of companies being charged.  Plan sponsors should be taking copious notes and learning lessons from this litigation.  Since it’s hard to predict what’s going to happen in the courts, plan sponsors should look to reduce the risk of litigation by following a best-practices strategy. Some key steps that sponsors can take to improve the plan for participants and protect themselves as fiduciaries include:

  1. Keep your ear to the ground. Know what is going on within the industry and what a prudent person would do.
  2. Benchmark and evaluate your providers. Even if a plan is satisfied with its current provider, consider periodically benchmarking or going out to bid with a Request for Proposal (RFP). The RFP process may disclose administrative and cost saving opportunities. Ensure that provider fees and expenses are reasonable by evaluating competitive bids every few years. An RFP process may uncover whether you are overpaying for services and whether other competitors might be providing useful additional services that your current provider does not offer.  At the end of the exercise you may not be dissatisfied with your current provider, but at the least, you will know whether you should be renegotiating your current provider’s fees.
  3. Offer a broad mix of investment options.  This will allow participants to adequately diversify their accounts. The menu should include low-cost index funds. Ask yourself, “Is a competitive capital preservation investment option available, and has the investment been thoroughly vetted?”
  4. Engage in fiduciary training. It is imperative that all committees understand the legal responsibilities of their position as a fiduciary.
  5. Review the cost and structure of your investments. A committee (or other fiduciary) should document that it regularly investigates share classes and fee options to ensure that it has considered the lowest cost option for which it qualifies. If higher cost funds are selected, a committee (or other fiduciary) should document the process that led to the selection of a higher cost fund as opposed to a cheaper fund - e.g., documenting the relative performance of the higher cost funds net of fees. Ensure fee transparency and equality for employees.
  6. Follow your governing documents.  Plans should adopt an Investment Policy Statement and follow it. Adopting a policy and not following it can be worse than not having a written policy at all.  Modify or update the policy as appropriate.
  7. Watch the proprietary funds.  Recent litigation has focused on providers who put their own funds in their employee plans even though they were not top performers. Ensure that you evaluate all investments options, using an unbiased, well-documented process that can reliably evaluate how well each option is aligned to your plan’s needs and demonstrate the prudence of your decisions.
  8. Hire expertise.  Unless you are a very large business with employees who have real expertise and time to spend, you are courting disaster by trying to do everything in house. Just about every plan needs professionals advising about investments and fees.  And those professionals should acknowledge that they are fiduciaries.
  9. Monitor your revenue arrangements.  There are alternatives to paying for plan services through revenue sharing that are more transparent. If you do enter into a revenue sharing arrangement, make sure your provider isnot being overpaid or that revenue sharing is not being used to pay for services to the plan sponsor rather than the plan participants.
  10. Continue to monitor the Plan investments.  Just because you picked an appropriate menu years ago does not mean your menu is the best for participants today.  Fiduciaries need to monitor performance against benchmarks and to be aware of new funds and alternatives to regular mutual funds, such as separate accounts and collective investment funds. 
  11. Hold regular committee meetings.  Prepare agendas and keep written minutes to record what is discussed and the reasons for decisions. Careful documentation makes it much easier to show a court that you were acting prudently. Make sure your notes are thorough.

One of the most dangerous statements that can be made is, “We have always done it this way.”  Plan sponsors now have a unique opportunity to learn valuable lessons from these lawsuits and court cases and adopt best practices for managing their fiduciary processes and responsibilities. 

Source: Innovest Portfolio Solutions, Gordon Tewell, CFA, CPC, ERPA




Brightscope and ICI Release Latest Edition of Comprehensive 401(k) Study

“One of the strengths of the 401(k) system is that it allows employers to customize their plans to meet the needs of their unique workforces,” said Sarah Holden, ICI’s senior director of retirement and investor research. “Employers use that flexibility to offer features that can encourage participation. Employer contributions, auto-enrollment, loans, and diverse investment options—including target-date funds—can make it easier for 401(k) participants to plan and save.” Click here to read more.

Source: BrightScope