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Common Fiduciary Errors

An ounce of prevention is worth a pound of cure. This saying is universal, and certainly applies to fiduciary responsibility. Beginning the year with an eye towards avoiding some of the most common errors makes sense. Most fiduciary errors are unintentional or even well meaning. Here are some examples. Following Plan Documents and Communicating Changes Possibly the most frequent source of fiduciary breach, interpretation of plan provisions is not always intuitive. The remittance of participant deferrals “as soon as…

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Continuity, Coronavirus, ERISA, Stimulus Package

The coronavirus relief includes a “temporary rule preventing partial plan terminations” for plan sponsors of defined contribution retirement plans. The provision specifically states, “A plan shall not be treated as having a partial termination (within the meaning of 4119(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020 and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021…

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Annual Plan Audit: An Auditor’s Perspective

                Does your plan require an annual audit? If your eligible participant count (including terminated employees who maintain an account balance) exceeds 100 at the beginning of your plan will you be required to conduct a benefit plan audit including financial statements attached to the Form 5500 (the one exception is the *80-120 rule.) The audit is intended to confirm the plan is operating within the guidelines of the plan documents and…

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Retirement Income Survey

              Attaining a satisfactory retirement experience is dependent on sufficiency of post retirement income. In an attempt to identify current attitudes in this regard the *Alliance for Retirement Income surveyed pre-retirees between the ages of 56 and 75 (with a minimum of $100k assets) regarding their anticipated timing of their retirement. https://www.allianceforlifetimeincome.org/feature/americans-more-pessimistic-about-retirement-plans-due-to-pandemic/ Here are some highlights resulting from the survey: 20% decided to retire later than originally planned 52% are not fully confident…

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Election Year Investment Volatility

Election years, with their uncertainty and increased emotions, cause anxiety for investors. Certainly, there may be short-term market volatility around elections, but history suggests that over the long-term the economy and markets move higher regardless of election outcomes. In fact, presidents often receive too much credit for strong economies and markets, as well as too much blame for weak economies and markets. Corporate earnings are the real driver of the market over time. Presidents have less impact on corporate…

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Plan Documents… Save or Purge?

Many ERISA plan sponsors are unclear regarding a primary fiduciary responsibility concerning plan document retention (which and when documents may be purged). Most plan sponsors adopt an assumed “reasonable” amount of time to retain documents prior to purging them. Unfortunately, IRS rules may not always be complicit with what may be assumed to be “reasonable”. The purpose of this communication is to underscore the important plan record retention so that you may not fall prey to the type of…

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Defined Contribution Recordkeeper Consolidation Continues

Empower recently announced an agreement to acquire MassMutual’s retirement plan recordkeeping business. The acquisition is expected to capitalize on both firms’ experience and expertise to the benefit of retirement plan participants and plan sponsors. Plans currently utilizing MassMutual are being notified of this action and should expect no changes or disruption to current operations during the next 4 to 6 months, with any potential changes likely 18 months away. While MassMutual’s retirement plan products and services are considered among…

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To Roth or not to Roth

Many Defined Contribution retirement plan participants are uncertain as to benefits of allocating their contributions to traditional vs Roth options. This is for good reason. There are two key major determiners as to the benefit of contribution to Roth: 1. Will they be in a higher or lower tax bracket in retirement? 2. Will tax rates increase, stay the same or decrease in the future? If you know for sure that tax brackets will increase in the future, the…

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Allowable Plan Expenses: Can the Plan Pay?

The payment of expenses by an ERISA plan (401(k), defined benefit plan, money purchase plan, etc.) out of plan assets is subject to ERISA’s fiduciary rules. The “exclusive benefit rule” requires a plan’s assets be used exclusively for providing benefits. ERISA also imposes upon fiduciaries the duty to defray reasonable expenses of plan administration. General principles of allowable expenses include the following: The expenses must be necessary for the administration of the plan. The plan’s document and trust agreement…

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It’s That Time Again! Back-to-School for Fiduciaries

Morgan Davis, Plan Advisor Can you hear the bells ringing? It’s that time of year to review your to-do list of fiduciary responsibilities. Ask yourself the following questions to make sure you are on top of your responsibilities and liabilities. Are you practicing procedural prudence when making plan management decisions? Are you documenting each plan management decision and its support? Are you certain that your plan is being administered in accordance with your plan document provisions? What fiduciary liability…

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