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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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What Constitutes Proper Documentation of Retirement Plan Committee Meetings?

With most retirement plans, the fiduciary responsibility of selecting and monitoring the plan’s menu of investments is designated to a retirement plan investment committee. This committee usually includes financial officers and human resources officers of the employer. The committee meets periodically (anywhere from annually to quarterly) to consider agenda items including investment due diligence, fees and services of plan providers, status of plan goals, etc. From a fiduciary perspective it is just as important to properly document these meetings…

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Why You Need to Communicate with Employees

Businesses understand how vital it is for employees to understand retirement options and are increasingly including employee education in fiduciary risk management, whether it’s in the form of one-on-one counseling or educational seminars. Take a look at these reasons why you should communicate with and educate your employees. Gossip Can Be Dangerous If retirement opportunities are not properly explained, employees will likely ask each other instead. Someone could accidentally relay incorrect information and create the misconception that your savings…

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Are Your Participants Experiencing a Fee Imbalance?

Subsequent to the 2012 implementation of ERISA fee reporting regulations (ERISA 408(b)(2) & 404(a)(5)), the Department of Labor (DOL) began to consider the appropriateness of the allocation of plan fees among participants. This is a subject that generally had not been on the radar screen of many plan fiduciaries, but once identified, tends to generate considerable traction due to its obvious validity. Ironically, a plan sponsors’ diligent attention to obtaining the lowest accessible share class for new funds in…

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How and When to Pay Plan Expenses with Plan Assets

Some retirement plan expenses can be paid for with plan assets – but many can’t. Which are the “reasonable and necessary” retirement plan expenses that can be paid out of plan assets? Generally, services required to maintain the plan’s compliance and administration can be paid from plan assets. Obvious examples include the annual nondiscrimination testing and preparation of the annual Form 5500. Another example is a plan amendment or restatement that is required because of a legislative change. Optional…

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Beware of the IRS & DOL: Four Red Flags They Seek on Form 5500

The Form 5500 is an ERISA requirement for retirement plans to report and disclose operating procedures. Advisors use this to confirm that plans are managed according to ERISA standards. The form also allows individuals access to information, protecting the rights and benefits of the plan participants and beneficiaries covered under the plan. Make sure you are compliant. Be aware of red flags that the IRS and DOL look for on Form 5500 filings: Not making participant deferral remittances “as…

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