Category: Retirement Plan Sponsors

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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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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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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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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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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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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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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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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Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney. Hey Joel, What’s the appropriate number of members and positions for a retirement plan committee? – Plannin’ in Pennsylvania Dear Plannin’, There is no specific guidance on the appropriate number of committee members. It’s important to have committee members who can contribute to the topics to be focused on. When there is one committee, as opposed to…

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Many plan sponsors struggle with deciding how many investment options to offer in their retirement plans. While people generally like to have lots of options when making other decisions, having too many plan options can potentially lead to poor investment decisions by plan participants. In addition, increasing plan options can also increase plan costs, as well as the administrative paperwork associated with the plan. In a study on retirement plan options, researchers concluded that it is possible to present…

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