Pulse Image_RPM Q4 2017_Blog Article 3_What Does it Really Take to Retire

What does it really take to retire?

As a plan sponsor, your employees rely heavily on your guidance. After all, you manage the plan that may offer their best chance for a successful retirement.

When the 401(k) plan was introduced in the mid-80s, it was not intended as a stand-alone solution; it was intended to be a part of a three-pillar system along with defined benefit (DB) plans and social security. However, as time passed, 401(k)s and other defined contribution (DC) plans became the primary savings vehicle for Americans.

Saving for retirement now rests predominately on your employees and they look to you for guidance. Read the rest of this entry »

If you’ve been considering adding Auto Features, like auto-enrollment and auto-escalation, to your retirement plan, you’re not alone.

Per recent studies by Deloitte and others, over 65% of all new plans are being installed with auto-enrollment. Of these plans, more than 60% are also deploying auto-escalation, i.e. annual increases to the initial auto-enrollment amount. And, as noted below, participants are overwhelmingly in favor of these “do it for me” features.

It is important for plan sponsors to note that Auto Features often engender some additional administrative attention. Further, retirement plan committees are finding that, in order to have a meaningful impact, the starting percentage for auto-enrollment needs to be higher than the historical default of 3% of salary.

However, when it comes to ensuring your participants are ready to retire, Auto Features can play an extremely significant role.

Auto-Escalation GraphII


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Financial wellness is more than just a buzzword or a “feel-good” benefit: when effectively implemented, it can be a powerful tool to help employees take control of their financial lives and help your company reach organizational goals.

This article will share insights on program partners and workplace benefits, as well as benchmarking tips and strategies that seek to improve financial wellness and increase employee engagement. Read the rest of this entry »

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Money Back is Good, Right?

Refunds can be great if you are referring to tax returns, or money back from an unfulfilling purchase. However, when it comes to your company’s retirement plan, refunds or corrective distributions are red flags indicating a deeper problem. They can be an administrative nightmare for plan sponsors and cause undue stress to highly-compensated employees who may be forced to refile their taxes.

What are Corrective Distributions?

Employees within your workforce are divided into two groups: highly-compensated employees (HCE) and non-highly compensated employees (NHCE).

HCE Table

Both groups have a desire to retire and contribute what they can to the company’s defined contribution plan, however their difference in pay will affect the amount which they can put away annually.

As a check on plan design equality, the IRS requires that both HCEs and NHCEs contribute to their 401(k) plans at similar percentages. If owners and managers contribute at far higher rates than their workers over the course of the year, the amount these executives have “over paid” will be refunded, which poses a problem for all parties involved. Read the rest of this entry »

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As people age, it becomes increasingly important that we all go to the doctor for regular checkups; checkups can lead to valuable changes in our lives… everything from the addition of a daily multivitamin to identifying the early stages of cancer. No one can make us go to the doctor, but it’s critical to prioritize monitoring and checking up on our health.

In the 401(k) industry, it is becoming more apparent that plans need to be reviewed regularly (at least annually) and more thoroughly in order to adequately address fiduciary responsibility and duties. However, many companies haven’t made benchmarking a priority even with recent 401(k) lawsuits.

If you have not yet made benchmarking your retirement plan a priority, here are four reasons why you should: Read the rest of this entry »

In a recent ruling by the Missouri Federal District Court, ABB, Inc. (manufacturer of energy-harnessing and automotive plant technologies) and the members of its Pension Committee were found joint and severally liable for breach of their fiduciary duty as retirement plan sponsors.  The court opined that the company’s 401k, provided by Fidelity, was largely populated with mutual fund choices that were selected more for the opacity of their fee structure than for the underlying merits of the investments themselves.

In turn the court levied the following judgments in favor of the plan participants:

  • Failure to monitor recordkeeping fees and to negotiate rebates:    $13.4MM
  • Failure to prudently select and retain investment options:             $21.8MM
  • Improper use of “free float” interest on plan assets (Fidelity):        $  1.7MM

In all, the fines represent about 3% of the plan’s roughly $1.4B in assets.

Despite the landmark nature of this case (i.e. a judgment was issued, as compared to the preponderance of cases that end in settlements) plan sponsors in the small- and mid-sized markets, collectively $0-$100MM in plan assets, are likely to view these results as a concern limited to firms in the Fortune 1000.

However, even the sponsor of a $5MM plan should take note, as a proportional judgment against its plan ($150K) would likely be meaningful to that company’s bottom line. Read the rest of this entry »

Retirement plans, like 401(k)s, 403(b)s, 457(b)s, etc., require the services of multiple providers to remain in good standing with the IRS and the Department of Labor (DOL). Chief among those services are administration, recordkeeping, investment advice, and custody. Each is provided in exchange for a fee, and it is the employer’s ongoing responsibility to ensure that these fees are reasonable.

On the surface, it sounds fairly easy.  Employers simply need to answer these three questions:

  1. What services are required for my plan?
  2. What am I paying for said services?
  3. Are those fees reasonable?

However, the vast majority of plan sponsors are hard-pressed to answer these three questions at all, let alone accurately. Read the rest of this entry »

Fiduciaries of ERISA-governed retirement plans, e.g. 401(k), 403(b), etc., must undertake a host of regular activities to ensure that their company’s employees are being offered sound retirement options. One such responsibility is the selection, monitoring, and maintenance of plan investments. If this duty is not performed correctly, penalties can be levied on both the sponsoring company as well as on each of the company’s executives individually. Given the significant potential liability, as well as the expertise required to do the job properly, many plan sponsors look to offload, or at least share, some of their fiduciary responsibility. ERISA allows for delegation of investment functions, however, understanding the nuances of the various arrangements can be challenging. Read the rest of this entry »

“Of course not… That would be absurd,” is what most executives would likely carp at that suggestion. However, in the case of retirement plans, like 401(k)s and 403(b)s, that is exactly what many executives are unwittingly doing. Read the rest of this entry »

There is a debate raging in the retirement industry, as well as the financial industry at large, and most investors have no idea. The debate centers on whether or not advice-providing investment professionals should be required to adhere to a fiduciary standard. In the simplest terms, a fiduciary standard is one requiring a professional to place their clients’ interests above their own at all times.

On the surface, it’s hard to imagine that this concept would be the subject of debate at all. It is akin to a politician who enthusiastically takes the stage to voice his or her “landmark” opposition to drunk driving, child abuse or world hunger… it’s pretty hard to contradict. In fact, when presented to most clients, they have a hard time even imagining what the other side of the argument might be.  Yet the vast majority of Wall St. firms have a significant and vested interest in lobbying for something far less restrictive. Read the rest of this entry »