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The mission of the Partners is to empower all of us to go directly to each other with our expertise. FiduciaryFirst is considered an industry leader and our knowledge and informative blogs can help you gain an understanding about key topics within the industry.

Missing Participants: Are You Doing Enough to Find Them?

Missing Participants: Are You Doing Enough to Find Them?
Recent Department of Labor (DOL) letters have threatened sanctions against plan fiduciaries for potential Employee Retirement Income Security Act (ERISA) violations regarding the handling of missing participants. The DOL also cited potential violations involving the timeliness of required minimum distributions for participants nearing the age of 701/2. This occurred despite a lack of clear-cut guidance from the DOL regarding best practices and appropriate administrative procedures for handling instances where prior employees cannot readily be located. As a result, plan sponsors have been required by Labor Department auditors to follow procedures regarding required minimum distributions (RMDs) not documented from any previous formal guidance. In response to concerns expressed by plan sponsors, the Internal Revenue Service, DOL and Pension Benefit Guaranty Corp. (PBGC) have released guidance regarding the steps plan sponsors and administrators should take when attempting to locate separated participants, including: Searching plan, employer, sponsor or other publically available sources of...
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ERISA Lawsuits Highlight Risks for Fiduciaries

ERISA Lawsuits Highlight Risks for Fiduciaries
Recent class action suits filed against Home Depot, First Group America, Aon Hewitt, Financial Engines and Alight seek millions in restitution. Two class action suits — one involving Home Depot and the other FirstGroup America — allege that failure to adequately perform oversight of outside fund advisors violated the sponsors’ fiduciary duties and ask for millions in restitution. According to the complaint, the Home Depot action alone, if certified, would incorporate more than 300,000 current and former employees. The Home Depot complaint names not only Home Depot Inc., but also its Administrative and Investment committees and their members. Outside advisors Financial Engines Advisors and Alight Financial Advisors and plan record keeper Aon Hewitt are also named. The 98-page complaint lays out an exhaustive case, which alleges a number of failures in performance of fiduciary duties, including: Home Depot allowed plan participants to pay unreasonable fees to the advisors. The advisors...
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Four Ways to Increase Employee Retirement Contribution Participation

Four Ways to Increase Employee Retirement Contribution Participation
As a retirement plan sponsor, can you encourage your employees to save and save more? A significant amount of research says that yes, you can improve both employee participation and their saving rates. Here are four ways you can help your employees start building a confident retirement: Boost employee participation with automatic enrollment. Choosing to automatically enroll all new employees in your retirement plan can dramatically improve your participation rates. According to the Center for Retirement Research (CRR) at Boston College, in one study of automatic enrollment, participation increased by 50 percent, with the largest gains among younger and lower-paid employees.1 While auto-enrolled employees are allowed to opt out of the retirement plan, most generally stay enrolled. Set the initial default contribution rate higher. Many companies who use auto-enrollment set their default contribution rate relatively low at three percent, according to the CRR, which is lower than the typical employer match rate of six...
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Plan Sponsor Focus Shifts to Retirement Readiness

The ninth annual Plan Sponsor Attitudes Study reveals plan sponsors’ top concerns, as well as information on plan changes and participation rates. Fidelity surveyed 1124 sponsors whose plans had at least 25 participants and $10 million in assets, and start-upsto plans with more than a quarter million in assets. Plan sponsors surveyed used an assortment of record-keepers. The study focused on sponsors that use a plan consultant or financial advisor. It found that a historically high proportion of sponsors, 92%, say they work with an advisor. And while 44% of plan sponsors indicate that they’ve retained their current advisor for four years or less, 22% were looking to make a switch. This was down from 38% reported in 2017. In line with previous years’ results, the report indicates a high level of plan sponsor activity, with more than eight in ten sponsors reporting changes to their plans within the last...
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IRS Tips for Plan Sponsors

IRS Tips for Plan Sponsors
As an employer, you’re ultimately responsible for keeping your company’s 401(k) plan in compliance at all times. Your plan document should be reviewed on an annual basis and administered accordingly. The IRS offers useful tips for plan sponsors to help in those efforts. Here are some highlights on their guidance. Understand and verify your adoption agreement options.For pre-approved plans, you may have an adoption agreement that supplements the basic plan document and lists features that may be selected. It’s important to understand this document and specifically what it says about plan eligibility, types and limits of contributions, how contributions are divided among plan participants, vesting and paying benefits. Educate yourself about your service agreement. As a plan sponsor, it’s important to understand what your service agreement does and does not cover. For administrative tasks, it’s imperative to know who will perform these and to make sure that person has the...
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Tax-Advantaged HSAs Can Lead to a Healthier Nest Egg

Recent changes have strengthened a savings tool that was already gaining popularity with retirement plan consultants. Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) were originally created by Congress to help consumers save money tax free to pay for healthcare. In 2018, contribution limits were raised, increasing the utility of these little-known but powerful accounts.   Sounds Similar — But Very Different   While HSAs and FSAs share some similarities, they can serve very different purposes. Retirement plan consultants can help participants boost their retirement savings by showing them an often overlooked benefit to one of these types of accounts. FSAs are employer sponsored and used to save for medical expenses that employees anticipate having during the year. HSAs are individual accounts that can be used for any purpose after age 65. Both allow money to be contributed pre-tax, and distributions are tax-free when used for qualified healthcare expenses....
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Overcoming Myopic Investment Decision-Making: Where Advisor and Analyst Meet

Even when presented with timely and accurate financial information by fiduciary advisors, employees don’t always make the best decisions for themselves when it comes to saving for retirement. When advisors exclusively focus on financial education and fail to address underlying issues of behavioral economics, there’s a greater chance that poorer financial decision-making may occur. Helping employees overcome the cognitive biases that can lead to bad investment decisions increases their chance for success in becoming retirement ready. Short-Term Thinking Myopia, in the realm of financial planning, refers to the tendency to make shortsighted financial decisions at the expense of longer term gains. Studies show that when offered the choice of $100 now or $120 in a month, more people choose the immediate reward. However, if the offer changes to $100 in 12 months or $120 in 13 months, they more often elect the higher payout. One potential explanation for this inconsistency...
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Time’s Up: TDFs and Your Fiduciary Obligations

Target date funds (TDFs) — which rebalance investments to become more conservative as a fixed date approaches — are a convenient way for plan participants to diversify their portfolios and reduce volatility and risk as they approach retirement, making them an increasingly popular choice. However not all TDFs are created equal, and selecting and monitoring them can pose unique challenges for plan sponsors and fiduciary advisors.   TDFs were first introduced in 1994. Ten years ago, just 13% of 401(k) plan participants were invested in TDFs. Today, that number has risen to more than 50%, according to a new report from Vanguard, which also estimates that 77% of Vanguard participants will be invested in a single TDF by 2022.   However, the “automatic” rebalancing feature of TDFs doesn’t supplant the obligation to monitor funds and educate participants. The Department of Labor (DOL) provides guidance on TDFs in the form of...
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