The Partners Circle

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.

TDF Investors Hang Tough in Down Markets

TDF Investors Hang Tough in Down Markets
Target date funds (TDFs) have grown increasingly popular since their inception over two decades ago. In fact, 72% of retirement plans have TDFs as their default option and more than 40% of retirement plan account holders use a TDF. With so many employees invested in Target date funds, it’s important to understand how they tend to behave in markets under pressure and their likelihood to adhere to a long-term investment strategy. The good news for plan sponsors with TDFs under management is that those invested in them tend to stay put — even during volatile and declining markets. A recent study by Fidelity examined the behavior of their TDF investors during two particularly volatile periods of the stock market: the 2007-2009 bear market and the 2015 downturn. They found that TDF investors tended to maintain consistent savings behavior and retain their market exposures during both of these declines. Interestingly, even...
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Reclaiming the American Dream

Reclaiming the American Dream
More than half of U.S. households say the American dream is unattainable for them, according to a recent survey of 3200 households with an average income of more than $122,000. When asked to define the American Dream, 82% described it as obtaining financial security for themselves and their family. A third of respondents feel the American Dream is disappearing altogether. These results, from a MassMutual 2018 study, represent a disturbing reality for far too many Americans who are struggling to get ahead and prepare for retirement while dealing with ever-mounting levels of personal debt. Here’s a look at the debt landscape among those survey participants: Mortgage: 64% carried a mortgage with an average balance of $188,795. Credit card: 56% reported having credit card debt, average total balance of $10,386. Student loans: 26% carried educational debt, with an average balance of $39,903. How are they dealing with their debt? According to...
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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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