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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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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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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