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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.

The DOL’s New Rule: 10 Things Employers Need to Know

Since June 9, 2017, the United States Department of Labor (DOL) rule for prudential management of employer participant retirement plans, has provided several important obligatory changes to the retirement plan sponsor practice. The DOL’s Fiduciary Rule or “Best Interests Rule created a new standard of professional care for brokers. Once more common for a Registered Investment Advisor (RIA) practice, the Fiduciary Rule now extends to all brokers and agents that work with employer retirement accounts. Duties of RIAs have customarily been a fiduciary standard, without the inclusion of investment advisors (i.e. agents and brokers). With the enactment of the 2017 Fiduciary Rule, all financial agents, including insurance brokers and investment advisors, who are paid commissions on sales must abide by the DOL rules laid forth for fiduciary practice. The rule is intended to protect retirement plan sponsors and plan members by negating issues of conflicted compensation, and enforces fiduciaries to...
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What to Look for in a Professional Retirement Plan Advisor

Most retirement plan sponsors understand the benefits of hiring a professional retirement plan consultant. Professional advisors helping address compliance requirements and manage fiduciary risk. They also recommend plan design features and help educate participants. So how can plan sponsors select a retirement plan consultant that’s right for them? A 2013 study1 from the Retirement Advisor Council shows that a plan sponsor typically base their retirement plan advisor selection on some standard criteria, including: Participant education and communication. In the study, 50 percent of plan sponsors based their advisor selection the role the retirement plan consultant plays in participant education, communication, and counseling. Participant education can include a personalized one-on-one enrollment and investment advice, model investment portfolios, 24-hour access to online and voice response systems, and other communications designed to help participants get the most from their retirement plans. Fiduciary support services. A retirement plan consultant must provide written acknowledgment of...
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Boost Your Participant Retirement Readiness Scores with a Professional Retirement Plan Advisor

Retirement Plan Sponsors that work with a professional retirement plan advisor show higher levels of participant retirement readiness, according to a 2014 study from the Retirement Advisor Council.1 The study included 407 employers that sponsor a 401(k) or 403(b) plan, and concluded that: Improve Retirement Participant Preparation Three-quarters of the sponsors surveyed who work with a professional advisor estimate that half or more of their plan participants are on track to a successful retirement. Professional advisors regularly review the readiness of plan participants and provide that information to plan sponsors. Sponsors are then able to act in an effort to improve retirement outcomes for their employees. These actions include increasing communication, educating participants better, adjusting the participant contribution formula, and adopting automatic contribution increases. More than 40 percent of the surveyed companies have their advisors meet individually with participants to provide investment information. Increase Contribution Levels Eighty-three percent of the...
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New Comparability 401(k) Plans

A new comparability plan is a type of profit-sharing plan that can either be a standalone plan or the profit-sharing contribution component of a 401(k) plan. For retirement plan sponsors who want to allocate larger contributions to older plan participants, a new comparability plan can be highly effective. The design of a new comparability plan allows participants to be grouped into different classifications, and then the participants receive a profit-sharing contribution based on that classification. Groups can be established based on things like job category, age, or age and service. New comparability plans are required to provide a minimum contribution to all non-highly compensated employees (HCE’s). This “gateway minimum contribution” must equal the lesser of one-third of the highest contribution rate given to any HCE or 5 percent of the non-HCE’s compensation. To test for non-discrimination contribution allocations are converted to a projected benefit at retirement age (typically, age 65)....
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DOL Fiduciary Rule Update: How the Future Will be Changed

The Department of Labor (DOL) has extended the applicability date of the new fiduciary rule and related exemptions to June 9, following a directive from the Trump administration to examine the rule and make sure it doesn’t affect consumers’ ability to get retirement information and financial advice. In general, the rule requires most non-fiduciary financial advisors to follow the fiduciary standard (acting in their clients’ best interest) when recommending investments, charge only reasonable compensation for their services, and avoid making misleading statements. Both 3(21) and 3(38) investment fiduciaries are already required to follow these standards, so the rule will largely affect other advisors, like insurance agents and broker-dealers. For 401(k) plan sponsors, the new rule will help them keep their 401(k) fees reasonable. Non-fiduciary advisors can recommend any investment as long as they follow the suitability standard, which, stated simply, means this investment meets their clients’ requirements. Non-fiduciary advisors aren’t...
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Better Manage Your Old 401(K)

If your employer is a retirement plan sponsor that offers access to a 401(k) plan, you should be taking advantage of it to save for retirement. 401(k)s offer significant advantages to workers, such as the ability to save on a tax-deferred basis and often, employer savings matches. However, most workers today will change jobs several times during their careers. In fact, according the Bureau of Labor Statistics, a person born between 1957 and 1964 will hold, on average, almost 12 jobs (11.7) by age 48.1 So what can you do with your 401(k) plan when you change jobs?  There are four basic options: Cash out This is not a good financial strategy. If you’re under age 59 ½, you’ll pay an early withdrawal penalty of 10 percent, and you’ll owe income taxes on the amount. Your employer will typically withhold 20 percent to pay the taxes, but depending on your...
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Buy or Refinance a Home

For most people, a home is the biggest financial commitment they will make, so it’s important to carefully review your options when you’re thinking about making a change to your housing situation. Retirement plan consultants also note that your home will also generally be your largest asset when you retire, and that’s an important consideration for many people. Buying a home Refinancing or buying a new home is often a key part of getting ready for retirement. Many people find their housing needs have changed. For example, children may have moved out. Others decide they want to relocate to areas with better climate or closer to grandchildren. In these situations, you probably want to buy a new home, rather than refinancing your existing home. It’s important to remember, though, that your home will be passed on to your heirs as part of your estate. Any mortgage obligation will typically also...
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Hidden Taxes in Your Tax-Free Retirement Account

Sometimes people are surprised to find out they owe taxes on investments in their “tax-free” retirement accounts. It’s not common, but pension consultants note that it can happen. While most earnings in tax-advantaged accounts, like IRAs, Roth IRAs, or 401(k)s, accumulates free of taxes, some types of investments within these accounts could qualify as Unrelated Business Taxable Income (UBTI) and trigger a tax bill. UBTI was originally created to make sure that tax-exempt organizations didn’t have an unfair advantage over taxable businesses like for-profit corporations. So if a tax-exempt organization regularly earns income from a trade or business that’s unrelated to the organization’s tax-exempt purpose, that income could be classified as UBTI and is subject to taxes. For example, if a university runs a pizza restaurant that sells to both students and non-students, that restaurant’s income is unrelated to the university’s tax-exempt mission of education. The university pays the same...
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