THINK GREEN: HAVE YOU CONSIDERED E-DISCLOSURES

Posted on by Jerome.Pfeffer

Anyone who has received stacks of mailed booklets, leaflets or other paper 401(k) disclosure materials might be cheering about the Department of Labor’s (DOL) recent rule that expands employer options for delivering retirement plan documents online.[1]

The Electronic Disclosure Safe Harbor for Retirement Plans went into effect July 27, 2020 as a “voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail.”[2]

This has many employers “thinking green” and considering a transition to a fully electronic delivery of 401(k) plan disclosure materials, which is also welcome news for many plan participants who are often overwhelmed by the extensive tiny-print disclosures they currently receive as required by ERISA each year.[3]

Going green could save some green

Companies making this transition could see a cost savings. According to the DOL, the move will save approximately $3.2 billion in net costs over the next decade for ERISA-covered retirement plans by eliminating significant materials, printing and mailing costs associated with furnishing printed disclosures.[4]

The DOL also shows that electronic delivery can create “cost savings (that could) ultimately be passed back to participants, translating to lower expenses – and higher net investment returns.”[5]

Additionally, another research study notes that participants may be able to respond quicker to plan information when received electronically because by providing real-time information, it is more accessible, digestible and customizable.[6]

Considerations and helpful information

Here’s what you need to know if you are considering a switch to fully online disclosures.

Under the new rule, the two options for electronic delivery are website posting and email delivery. Plan participants can receive the required notices and disclosures as long as they have access to the information electronically and they are properly notified of any changes.

The move towards an environmentally friendly, more efficient and cost-effective 401(k) disclosure process could be an opportunity for employers to enhance their retirement plan communication with plan participants.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.


[1]Department of Labor. “Electronic Disclosure Safe Harbor for Retirement Plans.” May 21, 2020.

[2]Department of Labor. “Electronic Disclosure Safe Harbor for Retirement Plans.” May 21, 2020.

[3] Department of Labor. “Employee Retirement Income Security Act (ERISA).” March, 29 2016.

[4]Department of Labor. “Electronic Disclosure Safe Harbor for Retirement Plans.” May 21, 2020.

[5]Department of Labor. “Electronic Disclosure Safe Harbor for Retirement Plans.” May 21, 2020.

[6] Spark Institute. “Improving Outcomes with Electronic Delivery of Retirement Plan Documents.” June 2015.

[7] Spark Institute. “Default Electronic Delivery Works.” November 2019.  

[8] Department of Labor. “Electronic Disclosure Safe Harbor for Retirement Plans.” May 21, 2020.

ERISA UPDATE: 5 BIG CHANGES PLAN SPONSORS NEED TO KNOW

Posted on by Jerome.Pfeffer

If navigating a worldwide pandemic weren’t enough, the world of employee benefits continues to throw curve balls at employers and plan sponsors who must constantly keep up. Below are 5 big changes that retirement plan decision-makers should know about.

1. How far will retirement savings go

All defined contribution (DC) plan benefits to be expressed as lifetime income. The SECURE Act requires that participant account balances in DC plans be expressed as both a life annuity and a qualified joint and survivor annuity (“QJSA”). A new DOL regulation applies the rule to defined contribution plans, whether or not they in fact provide annuities as a form of distribution. 

Each benefit statement issued after September of 2021 must contain the required disclosures. The new disclosures must be made once every 12 months. So long as they are fully in accordance with the new regulation, plan sponsors, fiduciaries and others are shielded from any liability arising from such disclosures. 

2. Pooled Employer Plans are coming

Is their strength in numbers or is it better to stay independent? One mission of the SECURE Act is to expand retirement savings. One of the ways in which that statutory purpose is achieved is through conditionally permitting groups of unrelated employers to form a new shared retirement plan called pooled employer plans (PEPs).

Among other requirements, PEPs must designate a pooled plan provider (PPP) to serve as a named fiduciary and plan administrator. Additionally, the PPP must register with the Department of Labor and the Treasury Department before beginning operations. It is anticipated that those participating in a PEP will save on administrative costs as only one Form 5500 will be filed. This will be a developing topic for 2021, and we will keep you informed.

3. CARES Act follow up

What is one more long-haul impact of the pandemic? The CARES Act, passed in response to the COVID-19 crisis, created many new features for retirement plans including special COVID-related loans and distributions. These and other changes are allowed without formal amendments to plan documents. Plan sponsors must ensure that plans are properly amended per CARES Act rules.

Additionally, a unique feature of COVID-related distributions presents a challenge to plan sponsors. Special attention may be required. Given the three-year window available to pay back COVID distributions to a qualified plan, it is possible that plan sponsors may be asked that COVID distributions from another plan be allowed into their plan, because the participant has a new employer (you) since taking the COVID related distribution. Plan sponsors should have a process in place to address this unique situation.

4. 401(k) Cyber theft causes ongoing litigation

How should you digitally protect your retirement plan? In a recent court case, Bartnett v. Abbott Laboratories, et al., a plan participant who had assets stolen from their retirement account by a sophisticated cybercriminal, sued both the plan sponsor and the third-party administrator. The lawsuit raises important and unique questions about whether ERISA’s fiduciary duties can be breached under such circumstances and how applicable state laws interact with ERISA’s regime.

Plan sponsors should pay close attention to such lawsuits to understand how the law develops and any new best practices. Plan sponsors should also be asking questions to their insurance brokers to find out whether insurance coverage is available to cover cybercrime, as it appears not to be slowing down. For more best practices on cybersecurity, contact us for a helpful checklist: Hacked, how protected is your company’s 401(k) plan?

5. Should Dunder Mifflin be worried?

E-disclosure regulation permits web posting and email delivery of retirement plan documents. Retirement plan administrators who want to use electronic media as a default to furnish covered documents to covered individuals now have a safe harbor via new DOL regulations.

There are two options for electronic delivery: website posting and email delivery. Previous safe harbor guidance on electronic disclosures remain available to plan sponsors who want to keep relying on it. For more information on e-disclosure, read our article, Think Green: Have you considered 401(k) e-disclosures?

Plan sponsors are constantly bombarded with legislative and regulatory changes, as well as court opinions that affect how they run their benefit plans. To make sense of it all, plan sponsors should seek out qualified advisors to assist with their compliance needs. Contact us today to discuss how these changes may impact your plan.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

NEWS AND INFORMATION FOR EMPLOYERS Q1 2021

Posted on by Jerome.Pfeffer

Does fiduciary plan governance look different in 2021? Our quarterly newsletter touches on fiduciary plan governance topics to help you stay informed on what has changed or requires action this year:

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

2021 Compliance Calendar

Posted on by Jerome.Pfeffer

Everyone loves the compliance deadlines that should be met every year. To help you stay ahead of the curve with important deadlines and filings, please find attached our complementary 2021 Compliance Calendar. If you have any questions about deadlines or information requested, please contact us to review today!

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

VIDEO – MARKET VOLATILITY: WE’VE BEEN HERE BEFORE

Posted on by Jerome.Pfeffer

Turbulent times can bring turbulent stock markets, leaving your employees worried!  Market downturns, as we know, are a part of any investing life cycle and experts agree it is best to stay invested.

Encouraging your participants to stay the course can be challenging, but looking back on history supports trusting the process. While we had market downturn such as the 2008 Market Crash and the Tech Bubble Burst, history shows that we were able to recover and come back much stronger than before.

SEEKING, FINDING AND CONSOLIDATING YOUR ACCOUNTS

Posted on by Jerome.Pfeffer

The average person has 12 jobs during the course of their career.[1] That’s a lot of jobs — and a lot of 401(k) accounts!

Around 25 million Americans have left money behind in an old 401(k) when leaving a job.[2] It’s possible that your current employees have missing 401(k) accounts. However, you can guide and help them with consolidating their accounts.

Help make your employees lives a little easier by sharing this useful infographic about seeking, finding and consolidating their accounts!


[1] Bureau of Labor Statistics. “Number of Jobs, Labor Market Experience, and Earnings Growth: Results from a National Longitudinal Survey.” Press Release. August 22, 2019.

[2] United States Government Accountability Office. “401(k) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts.” November 2014.

WHY IT’S IMPORTANT TO REVIEW, REFRESH AND REVISE RETIREMENT PLAN DOCUMENTS

Posted on by Jerome.Pfeffer

You likely recognize the importance of seeing your doctor for an annual physical to keep your health in tip-top shape, or taking your car in for routine maintenance to keep it running like new.

But what about checking the health of your retirement plan? When is the last time you reviewed your retirement committee charter, investment policy statement (IPS) and other key retirement plan documents to monitor your plan’s compliance with specific standards of conduct and fiduciary responsibilities under the law?

Ideally, you should meet with your plan’s advisor at least once a year to evaluate the overall health of your retirement plan, which includes reviewing plan documents and operations to help ensure they are up to date with current guidance and regulations.

Always a Fiduciary: An Ongoing Responsibility

As a retirement plan fiduciary, adhering to plan documents is one of your most important roles. As a plan sponsor, you are a fiduciary to the plan. This means you have an ongoing and continuous responsibility to monitor the plan, service providers, investment offerings and operations. It’s your job to ensure they are being managed in the sole interest of your participants and their beneficiaries, and for the exclusive purpose of providing benefits and paying plan expenses.[1] Not following these standards of conduct could subject you to personal liabilities. In addition, courts could take action against plan fiduciaries who breach their responsibilities. There has already been a plethora of lawsuits against plan fiduciaries in recent years.

Associate Supreme Court Justice, Stephen J. Breyer, famously submitted his verdict of the landmark Tibble v. Edison case, which set a precedent for fiduciary breach cases regarding the monitoring and selection of retirement plan investments. He stated that “… a trustee has a continuing duty — separate and apart from the duty to exercise prudence in selecting investments at the outset — to monitor, and remove imprudent, trust investments.” In short, monitoring and managing your retirement plan, its investments and operations are not responsibilities to be taken lightly.

Compliance Never Sleeps

Moreover, government and regulatory agencies such as the Department of Labor are continually monitoring plan fiduciaries to make sure they are following plan documents and procedures in accordance with the Employee Retirement Income Security Act (ERISA), the law that governs employer-sponsored retirement plans. Ultimately, this puts the onus of compliance and proper plan management on you. That said, it can be helpful to partner with your plan advisor to perform annual plan reviews for any common mistakes while managing your retirement plan and investments.

Addressing six common mistakes:

  1. Poor investment oversight. Create an investment committee, led by a qualified financial professional and conduct periodic investment reviews and ongoing monitoring towards ensuring the plan’s investment options and fees are appropriate for all participants.

If you identify operational or compliance errors during your annual review — don’t panic. The Internal Revenue Service (IRS) and Department of Labor (DOL) have programs to assist you in fixing mistakes. Your plan’s advisor and third-party administrator (TPA) can help with operational and compliance errors, too.

Keep in mind that once you’ve identified and corrected any plan errors, you should put processes in place to avoid future mistakes. In addition to conducting annual reviews, you should also perform regular maintenance to ensure your plan remains in good health — just like sticking to a healthy diet and exercise regimen prevent illness and performing routine tune-ups on your car keep it performing at its best.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC.  All rights reserved. Proprietary and confidential.  Do not copy or distribute outside original intent.


[1] U.S. Department of Labor. “Fiduciary Responsibilities.”

MISSING PARTICIPANTS: END OF THE YEAR CLEAN UP

Posted on by Jerome.Pfeffer

As a plan fiduciary, you are responsible for your keeping track of former employees with account balances, a.k.a. missing participants. The DOL and IRS are paying more attention to plan sponsors’ efforts to identify and locate these participants, especially when uncashed checks and approaching RMDs are involved.

If you have missing participants, the first step in locating them is to get your plan in order. By cleaning up your plan, you will be able to identify the participants and then take the necessary steps to locate them.

This easy-to-use checklist can help you take control of former employees and your missing participant problem.

2021 ANNUAL CONTRIBUTION LIMITS

Posted on by Jerome.Pfeffer

The IRS has announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. For company retirement plans, the most recognized highlights include:The following limits are going up for 2021:

The following limits will remain the same for 2021:

Review the full list of contribution limit changes below and share with your plan participants!

TRACKING DOWN YOUR MISSING PARTICIPANTS

Posted on by Jerome.Pfeffer

If you have terminated participants with balances in your 401(k) plan, some of whom you can’t locate, you’re not alone; missing participants are an industry-wide problem.

What is a missing participant? A missing participant is a former employee who has left funds in a qualified retirement plan (ex. 401(k) plan) at their former employer but has failed to keep their contact information current and is no longer actively managing their plan account.             

A 2018 survey by Boston Research Technologies and the Retirement Clearinghouse estimates that 11% of terminated employees have stale addresses in their plans and one of five relocations result in a missing plan participant; their research also suggested an excess of three million missing participants.[1]

The Problem of Missing Participants

There are two main reasons why participants disappear. The first is frequent job-hopping, and the second is not keeping plan contact information up-to-date. Boston Research Technologies found another reason—one-third of their respondents didn’t know they had an account with a previous employer.[2]

Missing participants have become a big enough problem that it has caught the attention of the Internal Revenue Service (IRS) and Department of Labor (DOL), who are stepping up plan audits to see if you’re making the requisite effort to find your plan’s missing participants.

It’s important to find your missing participants; they cost you money and increase your fiduciary liability. Plus, it’s much easier to administer a plan with clean data.

Plan Sponsor Responsibilities

As a plan fiduciary, you are required under the Employee Retirement Income and Security Act of 1974 (ERISA) to make every reasonable effort to find your plan’s missing participants. However, you have a couple of challenges facing you, says David Kaleda of the Groom Law Group:[3]

But it’s not easy and there’s a lot of uncertainty around how to go about it. The most recent guidance is from the DOL, Field Assistance Bulletin (FAB 2014-01), but it only addresses the missing participants of terminated plans. The guidance can be useful to ongoing plans; however, some plan sponsors are using it as a roadmap to find their missing participants.

FAB 2014-01 recommends taking the following steps:[4]

Finally, document everything! It’s important to have a written policy in place detailing the steps to be taken to identify missing participants. Conduct an annual review to identify these participants. Document the methods used and the results of each search. The DOL will want to know this information if they ever audit your plan.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC.  All rights reserved. Proprietary and confidential.  Do not copy or distribute outside original intent.


[1] Boston Research Technologies and Retirement Clearinghouse. “The Mobile Workforce’s Missing Participant Problem.” March 13, 2018.

[2] Boston Research Technologies and Retirement Clearinghouse. “The Mobile Workforce’s Missing Participant Problem.” March 13, 2018.

[3] David Kaleda. “Lost Participants: It is sponsors’ duty to locate their terminated ‘missing persons.’” PLANSPONSOR. January/February 2019.

[4] U. S. Department of Labor. “Field Assistance Bulletin No. 2014-01.” EBSA. August 14, 2014.

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