Changing Times: Impact of the shift in types of retirement plans

The days are gone when a typical employee works for the same employer for 30 or 40 years and then collects a check every month for the rest of his or her life. Although the majority of employees had little understanding of how a defined benefit plan worked, they knew exactly how much they would get each month at retirement. Together with what they would earn from Social Security, it was relatively easy to plan for the future.

DOL Delays Fiduciary Rule

On Monday, November 27, 2017, the Department of Labor (DOL) announced that some key provisions of the fiduciary rule will be extended for 18 months.

The fiduciary rule, in its most basic context, requires brokers and advisors to act in the best interests of their clients who have retirement accounts, including IRAs and rollovers from qualified retirement plans, including 401(k) and 403(b) plans.  The DOL first proposed the regulations in October 2010 but withdrew them in 2011 after opposition from the financial services industry as well as some members of Congress.  The regulations were reintroduced in 2015 with the final rule becoming effective June 7, 2016.  Compliance with the rules surrounding broker conduct and disclosure was delayed until April 10, 2017.  A transition period for compliance with some of the provisions was put in place from April 10, 2017 until January 1, 2018.  This latest delay will extend implementation of the enforcement provisions of the rule until July 1, 2019.  During this now extended transition period, fiduciaries will be required to meet the Impartial Conduct Standards, which requires that they receive only reasonable compensation, make no misleading statements, and act in their clients’ best interest.  Clearly, the path of these regulations has been arduous and the recent delay only makes it more so.

Key Retirement and Employee Benefits Compliance Reminders for December

Due December 1st

• Deadline for participant notices, including safe harbor notice, QDIA notice, automatic contribution arrangement notice.

Due December 15th 

• Extended deadline for distributing Summary Annual Report to participants.

Due December 31st

• Corrective distributions for failed ADP/ACP test for 2016 (10% excise tax applies).
• QNEC contributions due for failed ADP/ACP test for 2016.
• RMDs due (except for first time qualifying participants).
• Last day to adopt discretionary plan amendments.
• Deadline to convert or remove safe harbor status for 2018 plan year.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for November

Due November 15th 

• Contributing entities making two reinsurance fee payments for 2016 must remit the second contribution payment. 

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Q3 Retirement Market Recap - Stocks Advance for the Eighth Consecutive Quarter

U.S. stocks, as measured by the S&P 500 Index, extended their gains for the eighth consecutive quarter, with the Index up 4.5%. The Index is up 18.6% for the one-year period through September 30, 2017.

The market shrugged off devastating hurricanes and political turmoil in Washington. In fact, the hurricanes stimulated demand for replacement cars and trucks, providing a welcome sales boost to that industry.

Read the Q3 Retirement Market Recap to learn more about the 3rd quarter stocks and bonds performance, and also review tips on "Understanding Stable Value Funds".

If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for October

Due October 14th 

• Creditable Coverage Disclosure notices due to all Part D eligible individuals who are covered under, or apply for, the plan’s prescription drug coverage.

Due October 15th

• Deadline for adopting a retroactive adjustment to correct 410(b) coverage or 401(a)(4) nondiscrimination failure for 2016.
• Deadline for the distribution of Creditable Coverage Notices to employees and dependents that are enrolled in a group health plan that are eligible for Medicare 

Due October 16th 

• Extended deadline for filing Form 5500.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Standard Items Appearing In An Investment Policy Statement

A retirement plan’s overarching goals are to help participants accumulate wealth during their years of employment and to provide them with income during their retirement.

The challenge for fiduciaries is to successfully navigate the options available and build an optimal investment menu that is designed to guide participant choices and improve their retirement readiness. Since plan fiduciaries may be exposed to personal liability, it is prudent to have a process in place for the selection and monitoring of investment options.

Plan fiduciaries should have an established framework on which they can defend their investment decisions should they ever be challenged. The process should begin with the construction of the plan’s Investment Policy Statement (IPS). Although not required by the Employee Retirement Income Security Act (ERISA), drafting an IPS is a fiduciary best practice. The IPS serves as a policy guide that can offer an objective course of action to be followed when emotional or instinctive responses might otherwise motivate less prudent action.

Which investment style has dominated over the long haul, active or passive?

Active vs. passive performance trends have been cyclical, with each experiencing its own periods of dominance. It is widely believed that the Morningstar Large-blend category (stocks in the top 70% of the capitalization of the US equity market where neither growth nor value characteristics predominate) is the most efficient category, or one that would customarily favor passive investing. However, even this category shows the cyclical nature of active and passive performance. Currently, we are experiencing a period of time when the performance of passive large blend funds is trouncing those actively managed.

Which came first––active or passive investing?

Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.

Active vs. Passive Investing Styles: An Age Old Rivalry

Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.

In Active vs. Passive Investing Styles: An Age Old Rivalry, SBS traces the origins of the active and passive investing styles, dives into the historical performance and asset flow trends of each, and addresses how plan sponsors can make prudent decisions about employing each investing style.

Complete the form below to download your copy today. If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for September

Due September 15th

• Extended due date for filing corporate tax returns and deductibility of contributions.

Due September 30th 

• Medical Loss Ratio (MLR) rebates due for the 2014 reporting year and beyond.
• Summary Annual Report due to participants, assuming filing of Form 5500 was not extended.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

11 Questions Employers Should Ask About Stable Value Funds

Stable value investments have been a core investment option in defined contribution retirement plans since the 1970s and are an attractive alternative to money market investments due to steady returns and principal preservation guarantees. Stable value funds have proven their worth to investors during the protracted period of low interest rates present since the recent financial crisis. Consider the following comparison of 2007-2016 calendar year total return for the Vanguard Federal Money Market Fund (VMFXX)[i] to the SBS MetLife Stable Value Fund.

1. What is a stable value fund?

Key Retirement and Employee Benefits Compliance Reminders for July

Due July 29th

• Summary of Material Modification (SMM) for amendments adopted in 2016.

Due July 31st 

• Form 5500 due (without extension)
• Form 5558 due for automatic extension to October 16 for filing Form 5500.
• Form 5330 due to report and pay excise tax on prohibited transactions and nondeductible contributions made in 2016.
• Patient-Centered Outcomes Research Institute (PCORI) fees and Form 720 due. 

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for June

Due June 30th

• Corrective distributions for failed actual contribution percentage (ACP)/actual deferral percentage (ADP) test without 10% excise tax penalty for plans with EACA.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for April

Due April 1st

• Required minimum distributions (RMD) for first time qualifying participants, including 5% owners.

Due April 17th 

• Deadline for corrective distributions for 402(g) excess contributions.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

8 Questions Plan Sponsors Should Ask about 457(b) and 457(f) Plans

Background:

457(f) and 457(b) plans are non-qualified deferred compensation plans for eligible highly-compensated employees. A non-qualified plan is a type of tax-deferred, employer-sponsored retirement plan that is not subject to Employee Retirement Income Security Act (ERISA) guidelines. Non-governmental 457 plans are not required to file Form 5500 since they are not subject to ERISA, but they are required within 120 days of the plan’s existence to file a one-time notification (“top hat letter”) with the Department of Labor. These plans are exempt from the non-discrimination testing that is required for qualified plans.

In 1986, Section 457 was added to the Internal Revenue Code (IRC) to specifically address the unique needs of the not-for-profit sector. The rules address governmental plans sponsored by state or local governments and non-governmental plans sponsored by tax-exempt organizations under Section 501(c). This frequently-asked question (FAQ) document will specifically address questions regarding non-governmental 457(b) and 457(f) plans.

Key Retirement and Employee Benefits Compliance Reminders for March

Due March 1st

• Form M-1 must be filed by multiple employer welfare arrangements (MEWAs) and entities claiming an exception from MEWA status (automatic 60-day extension is available upon request).

Due March 2nd

• Section 6055 (Forms 1094-B and 1095-B) Individual statements must be furnished 
• Section 6056 (Forms 1094-C and 1095-C) Individual statements must be furnished 

Due March 15th 

• Corrective distributions for failed actual contribution percentage (ACP)/actual deferral percentage (ADP) test without 10% excise tax penalty (for plans without EACA).
• Corporate tax returns due and contribution deadline for deductibility (without extension). 
• Due date for automatic extension to September 15 for corporate tax returns.

Due March 31st

• Electronic filing of Form 1099-R for distributions made in 2016.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

2017 Retirement and Employee Benefits Compliance Calendar

Strategic Benefit Services wants to help you stay compliant with our 2017 Retirement and Employee Benefits Compliance Calendar.

Compliance is just one of many services SBS provides. Visit our Retirement Plan Services and Employee Benefits service pages to learn more.

If you have any questions regarding compliance requirements or their application to your plan, contact us at (855) 882-9177 or at sbs@hanys.org.

Remedial Amendment Period for §403(b) Plans

Sponsors of 403(b) plans, both those subject to the Employee Retirement Income Security Act (ERISA) and non-ERISA plans, were required (with few exceptions) to have in place a written plan document by December 31, 2009. Sponsors who did so will be able to restate their plans to adopt one of the prototype plans or volume submitter plans when they become available.

The Internal Revenue Service (IRS) issued Revenue Procedure 2013-22 in March 2013, which provided guidelines for issuing opinion and advisory letters for §403(b) prototype plans and volume submitter plans. The Revenue Procedure stated that a remedial amendment period would be available whereby eligible employers could retroactively correct defects in the form of written 403(b) plans.

Understanding Your Retirement Plan Fee Methodology

Understanding your retirement plan’s fees is not only a good practice; it’s a fiduciary requirement as prescribed by the U.S. Department of Labor (DOL) under the Employee Retirement Income Security Act (ERISA). The traditional enforcement mechanism has been DOL plan audits. More recently, high-profile litigation has driven plan sponsors to evaluate their plan fees. These fees can be grouped into several categories: record keeping, administrative, legal, plan advisory, investment, and education and communication. The principal reason fees have been thrust into the limelight is that plan participants often bear most, if not all of the cost of running the plan.