Most Companies Taking a Selective Approach to HR Outsourcing - Summary: Most companies are taking an incremental, selective approach towards the outsourcing of their human resources functions. While the majority of respondents say they expect to outsource more in the future, they also report they are disinclined toward consolidating their outsourcing activities with a single vendor. Located at: 401khelpcenter.com. Click on headline for full article.
Mutual Funds in Retirement Plans Continue to See Fee Reductions - Summary: Through its Barometer, Invesmart has determined that 58 basis points or less represents a reasonable standard for the investment management fees that a plan participant should pay annually. This compares to fees of 63 basis points or less as measured by the Barometer in November 2004, and 65 basis points in April of the same year. Located at: 401khelpcenter.com. Click on headline for full article.
New Data Highlights Importance of EGTRRA - Summary: Since signed into law in 2001, provisions of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) that helped make company-sponsored retirement plans more affordable for employers and more attractive to employees have proven quite popular, according to new data from Transamerica Retirement Services. Located at: 401khelpcenter.com. Click on headline for full article.
Legal Questions Inhibit Automatic Enrollment - Summary: Automatic 401k enrollment has been shown to increase plan participation and improve nondiscrimination testing, but some employers are reluctant to adopt it because the practice runs up against state law. Located at: Benefitnews.com. Click on headline for full article.
Catch-Up Contributions in 2004: Plan Sponsor and Participant Adoption - Summary: The Economic Growth and Tax Relief Reconciliation Act of 2001 permitted workers age 50 and older to contribute additional savings to their defined contribution plan accounts. Three years later, most plans allow these catch-up contributions; however, only 13% of eligible plan participants made a catch-up contribution in 2004. As expected, participants with high household incomes were more likely to take advantage of this plan feature than their less affluent workers. Located at: Vanguard Center for Retirement Research (PDF file). Click on headline for full article.
401k Sponsors Consider Exchange-traded Funds - Summary: Historically, 401k plans have depended on mutual funds to keep them afloat, and the two have made a good team. But now, plan sponsors, weary of high fees and shaken by recent market timing scandals in the mutual fund industry, are searching for other investment options. Located at: Benefitnews.com. Click on headline for full article.
Prohibited Transactions: It's All In How You Look At It - Summary: There are sometimes multiple ways of looking at a set of facts. The following case in point shows that how you look at them can dramatically affect the results. Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.
Spoon-Feeding Employees Healthy Dollops of 401k - Summary: With fewer and fewer traditional defined benefit pension plans out there and the guaranteed cushion of Social Security looking shaky, 401k savings are likely to become an increasingly important source of workers' retirement income in the years to come. So how can companies-88% of which are even willing to kick in some matching funds-get workers to participate? The answer for a growing number of plan sponsors is to do it for them. Located at: Treasury & Risk Management. Click on headline for full article.
'Going Dutch' One Approach for Pension Reform - Summary: There is no mania in the Netherlands when it comes to pension reform. The Dutch have adopted a rational, innovative reform program using global investing to address their funding shortfall, although it involves neither direct benefit cuts nor sole reliance on personal accounts carved out of a national pension program. Located at: Bloomberg.com. Click on headline for full article.
Fiduciary Issues
Taking Control of the Fiduciary Function - Summary: This article covers some of the fundamental steps that every fiduciary should take to minimize their exposure to litigation related to plan investments. Located at: Benefitnews.com. Click on headline for full article.
Self-Directed Brokerage Accounts Tend to Reduce Retirement Success and May Not Decrease Plan Sponsor Liability - Summary: Plan participants often expect that self-directed brokerage accounts offer more choices and wealthier retirement prospects than do managed model portfolios; plan sponsors might expect less liability. But the substantial under performance, restrictions, costs, and liabilities of such plans dictate that caution is in order. Located at: Unified Trust (PDF file). Click on headline for full article.
Court Approves Settlement With Some Defendants in Enron Fiduciary Breach Litigation - Summary: A proposed settlement has been approved by the court in this class action against fiduciaries of three Enron Corporation ERISA plans, despite objections from the nonsettling defendants. Under the terms of the settlement, various fiduciaries, including officers, directors, and administrative committee members are released from ERISA claims in return for payment of an amount equal to the limits on two fiduciary liability policies ($85 million). Located at: Employee Benefits Institute of America. Click on headline for full article.
Department of Labor and IRS Issues
New Section 415 Would Replace Existing Regulations for Years Beginning in 2007 - Summary: Following closely on the heels of new final regulations under Code Sections 401(k) and 401(m), the IRS has issued proposed regulations that, when finalized, would replace existing final regulations under Code Section 415. Located at: Employee Benefits Institute of America. Click on headline for full article.
If You Think Correction Under EPCRS Is Routine, Think Again - Summary: Although the IRS has provided much guidance regarding how to correct typical defects, it is still important to be aware of and carefully consider all of your options before engaging in the corrective process. The IRS standardized correction guidance is far from complete in terms of adequately addressing the various compliance issues that arise in plans. This means great care must be taken in order to ensure plan defects are being corrected under the methodology most advantageous to the plan sponsor, as permitted under EPCRS. Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.
Roth 401ks Provide Employees New Plan Alternative in 2006 - Summary: Guidance regarding designated Roth contributions was recently issued by the United States Treasury Department and Internal Revenue Service in the form of proposed regulations under Code Sections 401(k) and 401(m). This Client Memo provides an overview of Roth 401k plans and the proposed regulations, and suggests action steps for plan sponsors to consider with respect to the implementation of a Roth 401k plan. Located at: Gardner Carton & Douglas LLP (PDF file). Click on headline for full article.
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