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Horan Securities, Inc.
Protecting Your Future, Today |
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February 2008 |
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Andrew E. Sweeny, Jr.
Vice President
Registered Representative
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Thank you for your continued business. If you know of anyone that could benefit from my services, please feel free to forward this newsletter on to them.
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More Info |
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If you would like more information about these
topics or about
Horan Securities, Inc.,
please contact
Andy Sweeny at
(513) 745-0707.
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Conducting a DC Plan Assessment |
It is clearer than ever that DC plan sponsors can no longer afford to take a laissez-faire approach toward plan management. The plan fiduciaries (typically, either the company itself or a designated committee) must ensure they are doing everything they can to act exclusively in the interest of the plan's participants. Although fiduciary standards have always been high, greater scrutiny of how those charged with overseeing the plan exercise their responsibility to accomplish all of their fiduciary obligations is expected.
To stay in control, DC plan sponsors should adopt an ongoing due diligence process that starts by conducting a fiduciary and operational assessment of the DC plan to determine and document its current state. By focusing on the plan's investments, administration, compliance and communications, the sponsors will be able to determine where any weaknesses lie and take steps to correct them. It is important to conduct this DC plan assessment under the supervision of legal counsel so that technical legal issues can be evaluated properly and, if any compliance problems arise, the analysis can be conducted under the confidentiality of attorney-client communications to the extent available.
Conducted correctly, a fiduciary and operational assessment will identify any deficiencies associated with the ongoing operations of the plan. See full story, located at Sibson Consulting.
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DOL Cracking Down on 401(k) Oversights |
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The Department of Labor is has proposed levying fines of up to $1,000 a day against retirement plan administrators who fail to disclose certain documents to investors.
The Pension Protection Act opened the door to a number of changes in 401(k) retirement plans. Among those changes is a provision allowing plan providers to dispense investment advice and to give employers the ability to implement automatic enrollment into their 401(k) plans.
The ACT also mandated that a plan administrator must give employees at least 30 days notice before they automatically enter that employee into the plan, giving the employee the opportunity to opt out of the plan.
Another portion focuses on under-funded plans. In some cases, a plan's expenses and fees are greater than the contributions. The law states that an administrator must inform participants when a plan's assets go below a certain level, according to the Department of Labor. | |
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If an employer or a plan administrator should fall short of any of those new provisions, the DoL has proposed a procedure by which it will use to levy fines of up to $1,000 a day. The penalties are primarily aimed at cases in which the plan provider fails to give proper disclosure documents to investors.
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| Is Defined-Contribution Plan Communication and Education Dead? |
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Now that plans can be automated to a large degree, do communication and education have roles to play? They do indeed. Getting workers into a 401(k) plan, increasing their savings rate, and improving their diversification through default mechanisms is not necessarily synonymous with financial security.
The act's support of automatic enrollment, contribution escalation and diversified default investment alternatives implies that it might be better for the plan sponsor to simply place participants onto the appropriate financial path, rather than attempting to educate them in the hope that they will find the right path on their own.
A recent study by Annamaria Lusardia of Dartmouth College and Olivia S. Mitchell of the University of Pennsylvania examined baby boomer retirement security and the roles of planning, financial literacy and housing wealth. The study found that people who engaged in even a small amount of planning were more prone to have sizable wealth holdings compared with those who had engaged in no planning.
Perhaps when it comes down to it, the right question to ask about defined-contribution communication and education is just this: What does the plan sponsor want to accomplish? If it is simply to increase plan participation, then automatic enrollment may be the right course of action. But if the goal is to increase plan participation, and have participants value and appreciate the 401(k) plan, then communication and education can play an important role.
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2008 Compliance Calendar Checklist for DB/DC/403(b) Plans |
 Certain provisions of the Pension Protection Act of 2006 will require plan amendments. Plan amendments should be effective retroactively and will not violate anti-cutback rules if made on or before the last day of the plan year beginning on or after January 1, 2009 (or 2011 for governmental plans).
See full story to veiw calendar and make sure you are in compliance; located at Plan Sponsor. (free registration may be required)
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Do you have a question you would like addressed in our next issue?
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Striving to educate our clients in the ever-changing face of the
insurance & financial industry.
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Disclaimer
This eNewsletter is a digest of information published by a variety of web-based sources and is published as a service to our users. Horan Associates, Inc | Horan Securities, Inc. is not the author of the material unless specifically noted. We review each article to ensure that it is related to the interests of our subscribers. Horan Associates, Inc | Horan Securities, Inc. does not endorse the individual authors of these articles, although Horan Associates, Inc | Horan Securities, Inc. has reviewed these articles, for accuracy and completeness and your independent review for personal relevance should be undertaken. Reliance on this material should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. All articles are copyrighted to their publishers. This publication is intended for general information only and not as legal advice. You should discuss specific details with your advisor.
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