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Protecting Your Future, Today |
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June 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
please contact
Andy Sweeny at
(513) 745-0707.
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401(k) Fee Disclosure |
| On December 13, 2007, the U.S. Department of Labor issued its proposed rule on 401(k) fee disclosures. This proposal is part 2 of a 3-part ruling. The first part issued November 15, 2007, contained final revisions to the form 5500. The third part will be new requirements for plan sponsor communications to participants about fees. This recent focus on fees and expenses should be causing many employers to scrutinize the fees and expenses of their plans. As a result, some employers have been able to negotiate reduced fees or move the plan to a more cost efficient provider.
The significant feature of the proposed regulation is its newly announced disclosure requirements. Specifically, the proposed rule requires the following two types of disclosures:
Disclosure of Services and Compensation. The service provider contract must disclose information regarding all services to be performed and all compensation that will be received either directly from the plan or indirectly from parties other than the plan or plan sponsor.
Disclosure of Conflicts of Interest. Service providers also must disclose information about relationships or interests that may raise conflicts of interest for the service provider in performing plan services.
To read more about disclosure of service and fees and 5500 schedule C reporting, see full story, by Scott Thole, HORAN.
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| Improving Returns on 401(k) Plans |
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It's easy to take 401(k) plans for granted. They're relatively simple to administer; they're popular with employees, and they provide a valuable benefit that most companies consider a "needed to play" item in attracting and retaining talent.
But is your 401(k) plan as effective as it can be in helping employees save for their retirement? Does it have auto-enrollment and other useful features that are available today from providers? These features can enhance the appeal of your employee savings programs and increase usage, making them even more effective.
Without question, the government is encouraging employers to help employees manage their saving accounts in a responsible manner. Automatic 401(k) features can have a variety of subtle (and some not so subtle) benefits for your plan:
- Enhance the perceived value of your 401(k) program among employees.
- Help support a culture of shared responsibility with your employees for financial security in retirement.
- Help ensure the level of financial security necessary to enable your employees to retire.
- Strengthen the company's value proposition to its employees and help brand your company as an employer of choice.
- Enhance employee retention.
For a growing number of companies today, maybe even yours, making 401(k) participation automatic appears to be an idea whose time has come.
See full story, located at Towers Perrin.
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Is Your ERISA Plan Up-to-Date? |
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The Employee Retirement Income Security Act was enacted in 1974. Since then, more than 75 laws have been passed that affect employee benefit plans and the protections afforded them by ERISA. Many of these subsequent laws have mandated extensive changes to benefit plans.
The following are some of the major laws passed:
- National Defense Authorization Act (NDAA)
- Pension Protection Act of 2006 (PPA)
- American Jobs Creation Act of 2004 (AJCA)
- Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA)
- Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
- Health Insurance Portability and Accountability Act of 1996 (HIPAA)
- Older Workers Benefit Protection Act of 1990 (OWBPA)
- Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)
- Pregnancy Discrimination Act of 1978 (PDA)
Benefit plans and operational policies and procedures that have not remained current with new requirements are at risk for being non-compliant and subject to fines and penalties. All employers should review their ERISA plans, including retirement and heath and welfare plans, as well as their operational policies and procedures, to verify that their plans, policies and procedures have been updated and amended for all applicable changes in the law.
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QDIA Notices - Who's Responsible? |
More than likely the burden for providing the notices will fall on recordkeepers or bundled service providers.
If that is the case, there is the issue of delivering the initial notice. That is, if someone other than the plan sponsor is responsible for providing the notice, the plan sponsor must have a process for collecting participant information so the notice can be sent. Generally, recordkeepers do not collect information on employees as they are hired. That is, most recordkeepers do not get information about employees until they become participants. Of course, that is too late for the initial notice, since it must be given 30 days prior to enrollment in a default.
Consider, for example, a participant that recently became eligible to participate in a plan. In order for the plan sponsor to obtain the QDIA safe harbor protection upon the participant's default into the QDIA (assuming the participant fails to make an affirmative investment election), that participant must be given a notice 30 days before they are defaulted into the QDIA. If the responsibility for providing notices is that of the recordkeeper, it is unlikely that the participant will receive the notice in a timely manner unless the plan sponsor gives its recordkeeper the information necessary to deliver that notice to the participant.
Since the notice responsibility is ongoing, it is important that the plan sponsor create a procedure for ensuring that the notices are delivered timely. A large part of that will be identifying who has the responsibility for providing the notices to participants both initially and annually.
See full story, located at RLR&C.
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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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Horan Securities, Inc., doing business since 1996.
Disclaimer
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