401k Essentials for 2015
401(k)fundamentals
Contributions Limits
Under 50 years of age$18,000
Over 50 years of age$18,000Plus Catch up contribution up to $6,000
Salary deferral plus employer contribution is limited to $53,000
Employee Education Education programs work to improve participation and
contribution rates – despite media report
Long term and ongoing commitment is required by the company and advisor
Most 401k sponsors have the best intention of holding education sessions but day to day concerns of the business pre-empt action
Schedule now to support all open enrollment dates
Education Case Study Education Plan
Large group meeting regarding 401k plan and benefits
Individual meetings using interactive tools and visuals
Results Increased active participation rate by 15%
Converted 56% of eligible, non-contributing members to active
Increased average deferral rate by 1%
68.5% are taking full advantage of the employer match
87% of employees participating in the plan
*Changed plan to operate as Safe Harbor plan design
Enrollment & Documentation Review HR records to ensure that accurate enrollment
forms are on file for ALL eligible employees
Changes in contribution rates must be made in writing
Records for those who decline participation are most often overlooked but most critical to have on file for a plan sponsor
Recent lawsuits and emphasis on retirement readiness underscore the importance of this documentation
Distributions for Terminated Employees Most plans have unnecessary accounts for terminated
employees
Account values under $1,500 can be paid to participants without their authorization*
Account values between $1,500 and $5,000 can be distributed to an IRA without participant authorization*
With an ever increasing burden to provide regulatory notices, accounts for terminated employee are costly to the plan
*Subject to provisions of your plan document
Legal & Legislativeupdate
Proprietary Funds Conflicts of interest
May have revenue-sharing Company receives money on assets
managed Overpriced and underperforming
Lawsuits Gordan v Massachusetts Mutual Life
Insurance Company Alan H. Tralins v. JPMorgan Chase & Co. Class action against Fidelity
In-Plan Roth Conversion American Taxpayer Relief Act
Permits participants in pretax 401k and Profit Sharing accounts to transfer amounts to Roth account.
Treated as taxable qualified rollover contribution Disbursements from Roth account are paid tax-
free
Plan Document Changes Plan must allow Roth contributions In-plan conversions must be allowed by plan
document
Plan document
Document Review Plan document review should be performed yearly
Questions to ask when reviewing: Are plan operations in line with plan document? Has the plan document been updated to reflect
regulatory changes? Are there changes that can make the plan more
efficient? Auto-Enrollment Auto-Escalation Safe-Harbor Plan Design Employer Contribution and Vesting Schedule Roth Contributions
Document Restatement
Required by DOL by spring 2016
Incorporates mandatory amendments from the last 5 years in the document
Opportunity to make other changes
Important Plan Featuresto consider
Managed Account Feature Allow a participant’s assets to be allocated
based on market trends and analysis
Can be used as Qualified Default Investment Alternative (QDIA)
Provides added fiduciary support to the plan
Provides advice and assistance that many participants crave
Online Educational Tools Risk tolerance assessment
Portfolio modeling
Retirement readiness/Goal tracking
Social networking integration
Fiduciary Support 3(21) Co-Fiduciary
Monitors investment lineup Directs the trustee when a change is necessary Provides support in situations of litigation on funds
and fund lineups they recommend 3(38) Fiduciary
Selects and monitors investment lineup Automatically makes change when necessary Provides support in situations of litigation on funds
and fund lineups they select and monitor
Fiduciary Support (Continued) 3(16) Fiduciary
Distribution of Required Notices Eligibility and Vesting Automatic Enrollment Procedures Distributions Hardship Withdrawals/Plan Loans Timing of Deposits 5500 Review and Signature
Department of Laboraudit alert
5500 Filings Electronic 5500 filings provide easily searchable data
for the DOL
Avoid common red flags in your plan’s filing
Bond amount must be greater than 10% of the plan assets
Adopt a Qualified Default Investment Alternative (QDIA)
Required Notices Must be delivered to plan beneficiaries 30-60 days before the
beginning of the plan year Safe Harbor Design
Qualified Default Investment Alternative (QDIA)
Required at least annually from the initial distribution in 8/12 Participant Fee Disclosure
Did you take advantage of the DOL permitted delay in 2013?
Feedisclosure
Compliance Alert
For attentive plan sponsors, those excessive payments will be indentified during the process of the 408(b)(2) disclosures…However, I am concerned that plan committees will fail to evaluate and benchmark those payments. If my fears prove to be well-founded, it will inevitably lead to litigation. -- Fred Reish, Chair of ERISA practice at Drinker, Biddle & Reath
Source: Plan Sponsor Magazine September 2012
What is Reasonable
• Not defined by DOL, ERISA or Fee Disclosure regulations
• Expenses and quality should be considered
Plan Benchmark DOL has provided guidance indicating that a
Benchmarking process based upon an RFP process is preferred
Quantitative and Qualitative factors should be considered
Documentation of a process for plan decisions is critical
Improvementopportunities
401(k) Plans Have Changed Fees have come down
Your plan needs may have changed
Providers have enhanced services
Additional Participant Tools are available
New Protections are available for Plan Fiduciaries
401k Essentials for 2015
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