Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 2nd, 2015
Editor’s Note
We are pleased to bring you today’s special edition NewsDash newsletter, sponsored by MainStay Investments, focused on fiduciary compliance and regulatory reforms.
Fiduciary Compliance
Understanding Fiduciary Responsibilities
Offering a retirement savings opportunity in the workplace is good for employees–and it can be good for business. Recent studies indicate that many workers today are not saving enough for retirement.Read more >
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Fiduciary Rule Could Have Unintended Consequences
In 2010, the Department of Labor proposed a new definition of fiduciary. But, it retracted that proposal based on retirement industry concerns, and has recently reissued what it now calls a proposed conflicted investment advice rule. CEO of the American Retirement Association Brian Graff, during the American Society of Pension Professionals and Actuaries’ (ASPPA’s) first-ever virtual conference, said the proposed rule is very broad in whom it captures as an Employee Retirement Income Security Act (ERISA) fiduciary, and he contended the proposal creates a significant challenge for conversations with participants about what to do with their money.Read more >
GOP Senators Demand More Time for Fiduciary Feedback
Sen. Lamar Alexander (R-Tennessee), chairman of the Senate’s Health, Education, Labor and Pensions Committee, led a group of 36 Senate Republicans requesting the Department of Labor (DOL) extend the comment period for its proposed rule on the fiduciary definition. Other groups have already expressed dissatisfaction with the 75-day timeline for comments; the Republican senators’ letter is urging the DOL to extend it to 120 days.Read more >
Index Fund Proxy Voting and Fiduciary Liability
A recent report from Wintergreen Advisers argues there is a critical flaw underlying the current trend of plan sponsors pushing more and more assets into lower-fee index funds—a flaw that could be construed as a fiduciary violation. The report’s title doesn’t mince words: “How the Votes of Big Index Funds Feed CEO Greed and Put Americans’ Retirement Savings in Peril.” Neither do David Winters, CEO of Wintergreen Advisers, and Liz Cohernour, chief operating officer (COO) of Wintergreen, in discussing what they see as major failures on the part of the big index fund providers to ensure individual investors are treated fairly.Read more >
Boomers and Gen X Call Retirement Passe
Baby Boomers are in the throes of retirement, and Generation X is only steps behind. According to Generations Apart—a new study from Allianz Life Insurance Company of North America—the vast majority of both groups believe the traditional definition of retirement is a “romantic fantasy of the past.” More than eight in 10 (84%) from both generations said they feel that a retirement starting at age 65 spent “doing exactly what you want” is now unrealistic.Read more >
You Failed Nondiscrimination Testing, Now What?
According to a survey from Judy Diamond Associates, nearly 60,000 401(k) plans failed Internal Revenue Service (IRS) nondiscrimination testing, with more than one in 10 issuing corrective distributions to highly compensated employees (HCEs) in 2012. “The plan design is by far the best way to get to a point where more employers are passing their nondiscrimination testing,” says Geno Cufone, senior vice president, retirement administration, at Ascensus in Dresher, Pennsylvania.Read more >
Money Market Reform Likely to Change Plan Investments
Money market fund reforms, which take effect in October 2016, will require retirement plan sponsors to review the money market funds in their lineups and possibly replace their funds, experts say. And this will affect nearly two-thirds of plans, as 63.5% have money market funds in their lineup, according to the 2014 PLANSPONSOR Defined Contribution Survey. The rule amendments require investment managers to establish a floating net asset value (NAV) for institutional prime money market funds. The rule also allows non-government money market funds to use liquidity fees and redemption gates.Read more >
Congressional Bill Would Junk Cadillac Tax
Representative Joe Courtney (D-Connecticut) unveiled legislation from the House Ways and Means Committee to repeal the excise tax on high-cost health insurance plans scheduled to go into effect in 2018. The policy, sometimes referred to as the “Cadillac tax,” would apply a 40% tax to health insurance expenditures over $10,200 per person and $27,500 per family—it is one of the most controversial provisions of the Patient Protection and Affordable Care Act (ACA).Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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