Employer Sponsored Retirement Plans - What's Happening in 2018

We were recently joined by one of the top ERISA attorneys in the country to update employers on the 2018 retirement regulatory landscape, DOL investigations, plan litigation, and fiduciary responsibilities.

The following provides a synopsis with 13 key takeaways from this very insightful webinar.

Takeaways: 

  1. The #1 cause of DOL investigations on employer sponsored retirement plans comes from participant complaints. 

  2. The most common violation found in DOL employer sponsored retirement plan investigations is delinquent contributions (when an employer is late in depositing employee paycheck contributions to their 401k plan).

  3. The DOL has focused extensively on ESOP (employ stock ownership plan) plans the last few years. The labor department investigates them more than any other kind of plan because they're concerned about conflicts of interest of owners selling the company to employees through this plan. 

  4. Starting in 2019, if your plan allows hardship withdrawals you are going to need to amend your plan to meet some new requirements. You will no longer be able to say to someone taking a hardship withdrawal that they have a 6 month prohibition on making new contributions.

  5. The last few years have seen more plan lawsuits start to come down market. It's no longer only the behemoth plans that are experiencing litigation. To reduce potential risk, be sure to understand the fees, share classes, revenue sharing, and all the other issues associated with your investments. As a plan fiduciary, it's your duty to know what's going on and have it all documented.

  6. The process is your protection as a fiduciary. Reducing your plan fiduciary liability is all about how you make the decision. You can't guarantee performance, but if you consider the right inputs, ask the right questions, and document all of those decisions at the time you made them, then you will be deemed to have made a prudent decision, even if the market goes south or if something unforeseeable goes wrong. You should work with your plan advisor to ensure your process is sound.

  7. Fiduciary myth - one of your duties as a fiduciary is to pay the cheapest fee. This is false. You are not obligated to pick the cheapest option. Cost is one of the factors, but the main concept is value. When you are paying a reasonable fee you are taking into account all the factors related to the selection of that service provider or investment. Reasonableness is a zone.  Consider if you are getting a good value for the fees that you are paying in light of the services you are receiving. 

  8. It can be expected that most of the action in the next year or two will come from regulatory agencies, not congress.

  9. DOL Fiduciary Rule - while the rule was being implemented there were lawsuits claiming the DOL had gone too far in the way it put out the regulation and that it wasn't valid. The lawsuits won and the 5th circuit court of appeals struck down the DOL rule. If you haven't already, have a discussion with your advisor to make sure you know what kind of advisor you have and whether your relationship will change is a result of this latest rule change.

  10. In Illinois, California, Washington, and Oregon - if you as an employer aren't offering a retirement plan, you would have to offer a payroll deduction IRA (in Illinois this plan is called Secure Choice. It was launched as a pilot state-sponsored retirement program in early 2018). This would be an automatic enrollment for workers. This raises many concerns for employers as there are a lot of potential for misuse and risk with a state run retirement program. 

  11. You always have responsibility as the plan fiduciary for selecting and monitoring the service providers you hire. Even if you hire a fiduciary manager, such as a 3(38) advisor, and you give them the authority to make decisions, you still have to periodically monitor what they are doing. You still have to have a prudent process for selecting that manager. You may not be responsible for them picking a specific fund, but you are responsible for periodically looking at them to make sure they are doing the job they're supposed to do.

  12. Education is not advice. Education is a great way to reach out to workers to be involved in the plan - how the plan works, the importance of saving for retirement early and often, etc. You can do that without creating a new fiduciary obligation. 

  13. Automatic enrollment and automatic escalation features have proven to be very effective at keeping workers in the plan and saving more towards their retirement. 

401k Plan Services

The full webinar can be viewed here:

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