IN THE NEWS
THE RISK OF 3(38) FIDUCIARY FLEXIBILITY
401k Specialist | Richard Friedman | July 19, 2017
You will hear some people (especially salespeople) say that plan sponsors get the same, if not better, protection from a platform level 3(21) fiduciary service as they do the platform level 3(38) fiduciary service. Simply not true; it’s not even close and probably fake news.... All 3(16) fiduciary services are the same. Again, simply not true. Not even close. There is a vast difference in the firm’s offering 3(16) services and those that will serve as the 3(16) Plan Administrator. Furthermore, there is a difference in the few firms that will serve as the Plan Administrator.
Wrong assumptions plan sponsors make
Employee Benefit Adviser | Carol Buckmann | June 15, 2018
A famous quote from an ERISA decision many years ago summed it up: “A pure heart and an empty head are not enough.” The IRS and DOL expect complete compliance, not near compliance or well-intentioned attempts at compliance that miss the mark... Fiduciaries must satisfy a “prudent expert” standard. If you are not an investment expert, you are required to consult someone who is.
Opaque, outdated 401(k) plan disclosures harming investors, advisers
Investment News | Greg Lacurci | June 20, 2018
"This lack of transparency hamstrings advisers trying to act in their clients' best interests, particularly when they try to serve less-well-off clients," ... Financial advisers can't easily compare a 401(k) plan to a rollover option or make recommendations about rebalancing "without detailed plan lineup data," they said. The extra effort required to do an analysis "greatly increases" the cost of financial advice, and higher-quality filings would "help democratize access" to rollover advice, according to the report, "Retirement Plan Transparency: Opaque Data Hinders Best-Interest Advice."
Unitized Model Portfolios: A Crucial Next-Step In Retirement Plan Product Innovation
Securian Financial | June 20, 2018
“Okay, target-date funds are a reasonable tool for retirement plans, but they are not necessarily the best Qualified Default Investment Alternative solution as they tend to contain proprietary fund options, many of which they would never hire for use in retirement plans as standalone investments.” So, if you’re an investment advisor with the capability to build your own models, you’re going to conclude that, “I can do it better.” -- At GCM, we agree!
Advisers urged to resist 'fiduciary fatigue'
InvestmentNews | Jeff Benjamin | June 6, 2018
It's important that financial advisers resist "fiduciary fatigue" and continue to stay engaged in the long-running battle over investment advice reform regulations. "The regulatory landscape will remain uncertain for a period of time, and litigation is increasing, particularly for advisers working on the retirement side."
Blaine Aikin, executive chairman of Fi360, discusses the current state of the fiduciary rule and encourages advisors to "refocus from regulation to your reputation."
Are the People Running Your 401(k) Putting Your Interests First?
The Street | Robert Powell | June 6, 2018
Do you know if your plan's sponsor and fiduciary are acting in your best interest?
At the Plan Sponsor Council of America's recent annual meeting, Blaine Aikin, the executive chairman of Fi360* and CEFEX, outlined the core principles that ERISA Plan Fiduciaries should have to help mitigate risk. This article outlines the main points Aikin made during his speech, which can be used to evaluate your current plan.
*Fi360 helps financial intermediaries use prudent fiduciary practices to profitably gather, grow and protect investors’ assets since 1999. GCM utilizes this platform for research and other in-house processes.
Retirement plan sponsors tread lightly with capital preservation
Investment News | Robert Steyer | May 29, 2018
ERISA lawsuits attacking the offering of money market funds instead of stable value funds allege the latter produce higher returns than the former, especially in recent years of low interest rates. However, DC consultants said stable value might not be appropriate or desirable for some plans... "Make sure you pick a strategy that you are comfortable with and that's appropriate for your participants" ... But sponsors must document why this was the best choice.
Fiduciaries, Protect Yourselves--Hire a Great Adviser
Cohen & Buckmann, P.C. | Carol Buckmann
This is an important article that all plan sponsors should read and understand. Many are not aware of the important role that advisers take on when being a fiduciary for a plan.
The Achilles Heel of All 401(k) Plans: The Payroll Interface
Plan Sponsor | Andrew S. Zito | May 25, 2018
The best analogy I’ve heard for the relationship between payroll and 401(k) plans is that of a busy interstate. Each of your participants is a car that’s entering the highway, changing lanes and exiting. Just like the design of the highway, the way a company designs its payroll-to-plan interface plays an important role in whether there is an accident.
Settlement Reached in Excessive Fee Suit One Day After Lawsuit Is Filed
Plan Sponsor | Rebecca Moore | May 14, 2018
That was fast! -- The first bone of contention the plaintiffs have is that the company offered the “microscopically low-yielding” Vanguard Prime Money Market Fund, rather than a stable value fund that would have provided better returns while preserving capital and liquidity without any greater increase in risk compared to money market investments.
What are the fees on that annuity? Good luck finding them.
Financial Planning | Bryan Borzykowski | May 8, 2018
Naturally, insurance companies don’t want their clients to know about the fees, which is why they’re listed deep into the insurance policy.“They’re buried on, like, page 84, where no one reads it,” Cutter says...It’s always important to read through the policy and find those fees.
Report Lays Out Causes and Consequences of ERISA Lawsuits
Plan Sponsor | Lee Barney | May 1, 2018
As a result of these lawsuits, many retirement plans have gravitated to low-cost passive mutual fund options, which also track very closely to their benchmarks... Plans have also dropped specialty asset class funds, such as industry-specific equity funds, commodities-based funds and narrow-niche fixed income funds, as these potentially charge higher fees and carry highest investment risks.
Increased Savings Rates and Auto Escalation Can Boost Retirement Income
Plan Sponsor | Lee Barney | April 26, 2018
Participants who work with a traditional or online adviser are on track to replace 116% of their income. Those working with any paid adviser, 91%, and those with no adviser, 51%.
5 Signs That You Have a Lousy 401(k) Plan
Investopedia | Roger Wohlner
Understanding whether your plan is a good one or substandard and pricey is important. This will help participants decide how much to invest and may also prompt them to ask their employer to make some improvements.
6 Great 401(k) Features Everyone Should Know About
The Motley Fool | Maurie Backman | April 4, 2018
One good thing about 401(k)s is that in some cases, you can delay your first RMD past 70-1/2. Specifically, if you're still working at that time and don't own 5% or more of the company employing you, you can hold off on RMDs until you leave that job.
How ‘easy’ target-date funds can endanger your retirement
Market Watch | Mitch Tuchman | March 22, 2018
Target-date funds are not universally cheap. They are not universally accurate in judging personal risk tolerance. And most important, they’re not right for many people because your retirement age could have little to do with your long-term need for growth from stocks.
Benefits Of Adding 3(38) And 3(16) Fiduciary Protection To Your ERISA 401(k)/403(b) Retirement Plan
Forbes | Amir Eyal | March 5, 2018
Instead of appointing a plan adviser, then doing independent research to determine whether or not to accept recommendations, some plan sponsors elect to save time by appointing a 3(38) fiduciary. Such fiduciaries have the authorization to make investment decisions for the plan so that your organization can focus on achieving its goals.
In addition, in a 3(16) fiduciary relationship, the plan sponsor outsources many vital responsibilities to a specialized plan administrator. The 3(16) fiduciary takes complete responsibility for all aspects of plan administration, assuming full discretionary control. Most important, liability is shifted to the 3(16) fiduciary, mitigating risk to employers.
New Study Finds the Smaller Your Business, the Higher Your 401(k) Fees
Entrepreneur | Tom Zgainer | February 9, 2018
The business owner usually engages a broker who seems like a likeable guy/gal. The broker typically wants to make as much as they can get away with. The broker selects a provider (often an insurance company or payroll company) and said provider typically makes money on “revenue-sharing,” which is a fancy way of saying that they get a cut of the mutual fund management fees. This means the funds in the plan are often expensive, and low-cost index funds, which don’t “pay to play,” are suspiciously missing from most plans (despite overwhelming evidence they outperform over time). Another common revenue source is the use of proprietary name-brand funds which often more profitable. And let’s not forget the local third-party administrator who can often get a cut of the action as well.