Tag Archives: 401k

Do you have missing participants in your 401K?

As employees terminate, they typically leave their balances with the prior employer.  In these cases, they are still participants – meaning you still pay to administer their account, and you have an obligation to communicate with them as much as any active employee.   This is not a problem, until you lose track of the ex-employee.  While it is not your Fault, it is still your responsibility under the law.

50% of Millenials in a recent survey learned of a retirement account with a previous employer they didn’t realize they had.

Enter the “Missing Participant IRA.”  The best solution is to get the ex-employee to take their balance with them when they leave.  Since that doesn’t always work, you need a mechanism to handle this.  With some of our clients we use a third-party outside service, but more and more high-end TPAs are providing this service automatically.

 

If you are concerned about COMPLIANCE in your 401k just give us a call.

Another 401k suit

NAPA is reporting another fee-based lawsuit against a Plan Sponsor:

“Yet another 401(k) provider and investment manager has been sued by one of its own participants for breaching its fiduciary duties to the plan – and while the claims are familiar, the venue is different.

This time the target is Mutual of Omaha in a suit filed last week in the U.S. District Court for the District of Nebraska by Berger & Montague and Schneider Wallace Cottrell Konecky Wotkyns LLP on behalf of Tamera S. Lechner, a participant in the plan, which had approximately 6,000 participants and some $500 million in assets.

Lechner alleged that the plan’s fiduciaries selected United of Omaha-branded investment funds “when each of these Omaha-branded funds invested all of its assets in another publicly available investment fund managed by an unrelated third party – causing the Plan to pay a fee to United of Omaha in addition to the fee charged by the underlying fund’s manager when the Plan could simply have offered the underlying fund and avoided paying any additional fee to United of Omaha.”

 

For the full article click here

Tax Reform affects 401k matching

Posted by John Sullivan on 1/26/18 in 401k specialist magazine:

 

The controversial tax reform legislation recently passed is paying off in the form of a boon for to corporate pay and benefits, and Willis Towers Watson is attempting to gauge just how much.

The company surveyed a swath of large and midsize employers and found that nearly half (49 percent) are considering a change to employee benefits, compensation, total rewards and executive pay programs either this year or next.

“The tax reform law is creating economic opportunity to invest in their people programs,” John Bremen, managing director, human capital and benefits, Willis Towers Watson, said in a statement. “While a significant number have already announced changes to some of their programs, the majority of employers are proceeding to determine which changes will have the highest impact and generate the greatest value.”

Two-thirds of those (66 percent) surveyed are planning or considering making changes to their benefit programs or have already taken action.

The most common include expansions to personal financial planning (34 percent), increasing 401k contributions (26 percent) and increasing or accelerating pension plan contributions (19 percent).

Other potential changes include increasing the employer health care subsidy, reducing or holding flat the employee payroll deduction, or adding a new paid family leave program in accordance with the Family Medical and Leave Act’s tax credit available for paid leave for certain employees.

Sixty-four percent of employers are also planning or considering taking action on their broad-based compensation programs or have already taken action.

The most common include conducting a review of their compensation “philosophy” (43 percent), addressing pay-gap issues (36 percent) and introducing a profit-sharing or one-time bonus payout to all employees (21 percent).

About four in 10 companies (41 percent) are planning or considering changes to their executive pay programs.

The most common include spending more time and analysis on this year’s incentive target (33 percent) and increasing the use of discretion in 2018 incentive plans (19 percent.

Human Resources Administrator found guilty in 401(k) Lawsuit!

In Tibble vs Edison International, a long-running case that ended up at the supreme court, The Human Resources VP was found guilty.  The case involved improper selection of funds – by using retail funds instead of the available institutional funds, which costs the plaintiffs $7,000,000.  Additionally, they used the retail fees to offset management fees charged by their record keeper.

It is important to understand how these seemingly small decisions can have enormous repercussions.  Recent fee-oriented suits by employees at Nordstrom, BlueCross Blue Shield, Lockheed Martin, and a number of educational facilities show that these suits are not going away.  Further, audits are increasing, as the Department of Labor has found that 70% of plans are not in full compliance.

According to a 2012 article in Financial Advisor Magazine, “An estimated 70% of retirement plans audited by the Department of Labor (DOL) in 2009 and 2010 were fined, received penalties or had to make reimbursements for errors–all of which ending up costing plan fiduciaries about $450,000 per plan, according to the department.” 

Small Businesses overpay for 401k plans

This article was published in MarketsInsider on 12/13/17.  Click Here for the full article.

America’s Best 401k took a closer look at the asset-based fees paid by small business owners and their employees and found that many overpay for their 401(k) plans… The industry has reported (on page 50 at the link here) a median cost for plans with 100 participants or more, and $1 million or more in assets, of just 0.93% of plan assets per year, with the rate dropping sharply as assets exceed $10 million and more to as low as 0.27% of plan assets per year. It’s a different story for small plans, according to America’s Best 401k’s new white paper: fees are considerably higher, nearing 2% of plan assets per year in the case of one provider.”

You are required to Benchmark your fees annually.  Are you aware of how much you plan really costs?

 

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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