IPS Advisors January Retirement Report

Fees, Funds and Fiduciaries: Cheaper is Not Always Better
The scrutiny of fees within retirement plans has reached a fever pitch and shows no signs of abating. The seemingly endless stream of lawsuits accusing plan fiduciaries of breaches of fiduciary duty and mismanagement, and service providers of charging excessive fees, of all types, has fostered a heightened sense of anxiety among plan sponsors and advisors. Understanding plan expenses in relation to services provided and paying only reasonable costs is of the utmost importance; however, examining fees in isolation is problematic. This is particularly true when applied to investments.

Selecting the lowest cost option or a passive fund due to fear of litigation does not automatically fulfill fiduciary obligations nor does it excuse liability and, potentially, may not be in the best interest of plan participants. According to a Cerulli report (The Cerulli Edge - U.S. Edition October 2015) titled "Facing Fiduciary Fears: Choosing passive does not equal fiduciary hall pass," the motivating factor for plan sponsors to select a passive fund over an active fund was to alleviate concerns related to lawsuits rather than having a well-developed rationale regarding the investment merit of active management. This approach toward investment selection could be interpreted as putting the plan sponsor's interest ahead of those of plan participants and their beneficiaries - a violation of fiduciary responsibility under ERISA.
Click here to continue reading the full article. (Source: Calamos Investments)

For more information on this topic, and how we assist clients with developing a plan investment menu and ongoing investment due diligence, please contact your IPS Retirement Plan Consultant or email ipsadvisors@ipsadvisors.com
Complying with ERISA 404(c)
Under ERISA, plan fiduciaries wishing to relieve themselves of liability for losses that result from the investment decisions made by plan participants must permit plan participants or beneficiaries to exercise control over the assets in his or her plan account. The section 404(c) regulations set forth specific rules that must be followed in order for plan fiduciaries to afford themselves the relief from liability allowed by ERISA Section 404(c).
A plan allows exercise of control if it provides participants or beneficiaries the opportunity under the plan to (1) have access to a broad range of investment alternatives, which consist of at least three diversified investment alternatives, each of which has materially different risk and return characteristics; (2) give investment instructions with a frequency that is appropriate in light of market volatility of the investment alternatives, but not less than once within any three-month period; (3) diversify investment alternatives within and among investment alternatives; and (4) obtain sufficient information to make informed investment decisions with respect to investment alternatives available under the plan.
Since the advent of the internet, most plan record keepers provide certain ongoing notices when a plan intends to qualify for 404(c) protection. Plan fiduciaries should consult with their record keepers or other plan providers and review 404(c) notices provided to plan participants and beneficiaries. Fiduciaries may also consider establishing internal procedures that are communicated to plan participants with respect to 404(c) status, account control, giving of investment instructions, voting and tender rights, and learning about plan investment alternatives. 

If you have questions about compliance with 404(c), please contact your IPS Advisors Retirement Plan Consultant for more information.
Employee Participation and Deferral Rates See Steady Increases
Participation and deferral rates in Defined Contribution Profit Sharing and 401(k) Plans posted steady increases, according to the 59th Annual Survey published by the Plan Sponsor Council of America (PSCA). "By designing plans that include features such as automatic enrollment and options such as target date funds and Roth 401(k), plan sponsors are helping to advance the interests of all participants and grow America's retirement savings," said Hattie Greenan, Director of Research and Communications. 
Respondents to the survey report that almost 90 percent of US employees are eligible to participate in their employer's defined contribution (DC) plan. The average percentage of eligible employees who have a balance in their plan is 87.6 percent, and 81.9 percent made contributions to their plan in 2015. This is up 5 percent over 2010.  The average salary deferral (pre- and after-tax) for all eligible participants was 6.8 percent. Lower paid participants contributed an average of 5.5 percent of pre-tax pay, while higher-paid participants averaged 7.0 percent.
The average company contribution to 401(k) plans is 3.8 percent, and the average contribution in combination 401(k)/profit sharing plans is 5.4 percent. Plans offer an average of 19 funds, a number that has remained steady over the last five years.
The survey found 66.8 percent of companies retain an independent investment advisor. Of those, 59.1 percent pay a fixed fee and 35.1 percent pay a percent of plan assets.
PSCA's 59th Annual Survey reflects the 2015 plan-year experience of 614 DC plan sponsors. For more information please visit www.psca.org.
Compliance Calendar Reminders
January 31: Deadline for mailing Form 1099-R to participants for distributions in prior year.
February 28: Deadline for paper Forms 1099-R filing with IRS.
Employee Communication Corner: Rebalancing Your Portfolio 
This month's sample employee memo provides participants with information on rebalancing their portfolios.  
Click here to access the memo and share with your employees.  
If you have questions, please contact your dedicated IPS Advisors Employee Benefit Specialist, or contact one of our Retirement Plan Consultants below:
Tim Thurston, AIF®
Manager, Retirement Plan Services
(214) 443-2410
Tammy Woodman, QKA, AAMS®
Defined Contribution Consultant
(214) 292-4123


The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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