IPS Advisors June Retirement Report

DC Plan Sponsors Say Less Is More in Investment Lineups
401(k) plan sponsors are consolidating the number of DC investment manager relationships as well as the number of plan investment options in an effort to reduce plan costs. Moreover, for the first time, the desire to reduce fees and expenses outranks underperformance as the most common reason for dropping an investment manager from the plan lineup. These and other findings are included in the annual Retirement Planscape®, a Cogent Reports™ study by Market Strategies International.

"It appears that fee disclosure regulations are driving a substantial amount of activity," says Linda York, senior vice president of the financial services division at Market Strategies. "During this period of lower returns and lower yield, the impact of fees is magnified-another factor driving the focus on fees. This year, we find significantly more plan sponsors intending to take action in the form of negotiating for lower fees or lower-fee share classes, eliminating revenue sharing arrangements, or consolidating the plan investment menu."

The report notes differences in intended actions by plan size, with smaller plans more likely to request lower fees and larger plans looking for lower-cost, more personalized investment options. In fact, despite reductions in investment options and relationships, the report finds an increase in the types of investment products offered in 401(k) plans. Mutual funds remain the most common investment vehicle offered, yet in search of performance and a more favorable fee structure, interest is rising in products such as managed accounts, ETFs and collective investment trusts (CITs). Visit www.marketstrategies.com for more findings uncovered in this particular report.
Compliance Calendar: July Reminders

ONE: Conduct a review of second quarter payroll and plan deposit dates to ensure compliance with the Department of Labor's rules regarding timely deposit of participant contributions and loan repayments.
TWO: Verify that employees who became eligible for the plan between April 1 and June 30 received and returned an enrollment form. Follow up for forms that were not returned.
THREE: Ensure that the plan's Form 5500 is submitted by July 31, unless an extension of time to file applies. (Calendar year plans). Form 5558 needs to be filed by July 31 for an extension to October 15.

Please contact your IPS Advisors Retirement Plan Consultant if you have any questions or require assistance. 
ERISA Fidelity Bond versus Fiduciary Liability Insurance  
Plan sponsors often ask, "Is an ERISA fidelity bond the same thing as fiduciary liability insurance?" The answer is no, they are not the same. The two insure different people and have different requirements under the terms of ERISA.

An ERISA fidelity bond is required under ERISA Section 412. Its purpose is to protect the plan, and therefore the participants. It does this by ensuring that every fiduciary of an employee benefit plan, and every person who handles funds or other property of the plan, be bonded. This protects the plan from risk of loss due to fraud or dishonesty on the part of the bonded individuals. The amount of the fidelity bond is 10 percent of the plan assets (with a $1,000 minimum) and is capped at $500,000 (or $1,000,000 for plans with company stock).

Fiduciary liability insurance protects the fiduciaries (not the plan or participants) from a breach of their fiduciary responsibilities with respect to the plan. Remember that fiduciaries may be held personally liable for losses incurred by a plan as a result of their fiduciary failures. Unlike a fidelity bond, fiduciary liability insurance is not required under ERISA. The Department of Labor may ask whether the plan fiduciaries have insurance in the event of an investigation. It's important that fiduciary liability insurance explicitly covers "ERISA" claims. Review of any policy, including E&O policies, should look for language that may void the coverage in the event a plan has ever been out of compliance (something virtually all plans experience at some point in their existence).
Employee Communication Corner
Our June sample memo informs employees about different options they can consider regarding the money in their retirement plan when they leave their current employer.
Click HERE to access the memo and share with your employees.
NOTE: If you require assistance with your comprehensive employee communications strategy and planning, please contact your IPS Advisors Retirement Plan Consultant for details on how we might help, or call 800.366.4779. 


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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