May 2008
401(k) Newsletter
General Issues
Best Practices in Employee Campaigns — Summary: A thoughtfully designed and executed communication program can go a long way toward engaging employees and motivating them to action. Learn the most important techniques and tools you can use to maximize the action rate of your communication. Located at: MassMutual (PDF File). Click on headline for full article.
401k Loans: Deal or No Deal? — Summary: Conventional wisdom is that 401k loans are just a part of any well-rounded plan, but unfettered access to 401k accounts is counter to the plans' purpose of providing a way for participants to save successfully for retirement. Located at: TRI-AD (PDF File). Click on headline for full article.
404(c) Meets "The Real World" — Summary: Who is responsible for a 401k plan participant's investment losses? Some courts agree with the DOL that the selection of a plan investment is a fiduciary function and, as such, lies outside ERISA Section 404(c)s protection. Other courts take a totality of the circumstances approach and indicate Section 404(c), under the right set of facts, may protect a fiduciary from liability when a 401k plan investment goes bad. Located at: Jones Day (PDF File). Click on headline for full article.
Hardship Withdrawals and the Mortgage Crisis — Summary: Hardship withdrawals from Vanguard DC plans rose in 2006 and 2007, although the absolute level of withdrawals is still quite low. The increase may be correlated with either the emerging home mortgage crisis or broader economic stress among financially vulnerable plan participants. Located at: Vanguard Center of Retirement Research (PDF File). Click on headline for full article.
QDIAs Pose More Questions Than Answers to Employers — Summary: Employers genuinely are confused about what to do regarding qualified default investment alternatives, and brokers confirm they have good reason to be baffled. Located at: Employee Benefit News (free registration may be required). Click on headline for full article.
Research
MetLife Study of Employee Benefits Trends — Summary: The 6th annual MetLife Study of Employee Benefits Trends examines the attitudes of an increasingly diverse workforce toward financial and benefits-related issues. The Study also captures the benefits practices and perspectives of both small and large companies across a wide array of industries. Located at: MetLife (PDF File). Click on headline for full article.
Adjusting Retirement Goals and Saving Behavior: The Role of Financial Education — Summary: Given the low level of saving by many households, the need for enhanced financial education to improve the level of financial literacy is an important policy issue. Employer-sponsored education programs can play a major role in disseminating specific information in order to increase the knowledge related to retirement planning. Located at: TIAA-CREF Institute (PDF File). Click on headline for full article.
DOL and IRS Issues
Overview of Internal Revenue Service Notice 2008-30 — Summary: The IRS has provided guidance on certain distribution related provisions of PPA that are effective in 2008. This Summary highlights the distribution provisions affecting DC plans. Located at: Transamerica Center for Retirement Studies (PDF File). Click on headline for full article.
DOL Working Hard to Ferret Out Fiduciary Breaches — Summary: It appears that the Atlanta regional office of the DOL is more active about looking for fiduciary breaches by plan sponsors than other parts of the country. Nonetheless, it is quite concerning, and plan sponsors and service providers everywhere should take notice. Located at: Ilene H. Ferenczy, LLC. Click on headline for full article.
Fiduciary Responsibility for the Collection of Delinquent Plan Contributions — Summary: The DOL recently issued guidance in response to the prevalence of trust agreements that purport to relieve financial institutions serving as plan trustees of any responsibility to monitor and collect delinquent employer and employee contributions. Located at: White & Case LLP. Click on headline for full article.
IRS Announces Opening of Determination Letter Program for Pre-Approved DC Plans — Summary: The IRS has advanced its cyclical determination letter program in Announcement 2008-23 by stating that it expects to begin issuing opinion and advisory letters for pre-approved defined contribution plans. Located at: BNAtax.com . Click on headline for full article.
Court and Legislative Issues
ERISA 401k Suit: Braden vs. Wal-Mart — Summary: A class action lawsuit filed in late March alleges that
Wal-Mart , the giant discount retailer, violated mutual fund ERISA statutes and cost its 401k employee plan holders and investors $60 million in unnecessary expenditures by purchasing expensive mutual funds, when cheaper alternatives were available. Located at:
Lawyersandsettlements.com . Click on headline for full article.
