401k Essentials for 2015

401(k)fundamentals

Contributions Limits

Under 50 years of age$18,000

Over 50 years of age$18,000Plus Catch up contribution up to $6,000

Salary deferral plus employer contribution is limited to $53,000

Employee Education Education programs work to improve participation and

contribution rates – despite media report

Long term and ongoing commitment is required by the company and advisor

Most 401k sponsors have the best intention of holding education sessions but day to day concerns of the business pre-empt action

Schedule now to support all open enrollment dates

Education Case Study Education Plan

Large group meeting regarding 401k plan and benefits

Individual meetings using interactive tools and visuals

Results Increased active participation rate by 15%

Converted 56% of eligible, non-contributing members to active

Increased average deferral rate by 1%

68.5% are taking full advantage of the employer match

87% of employees participating in the plan

*Changed plan to operate as Safe Harbor plan design

Enrollment & Documentation Review HR records to ensure that accurate enrollment

forms are on file for ALL eligible employees

Changes in contribution rates must be made in writing

Records for those who decline participation are most often overlooked but most critical to have on file for a plan sponsor

Recent lawsuits and emphasis on retirement readiness underscore the importance of this documentation

Distributions for Terminated Employees Most plans have unnecessary accounts for terminated

employees

Account values under $1,500 can be paid to participants without their authorization*

Account values between $1,500 and $5,000 can be distributed to an IRA without participant authorization*

With an ever increasing burden to provide regulatory notices, accounts for terminated employee are costly to the plan

*Subject to provisions of your plan document

Legal & Legislativeupdate

Proprietary Funds Conflicts of interest

May have revenue-sharing Company receives money on assets

managed Overpriced and underperforming

Lawsuits Gordan v Massachusetts Mutual Life

Insurance Company Alan H. Tralins v. JPMorgan Chase & Co. Class action against Fidelity

In-Plan Roth Conversion American Taxpayer Relief Act

Permits participants in pretax 401k and Profit Sharing accounts to transfer amounts to Roth account.

Treated as taxable qualified rollover contribution Disbursements from Roth account are paid tax-

free

Plan Document Changes Plan must allow Roth contributions In-plan conversions must be allowed by plan

document

Plan document

Document Review Plan document review should be performed yearly

Questions to ask when reviewing: Are plan operations in line with plan document? Has the plan document been updated to reflect

regulatory changes? Are there changes that can make the plan more

efficient? Auto-Enrollment Auto-Escalation Safe-Harbor Plan Design Employer Contribution and Vesting Schedule Roth Contributions

Document Restatement

Required by DOL by spring 2016

Incorporates mandatory amendments from the last 5 years in the document

Opportunity to make other changes

Important Plan Featuresto consider

Managed Account Feature Allow a participant’s assets to be allocated

based on market trends and analysis

Can be used as Qualified Default Investment Alternative (QDIA)

Provides added fiduciary support to the plan

Provides advice and assistance that many participants crave

Online Educational Tools Risk tolerance assessment

Portfolio modeling

Retirement readiness/Goal tracking

Social networking integration

Fiduciary Support 3(21) Co-Fiduciary

Monitors investment lineup Directs the trustee when a change is necessary Provides support in situations of litigation on funds

and fund lineups they recommend 3(38) Fiduciary

Selects and monitors investment lineup Automatically makes change when necessary Provides support in situations of litigation on funds

and fund lineups they select and monitor

Fiduciary Support (Continued) 3(16) Fiduciary

Distribution of Required Notices Eligibility and Vesting Automatic Enrollment Procedures Distributions Hardship Withdrawals/Plan Loans Timing of Deposits 5500 Review and Signature

Department of Laboraudit alert

5500 Filings Electronic 5500 filings provide easily searchable data

for the DOL

Avoid common red flags in your plan’s filing

Bond amount must be greater than 10% of the plan assets

Adopt a Qualified Default Investment Alternative (QDIA)

Required Notices Must be delivered to plan beneficiaries 30-60 days before the

beginning of the plan year Safe Harbor Design

Qualified Default Investment Alternative (QDIA)

Required at least annually from the initial distribution in 8/12 Participant Fee Disclosure

Did you take advantage of the DOL permitted delay in 2013?

Feedisclosure

Compliance Alert

For attentive plan sponsors, those excessive payments will be indentified during the process of the 408(b)(2) disclosures…However, I am concerned that plan committees will fail to evaluate and benchmark those payments. If my fears prove to be well-founded, it will inevitably lead to litigation. -- Fred Reish, Chair of ERISA practice at Drinker, Biddle & Reath

Source: Plan Sponsor Magazine September 2012

What is Reasonable

• Not defined by DOL, ERISA or Fee Disclosure regulations

• Expenses and quality should be considered

Plan Benchmark DOL has provided guidance indicating that a

Benchmarking process based upon an RFP process is preferred

Quantitative and Qualitative factors should be considered

Documentation of a process for plan decisions is critical

Improvementopportunities

401(k) Plans Have Changed Fees have come down

Your plan needs may have changed

Providers have enhanced services

Additional Participant Tools are available

New Protections are available for Plan Fiduciaries

401k Essentials for 2015