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Defined Contribution in Review A Quarterly Briefing for Plan Sponsors: 4Q18

FOR INSTITUTIONAL INVESTOR USE ONLY / NOT FOR PUBLIC VIEWING OR DISTRIBUTION

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What’s Inside?

Our Defined Contribution in Review is designed to help institutional plan sponsors and consultants stay informed on recent events that could have an impact on plans or plan participants. Inside you will find the following information:

Quarterly Highlights: A summary of plans and sponsors making the news

Plan Sponsors’ Corner: Timely insights about plan sponsors’ retirement readiness

Legislative Review: A summary of new and pending legislation

Regulatory Review: News out of the Department of Labor and other regulatory bodies

Legal Review: An update on high-profile ERISA cases

Global Headlines: A brief synopsis regarding global retirement issues

Defined Contribution Capabilities: Janus Henderson defined contribution capabilities

Defined Contribution in Review 4Q18



Quarterly Highlights

4

Pensions & Investments Announces the 2018 Excellence

& Innovation Awards




For additional information, please visit pionline.com

Award Recipient Employer Initiative

Kerstin Aiello Synopsys Inc. Introduced an online 401(k) quiz

Marco Merz &

Arthur Guimaraes University of California, Oakland

Lowered costs by adding collective trust funds to

their 403(b) plan

Mary Nell Billings Hilton Worldwide Holdings Launched a targeted educational campaign

based on participant savings rates

Tricia Miyoshi Package Pavement Co. Inc. Provided mandatory employee workshops

Lisa Montalvo &

Michelle Ryan

Lawrence Livermore National Laboratory &

Los Alamos National Laboratory Rolled out financial fitness boot camps

Tobias Read OregonSaves Launched the first state-based automatic IRA

program

Diana Winalski International Paper Co. Added income solutions to engage retired

employees to remain in the plan

https://www.pionline.com/article/20181022/ONLINE/181029996/9-awarded-excellence-and-innovation-awards-from-pampi

5

Synopsys Rolls Out Online Quiz to Engage Participants

﹢ The San Francisco-based software company rolled out an eight-question online 401(k) quiz to better engage their 4,200 employees

﹢ Quiz questions included:

• What are ways to contribute to the 401(k) plan?

• What are target-date funds?

• How often should accounts be reviewed?

• What is the size of the company match?

﹢ Participant actions following the quiz were compared to a control period; 363 participants changed their asset allocation compared to 125 in the control period, and 135 participants increased their deferral compared to 90

﹢ According to the company, 25% took the quiz, and the average score was six out of eight questions correct; some employees retook the quiz until they scored 100%




6

University of California Adds CITs to 403(b) Plan

﹢ Officials overseeing the University of California, Oakland retirement plan reduced costs by 25%, or $6 million, in part by converting two institutionally priced mutual funds into collective trust funds

﹢ The managers remained in place, but the names of the options were changed to the UC Growth Company Fund and the UC Diversified International Fund

﹢ To offer the collective trusts, the university received a private letter ruling from the Internal Revenue Service acknowledging it could proceed




7

Hilton Participants Receive Targeted Communications

﹢ Using data from the plan’s record-keeper, Hilton Worldwide Holdings Inc. sent a tailored message to participants based on whether they were not saving, saving but at levels below the full employer match or saving enough to reap the full benefit of the match

• For those not saving, the communication focused on “leaving money on the table”

• For the middle group, the company match of dollar for dollar up to 3% and 50 cents on the next 2% was reviewed, and the concept of “more free money” was stressed

• The last group was encouraged to review their long-term goals and consider saving even more

﹢ The campaign, which ran in April 2018 to coincide with Financial Literacy Month, led to 503 nonsavers enrolling in the plan, 175 of the below-match savers increasing their contributions and 660 of the third group also increasing their contributions




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﹢ The Stormville, New York, family-owned business boasts a 100% participation rate for its $29 million 401(k) plan that covers 160 employees

﹢ Mandatory employee workshops and the opportunity to meet one on one with company officials allows employees to better understand plan features, including how the company match and plan’s target-date funds work

﹢ The company auto-enrolls employees at 3% of pay and auto-escalates deferrals at 1% per year up to a 10% cap

﹢ The workshops are targeted by career band: new hires, midcareer employees and employees 50 and over; sessions are also provided in Spanish, the primary language for approximately 25% of the workforce

Mandatory Workshops and Auto-Enrollment Lead to 100% Participation

Rate at Package Pavement



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Two Plan Sponsors Share Notes on Financial Fitness Boot Camp

﹢ Human resource professionals from Lawrence Livermore and Los Alamos National Laboratories collaborated to launch a financial fitness boot camp to help participants save for their futures and reduce financial stress

﹢ The information was tailored to people at different stages of employment, early career, midcareer and late career, and featured speakers from the plan’s record-keepers, investment managers and benefit providers

﹢ Subjects included debt management, saving for retirement, home ownership and paying for college expenses

﹢ Los Alamos held their first boot camp in 2014, and representatives from Lawrence Livermore attended in 2016 to get ideas for their own program; in 2017, Lawrence Livermore held its first boot camp, which offered 24 education sessions, and more than 1,350 employees attended




10

Oregon Launches First State-Run Auto IRA Program

﹢ OregonSaves opened to all employers in December 2017, and by mid-October 1,275 companies and 42,989 participants (73% of eligible employees) had enrolled

﹢ The average contribution is $115 per month, and the average savings rate is 5.15%; the assets invested in the program total $8.33 million

﹢ The program sets an automatic deferral of 5% of pay per year plus an annual 1% auto-escalation until the retirement contribution reaches 10% of pay; employees can opt out, and they can contribute up to the limits set by Roth IRA rules

﹢ State officials recently announced that the program is available to all residents of the state; contributions can be direct deposited from a bank account and start for as little as $5 per month




11

International Paper Adds Two Options to Help Retirees Generate Income

﹢ To encourage more retirees to remain in the International Paper 401(k) plan, two options were recently added to help generate income:

• A long-bond fund with an allocation of 51% corporate bonds and 49% government bonds and duration of 14.7 years

• An out-of-plan annuity solution powered by Hueler Income Solutions

﹢ The Hueler platform provides names of prescreened providers with information on quotes, credit ratings and product features

﹢ A participant can purchase an annuity with in-plan assets that in turn roll out of the plan to facilitate the transaction; out-of-plan assets may also be used





Plan Sponsors’ Corner

13

Benefits Viewed as Key Employment Decision Driver

﹢ A new survey by Glassdoor, “The Benefits Employees Want Most,” concludes that 57% of job candidates report benefits and perks are among their top considerations before accepting a job. Additional findings include:

• Nearly 80% of workers would prefer new or additional benefits to pay increases

• 90% of those ages 18- to 34-years-old say they would prefer benefits over pay versus 70% of those 45 to 54 and 66% of those 55 to 64

﹢ The survey also found that the benefits that have the highest correlation to overall satisfaction with benefit packages are health insurance (0.7), vacation and paid time off (0.6), pension plan (0.6), 401(k) plan (0.6) and retirement plan (0.5)




14

Boomers Express Confidence in Their 401(k) Plans

﹢ A recent survey of workers ages 54 to 70 conducted by Charles Schwab found that 75% of respondents believe their 401(k) is in better shape than ever before

﹢ The survey also found a high level of retirement confidence among respondents:

• Only 16% expect to work in retirement due to needing the money

• Nearly 75% feel their quality of life in retirement will exceed their parents’, and 78% think it will be better than younger generations’ retirement years

﹢ Despite their confidence, some respondents still need help:

• 36% do not know how much they will need to safely retire

• 25% do not know how much of their salary should be saved

• 20% do not understand the process for withdrawing from their 401(k)




15

Voya Survey Finds Financial Advice Critical to Retirement Preparedness

﹢ A survey conducted by Voya of over 1,000 adults in the U.S. found that people who work with a professional are significantly more prepared for a range of financial decisions in retirement compared to those who go it alone. Specifically:

• 94% of those who work with an advisor feel at least somewhat prepared to make decisions about estimating monthly income in retirement compared to 42% without an advisor

• 76% of individuals with an advisor plan to make adjustments to their investments leading up to retirement compared to 35% who do not work with an advisor

• 83% of individuals with an advisor have thought about how they will fill their time in retirement compared to 56% without an advisor




16

Retirement Security at Risk Despite Economic Recovery

﹢ A new paper by the Center for Retirement Research at Boston College, “Trends in Retirement Security by Race/Ethnicity,” found that despite the economic recovery, 50% of households in 2016 are at risk of maintaining their pre-retirement lifestyle compared to 44% in 2007

﹢ The study examined households by race/ethnicity and found that black households at risk remained steady (54% in 2016 versus 52% in 2007) and an increased number of white households (48% in 2016 versus 42% in 2007) and Hispanic households (61% in 2016 versus 51% in 2007) are at risk

﹢ The paper posits that Hispanic households were hit hardest by the recession because of the timing and location of prerecession housing decisions, while black households remained steady because of the progressive nature of Social Security’s benefit formula




17

Less Choice Leads to Lower 403(b) Participation

﹢ A study conducted by the National Tax-Deferred Savings Association, “Improving Retirement Savings for America’s Public Educators,” found that a decrease in investment choice and reduced access to advisors leads to lower retirement plan participation

﹢ Additional findings from the study were:

• There is a 25% greater participation rate in plans with 15 or more investment providers compared to plans with only one provider

• On average, account balances are 73% higher among plans with 15 or more providers compared to single-provider arrangements

• There is a 203% increase in the average contribution rate among plans with 15 or more providers compared to plans with only one provider




18

Many Retirees Fail to Consider Effect of Taxes

﹢ A Nationwide Retirement Institute survey found that 37% of retirees admit they did not consider how taxes would impact their retirement income; as a result, the Institute suggests they may have lost the opportunity to save six years’ worth of income in retirement

﹢ Among the key findings:

• 46% of recent retirees wish they had better prepared for paying taxes in retirement, and 24% said they have paid several thousands of dollars more in taxes than they had expected

• 82% of those nearing retirement and 64% of those recently retired want to learn about taxes

• 38% of future retirees said they would switch advisors for someone who could plan for taxes in retirement




19

Many Americans Follow Nontraditional Paths to Retirement

﹢ According to a study by the RAND Corporation, less than 40% of American workers follow the “standard” pattern of retiring directly and completely from a full-time job

﹢ Based on data collected from the Health and Retirement Study, 13.6% of workers transition to part-time work, 16.9% leave and then reenter the workforce and 25.7% stay in full- or part-time jobs past age 70

﹢ Seniors with better cognitive ability were more likely to follow nonstandard pathways, with 59.1% of these seniors having jobs after age 65

﹢ Extroverts were more likely to follow nonstandard paths and work for pay after age 65, but they also appear more likely to move to part-time work without fully retiring by age 70




20

Most Employees Did Not Receive Transition Help from Employers

﹢ A survey of 2,043 retirees by the Transamerica Center for Retirement Studies shows that 66% say their most recent employer did “nothing” to help preretirees transition into retirement, and 16% are “not sure” what their employers did

﹢ Among the 18% whose employers helped preretirees, the most frequently cited offerings are:

• Financial counseling (6%)

• Seminars and education (5%)

• Ability to reduce work hours and shift to part time (5%)

• Flexible work schedules and arrangements (5%)




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﹢ Using detailed records of work quantity and quality for a relatively sizable group of 17,000 client-facing employees, Willis Towers Watson measured the difference in the performance of financially stressed employees and nonstressed employees

﹢ High-stressed field technicians demonstrated significantly poorer work performance relative to peers with low financial stress; for phone agents, the patterns of differences were similar but not as pronounced

﹢ In addition, high-stressed employees took 1.75 absence days to every one day taken by low-stressed employees

Willis Towers Watson Finds Connection Between Financial Worries and

Work Performance



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﹢ Researchers at Texas Tech University and the University of Texas at Austin conducted an experiment that provided individuals with either a long or short description of a hypothetical employer 401(k) plan

﹢ Individuals were asked if they would enroll and, if so, at what percentage of their compensation. In addition, individuals who indicated that they would enroll were asked how they would allocate their contributions between stocks and bonds

﹢ Surprisingly, after controlling for demographic factors, the experiment yielded no differences in the behavior of participants supplied with the long description versus the participants supplied with the short description

Researchers Find that Providing Less Information Does Not Lead to

Better Participant Choices




Legislative Review

24

Major Pension Reform Introduced, Dies in Lame Duck Congress

﹢ Former House Ways and Means Committee Chairman Kevin Brady (R-TX) introduced a 300-page legislative proposal in late November that would have extended many provisions of the 2018 Tax Relief Act while addressing several retirement saving enhancements

﹢ The legislation called for:

• Allowing open Multiple Employer Plans (MEPs)

• Extending the deadline to establish a qualified plan to the businesses’ tax-filing deadline

• Increasing the small-employer pension plan start-up credit to $1,500


Legislative Review


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Legislative Review

﹢ Senators Rob Portman (R-OH) and Ben Cardin (D-MD) introduced legislation that contains more than 50 provisions aimed at improving pension coverage for small employers and part-time workers

﹢ Among the key provisions:

• Easier access to lifetime income options

• Required minimum distribution relief

• New automatic enrollment safe harbor provisions

• Reduction in the 1,000-hour eligibility requirement to 500 hours

• Ability to make matching contributions to participants paying off student loan debt

Senators Portman and Cardin Introduce the Retirement Security and

Savings Act



26

Pension Bill Would Resurrect myRAs

﹢ Senate Finance Committee ranking member Ron Wyden (D-OR) and four other Democratic senators have introduced the Encouraging Americans to Save Act (EASA). If enacted, the bill would:

• Replace the current saver’s credit with a government-funded 50% match of up to $1,000 to be deposited directly into a 401(k), IRA or similar account

• Reestablish the myRA program, which was a President Obama initiative that was phased out in September 2017


Legislative Review


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Federal Government-Run 401(k) Legislation Introduced

﹢ The Portable Retirement and Investment Account Act, was introduced by Representative Jim Himes (D-CT), would open an account at birth

﹢ Upon entering the workforce, employees could request employers to direct a portion of their wages to their accounts up to the current year’s salary deferral limits

﹢ These accounts would be managed by preselected financial institutions, portable to one another, and have similar distribution rules as IRAs

﹢ The program would be overseen by an independent board and a director, the latter selected by the president


Legislative Review


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Legislative Review

﹢ Senators Ron Wyden (D-OR) and Ben Cardin (D-MD) have introduced legislation that would treat student loan payments like salary deferrals and allow plans to make matching contributions to 401(k), 403(b) and SIMPLE retirement plans

﹢ Under the proposal:

• The provision must be available to all eligible employees

• The provision would apply only to debt incurred for higher education expenses

• The matching formula for salary deferral and loan repayment participants must be the same

﹢ Most significantly, the bill provides that these contributions may continue to qualify as a safe harbor for nondiscrimination testing purposes

Bill Would Allow Use of Retirement Plans to Provide Student Loan

Repayment Benefits



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Connecticut to Implement Mandatory IRA Program in 2019

﹢ The state of Connecticut announced that in January 2019 it will begin requiring employers without their own workplace-based retirement plans to enroll employees in IRAs sponsored by the state

﹢ The program applies to employers that on October 1 of the preceding calendar year employed five or more individuals in the state who received at least $5,000 in compensation

• Employers with four or fewer employees may voluntarily join the program

﹢ Employees will be auto-enrolled at 3% of salary, although an opt-out is available, and money will be deposited into a Roth IRA and invested in a target-date fund


Legislative Review



Regulatory Review

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Regulatory Review

Reminder: 1st Quarter Compliance Calendar

January February March

January 31:

+ Deadline for sending Form

1099-R to participants who

received distributions during

previous year

February 28: + Deadline for filing Form 1099-

R with IRS to report

distributions made in previous

year (deadline for electronic

filing is March 31)

March 15: + Deadline for processing

corrective distributions for

failed ADP/ACP test without

the 10% excise tax

+ Deadline for filing S

Corporation and partnership

tax returns and contribution

deadline for deductibility

(without extensions)

March 31: + Deadline for electronic filing

of Form 1099-R to report

distributions made in previous

year



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Retirement Plan Limits for Tax Year 2019


Regulatory Review


2019 2018 2017

401(k) Elective Deferrals $19,000 $18,500 $18,000

Defined Contribution Limit $56,000 $55,000 $54,000

Annual Compensation Limit $280,000 $275,000 $270,000

Catch-Up Contribution Limit $6,000 $6,000 $6,000

Highly Compensated Employee $125,000 $120,000 $120,000

403(b)/457 Elective Deferrals $19,000 $18,500 $18,000

SIMPLE Employee Deferrals $13,000 $12,500 $12,500

SIMPLE Catch-Up Deferrals $3,000 $3,000 $3,000

SEP Minimum Contribution $600 $600 $600

Social Security Wage Base $132,900 $128,400 $127,200

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Saver’s Credit Limitations for 2019


Regulatory Review


Credit Rate Married Filing Jointly Head of Household All Other Filers

50% of contribution AGI below $38,500 AGI below $28,875 AGI below $19,250

20% of contribution AGI between $38,501

and $41,500

AGI between $28,876

and $31,125

AGI between $19,251

and $20,750

10% of contribution AGI between $41,501

and $64,000

AGI between $31,126

and $48,000

AGI between $20,751

and $32,000

0% of contribution AGI above $64,000 AGI above $48,000 AGI above $32,000

34

DOL Issues Advisory Opinion on Auto-Portability Program

﹢ In November 2018, the Department of Labor (DOL) issued an advisory opinion and prohibited the transaction exemption regarding a proposed auto-portability program administered by Retirement Clearinghouse LLC

﹢ The program would accept rollovers of terminated participant balances between $1,000 and $5,000; absent alternative participant instructions, the Retirement Clearinghouse would automatically roll over these balances into the participant’s new employer’s plan

﹢ The advisory opinion stated that the decision to use this or any other program as a default IRA provider was subject to a fiduciary standard; however, the actual transfer of funds from the default IRA to a new employer plan did not impose a fiduciary standard on the prior or new plan sponsor

﹢ Because the Retirement Clearinghouse would impose a fee on the participant, a prohibiting transaction exemption was issued that allows for the collection of fees, provided several conditions are satisfied


Regulatory Review


35

New MEP Proposed Regulation Offers Some, but Not Much Expansion

﹢ In October 2018, the DOL issued proposed regulations on MEPs in response to the president’s August 31, 2018, Executive Order directing the DOL to consider ways to expand coverage of multiple employers under a single plan

﹢ The proposal makes it easier for qualifying a MEP as a single plan in two circumstances: professional employer organizations (PEOs) and plans of bona fide associations or groups

﹢ It is important to note that the proposal does not change the rules regarding open MEPs (these are plans generally sponsored by service providers and consist of unaffiliated businesses) nor does the plan solve the “one bad apple rule” (if a participating employer fails in its responsibility to the plan, the entire plan risks disqualification)


Regulatory Review


36

IRS Proposes Regulation on New Hardship Rules

﹢ In November 2018, the IRS issued proposed regulations regarding hardship distributions in response to new issues raised by the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act of 2018. The highlights include:

• The elimination of the six-month contribution suspension rule is optional for 2019 but required for 2020

• Beginning in 2019, plans may remove the requirement that a participant take a loan before becoming eligible for a hardship distribution

• Beginning in 2018, hardship distributions may be allowed to repair damage to a participant’s primary residence (casualty losses) even if the participant is not in a federally declared disaster area; however, if the participant incurs casualty losses and resides in a federally declared disaster area, they will automatically satisfy the safe harbor for having an immediate and heavy need

• The Facts and Circumstances Rule will be eliminated in 2020, and plans can rely on a participant’s representation of insufficient cash or liquid assets to satisfy a financial need


Regulatory Review


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Relief for 403(b) Plans Regarding the Exclusion of Part-Time Employees

﹢ In Notice 2018-95, the IRS issued transition relief for 403(b) plans where the “once-in-always-in” rule under the universal availability requirement has not been correctly applied to part-time employees

• Generally, part-time employees may be excluded if they work less than 20 hours per week; final regulations issued in 2009 provided guidance for applying the 20-hour-per-week rule

• Once an employee becomes eligible, he/she continues to be eligible even after returning to part-time status; some employers were excluding these otherwise eligible employees from the plan

﹢ The notice provides employers a “fresh start” effective January 1, 2018, when their plan is deemed operationally compliant


Regulatory Review


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IRS to Audit 401(k) Savers Who Contribute Too Much

﹢ The Treasury Inspector General for Tax Administration has issued a report that suggests some individuals are overcontributing to their 401(k) plans

﹢ The report cites two examples:

• Some 401(k) plans do not have the controls in place to prevent some employees from exceeding the annual limits

• Taxpayers are exceeding the annual limit when participating in multiple 401(k) plans

﹢ The IRS plans to increase its employer education and conduct targeted audits for taxpayers who appear to have excess 401(k) deferrals


Regulatory Review


39

VCP Submissions Must Be Submitted Electronically

﹢ In Revenue Procedure 2018-52, the IRS announced that effective April 1, 2019, submissions to the Voluntary Correction Program (VCP) must be made electronically using the www.pay.gov website to file the appropriate paperwork and submit applicable user fees

﹢ The VCP is one of three correction programs plan sponsors can use to correct errors under the Employee Plans Compliance Resolution Program and is in place for plan sponsors to correct mistakes with either the plan document’s language or how it has been run


Regulatory Review


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DOL Provides Relief for Hurricane and Fire Victims

﹢ The DOL announced that an employee pension benefit plan that does not follow procedural requirements for plan loans or distributions will not be treated as a plan failure if:

• The failure is solely attributable to Hurricane Florence, Hurricane Michael or the California wildfires

• The plan administrator makes a good faith diligent effort under the circumstances to comply with those requirements

• The plan administrator makes a reasonable attempt to assemble any missing documentation as soon as practicable

﹢ Further, delays in forwarding participant payments and withholdings to plans within the prescribed time frames will also not be treated as a plan failure if the employer and service provider act reasonably, prudently and comply as soon as practicable under the circumstances


Regulatory Review



Legal Review

42

Intel Case Remanded to District Court

﹢ In Sulyma v. Intel Corporation, the Ninth Circuit Court of Appeals held that having access to documents disclosing an alleged breach of fiduciary duty does not sufficiently trigger the three-year statute of limitations

﹢ This case was dismissed earlier by the District Court after finding that the three-year statute of limitations expired since the lawsuit was filed more than three years after Intel made available plan documents, fund fact sheets and a summary plan description

• The original lawsuit alleged the improper use of hedge funds as part of the plan’s target-date fund investments

﹢ The appellate court instead ruled that the three-year statute of limitations period begins after the plaintiff has actual knowledge that a fiduciary breach occurred


Legal Review


43

Updates on Three Fiduciary Breach Cases

﹢ Participants in Kaleida Health’s 403(b) and 401(k) plans have filed a lawsuit alleging that the defendants failed to take advantage of the plan’s bargaining power by offering only retail mutual funds instead of identical institutional share class funds with lower operating expenses

﹢ BB&T Bank, based in Winston-Salem, North Carolina, has reached an agreement with plaintiffs in an excessive fee lawsuit; in addition to a monetary settlement, the bank agreed to make some administrative changes, including hiring independent investment consultants

﹢ A settlement has been reached in the Pioneer Natural Resources excessive fee case; the $500 million plan with 4,400 participants has agreed to deposit $500,000 in an interest-bearing account from which participant recoveries, legal fees and administrative expenses will be paid


Legal Review


44

Higher Ed Lawsuits Keep Rolling Along

﹢ Following a second judgment in favor of the defendants in the New York University excessive fee lawsuit, the plaintiffs filed to have two fiduciaries removed from the plan’s retirement investment committee and for monetary damages, including legal fees

﹢ The Missouri federal district court has dismissed a fiduciary breach lawsuit against Washington University’s 403(b) plan that alleged excessive recordkeeping and administrative fees, inappropriately offering retail share class funds when institutional share classes were available and failure to remove poorly performing funds

﹢ Duke University has reached a settlement with plaintiffs; details have not yet been announced


Legal Review


45

Second Circuit Revives Dismissed IBM Stock Drop Case

﹢ The U.S. Second Circuit Court of Appeals reinstated a claim for breach of fiduciary duty under ERISA brought by participants in IBM’s 401(k) plan who suffered losses from their investments in IBM stock

﹢ In so ruling, the Second Circuit became the first circuit court since the Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer to allow such a claim to survive a motion to dismiss


Legal Review


46

Appellate Court Finds Retirement Assets Not Protected in Bankruptcy

﹢ A three-judge panel of the United States Bankruptcy Appellate Court for the Eighth Circuit has ruled that 401(k) and IRA assets acquired by a former spouse in a divorce proceeding are not retirement funds that qualify as exempt from bankruptcy proceedings

﹢ Qualified assets generally are fully shielded from most bankruptcy creditors and IRA-originated assets are shielded up to $1.28 million (indexed for inflation)

﹢ The panel cited as precedent Clark v. Rameker, in which tax-qualified retirement assets inherited by a nonspouse beneficiary were found not to be retirement assets intended for that individual and thus not shielded from creditors in bankruptcy


Legal Review



Global Headlines

48

Half of UK Investors Avoid Risk at All Costs

﹢ Around 42% of UK investors avoid investment risk at all costs and only 6% said their family and friends would describe them as a risk taker, according to an Aegon survey

• The research also found that 56% admit that their risk appetite is low or zero, with respondents preferring lower returns for minimal potential loss

• Reaffirming this, 67% said they would be unlikely to invest any extra money they have into riskier investments, such as stocks

﹢ The survey revealed that fear and uncertainty are the key factors in holding people back from taking increased risk with their investments

• Only 14% said they would be more open to taking greater risk with the knowledge that good investment returns over the long term requires some risk

• Of those who said they are more risk averse now than they were 10 years ago, 31% are nervous about the overall state of the economy, 24% are concerned about another financial crash and 19% incurred financial losses in the last year and are more cautious with their money


Global Headlines


49

UK Contribution Increase Did Not Impact Auto-Enrollment

﹢ According to data from the country’s three top providers, UK’s automatic enrollment regime was not impacted when the minimum contribution was increased in April 2018

• The minimum contribution rose from 2% to 5%, made up of 3% from the employee and 2% from the employer

﹢ Members who opted out remained steady at 6.2% in the three months immediately following the contribution increase, and the proportion of people who stopped contributing rose from 3.3% in the first quarter of 2018 to 3.5% in the second quarter

﹢ In April 2019, the total contribution will rise again to 8% of salary


Global Headlines


50

Poland Enacts Auto-Enrollment Program

﹢ The Employee Capital Plans (PPK) became effective January 1, 2019, with a six-month grace period

﹢ Employers are exempt from providing a PPK if they provide an Employee Pension Program (PPE) to which they contribute at least 3.5% of an employee’s pay and at least 25% of employees participate

﹢ Employers who fall under the PPK rules must contribute at least 1.5% of pay for enrolled employees, and employees must contribute 2% of pay

• Employees ages 18 to 55 are automatically enrolled with the option to opt out; employees ages 55 and older can participate voluntarily

• Employer contributions are not required for employees who stop their contribution payments

• Lifecycle investment funds must be offered


Global Headlines


51

Too Much Choice Found to Paralyze Swedish Pension Savers

﹢ The Dutch think tank Netspar surveyed 2,650 pension savers in Sweden and found that 35% of respondents experienced “choice stress” – when faced with too many options, people’s financial well-being was negatively affected

﹢ The survey also found that when the pension started in 2000, two-thirds of people selected their investments; today almost 50% select the default option

﹢ Researchers suggest that the number of choices should be limited and offered in layers to make choosing easier


Global Headlines


52

Global Headlines

﹢ A new report by the Grattan Institute, “Money in Retirement: More Than Enough,” found that after allowing for inflation, most workers could expect a retirement income of at least 91% of their preretirement income

﹢ The report did acknowledge that the retirement income system is not working for some Australians, particularly lower-income women who rent in Sydney and Melbourne

﹢ In addition, the report makes several controversial recommendations, including eliminating the planned increase in worker contributions from 9.5% to 12%, winding back certain tax breaks and increasing the retirement age to 70

Majority of Australians Will Retire With Enough Money, Except Older

Women Who Rent




Defined Contribution Capabilities

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Defined Contribution Capabilities



55

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