The New Fiduciary Rule’s Important Take Aways
On April 7, 2017, just three days before the original set applicability date, the Department of Labor announced they will be postponing the applicability dates originally stated in the Fiduciary Rule from April 10, 2017 to June 9, 2017, and certain provisions in the exemptions will be further delayed until January 1, 2018. Under this […]
Defining a Standard of Care
In the context of retirement readiness, how do we identify the circumstances under which reasonable caution and prudence must be exercised? The standard of care stems from the 1837 case of Vaughan v Menlove. This case established that the standard of care is dependent on the circumstances, and upon whether the individual proceeded with reasonable […]
Employee Investment Outcomes and the New Fiduciary Standard
When Section 401(k) became a permanent provision of the Internal Revenue Code in 1980, a seismic shift occurred in American workers’ preparation for retirement. The responsibility for contribution and investment decisions shifted from employers to employees. Before 1980, companies that offered a retirement plan were required to fund them. That meant that the employer alone […]
The New Fiduciary Rule—Advisors Who Only Educate Might Put Plans at Risk
At a recent 401(k) summit in Nashville, I was surprised to hear the number of advisors who said they are considering offering only education to participants, so they do not have to comply with the new fiduciary rule. As many now know, under the new fiduciary rule announced by the Department of Labor, anyone who […]
Employees & Short-Term Value
In today’s world of instant gratification, it’s no wonder that workers value short-term benefits the most. According to a worldwide study of more than 10,000 workers conducted by Mercer, a salary increase was preferred over all types of benefits. While saving for retirement may seem to some like saving for a stranger, U.S. workers did rank DC […]
Cash Balance Plans for Larger Tax-Deferred Contributions
Cash Balance Plan: What is it? How does it work? There are two main types of qualified retirement plans: defined contribution (DC) and defined benefit (DB). The maximum annual contribution to a DC plan is $54,000, while the contributions to a DB plan could be in excess of $215,000. This makes DB plans a much […]
Fiduciary Basics – Helping 401(k) Plan Sponsors Understand Fiduciary Status
A fiduciary is defined as a legal or ethical relationship or trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person. How does this relate to 401(k) plans? When a company decides to sponsor a 401(k) plan they must establish a trust account to hold the contributions to […]
Profit Sharing Plans: Better Ways to Use Them and Why
A Profit Sharing Plan is another special type of defined contribution (DC) plan under which employers, rather than employees, are the ones making contributions. After the company makes its annual contribution, the total contributions are then allocated to individual employee accounts, generally using the “comp-to-comp” method, but several other methods are also available. Because the […]
Safe Harbor Plans: Costly When Poorly Designed
A safe harbor provision simply means that you will not violate a statute or regulation as long as certain conditions are met. In other words a free pass for nondiscrimination testing for 401(k) plans. Traditional Safe Harbor Costs In order for 401(k) plans or other qualified plans to enjoy tax preferred status, they must comply […]