The Partners Circle

The mission of the Partners is to empower all of us to go directly to each other with our expertise. FiduciaryFirst is considered an industry leader and our knowledge and informative blogs can help you gain an understanding about key topics within the industry.

Plan Sponsor Focus Shifts to Retirement Readiness

The ninth annual Plan Sponsor Attitudes Study reveals plan sponsors’ top concerns, as well as information on plan changes and participation rates. Fidelity surveyed 1124 sponsors whose plans had at least 25 participants and $10 million in assets, and start-upsto plans with more than a quarter million in assets. Plan sponsors surveyed used an assortment of record-keepers. The study focused on sponsors that use a plan consultant or financial advisor. It found that a historically high proportion of sponsors, 92%, say they work with an advisor. And while 44% of plan sponsors indicate that they’ve retained their current advisor for four years or less, 22% were looking to make a switch. This was down from 38% reported in 2017. In line with previous years’ results, the report indicates a high level of plan sponsor activity, with more than eight in ten sponsors reporting changes to their plans within the last...
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IRS Tips for Plan Sponsors

As an employer, you’re ultimately responsible for keeping your company’s 401(k) plan in compliance at all times. Your plan document should be reviewed on an annual basis and administered accordingly. The IRS offers useful tips for plan sponsors to help in those efforts. Here are some highlights on their guidance. Understand and verify your adoption agreement options.For pre-approved plans, you may have an adoption agreement that supplements the basic plan document and lists features that may be selected. It’s important to understand this document and specifically what it says about plan eligibility, types and limits of contributions, how contributions are divided among plan participants, vesting and paying benefits. Educate yourself about your service agreement. As a plan sponsor, it’s important to understand what your service agreement does and does not cover. For administrative tasks, it’s imperative to know who will perform these and to make sure that person has the...
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Tax-Advantaged HSAs Can Lead to a Healthier Nest Egg

Recent changes have strengthened a savings tool that was already gaining popularity with retirement plan consultants. Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) were originally created by Congress to help consumers save money tax free to pay for healthcare. In 2018, contribution limits were raised, increasing the utility of these little-known but powerful accounts.   Sounds Similar — But Very Different   While HSAs and FSAs share some similarities, they can serve very different purposes. Retirement plan consultants can help participants boost their retirement savings by showing them an often overlooked benefit to one of these types of accounts. FSAs are employer sponsored and used to save for medical expenses that employees anticipate having during the year. HSAs are individual accounts that can be used for any purpose after age 65. Both allow money to be contributed pre-tax, and distributions are tax-free when used for qualified healthcare expenses....
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Overcoming Myopic Investment Decision-Making: Where Advisor and Analyst Meet

Even when presented with timely and accurate financial information by fiduciary advisors, employees don’t always make the best decisions for themselves when it comes to saving for retirement. When advisors exclusively focus on financial education and fail to address underlying issues of behavioral economics, there’s a greater chance that poorer financial decision-making may occur. Helping employees overcome the cognitive biases that can lead to bad investment decisions increases their chance for success in becoming retirement ready. Short-Term Thinking Myopia, in the realm of financial planning, refers to the tendency to make shortsighted financial decisions at the expense of longer term gains. Studies show that when offered the choice of $100 now or $120 in a month, more people choose the immediate reward. However, if the offer changes to $100 in 12 months or $120 in 13 months, they more often elect the higher payout. One potential explanation for this inconsistency...
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Time’s Up: TDFs and Your Fiduciary Obligations

Target date funds (TDFs) — which rebalance investments to become more conservative as a fixed date approaches — are a convenient way for plan participants to diversify their portfolios and reduce volatility and risk as they approach retirement, making them an increasingly popular choice. However not all TDFs are created equal, and selecting and monitoring them can pose unique challenges for plan sponsors and fiduciary advisors.   TDFs were first introduced in 1994. Ten years ago, just 13% of 401(k) plan participants were invested in TDFs. Today, that number has risen to more than 50%, according to a new report from Vanguard, which also estimates that 77% of Vanguard participants will be invested in a single TDF by 2022.   However, the “automatic” rebalancing feature of TDFs doesn’t supplant the obligation to monitor funds and educate participants. The Department of Labor (DOL) provides guidance on TDFs in the form of...
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3(38) or 3(21): Which Fiduciary Service Is Right For You?

Want to reduce your fiduciary risk as a plan sponsor? A little outside help can yield big reductions in risk. Here’s a way to think through your options. You’re trying to provide the best for the people on your company’s payroll, and you feel good about your qualified retirement plan. But what’s good for the goose — in this case the plan participants — isn’t all sauce for the gander (the company). As the plan sponsor, the company takes on substantial legal and financial liabilities. If you’re listed as the plan administrator, some of those liabilities accrue to you as well. The law suggeststhat any plan sponsor who does not possess the technical knowledge and experience to manage investments consider hiring an advisor. Your choice of advisor can significantly lower your fiduciary risk. Why Hire a Fiduciary? Hiring an outside fiduciary can reduce some or most of that liability by...
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Financial Wellness and Productivity: Alarming Concerns for 401(k) Plan Sponsors

New insights show that if your employees are worried about personal finances — and they are — you’re losing productivity and risking higher turnover. Employees worried about their personal finances are less productive, more distracted and are easier targets for poachers. While none of that is a revelation, a recent nationwide survey showed just how pervasive financial insecurity is in the workforce and how large the losses and potential risks are for employers at every level. When asked what they feel stressed about, 46% of respondents said personal finances were their No. 1 concern. Other familiar stressors paled in comparison — “my job” at 17%, “relationships” at 15% and “health” at just 14%.  If you have a 401(k) plan advisor or retirement planning professionals who work with your employees, that’s a good start, but the study shows the problem — and effective solutions — go much deeper. Who’s at Risk?...
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How Retirement Program Advisors Can Help Close the Retirement Gender Gap

Despite the fact that women tend to live longer, female workers typically have lower retirement account balances than their male counterparts. Many factors may contribute to this disparity, including: lower earnings, greater part-time work and time off for child and eldercare, lower levels of financial literacy, and lower risk/return investment choices. As a result, women can face significant hardships during their retirement years, which they may have to deal with on their own. But is there anything retirement program advisors can do to help reverse this troubling trend? One study attempted to answer this question. EMPOWERing Women Researchers examined the effect of a multimedia education program called Embracing and Promoting Options for Women to Enhance Retirement (EMPOWER) geared toward increasing female employees’ retirement savings by providing educational content and increasing motivation for contribution. Data was collected on 31,000 male and female Wisconsin public sector workers. Over a period of several...
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