The 2016 U.S. general election was an unusually dramatic event for investors, most of whom were expecting the Democrats to hold the White House. Investors reacted favorably to the election results, with the S&P 500 closing at a new record high on November 22, and continuing to advance through the end of the quarter. Read the Q4 Retirement Market Recap to learn more about the impact of the 2016 election. Also included is an update on litigation targeting non-profit retirement plans. If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (800) 388-1963 or email us at hbs@hanys.org.

Understanding your retirement plan’s fees is not only a good practice; it’s a fiduciary requirement as prescribed by the U.S. Department of Labor (DOL) under the Employee Retirement Income Security Act (ERISA). The traditional enforcement mechanism has been DOL plan audits. More recently, high-profile litigation has driven plan sponsors to evaluate their plan fees. These fees can be grouped into several categories: record keeping, administrative, legal, plan advisory, investment, and education and communication. The principal reason fees have been thrust into the limelight is that plan participants often bear most, if not all of the cost of running the plan. This article does not discuss how to determine if fees are reasonable, but instead explores a relatively new debate over which fee assessment methodology is fairer. Since DOL has been silent on this issue, it affords the plan sponsor the opportunity to determine the most appropriate structure for their plan based on their demo...

The 2016 Employee Benefits survey helped call to attention the increasingly complex circumstances under which employee benefit plans are constructed. The popularity of wellness programs certainly shows a direct correlation between the health and welfare of employees and cost of their care. Most respondents said their organization offers a wellness program (74%), with the most popular methods including: flu shots; smoking cessation; and a health risk assessment. If wellness helps reduce the risk of heart attack, stroke, diabetes, hypertension, and other serious conditions, then the hope is that it will result in fewer medical claims. Download our  2016 Employee Benefits Survey Report  and the  Employee Benefit Survey Webinar Presentation Recording  to understand what these results mean to you as an employer, and what challenges and risks you may face when attempting to offer a competitive benefits package under the Affordable Care Act. If you have any questions, or wo...

1. Which employers can offer a 403(b) plan? Public education organizations such as public elementary and high schools, state colleges and universities, and boards of education. 501(c)(3) nonprofit organizations such as private schools, research facilities, private hospitals, charities, social welfare agencies, healthcare organizations, and religious institutions. Grandfathered Indian tribal governments. Certain religious ministers of a church or related religious organizations. 2. Which employers can offer a 401(k) plan? Almost any type of company may offer a 401(k) plan. Most private, for-profit companies are eligible.  Many tax-exempt, non-profit organizations have a choice between sponsoring a 401(k), a 403(b), or both. 3. How are 401(k) and 403(b) plans similar? Have the same 402(g) elective deferral contribution limits. For 2016, elective deferrals cannot exceed $18,000.  Allow the additional catch-up contribution for employees over age 50. For 2016, the maximum catch-up ...

1. What are safe harbor plans? Safe harbor plans are retirement plans that generally satisfy the non-discrimination rules for elective deferrals and employer matching contributions and therefore are appealing to organizations that are at risk of failing the ADP and ACP tests (see below). Safe harbor plans can be offered with the same flexible features as traditional retirement plans, including eligibility, participant loans, and distributions. However, employers must satisfy certain contribution, vesting, and notice requirements and employers may not apply allocation conditions to safe harbor contributions (e.g., last day of employment requirement, 1,000 hours in the year requirement, etc.). 2. What is non-discrimination testing? Generally, the U.S. Government wants to ensure that plans do not favor highly compensated employees (HCEs) over non-highly compensated employees (NHCEs). The government established required compliance tests to verify all employees have fair representation in a...

1. What is a Qualified Default Investment Alternative (QDIA)? The Pension Protection Act of 2006 (PPA) encouraged employers to adopt automatic enrollment features for their participant‐directed plans by providing a new type of fiduciary liability relief for “default investments,” or Qualified Default Investment Alternatives (QDIAs). A QDIA is used when a participant fails to make his or her own election. An investment must have specific qualifications to be considered a QDIA. Importantly, a QDIA’s asset allocation strategy need only take into account participant age, and does not need to consider an individual participant’s risk tolerance or other investment assets. One of four types of allowable QDIA’s, Target Date Funds (TDFs) were the QDIA in 95% of retirement plans in 2015 (Source: Vanguard, 2016). 2. What due diligence should plan fiduciaries perform when choosing a TDF? Target Date Funds were among the four types of investments given QDIA status in 2006 by the PPA. Plan fiduciari...

1. What is an Automatic Enrollment Arrangement? Traditionally, defined contribution retirement plans have required employees to affirmatively choose to save money in the plan through salary deferral. Today’s plans that adopt automatic enrollment are encouraging employees to save by making salary deferral the default, requiring them to opt-out or choose not to contribute to the plan 2. What are the different types of Automatic Enrollment Arrangements? Arrangement Type Features – Must be stated in the Plan Document and timely communicated to employees Basic Automatic Enrollment Employees will be auto enrolled unless they opt-out. Specifies the percentage of an employee’s wages that will be automatically deducted. Employees may choose not to withhold salary deferrals, or to elect a different percentage to be withheld. Eligible Automatic Contribution Arrangement Similar to the Basic Automatic Enrollment, but has specific notice requirements. An EACA can allow automatically enrolled partic...