JM Pension, and Your Retirement Plan: New and Improved!

Welcome to the latest version of our periodic newsletter, JM Pension Points! So far in 2015, JM Pension has undergone several exciting changes, including moving into a new office space, adding new members to our team, joining a new professional organization (see announcement), and upgrading several of our internal processes, including the format of this newsletter, which will now come to you in this e-mail format. All of these changes have been a tremendous opportunity for us to review, evaluate, and improve upon our infrastructure so that we can bring our clients and business partners even better service.

Over the next several months, we’ll be releasing a series of “white-paper” style e-newsletters that focus on a topic that presents a similar opportunity for Retirement Plan Sponsors.

This topic is the requirement for all Defined Contribution (for example, 401(k) and Profit Sharing Plans) Retirement Plans that utilize a Plan Document pre-approved by IRS to restate that document in full no later than April 30th, 2016. We first announced this requirement in late 2014, and the majority of defined contribution plan sponsors, including JM Pension clients, are affected. Some plans have already been restated, many more plans will be completing their restatement in the remainder of 2015, and still others may choose to restate their plan in early 2016.

We want to use this series of newsletters as a forum to ensure that all interested parties in a plan that must be restated are not only aware of the requirement, but understand that it represents the perfect time for your team – business owners, advisors, HR staff, etc. – to better understand their plan, review the objectives of offering the plan, consider new features, and incorporate changes in one fell swoop.

One part of this process may be to “benchmark” the features offered in your Plan against those offered in other employer plans. Recently the 401khelpcenter published a compilation of results from retirement plan studies, including some interesting statistics that may be considered as you evaluate your plan.

  • Even though Roth 401(k) deferrals are a relatively new option for plans (offered first in 2006), 51% of 401(k) Plans now offer the feature.  The most frequent reason cited for offering the feature was to maintain a competitive plan.
  • Participant Loans and In-service withdrawals for financial hardship are optional features in a Plan.  Many small employers shy away from offering these features, citing possible Fiduciary exposure, and administrative burden.  However, 83% of plans now offer a hardship withdrawal feature and 90% offer a loan feature.
  • A plan restatement is a great time to review the investment offerings in your Plan, ensuring that prudent retirement savings vehicles are available to participants.  On average, plans offer 19 investment options to participants.
  • Nearly 70% of Plans engage an investment advisor to assist with Fiduciary responsibilities, such as monitoring plan investment offerings.
  • An increasing number of Plans are offering a QDIA (Qualified Default Investment Alternative).  This is a default investment for participants who do not make their own election, that meets certain DOL requirements as a prudent retirement investment.  In the past, this has been most popular with automatic enrollment plans – 77% of these plans offer QDIA, according to Deloitte – but due to an added layer of protection for Fiduciaries that a QDIA offers, a growing number of plans with non-elective contributions are adopting this feature.

If we have not already, we will be reaching out to you to review your existing plan to be sure the plan features you offer meet your objectives and maximize employee satisfaction.

Future issues of our newsletter will focus on specific issues brought about by Pension Protection Act. In our upcoming issue, we will discuss the effect of PPA on the use of any unallocated forfeiture monies that your plan may have.

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