February 2, 2017

With Change on the Horizon, Segal's Advice for DC Plan Sponsors in 2017

With a new president and full Republican control of Congress, change is in the air and on everyone’s mind. For sponsors of defined contribution (DC) pension and savings plans, 2017 is a chance to proactively focus on certain issues that might need attention before Congress turns its attention to tax reform, which likely will include new laws affecting DC plans.

Segal recommends plan sponsors focus on the following five important issues this year:

  1. Protecting Plan Data  In light of the ever increasing number of data breaches, DC plan sponsors should take steps ensure that DC plan data is adequately secured. This includes contractual arrangements with all service providers that handle plan data. In addition, sponsors should consider obtaining adequate cyber liability insurance to protect the plan in the event the plan’s data is, nonetheless, successfully hacked.
  2. Controlling Fees  Continuing “excessive fee” litigation against corporate and higher education DC plans makes this a front-burner issue for every DC plan sponsor. The reasonableness of a fee can differ for a variety of reasons — the amount of assets under management, the number of participants in the plan, and the extent or complexity of the services provided, to name just a few. Sponsors need a prudent process to ensure that they determine the reasonableness of fees on a regular and continuing basis, and through a variety of methods, including benchmarking and periodic “requests for proposals.” It is also critical to have detailed documentation of the process to substantiate the results.
  3. Helping Participants Maximize Benefits  Sponsors of participant-directed plans need to closely oversee their plans’ investment offerings to ensure participants are not being disadvantaged by too many or too few investment choices, or choices that are not aligned with participant demographics. These sponsors also may want to consider how best to provide investment education to participants to help them avoid making sub-optimal choices.
  4. Finding “Lost” Participants  Over time, it is not uncommon for DC plan sponsors to lose touch with participants (and beneficiaries) who still have accounts in the plan, but who no longer appear to be actively employed or who are eligible for benefits but have not claimed them. For ERISA plans, the Department of Labor has made it clear that finding lost participants is an enforcement priority. Plan sponsors should have a procedure in place to search for/contact participants on a regular basis, and particularly when the participants have not claimed benefits by the plan’s retirement age, or when an incorrect or missing address is discovered. Online tools can help plan sponsors and their record keepers find “missing” owners of DC accounts. In order to comply with required minimum distribution rules under the Internal Revenue Code, plan sponsors should have a procedure in place to search for/contact participants who have reached their required beginning date (generally, age 70½), and search for those whose addresses are incorrect or missing. Online tools can help plan sponsors and their record keepers find “missing” owners of DC accounts.
  5. Monitoring Uncashed Checks  Plan sponsors should be sure to monitor the amount and treatment of uncashed checks. This includes identifying who benefits from the “float,” and how such amounts are ultimately treated.

Of course, plan sponsors should take steps every year to ensure that their DC plans are being operated in accordance with the terms of their documents and in compliance with applicable law. This includes, for example, timely amending plan documents for discretionary changes in plan design and for changes required by law or agency guidance, performing any necessary nondiscrimination testing, and providing any required notices to participants. (Refer to our 2017 Reporting & Disclosure Calendar for Multiemployer Plans for a list of notices and disclosures that might be required for your plan this year.) This includes, for example, timely amending plan documents for discretionary changes in plan design and for changes required by law or agency guidance, and providing required notices to participants who receive a distribution, such as the rollover notice and Form 1099-R.

As always, Segal will follow legislative and regulatory developments closely so we can give you timely updates on key issues that may impact your DC plan.

With a new president and full Republican control of Congress, change is in the air and on everyone’s mind. For sponsors of defined contribution (DC) pension and savings plans, 2017 is a chance to proactively focus on certain issues that might need attention before Congress turns its attention to tax reform, which likely will include new laws affecting DC plans.

Segal recommends plan sponsors focus on the following five important issues this year:

  1. Protecting Plan Data  In light of the ever increasing number of data breaches, DC plan sponsors should take steps ensure that DC plan data is adequately secured. This includes contractual arrangements with all service providers that handle plan data. In addition, sponsors should consider obtaining adequate cyber liability insurance to protect the plan in the event the plan’s data is, nonetheless, successfully hacked.
  2. Controlling Fees  Continuing “excessive fee” litigation against corporate and higher education DC plans makes this a front-burner issue for every DC plan sponsor. The reasonableness of a fee can differ for a variety of reasons — the amount of assets under management, the number of participants in the plan, and the extent or complexity of the services provided, to name just a few. Sponsors need a prudent process to ensure that they determine the reasonableness of fees on a regular and continuing basis, and through a variety of methods, including benchmarking and periodic “requests for proposals.” It is also critical to have detailed documentation of the process to substantiate the results.
  3. Helping Participants Maximize Benefits  Sponsors of participant-directed plans need to closely oversee their plans’ investment offerings to ensure participants are not being disadvantaged by too many or too few investment choices, or choices that are not aligned with participant demographics. These sponsors also may want to consider how best to provide investment education to participants to help them avoid making sub-optimal choices.
  4. Finding “Lost” Participants  Over time, it is not uncommon for DC plan sponsors to lose touch with participants (and beneficiaries) who still have accounts in the plan, but who no longer appear to be actively employed or who are eligible for benefits but have not claimed them. For ERISA plans, the Department of Labor has made it clear that finding lost participants is an enforcement priority. Plan sponsors should have a procedure in place to search for/contact participants on a regular basis, and particularly when the participants have not claimed benefits by the plan’s retirement age, or when an incorrect or missing address is discovered. Online tools can help plan sponsors and their record keepers find “missing” owners of DC accounts.
  5. Monitoring Uncashed Checks  Plan sponsors should be sure to monitor the amount and treatment of uncashed checks. This includes identifying who benefits from the “float,” and how such amounts are ultimately treated.

Of course, plan sponsors should take steps every year to ensure that their DC plans are being operated in accordance with the terms of their documents and in compliance with applicable law. This includes, for example, timely amending plan documents for discretionary changes in plan design and for changes required by law or agency guidance, performing any necessary nondiscrimination testing, and providing any required notices to participants. (Refer to our 2017 Reporting & Disclosure Calendar for Staff Plans for a list of notices and disclosures that might be required for your plan this year.) This includes, for example, timely amending plan documents for discretionary changes in plan design and for changes required by law or agency guidance, and providing required notices to participants who receive a distribution, such as the rollover notice and Form 1099-R.

As always, Segal will follow legislative and regulatory developments closely so we can give you timely updates on key issues that may impact your DC plan.

With a new president and full Republican control of Congress, change is in the air and on everyone’s mind. For sponsors of defined contribution (DC) pension and savings plans, 2017 is a chance to proactively focus on certain issues that might need attention before Congress turns its attention to tax reform, which likely will include new laws affecting DC plans.

Segal recommends plan sponsors focus on the following five important issues this year:

  1. Protecting Plan Data  In light of the ever increasing number of data breaches, DC plan sponsors should take steps ensure that DC plan data is adequately secured. This includes contractual arrangements with all service providers that handle plan data. In addition, sponsors should consider obtaining adequate cyber liability insurance to protect the plan in the event the plan’s data is, nonetheless, successfully hacked.
  2. Controlling Fees  Continuing “excessive fee” litigation against corporate and higher education DC plans makes this a front-burner issue for every DC plan sponsor. The reasonableness of a fee can differ for a variety of reasons — the amount of assets under management, the number of participants in the plan, and the extent or complexity of the services provided, to name just a few. Sponsors need a prudent process to ensure that they determine the reasonableness of fees on a regular and continuing basis, and through a variety of methods, including benchmarking and periodic “requests for proposals.” It is also critical to have detailed documentation of the process to substantiate the results.
  3. Helping Participants Maximize Benefits  Sponsors of participant-directed plans need to closely oversee their plans’ investment offerings to ensure participants are not being disadvantaged by too many or too few investment choices, or choices that are not aligned with participant demographics. These sponsors also may want to consider how best to provide investment education to participants to help them avoid making sub-optimal choices.
  4. Finding “Lost” Participants  Over time, it is not uncommon for DC plan sponsors to lose touch with participants (and beneficiaries) who still have accounts in the plan, but who no longer appear to be actively employed or who are eligible for benefits but have not claimed them. In order to comply with required minimum distribution rules under the Internal Revenue Code, plan sponsors should have a procedure in place to search for/contact participants who have reached their required beginning date (generally, age 70½), and search for those whose addresses are incorrect or missing. Online tools can help plan sponsors and their record keepers find “missing” owners of DC accounts.
  5. Monitoring Uncashed Checks  Plan sponsors should be sure to monitor the amount and treatment of uncashed checks. This includes identifying who benefits from the “float,” and how such amounts are ultimately treated.

Of course, plan sponsors should take steps every year to ensure that their DC plans are being operated in accordance with the terms of their documents and in compliance with applicable law. This includes, for example, timely amending plan documents for discretionary changes in plan design and for changes required by law or agency guidance, and providing required notices to participants who receive a distribution, such as the rollover notice and Form 1099-R.

As always, Segal will follow legislative and regulatory developments closely so we can give you timely updates on key issues that may impact your DC plan.

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Richard Reed

Richard Reed

VP, National Multiemployer Defined Contribution Practice Director

Richard Reed

Richard Reed

VP, Defined Contribution Practice Director

Wendy Carter

Wendy Carter

VP, National Public Sector Defined Contribution Practice Director