This document discusses 401k essentials for 2015, including contribution limits, employee education best practices, enrollment and documentation requirements, and distributions for terminated employees. It also provides an overview of legal and legislative updates such as conflicts of interest with proprietary funds and in-plan Roth conversions. The document concludes with a discussion of important plan features to consider like managed accounts, online tools, and fiduciary support models.

1. 401k Essentials for 2015

2. 401(k)
fundamentals

3. Contributions Limits
Under 50 years of age
$18,000
Over 50 years of age
$18,000
Plus Catch up contribution up to $6,000
Salary deferral plus employer contribution is
limited to $53,000

4. Employee Education
 Education programs work to improve participation and
contribution rates – despite media report
 Long term and ongoing commitment is required by the
company and advisor
 Most 401k sponsors have the best intention of holding
education sessions but day to day concerns of the
business pre-empt action
 Schedule now to support all open enrollment dates

5. Education Case Study
 Education Plan
 Large group meeting regarding 401k plan and benefits
 Individual meetings using interactive tools and visuals
 Results
 Increased active participation rate by 15%
 Converted 56% of eligible, non-contributing members to active
 Increased average deferral rate by 1%
 68.5% are taking full advantage of the employer match
 87% of employees participating in the plan
*Changed plan to operate as Safe Harbor plan design

6. Enrollment & Documentation
 Review HR records to ensure that accurate enrollment
forms are on file for ALL eligible employees
 Changes in contribution rates must be made in writing
 Records for those who decline participation are most
often overlooked but most critical to have on file for a
plan sponsor
 Recent lawsuits and emphasis on retirement readiness
underscore the importance of this documentation

7. Distributions for Terminated
Employees
 Most plans have unnecessary accounts for terminated
employees
 Account values under $1,500 can be paid to participants
without their authorization*
 Account values between $1,500 and $5,000 can be
distributed to an IRA without participant authorization*
 With an ever increasing burden to provide regulatory notices,
accounts for terminated employee are costly to the plan
*Subject to provisions of your plan document

8. Legal & Legislative
update

9. Proprietary Funds
 Conflicts of interest
 May have revenue-sharing
 Company receives money on assets
managed
 Overpriced and underperforming
 Lawsuits
 Gordan v Massachusetts Mutual Life
Insurance Company
 Alan H. Tralins v. JPMorgan Chase & Co.
 Class action against Fidelity

10. Proprietary Funds
 Conflicts of interest
 May have revenue-sharing
 Company receives money on assets
managed
 Overpriced and underperforming
 Lawsuits
 Gordan v Massachusetts Mutual Life
Insurance Company
 Alan H. Tralins v. JPMorgan Chase & Co.
 Class action against Fidelity

11. In-Plan Roth Conversion
 American Taxpayer Relief Act
 Permits participants in pretax 401k and Profit
Sharing accounts to transfer amounts to Roth
account.
 Treated as taxable qualified rollover contribution
 Disbursements from Roth account are paid tax-
free
 Plan Document Changes
 Plan must allow Roth contributions
 In-plan conversions must be allowed by plan
document

12. Plan
document

13. Document Review
 Plan document review should be performed yearly
 Questions to ask when reviewing:
 Are plan operations in line with plan document?
 Has the plan document been updated to reflect
regulatory changes?
 Are there changes that can make the plan more
efficient?
 Auto-Enrollment
 Auto-Escalation
 Safe-Harbor Plan Design
 Employer Contribution and Vesting Schedule
 Roth Contributions

14. Document Restatement
Required by DOL by spring 2016
Incorporates mandatory amendments
from the last 5 years in the document
Opportunity to make other changes

15. Important Plan Features
to consider

16. Managed Account Feature
 Allow a participant’s assets to be allocated
based on market trends and analysis
 Can be used as Qualified Default Investment
Alternative (QDIA)
 Provides added fiduciary support to the plan
 Provides advice and assistance that many
participants crave

17. Online Educational Tools
 Risk tolerance assessment
 Portfolio modeling
 Retirement readiness/Goal tracking
 Social networking integration

18. Fiduciary Support
 3(21) Co-Fiduciary
 Monitors investment lineup
 Directs the trustee when a change is necessary
 Provides support in situations of litigation on funds
and fund lineups they recommend
 3(38) Fiduciary
 Selects and monitors investment lineup
 Automatically makes change when necessary
 Provides support in situations of litigation on funds
and fund lineups they select and monitor

19. Fiduciary Support (Continued)
 3(16) Fiduciary
 Distribution of Required Notices
 Eligibility and Vesting
 Automatic Enrollment Procedures
 Distributions
 Hardship Withdrawals/Plan Loans
 Timing of Deposits
 5500 Review and Signature

20. Department of Labor
audit alert

21. 5500 Filings
 Electronic 5500 filings provide easily searchable data
for the DOL
 Avoid common red flags in your plan’s filing
 Bond amount must be greater than 10% of the plan
assets
 Adopt a Qualified Default Investment Alternative
(QDIA)

22. Required Notices
 Must be delivered to plan beneficiaries 30-60 days before the
beginning of the plan year
 Safe Harbor Design
 Qualified Default Investment Alternative (QDIA)
 Required at least annually from the initial distribution in 8/12
 Participant Fee Disclosure
 Did you take advantage of the DOL permitted delay in
2013?

23. Fee
disclosure

24. Compliance Alert
For attentive plan sponsors, those excessive
payments will be indentified during the process of
the 408(b)(2) disclosures…However, I am
concerned that plan committees will fail to
evaluate and benchmark those payments. If my
fears prove to be well-founded, it will inevitably lead
to litigation. -- Fred Reish, Chair of ERISA practice at Drinker, Biddle & Reath
Source: Plan Sponsor Magazine September 2012

25. What is Reasonable
• Not defined by DOL, ERISA or Fee
Disclosure regulations
• Expenses and quality should be
considered

26. Plan Benchmark
 DOL has provided guidance indicating that a
Benchmarking process based upon an RFP process is
preferred
 Quantitative and Qualitative factors should be considered
 Documentation of a process for plan decisions is critical

27. Improvement
opportunities

28. 401(k) Plans Have Changed
 Fees have come down
 Your plan needs may have changed
 Providers have enhanced services
 Additional Participant Tools are available
 New Protections are available for Plan Fiduciaries

29. 401k Essentials for 2015