What Now for Brokerage Accounts in 401(k)s?

Now that the Department of Labor has released their fiduciary regulations (DOL fact sheet), everyone across the 401(k) landscape is working to digest the impact. The new rules are being phased in beginning in April of 2017 with full compliance required by January 1, 2018.  At that point, anyone providing retirement investment advice to 401(k) plans or IRAs has to abide by a fiduciary standard.

Even before the final regulations were released in April, a major broker dealer announced in January that all 401(k) plans currently using them for self-directed brokerage accounts will need to move to an approved record-keeping platform by September. This announcement is expected to impact more than 6,000 retirement plans.

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Safe Harbor is Great, but…

Safe Harbor (SH) plans are popular for 3 reasons:

1.  If your client has ever complained about getting a check back at the end of the year you know how frustrating it is to not be able to defer the full $18,000 a year or $24,000 if over 50 years old. SH plans ensure all participants are able to defer up to the max allowable each year (no non-discrimination testing). 
2.  Generally, SH eliminates any possibility of the company having to make an unexpected mandatory contribution due to top heavy issues with the plan. 
3. SH formulas and vesting are predetermined and, therefore, less complicated.  

But SH plans also restrict some of the mid-year changes a plan might want to make..  

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New Forgiveness for Auto-Enroll Errors, But With a Catch

Last month we talked about some of the knowledge gaps with an auto-enrollment plan.  

The good news is the IRS eased the penalties for automatic enrollment errors in April, but there is a catch in order to qualify*. 
Here’s What You Need to Know

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The Automatic Enrollment Knowledge Gap

Study after study proves automatic enrollment plans drastically increase the number of eligible employees participating in the retirement plan. But, while many plan sponsors are familiar with the benefits of auto enrollment, the majority will have limited experience implementing this feature into a plan. 
As an advisor and retirement plan professional, this knowledge gap creates..

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Hardship Distributions from 401(k) Plans

It's four o'clock on Friday afternoon and there's a knock on the door of the Human Resource Manager's office. It's Zachary, a fairly new employee who entered the company's 401(k) plan last month. He's been deferring $40 a week into the plan, which means he has accumulated $160 by now. But last night his cable TV was shut off because he couldn't afford to pay the bill and from his 23-year-old point of view, retirement seems like a long way off.

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