Prairie Post

Blue Prairie Group is committed to helping our clients – plan sponsors, participants and individuals – achieve their financial goals. These articles will discuss timely and relevant topics such as retirement plans, employee financial education, and wealth management. We hope you enjoy these articles and find them useful!

What’s Reasonable? Rule of Thumb Benchmark for 401k Advisory Fees

Plan sponsors are increasingly aware of their fiduciary responsibility to ensure that their plan only pay “reasonable fees” to their service providers. While commonly used benchmarks on recordkeeping and investment data are readily available, there is far less information on the fees plan sponsors pay to their advisors. The best way for a plan sponsor to benchmark the reasonableness of their advisory fees is to issue a Request for Proposal (RFP). As a quick check, we’ve developed the following grid to help plan sponsors with some quick guidelines on advisory fee data. Click here to read more

Top 12 Biggest Plan Mistakes…and How to Avoid Them

No one likes to make mistakes — especially retirement plan mistakes that can result in costly fines or even litigation. In 2014, the Internal Revenue Service/Department of Labor collected nearly $600 million for plan restorations, penalties and fines. Here’s the DOL break down: 3,928 DOL investigations closed, with Nearly 65 percent resulting in monetary compensation for plans or other corrective actions; and 161 cases referred for litigation. Violations often result from plain oversight (i.e., errors or omissions on the employer’s part) resulting in an audit headache and financial pain. This is why employers must be proactive and vigilant in avoiding [ read more ]

Spread Some Lovin’

Valentine’s Day is a perfect time to spread some lovin’ to your employees by adding to, or improving upon, a matching contribution formula for your retirement savings plan. Just as with other forms of compensation, an employer match keeps you competitive within your industry, while also helping your employees save more for retirement. Retirement industry experts agree the average worker should save 15 percent of their current annual salary to support future retirement. An employer matching program helps meet this need by: Driving Participation – Employees are more likely to enroll in a retirement savings plan when it includes a [ read more ]

Picking the Right Audit Firm Can Minimize Chances of a Plan Audit

In a recent government study on the quality of audit work performed by independent, qualified public accountants with respect to financial statement audits of employee benefit plans, 39 percent of the audits reviewed contained major deficiencies that would lead to rejection of the filing of Form 5500. While it can be tempting to take the easy route and use your current CPA firm for the 401(k) plan audit, it is important to hire a firm with the background, training and ongoing professional development to conduct these audits. There are many resources available to you that can help you make an [ read more ]

What Puts the “Well” in Financial Wellness?

A recent public opinion report found that 86% of those 25 and older believe our country faces a retirement crisis and nearly 75% are concerned about their ability to achieve a successful retirement. Clearly more people need assistance when it comes to planning and saving for their financial future. The good news is that financial wellness programs can help. These programs have proven to improve the financial outlook of employees by helping them take charge of their short-term and long-term financial needs. And luckily, company-sponsored financial wellness programs are gaining in popularity. In fact, a new study found 89% of [ read more ]

Inside atrium of modern office bldg. looking up at modern skyscrapers

Top Four Things Every Plan Sponsor Should Know About TDFs

Ten years ago, target date funds (TDFs) were just another investment option in a defined contribution plan. However, since the Pension Protection Act (PPA) solidified TDFs as a qualified default investment alternative (QDIA) in 2006, they have become the default of choice. If you offer employees target date funds in your plan line-up (or are planning to), here are four things you need to know: It’s a fiduciary duty to conduct target date fund due diligence, just as it is with all funds in your line-up. However TDF due diligence is particularly important since so many participants make a TDF [ read more ]

America Saves Week: Take the Pledge!

February 26 – March 3 is America Saves Week (ASW) and the theme this year is “Making Saving Automatic”. ASW is an opportunity for individuals to assess their savings status and take financial action, and for organizations to promote good savings behavior among employees. Employers whose organizations participate in America Saves Week have seen an increase in employee: Wealth. Productivity and focus. Appreciation, retention and stability. You can join the thousands of organizations that participate and encourage your employees (and yourself) to take the America Saves Pledge to save money, reduce debt and build wealth. It’s easy to participate. Signing [ read more ]

Choose Your Plan Auditor Carefully

Are you happy with your plan auditor? Do you know what qualifications to consider when choosing one? Equally important, do you know a recent study by the U.S. Labor Department’s Employee Benefits Security Administration found major audit deficiencies occurred 39 percent of the time resulting in possible Form 5500 filling rejections? Yes, in review of over 81,000 audits performed by 7,330 audit firms, the mistakes put “$653 billion and 22.5 million plan participants and beneficiaries at risk,” according to the May 2015 DOL report Assessing the Quality of Employee Benefit Plan Audits. The report looked at six different levels, or [ read more ]

Don’t Forget the Must-Do Communications

Ongoing communication with your retirement plan participants can often help boost contributions and retirement readiness. While much of this type of messaging is optional, there are some instances when participant notifications are a necessity and cannot be overlooked. To keep your plan in compliance, make sure you are aware of all communication requirements. The following are some of the instances requiring participant notification as outlined by the Internal Revenue Service in Retirement Plan Participant Notices (and subsequent pages). Required notices may vary by Plan type (401(k), 403(b), etc.), so become familiar with the notices required for your specific plan. Plan [ read more ]

Barn on a Farm in a Prairie

Follow Hardship Distribution Rules to Keep Plan Status

While many employees today understand the importance of retirement readiness, some plan participants may seek a 401(k) hardship distribution to accommodate crucial, more immediate needs. If your retirement plan includes this optional provision, make sure it fulfills all necessary U.S. Internal Revenue Service rules and requirements to maintain your qualified plan status. According to the IRS Do’s and Don’ts of Hardship Distributions, a withdrawal can only be made if the following criteria are met: The 401(k) retirement plan permits a hardship distribution. There is an “immediate and heavy financial need” by the employee and, in some cases, by the employee’s [ read more ]

What’s the Scoop on Lifetime and Income Plan Participation?

Have you heard about lifetime retirement plans and wondered what they are and how they might impact you as a plan sponsor? A recent Institutional Retirement Income Council (IRIC) report examines the (ERISA) Advisory Council’s recommendations for lifetime plans, explains the concept, and addresses some key questions and concerns. With the shift from Defined Benefit to Defined Contribution retirement plans, much of our efforts focus on employee participation, contribution deferral rates, and retirement readiness. However, according to the August 2015 IRIC document, Model Notices and Plan Sponsor Education on Lifetime Plan Participation, employers should now also consider extending to retirees [ read more ]

Retirement? Not Everyone Plans to Stop Working

One in five Americans expect to work forever, or basically until they are unable, according to a recent generational retirement study by Transamerica. This percentage seems incredibly high, yet not entirely unexpected as more people work well into “retirement years” by choice or by necessity. Interestingly, younger and older workers are more likely to report they will work longer for enjoyment reasons, while “workers in their thirties (62 percent), forties (66 percent), and fifties (65 percent) are similarly likely to cite income and benefits-related reasons for working in retirement,” according to the May 2015 Retirement Throughout the Ages: Expectations and [ read more ]

Just in Case: Understand Plan Audits and Procedures

Few, if any, retirement plan sponsors want to face an audit, yet a successful private retirement system necessitates occasional employer audits by the Internal Revenue Service’s Employee Plans (EP) compliance program. Plan oversight is two-prong, with the IRS covering the “qualified status of 401(k) plans” and the DOL overseeing the “fiduciary standards, reporting and disclosure requirements and other rules that do not affect the qualified status of 401(k) plans,” as explained in the IRS 401(k) Resource Guide – Plan Sponsors – What if You are Audited? The Guide states the primary objective of the IRS’ examination program “is to develop [ read more ]

DOL Provides Safe Harbor Annuity Clarification

In 2008, the U.S. Department of Labor amended The Pension Protection Act of 2006 to establish Safe Harbor Rules for the selection of annuity providers for defined contribution plans. The details were intended to provide fiduciaries with clear “safe harbor conditions for the selection and monitoring of annuity providers and annuity contracts for benefit distributions,” according to the DOL’s recent Field Assistance Bulletin No. 2015-02. However, many employers are still unclear on the rules, which has made some plan providers reluctant to offer lifetime annuity income distributions to their employees. “Confusion or lack of clarity regarding the nature and scope [ read more ]

Expanding Family Base Impacts Employee Outlook

Today’s “sandwich” generation is feeling the squeeze from both sides (of the bread) as they try to assist both aging parents and children. Nearly a fourth of the U.S. population “have one or two parents age 65 or older and are either raising a young child or have provided financial assistance to a grown child in the preceding 12 months,” according to the Pew Research Center’s May 2015 report: Family Support in Graying Societies. This sandwich phenomenon is impacting the workforce, economy, government programs (particularly, Social Security), and the overall structure of today’s families. For employers, the impact can be [ read more ]

What’s in a Name?

Retirement. The word invokes a variety of responses from people, but quite often the reactions are negative. Little wonder, since dictionaries define retire with negative sentiments such as retreat, recede, go to bed, withdraw, to stop or end something because of age or injury. When people hear the word “retirement”, they most often associate it with “old”, according to Financial Times. In the December 2014 How Do You Feel When You Hear the Word “Retirement”? blog, the company shared results from an informal survey that asked people to consider the word retirement. In addition to old, respondents also mentioned scared, [ read more ]

“Buying” Retirement

Most people make some type of purchase every day, but how often does anyone consider “buying” retirement? An emphasis on “purchasing” a retirement future is at the crux of the 40-plus-page Savings Fitness: A Guide to Your Money and Your Financial Future booklet by the DOL and Certified Financial Planner Board of Standards Inc. (CRP Board). The guide features colorful graphics, a straightforward yet encouraging and conversational tone, plus useful worksheets to explain the key steps to obtaining retirement readiness. To meet varying needs, the guide can be printed or downloaded, and interactive worksheets are also available online. Without being [ read more ]

Joint Planning Improves Retirement Readiness and Happiness

Helping employees prepare for retirement is an obvious goal for many plan sponsors, but did you ever consider the role your efforts can play with helping couples improve their financial communication? Money issues are often a source of friction for many couples as people struggle to handle current, near-term and future financial obligations. Yet, a recent Fidelity Investments report finds that “planning for the future goes a long way to achieving greater peace of mind and alignment as a couple.” The 2015 Fidelity Investments Couples Retirement Study looked at retirement expectations and preparedness among 1,051 couples. While some people were [ read more ]