Start 2011 on firm fiduciary footing

‘Tis the season for making new year’s resolutions: losing weight, quitting smoking, reducing stress, taking that dream vacation and of course — being a better fiduciary.

Although I can’t offer you a personal trainer, nicotine gum, daily massages or first-class plane tickets, if you’ve resolved that 2011 is the year you’ll be new and improved in meeting your fiduciary responsibilities, you’ve got support.

Mercer has recently released its checklist of New Year’s resolutions that U.S. defined contribution plan sponsors should make now to address investment and plan-design concerns, fulfill fiduciary responsibilities and help participants meet their retirement objectives.

"Investment line ups continue to evolve as plan sponsors work to best meet the needs of participants," says Toni Brown, a partner in Mercer’s investment consulting business.

"For 2011 in particular, sponsors may want to consider offering an inflation hedge option; evaluate spend-down products that seek a balance of growth, capital preservation, and liquidity; and look to October for the results of the Federal government’s study on stable-value wrap contracts," he adds.

Amy Reynolds, a partner in Mercer’s retirement, risk and finance business, adds that "plan sponsors are continuing to evaluate Roth options and other low cost design features while evaluating the impact of recent automation trends. We foresee that 2011 is going to continue to be a challenging year as new disclosure rules will be a key area of focus for sponsors and their record keepers. Looking forward, we expect continued focus by participants and regulators on defined contribution plans. Sponsors need to stay abreast of changes and trends, and respond appropriately."

So, DC plan sponsors, here are the top 10 areas you should resolve to stay attuned to in 2011:

1. Participant fee disclosure. New rules are coming in 2012. Determine what’s required, who’s responsible and how to integrate the new requirements with other plan communications.

2. Fee oversight. Establish a policy for ongoing fee benchmarking. Receive all required disclosures. Document your oversight in a fee policy statement.

3. Stable-value wrap contracts. A joint study by federal regulatory agencies (to be completed by October 2011) will determine whether stable value wrap contracts are exempt from the swap restrictions of Title VII of the Wall Street Reform and Consumer Protection Act (current wraps are grandfathered). Should capacity exist, make increased diversity in your line up a priority in 2011.

4. Inflation hedge option. Consider adding a diversified inflation hedge option to your line up. Evaluate a diversified option versus a Treasury Inflation-Protected Securities (TIPS) option. Near-retirees benefit most from inflation hedging options.

5. Retirement income solutions. New retirement income products and modeling tools continue to hit the market. Plan sponsors should understand the available solutions to determine if one or more are appropriate for their demographics.

6. Participants nearing retirement. Investment performance is critical for near-retirees. Do their investment strategies match expected spend-down needs? Would retirement planning seminars and other assistance reduce financial anxiety (and its drag on productivity)?

7. Roth 401(k) contributions. In tough economic times, consider a low-cost plan enhancement, such as a Roth, that expands financial opportunities for participants.

8. Managed accounts and/or investment advice. Should you offer participants advice or managed accounts (or both)? Should you take advantage of improved access to custom target date funds, which allow tailored glide paths based on your core options?

9. Auto features. "Set it and forget it" doesn’t work for plan sponsors! For example, should auto-enrollment contribution rates be increased? Are vesting and withdrawal provisions still appropriate for your organization?

10. Plan operations. The Internal Revenue Service and Department of Labor are focusing on defined contribution plan compliance and recommend periodic review of plan operations both against the terms of the plan and against governmental requirements.

Any other New Year’s benefits resolutions you’re making? Share them in the comments.

Register or login for access to this item and much more

All Employee Benefit News becomes archived within a week of it being published

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access