Summer 2009
Market Commentary
The equity markets continued to rebound in April and May. Through the end of May, the S&P 500 was up 15.70 percent, while the Russell 2000 was up nearly 19 percent. International markets were even stronger, with the MSCI EAFE index gaining over 26 percent. Since the end of May, markets have struggled to make additional progress. The strength of the markets can be linked to better economic news and reduced anxiety in the financial markets.
The economy appears to be bottoming out, relatively on schedule. The pace of the contraction is slowing with home sales picking up, improving consumer confidence and slowing job losses. In addition, the financial markets appear to be healing.
continueWelcome Reporting Relief for 403(b) Plan Administrators
After the Internal Revenue Service issued final code section 403(b) regulations in 2007, the Department of Labor (DOL) separately published Form 5500 revisions and related final regulations effective for plan years beginning on or after Jan. 1, 2009. Because 403(b) plans have historically been treated as a collection of individual contracts, plan sponsors expressed concern over obtaining financial information about certain pre-2009 contracts and custodial accounts to which the employer is no longer making contributions. In response, the DOL issued Field Assistance Bulletin 2009-02 on July 20, providing much-needed transitional reporting relief for 403(b) plans.
Find out what conditions must be satisfied for a 403(b) plan to be eligible for the relief.
continueMore Sponsors Use IPS
An investment policy statement (IPS) is a useful tool for plan fiduciaries who are responsible for investment management decisions. It can provide a framework for measuring and monitoring the performance of the plan’s investments and may provide some protection for the fiduciary when his or her investment decisions are challenged.
More plan sponsors are recognizing the value of an IPS in describing investment strategy and monitoring methods. In a recent survey, 81 percent of responding sponsors said they have a formal IPS. Of those, nearly 40 percent said theirs was developed by the sponsor or a committee; a consultant or advisor created the IPS for 35 percent of respondents.
Find out how you can develop a policy appropriate for your plan.
continueSponsors List 2009 Priorities
As evidence of continuing employer efforts to ensure that employees take steps to achieve their retirement goals and needs, a recent survey found that 55 percent of employer respondents ranked employees’ understanding of future retirement benefits as their highest priority for 2009. Getting employees to accept accountability for retirement followed closely as the next highest priority (52 percent).
Learn what else the survey revealed about plan sponsors’ priorities for this year.
continueIRS Issues Final 401(k) Regulations on Automatic Contribution Arrangements
On Feb. 24, 2009, the IRS issued final regulations for automatic enrollment arrangements. The regulations also addressed some of the concerns regarding the proposed rules, such as the treatment of rehired employees and the availability of mid-year Eligible Automatic Contribution Arrangements (EACAs).
Become familiar with how these changes can affect your plan.
continueEmployers Facing Business Hardship May Halt 401(k) and 403(b) Safe Harbor Nonelective Contributions
On May 18, 2009, the IRS issued proposed regulations allowing employers experiencing substantial business hardship to reduce or suspend safe harbor contributions mid-year for plans under IRC § 401(k)(12) and Qualified Automatic Contribution Arrangements (QACAs) under IRC § 401(k)(13). The proposed regulations allow nonelective safe harbor contributions to be suspended mid-year under certain conditions without terminating the plan.
Find out the answers to several commonly asked questions regarding this issue.
continuePlan Sponsors Ask…
Q. What can I tell my participants about their retirement accounts during turbulent economic conditions?
Read our advice on what to communicate during times of financial crisis.
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The Mainspring in Motion quarterly newsletter for retirement plan sponsors features market commentary, regulatory and legislative updates, product enhancement announcements and articles on retirement readiness, savings, participant behavior and improving plan effectiveness.
Plan Sponsor Quarterly Calendar
Consult your plan's counsel or tax advisor regarding these and other items that may apply to your plan.
July
Conduct a review of second quarter payroll and plan deposit dates to ensure compliance with the Department of Labor’s rule regarding timely deposit of participant contributions and loan repayments.
Ensure that the plan’s Form 5500 is submitted by July 31, unless an extension of time to file applies (calendar-year plans).
Verify that employees who became eligible for the plan between April 1 and June 30 received and returned an enrollment form. Follow up on forms that were not returned.
August
Submit employee census and payroll data to the plan’s recordkeeper for mid-year compliance testing (calendar-year plans).
Begin preparing for the distribution of the plan’s Summary Annual Report to participants and beneficiaries by September 30, unless a Form 5500 extension of time to file applies (calendar-year plans).
September
Prepare to distribute safe harbor or other notices to employees, and plan for distribution of the notices between October 3 and December 2 (calendar-year plans).
Send a reminder memo or email to participants to encourage them to review and update their beneficiary designations for all of their employee benefit plans.
Distribute the plan’s Summary Annual Report to participants and beneficiaries (calendar-year plans).
