Compliance October 31, 2013

House Approves Bill to Delay DOL Fiduciary Rule

October 31, 2013 (PLANSPONSOR.com) – The U.S. House of Representatives has approved a bill that would delay issuance of a new definition of fiduciary by the Department of Labor (DOL).
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According to text of the Retail Investor Protection Act, “the Secretary of Labor shall not prescribe any regulation under the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) defining the circumstances under which an individual is considered a fiduciary until the date that is 60 days after the Securities and Exchange Commission issues a final rule relating to standards of conduct for brokers and dealers pursuant to the second subsection (k) of Section 15 of the Securities Exchange Act of 1934.”

The bill goes on to say the Securities and Exchange Commission (SEC) cannot issue its final rule until it determines whether retail investors are being harmed by different standards for broker/dealers and advisers and whether adopting a uniform fiduciary standard of care for broker/dealers and advisers would adversely impact retail investors’ access to personalized investment advice.

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During a recent speaking engagement, Assistant Secretary of Labor Phyllis Borzi of the DOL’s Employee Benefits Security Administration (EBSA) said the agency is “very close to finishing” a new definition of fiduciary (see “Shutdown Put Delay on Some Regulations”). She assured the audience the EBSA is working closely with the SEC on the regulations.

Text of House bill H.R. 2374 is here.

Benefits October 31, 2013

Employees Need Education About Contribution Limits

October 31, 2013 (PLANSPONSOR.com) – Retirement plan participants need more education about contribution deferral limits, according to a recent survey.
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Preliminary results of the 2013 Mercer Workplace Survey show the average participant believes his tax deferral limit for 2013 is around $8,500 rather than the actual limit of $17,500. The survey also found for those in the 50-and-older age range and nearing retirement, the gap between supposed and accurate knowledge about limits is even more substantial.

In terms of what participants perceived as being their limit and what they annually contributed to their plans because of that perception:

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  • For ages 18 to 34, the perceived limit was $7,631 and the average contribution was $7,535;
  • For ages 35 to 49, the figures were $9,476 and $7,667, respectively;
  • For ages 50 to 64, the figures were $8,304 and $6,673, respectively; and
  • For ages 65 and older, the figures were $9,039 and $7,704, respectively.

According to Mercer, the data not only points to a troubling disconnect between perception and reality, but also creates a false sense of security among participants when it comes to saving for retirement. Although 61% of respondents said they are saving for retirement outside of their 401(k) plans, 34% said they would increase their employee contributions to the tax-deferred maximum limit if they could live the past year over again.

For the survey, online interviews were carried out with 1,506 retirement plan participants between May 28 and June 5. This represented a cross-section of participants currently contributing to a 401(k) plan regardless of balance or those having a balance of $1,000 or more with their current employer, regardless of whether they are currently contributing. A full release of survey findings will be issued in one to two weeks.

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