Participants March 15, 2016

2015 Lightest Trading Year on Record for DC Plans

Aon Hewitt attributes this, in part, to the prevalence of target-date funds in DC plans.
Reported by

According to the Aon Hewitt 401(k) Index, 2015 was the lightest trading year on record for participants in defined contribution (DC) plans.

Overall, 1.52% of balances were transferred in 2015—well below the historical average of 2.88%. There were 39 days of above-normal daily transfer activity in 2015. The number of above-normal days in 2015 (39) is in line with the average number of above-normal days over the past five years (35) and past 10 years (35), Aon Hewitt says.

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Part of the light trading activity can be explained by the prevalence of target-date funds (TDFs), which are now the largest asset class in the 401(k) Index. As of year-end 2015, target-date funds represented 23.1% of total assets, slightly edging out Large U.S. Equity (22.7%).

When participants made trades, they tended to favor fixed income funds over equity instruments. The number of fixed income-oriented days was 139, compared to 109 for equity-oriented days. GIC/stable value funds received the most inflows (41%) while the majority of outflows came from TDFs (37%) and company stock (30%).

However, TDFs received the most contributions in 2015 (42% or $498 million).

After reflecting contributions, trades, fund changes, and market activity, participants ended the year with 65.4% in equities—a decrease from 66.4% of assets invested in equities at the end of 2014.

More information is here.

Compliance March 15, 2016

Applied Technology Systems Ordered to Pay Back Retirement Plan

The sponsor used plan assets for non-plan purposes.
Reported by

A plan fiduciary has been ordered to restore $111,331.71 to the Applied Technology Systems Inc. Retirement Plan.

The Department of Labor (DOL) had previously filed a lawsuit for Clark V. Hayes’ failure to segregate and remit employee contributions to the plan in violation of the Employee Retirement Income Security Act (ERISA). Hayes is a fiduciary to the plan. A default judgment was entered in that suit in July 2015.

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According to the DOL, Hayes subsequently improperly transferred $210,662.18 of the plan’s assets from a plan account to an account in the name of the company and then used $98,581.75 of the amount for non-plan purposes. In order to protect the remaining assets of the plan, a default judgment signed September 17, 2015, appointed an independent fiduciary to take control of the assets held in the company account.

Now, a new judgment orders Hayes to restore $111,331.71 to the plan. This amount represents the improperly transferred plan assets that the independent fiduciary could not recover and lost opportunity costs. In addition, the judgment bars Hayes and the company from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan in the future.

The court’s judgment can be viewed here.

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