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MARCH RETIREMENT PLAN NEWSLETTER

DEPARTMENT OF LABOR ISSUES RELIEF GUIDANCE FOR VICTIMS OF CALIFORNIA WILDFIRES

Department of Labor Issues Relief Guidance

The U.S. Department of Labor (DOL) recently issued benefit plan guidance and relief for plans and participants affected by the 2018 California Wildfires.  The DOL recognizes that plan sponsors and participants may be affected in their ability to achieve compliance with various regulatory requirements.  The guidance generally applies to all parties involved in employee benefit plans located in areas identified by FEMA as disaster areas, listed here:  www.fema.gov/disasters. 

The guidance provides relief from procedures related to plan loans and loan repayment, distributions, contributions and blackout notices.  In general, the DOL will not take enforcement actions if plans follow the guiding principle to act reasonably, prudently and in the best interests of workers and families who rely on the plans for their economic well-being. 

Specific guidance is offered in certain areas:

  • Loans and Distributions: Plan sponsors must make a good faith effort to follow procedural requirements under the plan, but the DOL will not assist with requirements and if unable, make a reasonable attempt to assemble any missing documentation as soon as practicable.
  • Participant Contributions and Loan Repayments: The DOL recognizes that some employers in these disaster areas may not be able to forward amounts withheld from employee wages within prescribed timeframes.  Employers are required to act reasonably, prudently and in the interest of employees and comply with the regulations as soon as practicable.  The DOL will not take enforcement action if timelines were not met solely due to the 2018 California Wildfires, in the FEMA-identified areas. 
  • Blackout Notices: Generally, 30 days’ advance notice is required when a participant’s rights under a plan will be temporarily suspended, limited or restricted due to a blackout period.  The DOL regulations provide an exception to this requirement when the inability to provide notice within the required timeframe is due to events beyond the plan sponsor’s or fiduciary’s control. 

The full DOL fact sheet can be found here.  Your advisor is available to answer any questions you may have or help you determine practical approaches to meeting fiduciary duties and requirements. 

 

About the Author,Bill Tugaw

Bill specializes in public sector 457(b) deferred compensation, 403(b) and 401(a) defined contribution plan consulting. He is a faculty instructor for the International Foundation of Employee Benefit Plans (IFEBP) on Public Sector 457(b), 401(a) and 403(b) plans.  Bill earned a Bachelor of Science degree from the W.P. Carey School of Business at Arizona State University and is co-author of two books: Deferred Compensation / Defined Contribution: New Rules / New Game for Public and Private Plans and Defined Contribution Decisions: The Education Challenge.

VISUALIZE RETIREMENT | WHAT ARE YOUR PARTICIPANTS SAVING FOR?

All too often, retirement planning success is measured purely by financial metrics: savings amounts (15 percent per year), income replacement ratios (75 percent of preretirement income), or withdrawal strategies (4 percent per year). And the most critical part of planning for retirement is forgotten: the plan itself.

 

Put another way: how can an employee know how much money they’re going to need in retirement if they don’t know what they’re saving for?

74% of 50-59-year-olds have made a serious effort to plan for financial aspects of retirement.

Only 35% of 50-59-year-olds have made a serious effort to prepare for the emotional aspects of retirement.

Visualize Retirement addresses the one planning need that many pre-retirees don’t even know they have: preparing for the nonfinancial side of retirement.

 Three key areas that studies and actual retiree responses, indicate are key drivers of happiness in retirement are:

1. LIFESTYLE: how participants will spend their time in retirement (family, leisure, travel, work, etc.).

Workers’ Vision for Retirement:

  1. 70% want to travel
  2. 57% want to spend time with family and friends
  3. 50% want to pursue hobbies
  4. 30% say they want to work

 

2. HEALTH CARE: how participants want to give and receive needed care.

Concern About Personal Events:

Concern About Personal Events Chart

 

3. MEANING: how participants will create a sense of purpose fulfilment.

Following almost 1,000 people, a study found that people with “high purpose” were:

  • 4x Less Likely to be afflicted with Alzheimer’s
  • Less Likely to develop mild cognitive impairment
  • Less Likely to develop disabilities or die young

 

 Benefits for Plan Sponsors

Workforce Management Flexibility:

  • Large amounts of time, money and resources go to offer and maintain benefits programs that help prepare employees for the next phase of their lives (retirement plans, company matching money, physical/financial wellness programs, healthy incentive programs).
  • What happens when the employee – due to a lack of emotional and psychological preparedness – doesn’t end up retiring?
  • That backlog can create recruitment and retention issues – as younger talent may seek opportunities elsewhere if A) there is no “foot in the door” position open, or B) they see minimal opportunities to advance internally.

 

Food for thought: Even if widespread workforce management issues are not prevalent, consider the type of employee that may have a difficult time moving on: the “career-minded executive” whose identity is wrapped up in their achievements and stature within the organization.

Long-term Cost Mitigation:

  • As a workforce’s age and tenure increase, so do the costs related to keeping that employee
  • An aging demographic – many of whom may not be emotionally prepared to retire – could impact organizational costs such as increased health care, payroll, or worker’s compensation.

To learn more about the Visualize Retirement program and plan sponsor and participant resources associated with it, please contact your plan advisor. The monthly participant memo companion piece to this newsletter is the Visualize Retirement workbook that helps participants visualize their retirement and define their purpose in retirement.

HEY JOEL!

Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.

Hey Joel,

My client wants to conduct an RFP for an ERISA attorney, what are important questions they should include? – Questioning the Expert

Hey Questioning,

While it is a somewhat unusual step to formally RFP for an ERISA counsel search, it can be a good exercise to ensure your client finds the best fit for their organization. Note, ERISA counsel typically does act in a fiduciary capacity in providing legal advice, so selection of ERISA counsel would likely not engender the same fiduciary scope as selection of an advisor, record-keeper or TPA. Fees, if paid out of plan assets, have to be reasonable, but that can be difficult to determine as legal fees can have an incredible variance.

All that said, here are a few excellent questions to assist the client in identifying ERISA counsel who will be a good fit:

  • Do you require a retainer? If so, what is the required amount? Does it need to be replenished on a regular basis, or is it just an initial engagement requirement?
  • What is your hourly fee?
  • Do you provide project-based fees? If so…
    • What falls into the scope of a project?
    • How are scopes determined?
    • How are scopes tracked to ensure the original quote is met?
  • What services do you anticipate will be included on an ongoing basis on an annual basis? What do you project the cost to be?
  • What issues do you commonly see arise with plans of similar size and design that require legal assistance? Please provide an estimate of cost for legal work for each.
  • Who in your firm will provide the work on our engagement? Please list all attorneys, paralegals, and anyone else whose time might be billed to us with their bio and their potential/anticipated role on our engagement.
  • Please provide three referrals for three clients who sponsor plans of a similar size and complexity.

The Expert,

Joel Shapiro

 

About Joel Shapiro, JD, LLM

As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.

PARTICIPANT CORNER: VISUALIZE RETIREMENT WORKBOOK

Visualize Retirement Image

This month’s employee memo is from our partner, T. Rowe Price, and gives participants a questionnaire so they can determine their priorities for retirement. Download the memo from your Fiduciary Briefcase at fiduciarybriefcase.com and distribute to your participants. Please see an excerpt below.

Retirement planning is both a financial and nonfinancial process. You may have received financial resources from your employer or financial advisor. But putting money aside now for a future date may be more meaningful to you if you have a good idea of what you’re saving for. This workbook is intended to help you visualize your retirement.

Retirees defined a personal retirement vision as follows¹: 50% said, “Working with my spouse/partner to define what we want in retirement”; 46 percent said, “creating a picture of what my retirement lifestyle could be”; 42 percent said, “defining how I would like to receive required health care in retirement”; and 32 percent said, “defining my purpose in retirement.”

 

1. Rank this list in the order of who you spend the most time with today. (1=most)

  •  Family/Household
  • Friends
  • Work/Former Work Colleagues
  • Social Groups (Clubs, Sports, Worship)
  • Neighbors/Community/Volunteerism
  • Other:

2. Now, reorder this list based on who you think you will spend the most time with in retirement.

  • Family/Household
  • Friends
  • Work/Former Work Colleagues
  • Social Groups (Clubs, Sports, Worship)
  • Neighbors/Community/Volunteerism
  • Other:

3. Who will be on your wellness support team in retirement, meaning who will provide you with care if needed?

  • Spouse/Partner
  • Siblings
  • Children
  • Other family members
  • Friends
  • Other:

4. Whose wellness support team do you anticipate being on, meaning, to whom will you provide care if needed?

  • Spouse/Partner
  • Siblings
  • Children
  • Other family members
  • Friends
  • Other:

Next Step: What can you do today to ensure you have the social and support network you will need in retirement?

5. Rank this list in the order of how you spend your time now (1=most)

  • Work
  • Leisure/Fun Activities
  • Physical Activities/ Exercise
  • Kids/Parents/Grandkids
  • Pets
  • Social
  • Learning/Education
  • Religious/Spiritual
  • Travel
  • Other:

6. Now, reorder this list based on how you plan to spend your time in retirement.

  • Work
  • Leisure/Fun Activities
  • Physical Activities/ Exercise
  • Kids/Parents/Grandkids
  • Pets
  • Social
  • Learning/Education
  • Religious/Spiritual
  • Travel
  • Other:

7. What activities will you pursue in order to have a vibrant retirement? (choose all that apply)

  • Exercise Regularly
  • Eat Well
  • Manage Your Weight
  • Be Proactive About Preventative Care With Doctors
  • Adopt a Positive Mindset
  • Learn New Things to Keep Your Mind Sharp
  • Engage With Others Socially
  • Do Mental Exercises
  • Spend Time With Family and Friends
  • Do Nice Things for Yourself (“Pampering”)
  • Other

Next Step: What changes can you make today so that you can spend your time in retirement doing what you want/need to do

8. Rank the following factors in deciding where to live in retirement. (1=most important)

  • Closeness to Family
  • Climate
  • Urban/Suburban/Rural
  • Access to Local Resources (Culture, Education, Recreation, Spiritual)
  • Cost of Living
  • Low Crime
  • Access to Good Health Care
  • Proximity to Work
  • Peaceful/Beautiful Location(s)
  • Access to Public Transportation
  • Social Access
  • Other

9.When you think about your primary home in retirement, what’s most important to you? (choose all that apply)

  • Stay in Your Current Home
  • Downsize
  • Upsize
  • Low Maintenance
  • Low Cost of Living and/or Taxes
  • Nice Climate
  • Live With Family
  • Live in Planned Community
  • Live in Resort Location
  • Live in College Town
  • Other

Next Step: What can you do now to help you prepare for where you want to live in retirement?

10 When would you like to retire, based on your personal definition of retirement?

  • At age:
  • At Asset Level:
  • In Which Timeframe:
    1. 55 (Early)
    2. 65 (Average)
    3. 75 (Late)

11. What is the primary reason for your expected timing?

  • Financial Readiness
  • Satisfaction With My job
  • Reaching My Intended Retirement Age
  • Want to Start a New Chapter/Do Other Things
  • Health-Related Issues (mine or others)
  • Feeling Personally/Emotionally Ready
  • Becoming Eligible for Government Benefits (Social Security, Medicare)
  • Other

Next Step: What can you do now to prepare to retire when you would like to

12. What provides you with the most fulfillment or meaning in your life today? (1=most)

  • Success In My Job
  • Family Time
  • Staying Healthy and Energized
  • Continuous Learning/Education
  • Traveling to New Locations
  • Nonwork-Related Hobbies
  • Religious/Spiritual Activities
  • Neighborhood/Community Involvement
  • Other

13. Now, reorder this list based on how your sense of fulfillment or meaning may change in retirement.

  • Success In My Job
  • Family Time
  • Staying Healthy and Energized
  • Continuous Learning/Education
  • Traveling to New Locations
  • Nonwork-Related Hobbies
  • Religious/Spiritual Activities
  • Neighborhood/Community Involvement
  • Other

Next Step: What can you do now to help you move towards a future retirement that aligns with what’s important to you?

 

You’ve thought about what and who is important to you today, and how that may change after the initial transition to retirement. Now, write your “dust jacket”: the personal profile of your retired life.

Think about your responses for each section in the workbook and how your rankings changed based on priorities and preferences. Incorporate your action items and key components from your vision that will lead to a happy, fulfilling retirement.

DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial (“Lutz”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Lutz is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Lutz’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a Lutz client, please remember to contact Lutz, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Lutz shall continue to rely on the accuracy of information that you have provided.

For more important disclosure information, click here.

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