Safe Harbor Plan

A safe harbor plan is a type of retirement plan designed to help employers comply with certain non-discrimination requirements set by the IRS. These requirements prohibit highly compensated employees (HCEs) from receiving disproportionate benefits or contributions compared to non-highly compensated employees (NHCEs) in a 401k or other qualified retirement plan.

By adopting a safe harbor plan, an employer can automatically satisfy certain non-discrimination testing requirements and avoid costly penalties that can arise from failing to meet these requirements. Safe harbor plans offer several benefits, including:

1. Enhanced contribution limits for HCEs: In a safe harbor plan, HCEs can make larger contributions to their retirement accounts without worrying about violating non-discrimination rules.

2. Reduced administrative burden: Safe harbor plans typically have fewer administrative requirements than traditional 401k plans, which can save employers time and money.

3. Greater employee satisfaction: Safe harbor plans can be designed to provide generous matching contributions, which can help attract and retain talented employees.

Overall, safe harbor plans can be an effective way for employers to offer a valuable retirement benefit to their employees while minimizing their own administrative burden and legal risk.

State Retirement Plan Mandates: What States Have Them and When Do They Take Effect?

 

CONTRIBUTOR

Vestwell

 

PUBLISHED

JAN 13, 2022 1:37PM EST

 

Currently, there are 14 states with retirement plan mandates to help individuals save for retirement. In this article, explore program mandates, structure, and roll-out plans for each of the 14 states to understand how (and if) this applies to you and your small business.

California

Name: CalSavers

Mandate: Companies with 5+ employees must offer a plan or face a fine of $250 per eligible employee after 90 days of noncompliance and an additional fee of $500 per eligible employee after 180 days of noncompliance.

Timing: As of September 30, 2020, anyone with 100+ employees must have complied; as of June 30, 2021, those with 50+ employees must have complied, and by June 30, 2022, those with 5+ employees must comply.

Colorado

Name: Colorado Secure Savings Programs

Mandate: Companies that have been in business for 2+ years with 5+ employees must offer a plan or face a fine up to $100 per eligible employee per year (up to max of $5,000 annually).

Timing: The pilot program begins in October 2022, enrollment begins in 2023.

Connecticut

Name: MyCTSavings

Mandate: Companies with 5+ employees paid more than $5K each in the calendar year (unless the business already offers a qualified, employer-sponsored retirement plan). Non-compliance may result in an investigation and penalties.

Timing: Pilot launched in November 2021, with full launch slated for early 2022.

 

Click here to view additional states.

 

Coronavirus (COVID-19) Regulatory Resources for Employee Benefit Plans

The past week has brought an onslaught of changes for the world, including changes in U.S. federal legislation to address the COVID-19 pandemic.

ComplianceDashboard has compiled a list of resources we feel may aid your everyday. The resources provide access to the following:

• COVID-19 information for advisers and employers.
• A summary of the Families First Coronavirus Response Act (FFCRA).
• A list of state websites where businesses and individuals may access state-specific guidance regarding legislation and government actions.
• Links to federal agency sites including CMS, DOL, and IRS.
• A listing (by most recent date of release) of articles from reputable sources re: employer considerations for benefit plans.

Click here to continue reading the full ComplianceDashboard Resource List.

ABB, Workers Get Early Approval for $55M 401(k) Settlement

The following article was featured on Financial Advisor Magazine.

Zeroing In On Fiduciary Risk Factors For 401(k) Advisors

AUGUST 19, 2019 

 
1. How did you personally become involved in fintech and what do you do on any given day?

As co-CEO I wear many hats and am very fortunate to have a strong experienced team surrounding me. We are constantly improving our technology—setting that agenda and vision is critical. I manage all of the recordkeeper relationships on our platform and my co-CEO and partner, Michael Steffan, has been focused on growing our footprint with advisors. 

2. What does your firm do/offer within the fintech sector?

Fiduciary Shield by BidMoni is an end-to-end fiduciary technology serving 401(k) advisors. 401(k) Prospector is a feature that identifies fiduciary risk factors on more than 800,000 plans. Advisors can geolocate plans, search by employer, search for service providers and even identify plan decision makers and connect with them via LinkedIn.

Advisors can request proposals from more than 20 recordkeepers through BidMoni's Fiduciary Shield platform. Advisors are able to download and analyze proposals with a simple and transparent interface. Automated plan monitoring reports are issued quarterly to help advisors and plan sponsors meet their ongoing requirement to monitor plan fees. All proposals, reports, forms and important documents are stored securely to help plan fiduciaries meet their obligations under ERISA.
 
3. How do you feel consumers (or if more relevant for your firm – businesses) are adapting to the facet of fintech that your company operates within?

A recent survey by the National Association of Retirement Plan Participants revealed that only 16% of participants trust financial advisors. The top driver of trust is fee transparency. Pairing transparency with a process that drives better fee results is a no brainer. Employers and advisors utilizing BidMoni's Fiduciary Shield platform are very pleased with the simplicity in which critical fiduciary data is presented and how easy it is to make an informed decision.

To view the full article click here

In the months that have passed since the death of the revised DOL Fiduciary Rule I can’t help but feel there was one key element seemingly lost in the discussion - why the changes were being considered in the first place. 

Back in 2015 The White House Council of Economic Advisors released a report detailing evidence that conflicted investment advice costs investors, on average, 1 percentage point lower annual returns on their retirement savings or $17 billion per year. 

Yet, here we are, barreling towards 2019 and those facts remain unchanged.   

So, as concerned (and frankly fed up) citizens we decided to do something about it. 

Our team has been working hard to create a platform that allows employers to request competitive retirement plan bids directly from top retirement plan providers.    

No conflicted advice.  No pay to play. No hidden fees. 

Fiduciary Shield by BidMoni delivers a layer of transparency to a process that has seemed to be made intentionally complex by many service providers. Employers can easily compare their current plan’s features and fees to the proposed plans’ features and fees side by side and make an informed decision, conflict of interest free. 

Choosing a retirement plan that puts more of your employees’ money to work for them has never been easier. 401(k) plans were created for the sole benefit of hard-working Americans saving their hard-earned dollars towards a future retirement.  It’s about time we got back to that. 

The intention behind ERISA was to ensure that those who manage retirement plans or their assets do so solely in the interest of plan participants and make good choices about investing plan assets.  Intentions aside, the regulations governing employee retirement plan administration tend to be confusing for employers.

Section 3 of ERISA contains the definitions that apply to the statute and defines ERISA fiduciaries in three sections – 3(16), 3(21), and 3(38).  Let's take a look at each section.

Section 3(16)

ERISA defines a Plan Administrator in section 3(16) as the individual designated by the employee benefit plan, the plan sponsor, or, in the absence of such designation, someone the Secretary of Labor determines. A plan sponsor is defined in that section as the employee organization (for a single employer plan) or the association or group of representatives of the organizations or parties making the plan (for a multiple employer plan). The Plan Administrator is the named fiduciary responsible for all plan administrative functions, including hiring and monitoring other plan service providers. The plan sponsor is often the named plan administrator, but an employee or committee of employees may also be named. Alternatively, a third party may be designated to provide some or all plan administration services. It should be noted that a third party administrator, or TPA, is generally not a section 3(16) administrator, although the TPA may agree to take on fiduciary responsibility for some or all of the plan administration services.

Section 3(21)

Section 3(21) of ERISA generally defines an ERISA fiduciary as someone who exercises any discretionary authority or control regarding the management of an employee benefit plan or the disposition of its assets. A fiduciary under section 3(21) also refers to someone who renders investment advice in exchange for compensation. Finally, section 3(21) also defines a fiduciary as someone with the ability to administer the plan. A section 3(21) fiduciary includes the plan trustee and plan administrator as defined above

Section 3(38)

Section 3(38) of ERISA defines an investment manager as an advisor who renders discretionary investment advice to an employee benefit plan. An investment manager is one who has the power to manage, acquire, or dispose of any asset of the plan and has acknowledged in writing that they are a fiduciary with respect to the plan.

While a section 3(21) investment fiduciary recommends investments and investment strategies to plan fiduciaries who either approve or reject them, an investment manager is given the discretion to implement those recommendations and strategies without the approval of other plan fiduciaries. Because of the increased responsibility of an investment manager, ERISA requires that this function is performed by a registered investment adviser under federal or state law, a bank, or an insurance company.

A simple way to understand the difference between the 3(21) & 3(38) service – a 3(21) provides investment recommendations while in contrast a 3(38) provides investment decisions to the plan.

How should a plan sponsor choose among the different types of third-party plan fiduciaries?  Plan Sponsors should consider their own ability to meet the requirements of ERISA as a fiduciary and, regardless of their own abilities, whether they want to mitigate their personal risk by hiring a third-party fiduciary.