Products June 23, 2015

Manning & Napier Releases QDIA Sync

The new tool accounts for plan demographics in TDF selection.
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Manning & Napier has developed QDIA Sync, a new, free tool to help advisers consider a retirement plan’s demographics when selecting a target-date fund (TDF) for the plan. The tool asks advisers to answer questions in five categories—risk, participants’ savings levels, other potential retirement income, participant behavior in terms of when they are most likely to exit the TDF, and the average age of participants.

For example, the first question under risk is, “When selecting a qualified default investment alternative (QDIA), is it more important to consider individual participant age or overall plan demographics?” Moving next to savings levels and risk tolerance, on average, are participants balanced, preservation-oriented or growth-oriented? What is the initial default deferral rate for the plan, and, if there is automatic escalation, how much is it every year? How much is the company match?

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In terms of other potential retirement income, QDIA Sync then looks at whether participants have a defined benefit (DB) plan as well, and whether the adviser believes participants will have accumulated a significant amount of retirement assets outside the employer-sponsored plan.

As for participant behavior, the tool asks whether the company has a high turnover rate, and if retiring participants take a lump-sum distribution or remain invested in the plan. Finally, QDIA Sync asks at what age the average participant retires, and what percentage of the employees is in each different age brackets. The tool then recommends a conservative, balanced or aggressive suite of target-date funds for the plan.

In conjunction with Strategic Insight, an Asset International company, Manning & Napier also issued a report, “Raising the Bar on Target Date Due Diligence: Demographics Matter.” The report says that the ways to evaluate multi-asset-class products such as target-date funds are changing. “Most notable of late is the integration of plan characteristics, or plan demographics, into target-date analysis,” the report says. “Demographic factors such as age, planned retirement dates, salary levels, turnover rates, contribution rates and withdrawal patterns can assist fiduciaries in their investment menu selection. 

Compliance June 23, 2015

IRS Publishes Information for Cycle E Plan Restatements

The information includes worksheets and explanations for the second Cycle E plan language, and explanations of the determination letter review process.
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The Internal Revenue Service (IRS) has released subject matter packages that Employee Plans Specialists use when reviewing retirement plan documents.

Plan sponsors can also use these packages as a review tool before submitting a determination letter application to the IRS. Plans in Cycle E submit determination letter applications for their plans beginning February 1, 2015, through January 31, 2016.

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Each subject matter—such as minimum vesting standards, required plan distributions and Section 401(k) requirements—is packaged as a publication and two forms. Not all packages are relevant to all plans.

Each package contains:

  • An Explanation that provides guidance in the law and legal citations;
  • Alert Guidelines (worksheets) you can use to review retirement plans. Generally, a “yes” answer to a question indicates a plan is in compliance with applicable law; and
  • Plan Deficiency Paragraphs (checksheets) that are pre-approved wording that, if used by plan sponsors, will satisfy the applicable Internal Revenue Code requirements. While you aren’t required to use this exact wording, the pre-approved language provides an easy and reliable method for assuring plan qualification.

The packages may be accessed here. 

The IRS has also provided determination letter review procedures that apply to Form 5300, Form 5310 and Form 5316 retirement plan determination letter applications received on or after February 1, 2015, starting with the second Cycle E. Form 5307 applications will continue to be reviewed under Cycle D2 procedures until the second six-year remedial amendment cycle for pre-approved defined benefit plans.

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