Products May 22, 2018

Retirement Readiness Measure Added to dailyVest’s Plan Health Tool

PlanAnalytics will now utilize retirement readiness data from GuidedChoice.

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dailyVest’s PlanAnalytics plan health dashboard will now utilize retirement readiness data from GuidedChoice, an independent digital investment advisory firm.

This will provide plan sponsors, administrators, consultants and advisers with an optimized way to evaluate data, garner insights and pinpoint areas for improvement within defined contribution (DC) plans.

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Projected retirement income can now be viewed at both the plan and participant level—providing the ability to analyze retirement readiness by demographics such as age, salary, contribution rate, or geography. This helps plan sponsors and administrators achieve a more thorough picture of key successes and issues, identify participants that might be falling behind, provide data-driven advice and ultimately make better plan design decisions. Retirement readiness metrics can be tracked over time and be securely accessed by plan consultants and advisers.

The firms note that outcome-oriented data is becoming even more important to plan sponsors as they are charged with understanding where participants stand relative to their individual retirement goals and then developing strategies to help improve that standing.

“In order to have a valid projection for a defined contribution account, the projection must include the viability of the marketplace. That’s accomplished through the simulated projection data that GuidedChoice provides.” says Sherrie Grabot, founder and CEO at GuidedChoice. “And providing the right information in the right format is the key.”

The platform and retirement readiness metrics will start rolling out to plan sponsors, administrators, consultants and advisers in July.
Compliance May 22, 2018

Plans With Complete Discontinuance of Contributions Treated As Terminated for Vesting Purposes

An IRS compliance project found some profit sharing, including 401(k), plan sponsors did not understand when a complete discontinuance of contributions occurs.

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The Internal Revenue Service (IRS) Employee Plans Compliance Unit (EPCU) completed its Complete Discontinuance of Contributions Project, which it used to determine whether profit sharing plans, including Internal Revenue Code (IRC) Section 401(k) plans, had experienced a complete discontinuance of contributions.

In its summary of project findings, the IRS reminded plan sponsors that if there is a complete discontinuance of contributions in a profit sharing plan, the plan is treated as terminated for vesting purposes and affected employees must be 100% vested in their accrued benefit. The project found that some plan sponsors did not know that an issue of complete discontinuance arises when the employer has failed to make substantial contributions for at least three years in a five-year period, and complete discontinuance is not an issue if plan participants receive full vesting at all times.

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In May 2014, the EPCU sent contact letters to plan sponsors who filed Form 5500 or Form 5500-SF returns for the 2012 or 2013 plan years showing zero contributions for five consecutive years, plan participants receiving distributions in the 2012 or 2013 plan year, respectively, and plan participants having terminated with less than 100% vesting. The responses indicated about 10% of plan sponsors had a complete discontinuance of contributions. These sponsors used the IRS self-correction program (SCP) and voluntary correction program (VCP) to correct this error and make the affected participants 100% vested in their accounts.

For a majority of the responses, the lack of contributions did not rise to the level of a complete discontinuance.

Responses showed that it was easier to determine whether Form 5500 filers were more likely to have experienced a complete discontinuance than Form 5500-SF filers. This was because unlike Form 5500, the Form 5500-SF (prior to 2014) did not contain a line item indicating whether participants terminated employment during the plan year with benefits that were not fully vested. In addition, the IRS said, some plan sponsors made errors in completing their Form 5500 series return because they did not understand the instructions for reporting terminated participants.

More information about IRS EPCU projects may be found here.

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