Environmental, Social and Governmental (ESG) Fund Best Practices for Plan Sponsors Socially responsible investing has grown in popularity as investors become more aware of how organizations operate from an environmental, social and governance perspective. Environmental factors may include a company’s carbon output, overall resource consumption and impact to air and water quality. Social factors include the types of business relationships the company maintains and how the organization treats people overall. Structural or governance factors include the level of transparency, conflicts of interest and Board composition. As a result, plan sponsors are considering Environmental, Social and Governmental (ESG) fund options as employee’s interest in ensuring their money has a positive impact on society continues to grow. Rules Surrounding ESG Funds: In December of 2020, the DOL released a rule for plan sponsors when considering Environmental, Social and Governmental (ESG) focused investments as options in their retirement plans. The rule required that…

How Working With a Qualified Plan Advisor Can Improve Your Audit Experience Hiring a quality qualified plan advisor provides many advantages to employers that sponsor a retirement plan. Specifically, one of those advantages is improving your annual qualified plan audit. As each audit season begins, employers often dread having to coordinate with their accounting firm while juggling their day-to-day tasks. The good news is, we have outlined three ways your qualified plan advisor can improve this administrative burden. Quick Access to Information Audits by nature involve many questions and requests for data. In some cases, the information in question is not regularly requested, making it difficult for employers to find. Advisors on the other hand have knowledge of the plan and recordkeeping systems to access certain information quickly, saving valuable time for everyone. Relationship with the Auditor Many advisors develop relationships with various auditing firms. By doing so, the advisor…

Put Your Advisor to the Test Ask these critical questions to test the knowledge of future plan advisors. A knowledgeable plan advisor is an important component in the successful operation of your qualified plan. However, selecting the right candidate requires more than simply reviewing typical Request for Proposal (RFP) responses. RFPs are an important part of the process, but boilerplate questions may draw generalized, high-level responses that reveal few details about a potential advisors’ knowledge. You should make sure the potential advisor possesses broad industry experience and expertise that applies to your unique situation. It only takes a few questions to put them to the test. So, as you consider prospective plan advisors, here are some non-boilerplate questions that you can ask to assess their knowledge. Under what scenario would my plan need a BRF test? Sometimes, plan designs create different benefits for different classes of participants. The BRF (Benefits,…

With student loan debt reaching astronomical numbers, employers are increasingly looking for ways to add student loan assistance programs to their benefits packages. While current student loan repayment programs can relieve financial stress, they do not offer tax benefits to employees. However, a recent IRS Private Letter Ruling allowing a major pharmaceutical company to add loan repayment benefits to its 401(k) plan has sparked interest in this approach. See how you may be able to design a solution that aligns with the IRS ruling here. Adding student loan repayment to a qualified plan is not the right solution for everyone. If you are considering this enhancement, contact Innovative to discuss your specific situation and objectives.

For plan sponsors, running a 401(k) plan can be complex and time consuming. Some plan sponsors hire outside advisors to help the plan stay compliant with IRS and ERISA laws. It is crucial to understand the difference between hiring a broker versus hiring a fiduciary. Each has a unique set of regulatory standards governing their behavior which can affect the range and quality of services offered to the plan. Below are a few key differences between brokers and fiduciaries: Standard of Care: Brokers: Are held to a suitability standard. Under this standard, brokers can only recommend investments that they reasonably believe are appropriate for the given situation. Fiduciary advisors: Are held to stricter rules, known as the fiduciary standard of care. This standard legally requires the investment representative to act in the best interest of the investor. The fiduciary duty is the highest standard of care under American law1. Commissions…

As the calendar year draws to a close, older plan participants may have to consider taking a required minimum distribution (RMD) from their qualified retirement plan. A required minimum distribution is a withdrawal from a qualified retirement plan for participants who have reached the age of 70½. While many qualified plans have services to notify participants that they have to take an RMD, it is important for plan sponsors to understand the mechanics and rules governing required minimum distributions. How is an RMD Calculated? An individual’s RMD is normally calculated using the “Uniform Lifetime Table,” which is an IRS chart that assigns a “Life Expectancy Factor” to each age. The previous 12/31 balance is divided by the “Life Expectancy Factor” to calculate the required minimum distribution. Other tables are used if either: The spouse is the sole beneficiary and they are more than 10 years younger than the participant. OR…

An existing client had experienced problems with their 401(k) plan audit for several consecutive years due to internal operational issues. The client requested our help in determining whether they should spend the money for a 3(16) service to help improve efficiencies and eliminate some of the operational errors they were experiencing. See how Innovative helped the client determine if it was the right strategy, move to the 3(16) and reduce their costs and audit error rate. Download full case study here. Let Innovative perform a complimentary review of your plan, contact our retirement planning team here.