Products March 5, 2014

John Hancock Expands Plan Pricing Solution

John Hancock Retirement Plan Services (JH RPS) is implementing a new way of pricing its 401(k) plan services that will help plan sponsors and advisers address the issue of fairness in allocating plan expenses among participants.
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JH Signature 2.0, effective in May 2014, not only expands its revenue-sharing allocation solution to plans from startups to $10 million in assets, but it uses John Hancock’s “required revenue” concept to establish pricing for a particular plan based on just what is needed for that plan, independent from a plan sponsor’s fund lineup or what participants invest in, Peter Gordon, president at John Hancock Retirement Plan Services in Boston, tells PLANADVISER.

Gordon explains that John Hancock launched its JH Enterprise solution for plans with $10 million in assets and greater as a way to ensure all revenue sharing was credited back to participants’ account balances, instead of using an ERISA (Employee Retirement Income Security Act ) account in which payments are credited to the plan and allocated to participants via a variety of methods. This is intuitive, Gordon contends. “Intuitively, you would expect credits to go back to participants invested in the fund that pays revenue sharing, and not that what someone else does in the plan would affect participants getting those funds back.”

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John Hancock carries that same concept to JH Signature 2.0, which focuses on plans from startup to $10 million in assets. In addition, the solution applies individual pricing to the less-than-$20 million market by looking at the demographics of a particular plan and charging a customized price—a concept Gordon says is usually associated with larger plans. “If we charge ‘x’ basis points for a plan, the plan sponsor can choose fund lineup ‘A’ or ‘B’ and the price would be the same. Participants are also paying what they intuitively would expect,” he adds.

The intuitiveness of the solution will make fee disclosures for plan sponsors and participants easier to understand, according to Gordon. “A lot of what we do is hard to explain to the average employee who is not in the retirement business, but with this solution, we can show them charges, credits and net fees,” he says.

“At the very core of it, that is the point, making disclosures more intuitive,” Gordon concludes.

Compliance March 5, 2014

IRS Summarizes Voluntary Corrections for 457s

Some plan sponsors, under limited circumstances, may submit requests for voluntary correction to the Internal Revenue Service (IRS) for their Code Section 457(b) retirement plans.
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The IRS updated and expanded its Employee Plans Compliance Resolution System (EPCRS) in Revenue Procedure 2013-12; however, the IRS’s Employee Plans Voluntary Compliance (VC) team will consider requests on a provisional basis outside of the Employee Plans Compliance Resolution System (EPCRS). The agency notes governmental plan sponsors do not have to make a submission to VC to voluntarily fix problems with their 457(b) plans.

VC will not process submissions that involve the form of the written 457(b) plan. In addition, the agency says it has received several submissions alleging that a written 457(b) plan was not adopted in a timely manner, or amended for some tax law or income tax regulation; VC will not issue closing agreements for these matters and will decline to process these requests and refund any payments. Plan sponsors who want the IRS to review their 457(b) plan document or consider any other document form issue may request a private letter ruling.

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A governmental plan sponsor has until the first day of the plan year that begins more than 180 days after the IRS notifies them of the failure to self-correct their plan failures. Considering this, they may not need to make voluntary submissions to the IRS in most cases.

If a governmental plan sponsor needs to request additional relief or simply wants IRS approval for a correction method for a non-plan document failure, they may make a submission to VC as permitted by Rev. Proc. 2013-12.

More information is here.

 

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