Messages cover such topics as saving for retirement,
budgeting and debt management. In addition, Voya, which has recently rebranded
from ING U.S., has created its own accounts on Facebook, LinkedIn and Twitter
to reach out to consumers. Earlier this year, Voya added a live chat feature to
its Facebook page to allow investors to interact with advisers. Voya has also
partnered with NBCUniversal to permit viewers of ”The Today Show” to pose
retirement-related questions to Voya professionals through Voya’s and NBC’s
social media channels using the #TodayMoney hashtag.
“It’s clear that social media has emerged as a powerful tool
for financial advisers,” says Tom Halloran, president of ING Financial
Partners. “However, in the regulated industry that we operate, the appropriate
guideposts must be in place for them to take advantage of this channel. We’ve developed a program that offers the
support, tools and content needed to tap into social media in a compliant manner.”
Investors today use social media even to make financial decisions, Halloran
says, so it is important for advisers to have a presence in these channels.
“This effort demonstrates our commitment to the advisers we work with as well
as our focus on serving the retirement readiness needs of clients,” he says.
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The study by Judy Diamond Associates, a 401(k) plan
intelligence provider, reveals that a total of 57,277 401(k) plans failed their
2012 nondiscrimination tests. These plans were then required to return $794
million in 401(k) contributions to highly compensated employees (i.e.,
corrective distributions), resulting in increased income taxes and lower
retirement savings for those participants.
The top five states for issuing corrective distributions for
the 2012 plan year were:
Kansas
(with 13.03% of plans issuing corrective distributions);
Texas
(12.79%);
New
Jersey (12.49%);
Georgia
(12.12%); and
Alabama
(11.95%).
The states that had the lowest percentage of plan issuing
corrective distributions include:
Montana
(6.18%);
Hawaii
(7.24%);
Wyoming
(7.61%);
West
Virginia (7.93%); and
Idaho
(8.01%).
The Internal Revenue Service requires 401(k) plans to
undergo nondiscrimination testing to ensure that both highly compensated
participants and rank-and-file participants contribute to the plan at similar
rates. When owners and managers of a company contribute at far higher rates
than their employees during the year, the plan must return some of the highly
compensated participants’ employee contributions, also known as corrective
distributions, which then become subject to normal income taxes (see “The
Tests You Don’t Want to Fail”).
Employers can use a number of options to improve their
chances of passing nondiscrimination testing. One such approach is the use of a
QNEC, or qualified nonelective contribution, on behalf of non-highly
compensated employees in the plan. A QNEC is an employer contribution that can
be used by 401(k) plans to ensure that testing requirements are satisfied without
having to refund contributions to highly compensated employees. Other options
include using a different form of compensation for nondiscrimination testing,
the use of permissive disaggregation, or switching from prior year to current
year testing (see “Improving
Nondiscrimination Test Results”).
“The issuance of corrective distributions should serve as a
red flag to plan sponsors. It means that the plan has highly compensated
employees who were unable to save as much for their retirements with pre-tax
income as they would like. It may also mean that the plan is not designed to
encourage workers to contribute sufficiently. Plan sponsors can utilize this
information by introducing retirement education programs and suggesting better
401(k) savings methods to participants,” says Eric Ryles, managing director of
Judy Diamond Associates, based in Washington D.C.
Plans that issue corrective distributions may have other
issues with their design, says Ryles, which may include inadequate fidelity
bonds, incorrect calculation of vesting schedules or failure to amend plans in
a timely period to conform with current laws and regulatory changes.
The study also shows that:
Nationwide,
12% of 401(k) plans issued corrective distributions in 2012;
Corrective
distribution issuance was down about 2% from the previous year; and
Small
states, proportionally, had fewer plans that issued corrective
distributions than big states, which most likely reflects the locations of
highly compensated workers.
Judy Diamond Associates based this research on the most
recently available complete set of 401(k) plan disclosure documents released by
the Department of Labor, in combination with the firm’s Retirement Plan
Prospector database and plan analysis tool.