PLANSPONSOR - February/March 2020 - 11

Plan Provisions That Could Be Pruned
WITH THE MANY plan features available
today, plan sponsors may feel obliged
to expand their plan's offerings. But some
experts advise the opposite approach: eliminating
excess features-especially those
that can hamper plan administration and
reduce participant saving.
In " Five Features That Retirement
Plans Can Do Without, " Mike Webb, vice
president at Cammack Retirement, says
one feature to cut is revenue sharing.
This practice, whereby investment companies
share a portion of their revenue
from fund expenses with a third party or
recordkeeper in exchange for services, is
complicated, confuses most participants
and " makes the issue of transparency
almost impossible, " he says.
A second-for 403(b) plan sponsors-
TIDBIT
Where American Retirees* Get Their Income
Both unmarried
older men and
women receive
retirement income
from similar
combinations of
sources, but the
men consistently
have higher
income than do
the women.
*60 years and older.
Source: National Institute on Retirement Security, " Examining the Nest Egg: The Sources of Retirement Income for Older Americans "
Defined benefit pensions have a
greater poverty-reducing effect than
do defined contribution plans. This
may be because recipients of DC
income tend to have much higher
net worth than do recipients of DB
income, which comprises a larger
share of their total retirement income.
DB DC
Roughly equal numbers of
American retirees receive
income from defined benefit
as from defined contribution
plans-which is likely to change.
40.2%
of American
retirees receive
income only from
Social Security.
3-Legged Stool
6.8% receive income
from Social Security, a DB
plan and a DC plan-
considered the ideal situation
for retirement security.
is the 15-year catch-up contribution. Webb
says that to let a participant defer above
the plan's statutory limit requires having
accumulated data throughout the worker's
career-making the process tricky. This
may be why noncompliance is widespread,
as IRS audits regularly discover.
Again for 403(b) sponsors, because of
complicated regulations, it is best to avoid
requesting contract exchanges between
two recordkeepers, he says. And while
using nonstandard definitions of compensation
or different definitions for different
purposes-e.g., eligibility, deferral
percentages, etc.-is permissible, it can
complicate administration if employers
need to enter a multitude of pay codes or
inadvertently use the wrong definition
and violate nondiscrimination testing.
Loan provision might also be excised.
Loans can be burdensome to administer
and involved to approve, notes
Steven Johnian, supervisor of Retirement
Consulting Services at Commonwealth
Financial Network. " And not having the
feature may save participants from themselves " -especially
true for those who
terminate with a loan outstanding. Still,
both he and Webb argue, the value of that
feature may outweigh the negatives.
Offering loans could be considered
in participants' best interest-a fiduciary
concern-notes Greg Ward, Think Tank
director of Financial Finesse. " While the
employer doesn't want to make decisions
for the participant, it needs to make sure
the participant is equipped to make good
decisions, " he says. -Amanda Umpierrez
PLANSPONSOR.COM February - March 2020 11
DB plan
Social Security
DC plan

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