Make Smart Mutual Fund Choices for a Smooth Retirement Ride
Choosing the right funds for your retirement plan starts with understanding a few key details, including asset class, average annual return, expense ratio, and how each fund supports your long-term goals. Our team is here to guide you through the process. Click the image below to watch a short video that explains what to look for when evaluating your options.
Important Update: DOL Weighs in on Forfeiture Lawsuits
After recent legal challenges around how 401(k) plan forfeitures are used, the Department of Labor (DOL) has offered its opinion, and it’s a positive sign for plan sponsors.
In a well-known case involving HP Inc., the plaintiffs argued that HP misused forfeitures by applying them to reduce employer contributions, instead of reallocating them to participants or covering plan expenses.
Although the court dismissed the case, it acknowledged that the legal theory was new and allowed the plaintiffs a chance to revise and refile their argument. Still, the judge initially found their claims too broad and lacking support from existing law.
What stood out was the DOL’s input in an amicus brief during the appeal:
– The DOL pointed to the IRS’s long-standing approval of using forfeitures to reduce employer contributions.
– It also stated that while deciding how to use forfeitures is a fiduciary responsibility, using them to offset employer contributions does not automatically violate fiduciary duties like loyalty or prudence.
What This Means for Plan Sponsors
– The IRS currently allows forfeitures to be used in several ways: reducing employer contributions, covering plan expenses, or reallocating to participants.
– The DOL’s comments support the legality of using forfeitures to reduce employer contributions, as long as it aligns with the plan document and is appropriately handled.
– Even so, plan sponsors should regularly review their plan documents and carefully document any fiduciary decisions related to forfeiture use.
As legal interpretations continue to evolve, this guidance from the DOL provides valuable clarity and reassurance for plan sponsors. By ensuring forfeiture practices are consistent with plan documents and fiduciary duties are well-documented, sponsors can move forward with greater confidence and compliance.
As the new school year approaches, it is a great time to review your education expenses and make sure you are using your 529 savings plan to its fullest potential. Managing the cost of education can be challenging, but a 529 plan can provide valuable assistance. These tax-advantaged accounts were originally designed to cover college expenses, but their flexibility has grown. Today, 529 funds can be used not only for college but also for K–12 tuition at public, private, and religious schools, as well as expenses related to two- and four-year colleges, trade schools, graduate programs, and some international institutions.
Understanding 529 Plans
To ensure your withdrawal is considered qualified, the distribution must occur in the same calendar year the expense is incurred. Taking a withdrawal at the wrong time could result in taxes and penalties.
Here are some common qualified education expenses:
Tuition and Enrollment Costs
Higher education includes most colleges, universities, and graduate programs that participate in federal student aid programs. Vocational or trade schools include institutions like culinary schools, as long as they are eligible for federal student aid. For K–12 education, up to $10,000 per student, per year, may be used toward tuition at eligible elementary or secondary schools.
Room and Board
On-campus housing expenses are covered, while off-campus housing may qualify only up to the school’s published cost of attendance.
Books and Supplies
Required textbooks, paper, pens, and other course materials are covered, up to the school’s budget for supplies.
Special Needs Services
Equipment and services for students with special needs may qualify, including certain transportation costs.
Technology and Internet Expenses
Technology is often essential for learning, and certain tech-related expenses may also qualify. Computers must be used primarily for educational purposes while the student is enrolled. Software must be required for a specific course, such as those in design or engineering programs. Internet access may qualify in some cases, but it’s best to confirm with your provider and the plan sponsor.
Understanding what your 529 plan covers can help you avoid unexpected expenses and make smarter decisions for the school year ahead. Because rules and benefits can vary by state and school, be sure to consult with your plan provider, the school, or a member of our team to confirm that your intended uses are qualified.
Are vesting schedules still effective?
Vesting schedules have traditionally been used by employers to manage retirement plan costs while encouraging employee loyalty. But new research shows they may not be as effective at retaining employees as once thought, though they still offer financial advantages to employers.
What is vesting, and how does it work?
“Vesting” means ownership of retirement plan funds. Employee contributions are always 100% vested; however, employees earn the right to employer contributions over time, based on years of service or hours worked. If an employee leaves before fully vesting, the unvested portion goes into the plan’s forfeiture account. Vanguard reports that over half of the plans it administers include a vesting schedule for employer contributions.
Vesting schedules are defined in the plan document and may vary:
- Immediate Vesting: Full ownership from day one.
- Cliff Vesting: 0% vested until a set number of years, then 100%.
- Graded Vesting: Ownership increases gradually each year.
The table below shows the differences between a cliff vesting schedule and a graded vesting schedule. For cliff vesting, the account becomes 100% vested after a set number of years, whereas a graded vesting schedule has gradual increases over a set number of years. This example reflects a three-year cliff vesting schedule and a six-year graded vesting schedule.
| Years of Service | Cliff Vesting | Graded Vesting |
| 1 | 0% | 0% |
| 2 | 0% | 20% |
| 3 | 100% | 40% |
| 4 | 100% | 60% |
| 5 | 100% | 80% |
| 6 | 100% | 100% |
Why do employers use vesting schedules, and what did Vanguard’s research reveal?
Employers who use vesting schedules are generally motivated by two main goals: retaining employees by encouraging them to stay longer in order to earn full benefits and managing costs by recouping unvested contributions when employees leave the company.
Vesting schedules are a common strategy used by about two-thirds of employers to promote retention, but their effectiveness is often limited by a lack of employee understanding. Many workers are unclear on how vesting works, which diminishes its intended impact.
A research report by Vanguard further challenges the idea that vesting schedules significantly influence employee retention. When comparing plans with immediate and three-year cliff vesting, they found no major differences in turnover, and many participants weren’t even aware their plan included a vesting schedule, highlighting a communication gap.
Employers benefit financially by recouping an average of 2.5% of contributions through forfeitures. However, these savings often come at the expense of lower-income employees, whose final retirement balances may be reduced by about 40%. This underscores the need for plan sponsors to balance the cost-saving benefits of vesting schedules with their potential negative impact on lower-paid, high-turnover workers.
What should plan sponsors do?
1. Review Your Plan Documents
Confirm if your plan has a vesting schedule and how it works.
2. Know Who Manages Vesting
Vesting is typically tracked by the plan sponsor, recordkeeper, or third-party administrator (TPA).
3. Communicate Clearly
Help participants understand the vesting schedule because it could influence their decisions and boost retention.
4. Understand Forfeiture Rules
Know how forfeitures can be used (e.g., offsetting employer contributions or plan expenses) and ensure compliance with your plan document.
Want help understanding or reviewing your plan’s vesting structure? Reach out to your Shepherd Financial advisor today.
i Plan Sponsor Council of America, 67th Annual Survey of Profit-Sharing and 401(k) Plans.
ii Internal Revenue Service.
iii How America Saves 2024, Vanguard, available at: institutional.vanguard.com/insights-and-research/report/how-america-saves.html.
iv Plan Sponsor Council of America, 67th Annual Survey of Profit-Sharing and 401(k) Plans.
v Does 401(k) vesting help retain workers?, Vanguard, available at:
Summer’s Here—Is Your Financial Plan on Track?
Warm weather, longer days, and vacation plans are all part of the summer season. But it’s also a great time to pause and take stock of your financial health. Mid-year check-ins can help ensure you’re on the right path before the year slips away. Here are a few smart questions to ask yourself:
Have your goals changed?
It’s always a good idea to review your credit report for accuracy and watch for signs of identity theft. A strong credit score is a key part of your overall financial picture.
How’s your credit score?
Our team can help you understand how disability insurance fits into your overall financial plan and guide you toward options that offer real security for life’s unknowns. Contact us today to get started.
Are your contributions on track?
Whether it’s a retirement account, emergency fund, or other savings goal, now’s a good time to evaluate your contributions. Could you increase them, even a little?
Does your spending still align with your plan?
If recent market activity or personal expenses have impacted your cash flow, consider whether your budget and spending plans for the rest of the year still make sense.
If any of these questions gave you pause, our team would be happy to talk through them with you. Let’s ensure your financial plan keeps pace with your life, summer, and beyond.
Caring for an aging parent, spouse, or loved one is one of the most selfless roles a person can take on. However, it often comes with unexpected financial challenges, such as covering medical bills, adjusting work schedules, managing insurance, or dipping into personal savings to cover the costs. Without a clear plan, these costs can strain your current budget and long-term financial goals.
Whether you’re already supporting a loved one or preparing for future responsibilities, these five practical strategies can help you regain financial clarity while continuing to provide meaningful care.
1. Set a Financial Baseline
Start by understanding how caregiving is affecting your personal finances. Are you covering medical bills, transportation, or daily care items? Have your working hours or earnings changed? Track these costs and compare them to your monthly income and savings goals. Knowing where you stand financially is the first step toward making more informed and confident decisions.
2. Explore Financial Support Options
Don’t assume you need to absorb all the costs alone. Research long-term care insurance benefits, veteran support programs, Medicaid, or other local and national resources that can help reduce the financial burden. If you’re managing a loved one’s finances, ensure you have the proper legal access through power of attorney or similar documentation.
3. Create a Shared Caregiving Plan
If other family members or friends are involved, make sure roles are clearly defined, especially when it comes to financial responsibilities. One person might coordinate medical visits, another may help cover specific expenses, and someone else could handle paperwork or insurance. Transparent communication around costs and expectations helps prevent future conflict and supports a more sustainable plan.
4. Don’t Neglect Your Own Financial Goals
It’s easy to place your own retirement savings or emergency fund on hold during caregiving, but that can have long-lasting effects. Continue contributing to your future when possible, and consult a financial advisor about adjusting your plan to reflect new caregiving responsibilities without sacrificing your long-term goals.
5. Get (and Stay) Organized
Keep key documents such as insurance policies, wills, healthcare directives, and financial statements both accessible and secure. Organizing paperwork, whether digitally or physically, can save time and reduce stress during critical moments when quick decisions are necessary.
Being a caregiver requires time, energy, and heart, but it shouldn’t come at the expense of your financial health. With the right planning and support, it’s possible to care for others while protecting your future. If you’re navigating the financial side of caregiving, our team is here to help. Contact us to learn how we can help you create a plan that supports your family and your financial well-being.
It might seem counterintuitive, but plan sponsors are responsible for keeping track of participants, even after they leave the company. Sometimes these former employees become “missing participants,” meaning they’ve left an account balance in the plan but haven’t provided their updated contact information. In other cases, these former employees may simply stop responding to communications from the plan sponsor.
Missing participants can create real headaches for plan administration, especially when you’re trying to terminate a plan or reduce small account balances to lower recordkeeping costs. Still, the law requires plan sponsors to provide plan notifications to all participants, and failure to meet these disclosure obligations can result in penalties.
Steps for Locating Missing Participants
The Department of Labor (DOL) requires plan sponsors to follow a prudent and consistent process to locate missing participants. Here’s a recommended framework:
1. Develop a Consistent Process
Create a documented procedure for locating missing participants that can be applied consistently over time.
2. Audit Plan Data Regularly
Review your census file, which includes participant contact information, to identify any gaps or outdated data. Make auditing a routine part of your administrative process
3. Determine Next Steps
After reviewing your data, assess whether additional measures are needed to locate participants. Remember, it’s the sponsor’s duty—not the participant’s—to maintain contact.
Consider the following tools:
- Free online search engines and public databases (such as those for licenses, mortgages, and real estate taxes)
- Obituaries
- Social media
- Commercial locator services or credit-reporting agencies
- Other reasonable methods, provided privacy rights are respected
4. Document everything
Keep clear records of the process, steps taken, and results for audit and compliance purposes.
5. Revisit the Process Regularly
This isn’t a one-time task. Add this to your fiduciary calendar and reassess periodically, based on your plan’s size and complexity.
Following these steps not only helps you stay compliant but also ensures participants maintain access to their hard-earned retirement savings. Let us know if you need help evaluating your current process or implementing a new one.
Think you don’t need disability coverage? Think again.
We plan for the unexpected with wills, estate strategies, and life insurance. But many overlook one critical protection: disability insurance—the coverage that protects your income and lifestyle while you’re still living.
According to the Social Security Administration, nearly 1 in 4 Americans in their 20s will experience a disability before retirement age. And yet, most households are financially unprepared for a sudden loss of income. If you’re unable to work, your income may stop—while your expenses continue, or even rise, due to medical and rehabilitation costs.¹
Unlike life insurance, which helps protect loved ones after you’re gone, disability insurance helps protect your daily living and long-term financial goals, such as covering your mortgage or paying for education, when illness or injury prevents you from working.
Disability insurance is issued by participating insurance providers. Policies can vary widely in coverage length, benefit amount, waiting periods, and whether they cover your “own occupation” or “any occupation.” Availability depends on the insurer and your state of residence. Any benefits are based on the financial strength and claims-paying ability of the issuing insurance company.
Is Government Assistance Enough?
Many discover they don’t qualify for Social Security Disability Insurance (SSDI) or that the process is long, complex, and restrictive. Those who do qualify often receive only a fraction of their previous income, which is far below what’s needed to maintain their lifestyle.
This May, during Disability Insurance Awareness Month, take a moment to ask yourself: If disability struck tomorrow, would your income—and your family’s future—be protected?
Now is the time to explore your options.
Our team can help you understand how disability insurance fits into your overall financial plan and guide you toward options that offer real security for life’s unknowns. Contact us today to get started.
1. SSA.gov, 2023
Planning ahead for education costs can feel overwhelming, but a 529 savings plan offers a smart, flexible way to get started. Whether you’re saving for college, K–12 tuition, or even your own future learning, 529 plans provide valuable tax benefits and investment growth opportunities. Here’s what you need to know:
Does saving in a 529 plan severely limit financial aid?
No, 529 plans don’t significantly hurt financial aid. Parent-owned 529 assets are counted at a maximum of 5.6% in aid calculations, while student-owned assets can be assessed up to 20%. This makes the impact of 529 savings relatively small.
Will I lose the money if my child or beneficiary doesn’t go to college or doesn’t need all the funds?
No, you won’t lose unused money in a 529 plan. The money can be used for post-secondary education, transferred to another beneficiary, or even used for your own education. If your child or beneficiary receives a scholarship, you can withdraw an equivalent amount without penalty, though earnings will still be subject to taxes. Non-education withdrawals, however, may incur taxes and a 10% penalty on the earnings portion. Contributions are always tax- and penalty-free. Beginning January 1, 2024, the IRS also permits 529-to-Roth IRA transfers under certain conditions.
Can money in a 529 plan be used for K-12 school tuition?
Yes, money in a 529 plan can be used for elementary, middle, or high school tuition, with up to $10,000 allowed per beneficiary each year. At the post-secondary level, 529 plan funds can be used for a wide range of higher education expenses, including tuition, fees, room and board, books, supplies, and computers or related equipment.
Can only parents open a 529 college savings account?
No, parents are not the only ones who can open a 529 college savings account. Anyone—friends, family members, or even non-relatives—can open an account for a beneficiary, regardless of income or their relationship to the student. They can also name themselves as the beneficiary if desired. Additionally, anyone can contribute to the account, so grandparents, uncles, aunts, and friends are all welcome to help. However, it’s important to note that if a family member other than the parent opens the account, it may affect the student’s financial aid eligibility depending on when the funds are used.
Can I save enough to make a difference?
Yes, even small, consistent savings can add up—especially over time with compounding interest. Encourage friends and family to contribute for birthdays or holidays to boost your efforts. Every bit helps reduce future borrowing.
Saving for education through a 529 plan offers flexibility, tax advantages, and long-term benefits that can significantly impact your child’s future. Whether you’re just starting or already saving, every contribution helps reduce future costs. Understanding how these plans work empowers you to make smart, goal-aligned decisions—it’s never too early to begin.
As recent market fluctuations unfold, we want to take a moment to update you on how Shepherd Financial is actively monitoring the situation and working to support both you and your retirement plan participants.
What’s Driving the Volatility?
Markets have experienced increased turbulence in recent days, largely due to rising global trade tensions. The U.S. has proposed and implemented new tariffs on imports from several countries, and there is ongoing uncertainty around potential retaliatory measures. These developments have impacted investor sentiment, causing notable swings in both domestic and international equity markets, as well as some disruption in fixed income performance.
Our Response and Ongoing Commitment
As your retirement plan consultant, we are carefully monitoring these developments and their protentional impact on plan investment options. Our investment team is reviewing fund performance, manager commentary, and market outlooks to ensure your plan’s investment menu continues to support long-term outcomes. For participants, we remain focused on reinforcing the value of disciplined, long-term investing. We continue to educate participants on the importance of staying the course during short-term volatility, reminding them that retirement investing is built to weather market cycles.
What You Can Expect from Us
You can expect us to stay closely attuned to market developments and evaluate any potential implications for your plan’s investments. We remain committed to providing you with fiduciary oversight and ensuring your investment menu remains diversified and aligned with long-term goals. If you or your participants have questions, our team is readily available for group sessions or one-on-one support. Please let us know if you would like to schedule time to review your plan’s investment strategy or discuss additional communications for your employees.
We are here to help you. Please don’t hesitate to reach out to us with any questions at shepfinteam@shepherdfin.com.