Lifetime Income Disclosure Act, UTC on Track

Recently (specifically, November 2009), the Lifetime Income Disclosure Act was introduced by Senators Jeff Bingaman, Herb Kohl and Johnny Isakson. This bill would require that 401(k) providers inform participants of the monthly income they would expect at retirement. This projection is intended to be modeled after the existing Social Security statements that Americans presently receive annually. The bill is intended to help the average worker to understand their present financial vulnerability. Click here for a copy of the bill.

Obviously, this is a new introduction to the Senate and will be placed on what seems to be a an ever-growing stack of proposed Retirement Plan legislation which may or may not get passed. However, this one is interesting as it supports many notions that we, at Unified Trust, have been talking about for years. Specifically, it mentions that the average American is on path to a substantial shortfall. We usually quote 80% of workers covered do not have adequate retirement savings in today’s dollars. What also is interesting is that this new type of disclosure is aimed at converting consumer (participants) thoughts from the traditional “investment account” approach to a new “benefit account” approach. I.E. Is the 401(k) actually providing me with adequate income replacement?

This is exactly what we are doing with our new service, The unifiedPLAN®. In fact, each participant enrolled in The unifiedPLAN® will be presented with a mathematically sound Success Analysis at the initial enrollment meeting and each quarter thereafter. Click here to view a sample report. This analysis will show them in today’s dollars what their projected surplus or shortfall is and offer suggestions on how to improve the outcome. In addition, based on this projection a custom tailored model portfolio will be established for the participant and adjust automatically as the math changes from quarter to quarter. This established glide path will improve outcomes for virtually all participants.

Benefit Policy Statement - New Value for Advisors

Over the last few years, as more and more professional Retirement Plan Consultants start to manage their practices as ERISA fiduciaries, the documentation process has become very important. Professionally, we have experienced the Investment Policy Statement (IPS) become a document as important to the plan file as the Plan Document, Adoption Agreement and other required documents. Various other policy documents are also normally required, but are often ignored. Some examples are a formal Loan Policy and a formal Funding Policy.

Specifically, cited in ERISA Section 402(b)(1) are requirements to have a written plan document (or documents) with a named fiduciary in charge, with the documents being required to do the following:

(b) Requisite features of plan
Every employee benefit plan shall—
(1) Provide a procedure for establishing and carrying out a funding policy and method consistent with the objectives of the plan and the requirements of this subchapter…

This requirement has been present since the beginning of ERISA, yet most plans simply don’t have one. This is a potential red flag for an auditor and impractical. Unified Trust Company is proud to announce the creation of a new Participant level document that will not only meet this ERISA requirement, but will also create a set of boundaries wherein each individual’s path to successful income replacement at retirement will be mapped out for them formally. This new document is called a Benefit Policy Statement (BPS). To view a sample of the Benefit Policy Statement, click here.

The purpose of this document is to give the participant formal notification of how the trustee intends to drive the process towards secure retirement for the participant. It will provide the Purpose, define the duties and responsibilities of all parties, provide what methods are used to determine Asset-Liability matching and more. Every participant will have their own BPS custom tailored to meet their individual needs. This document will be rolled out in conjunction with Unified Trust’s impending launch of The UnifiedPLAN®, the system of Defined Goal Investing that you’ve been hearing about from us for some time. The UnifiedPLAN® and its use of the BPS are enhancements to Unified Trust’s already successful, Unified Success Pathway™.