Wednesday, January 29, 2014

State of the Union - Mostly good, with a mix of ignorance

If you watched last night’s State of the Union speech by President Obama, you were probably moved by the President's passion and eloquence and also excited by his remarks surrounding the minimum wage increase, energy independence and support for small business.  However, upon a closer observation the president had a few choice (albeit ignorant) words regarding the state of the private retirement system.

I'm not sure that I was horrified to hear what he said, but I was dismayed to say the lest.  The President claimed that only the wealthiest Americans were benefiting from tax incentives for the employer-based retirement system, calling them, “upside down retirement tax incentives.”
Plainly stated, he is wrong.  He has incorrect facts, wrong data or wrong data interpretation.  So here are some truths:

  •  80% of 401(k) plan participants are middle class Americans making less than $100,000. 
  • Households making more than $200,000 (the wealthiest Americans) only get 17% of the tax benefits from 401(k) plans, while middle income households enjoy the majority of such tax benefits.”
It's a shame that he chose to taint a moment like this where he discussed expanding coverage by creating a payroll deduct IRA with a subtle, yet slanted attack on the current private system.  So, while we agree that expanding coverage with new and different vehicles is a good idea, it cannot be at the expense of undermining the current retirement plan system.
Last year, yours truly attend a Fly-In to Washington D.C. where we met with various congress people about this issue.  That experience coupled with ongoing negative press and now the State of the Union, it has become apparent to me that there are those in Washington who still do not understand that the retirement savings tax incentive is not a permanent write-off like most other tax breaks – it is a deferral.  A dollar deferred today is a dollar taxed tomorrow.  
There's a great website where it will help you facilitate an email to your Congressmen and women, telling them to stay away from our 401(k)s!  Go to today.  It's very easy.

Friday, January 24, 2014

Fiduciaries, Know thy Duty!

Good article posted this AM on authored by John Lekel.  Within the article it cites a webinar that was conducted for NAPA in January presented by Dr. Greg Kasten of Unified Trust Company regarding fiduciary duty for retirement plan fiduciaries.  Within the webinar, Dr. Kasten offers a variety of good pointers on best practices and some warnings about what is being sold in the market vs. what clients think they are buying.  Here's a short list of best practices;
"Prudence is key, Kasten argued, in exercising fiduciary duty. He offered these pointers:
• consider what information is relevant to the decision;
• obtain the information;
• analyze the information;
• make a reasoned decision that other experts in similar situations would make; and
• document the decision"

Thanks John and thanks Dr. Kasten.

Friday, January 3, 2014

DOL - the 2014 Pipeline!

In case you missed it, recently the DOL published a list of initiatives for 2014.  It was written about in an article from Plan Adviser magazine, linked here.

As a summary of this, here are the eight items on the DOL’s published agenda for 2014 that impact ERISA Retirement Plans (as opposed to IRAs, Health Plans, 457 plans or non-ERISA 403(b)s).

1.) Fiduciary Re-Definition – Targeting August 2014 – This will continue to be an argument.  NAPA and ASPPA are against fiduciary standard in its current form, which has (in their opinion) too many exceptions resulting in a “non-uniform, uniform fiduciary standard”.  An article on today indicates that the DOL is lobbying pretty hard to get this done this year.  Time will tell.  Article linked here:
2.) Lifetime Income Illustrations – Targeting August 2014 – DOL is still interpreting comments.  Seems like this idea has legs behind it despite some of the obvious deficiencies in the accuracy of calculations.

3.)  Review use of Brokerage Windows in Partic. Directed plans – This could be a big deal, and will be the one that I’m most interested in.  As many of us in the industry know and agree, the use of individual brokerage in plans has a TON of problems, hopefully they’ll make this restrictive enough that they will mainly go away.
a.       Explore whether and to what extent regulatory guidance on fiduciary requirements and safeguards for such arrangements are appropriate (b/c they could be problematic) – RFI expected in April of 2014

4.)  408(b)(2) amendments coming requiring providers to provide a guide to understanding or a similar tool to help sponsors, especially small ones to understand this guidance – notice of proposed rule making (NPRM) in January – Great idea, but I suspect that the tools created will be too difficult for clients to use, or some other such problem so that most providers can continue to hoodwink the clients on what they are truly paying

5.)    Reduction in Safe Harbor afforded to selection of Annuity option in individual account plans to only cover the idea that the provider has the ability to make lifetime payments (not as to quality of annuity or provider) – October 2014

6.)    DB funding notice finalizing – March 2014

7.)    Amendment to Participant Disclosures surrounding Qualifed Default Investment Alternatives and Target Date funds under 404a-5 – looking for more specificity – March 2014 – More written disclosure that will go unread and not understood by participants.  This is a huge waste of energy and resources.

8.)    QTA – Qualified Termination Administrator – Looking to create to deal w. issue of abandoned plans, similar to using a bankruptcy trustee – April 2014 for final rule

Thursday, January 2, 2014

Retirement Plan Business Models - Some thoughts

In early November, I did an interview with a Paula Aven Gladych of benefitspro (, an online media source for all things related to the benefits marketplace.  The topic of the interview was "broker business models for retirement plans".  Very soon after the interview, they posted an article called "Demand Rising for 401(k) advisors".  I was cited in the piece, but a lot of what she and I had discussed was left out, linked below.

Unbeknown to me, the author had intended a second piece which was published on 12/27 entitled "Brokers begin to break into 401(k) market".  More of what she and I had conversed about appears in this article.  In it, I discuss a couple of different service models that can work, the widening gap between "retirement pros" and beginners and how both can succeed in selling and servicing retirement plans.  Please enjoy it, linked below.