Nevin's Data "Points"

On Friday, the Department of Labor, as part of the White House’s Middle Class Task Force, formally unveiled a couple of initiatives. The “new” one—and the one likely to capture the attention of the retirement plan community over the next several weeks—deals with investment advice for participants (see “ DoL Proposes New Advice Rule ”). At a high level, the DoL has taken a major step back from the position it took in the final regulations on the subject put together—by the DoL—in 2008 before being halted, and then withdrawn last November by the new Administration (see “ IMHO: Executive Order ”). They also, IMHO, seem to have taken a step back from the admonitions of the Pension Protection Act of 2006 (PPA) to draft regulations that would craft an exemption to ERISA’s prohibited transaction rules that have long barred the ability to be compensated for advice on a basis that might vary according to the recommendations of the adviser 1 . Withdrawal “Symptoms” Now, many (including, appar

It was hard not to be struck this past week by that Pew Center on the States report titled “The Trillion Dollar Gap.” That title was a reference to the apparent chasm between the potential obligations of the assorted pension and retiree health-care programs of the 50 states, and the money set aside to pay for them (see “ States Face $1 Trillion Retirement Benefits Funding Gap ”). In some respects, the portrayal was better than it might have been: For one thing, the analysis was based on plan year-ends that predated the Q4 2008 meltdown, and it focused only on state programs, rather than the assortment of local government programs. On the other hand, it suffered—as many of these reviews do—from a lack of context. It combined the obligations represented by retiree health and pensions—and, while both surely are financial obligations, they are driven by different factors. More importantly, most of the public sector has, until very recently, treated retiree-health obligations as a pay-a

Two weeks ago, the Department of Labor and the U.S. Treasury turned to the retirement plan community for some input on how to “enhance retirement security for workers in employer-sponsored retirement plans through lifetime annuities or other arrangements that provide a stream of income after retiring.” Now, part of what the DoL is trying to figure out (see Feds Call for Lifetime Income Product Public Comment ) is why the take-up rate on annuities (technically “lifetime annuities or other arrangements that provide a stream of income after retiring”) is so dismal—not just because many see them as a superior way to ensure that “stream of income,” but because some are hoping that, if it can be made more available as a distribution option (perhaps even a default distribution option), more participants will take advantage of it. There are good reasons for the inquiry. We all know that most participants with a non-retirement-related distributable event (such as a job termination) tend to ha

That report, published by Towers Watson (see “ Towers Watson Finds DB Plans Outperformed DC Plans ” at ), compared the differences in investment results between 401(k) plans and defined benefit (DB) plans—and, in a contest that you’d surely have trouble getting decent odds on in Vegas, defined benefit plans fared better. That shouldn’t—and probably didn’t—surprise anyone, IMHO. Defined benefit plans have a lot of things going for them that 401(k)s don’t. First, most DB plans have someone in an official capacity paying attention to them. They are obligations of the employer, after all, and they have a direct—and increasingly visible—impact on the bottom line. Second, in view of the first consideration, those responsible for that bottom line impact of the DB plan generally have the good sense to engage the services of experts to help them make the right decisions. Finally, and perhaps most importantly when it comes to making investment decisions, DB plans have the benefit of time—an