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Showing posts from August, 2015

‘Tipping’ Points: 4 Ways to Tell a Fad from a Trend

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One of the most valuable skills in my profession — and perhaps in any profession — is an ability to discern trends early. Just as valuable is the ability to discern the sometimes fine line of distinction between what may be a trend, and what may, in fact, be nothing more than a fad. Most plan sponsors have a functional aversion to the latter, and the vast majority have no real passion for being too early in the adoption of the former. After all, nowhere in the fiduciary directive to do only things that are in the best interests of participants and beneficiaries will you find an admonition to be “first.” One must be careful in making generalizations about such things, of course. The difference between a fad and a trend is often no more than one of time and acceptance, after all, and each plan sponsor situation is based on hugely independent factors. Still, in working with plan sponsors over the years, I have found that a new idea/product can quickly evolve to become a trend if it:

7 Things Every ERISA Fiduciary Should Know

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When it comes to workplace retirement plans, there are three kinds of people: people who are ERISA fiduciaries and know it, people who aren’t ERISA fiduciaries and know it, and people who are ERISA fiduciaries and don’t know it. If you’re in the first or last category — well, here are seven things that every ERISA plan fiduciary should know. If you’re a plan sponsor, you’re an ERISA fiduciary. Fiduciary status is based on your responsibilities with the plan, not your title. If you have discretion in administering and managing the plan, or if you control the plan’s assets (such as choosing the investment options or choosing the firm that chooses those options), you are a fiduciary to the extent of that discretion or control. If you’re not sure, there’s a good chance you are. For the very most part, you can’t offload or outsource your ERISA fiduciary responsibility. ERISA has a couple of very specific exceptions through which you can limit — but not eliminate — your fiduciary o

Why the ‘Ideal’ Plan Isn’t Always

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Advisors and providers often talk about the “ideal” plan — but ideal for what? That’s a rhetorical question of sorts — generally it means “ideal” in terms of providing a better retirement savings outcome. Indeed, I routinely see articles and commentaries (and panel presentations) that self-righteously take employers to task for not “caring” enough about their workers (or their retirement outcomes) to do the “right” things. While I think our industry views such observations as a challenge, a call to action, all too often I think policymakers and regulators — and certainly the 401(k) “haters” — hear a different message. While I suspect that one-on-one, most advisors allow for a more nuanced perspective on such things, at the risk of stirring up a little controversy, let me offer a different perspective on that “ideal” plan. Extending Automatic Enrollment to All Following the passage of the Pension Protection Act of 2006, with its automatic enrollment safe harbor, many likely ass

3 Things Plan Sponsors Should Know About Changing Providers

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By most industry estimates, approximately 10% of plans change providers every year.  Of course, far more consider making a change (without actually acting on it), and many changes are thrust upon plan sponsors, a consequence of poor service, or provider consolidation. Regardless of the motivation for undertaking the change, here are three things that in my experience every advisor (and provider) wishes plan sponsors understood about recordkeeping conversions — before setting them in motion. Your provider search will take longer than you think. Human beings are, generally speaking, poor judges of time requirements, particularly with things with which they don’t have a lot experience (like provider searches) and that require the involvement/input of committees (like provider searches). We tend to assume that we’ll have more time available for such things than actually winds up being the case, and we tend to assume that such things will take less time than they actually do. We als

Are You Exploiting Naïve Myopic Workers With That Employer Match?

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Over the years, I’ve seen some convoluted ways to rationalize undermining the tax preferences of workplace retirement plans and substituting government tax credits — but a new one just may take the cake. “ A Behavioral Contract Theory Perspective on Retirement Savings ,” authored by Ryan Bubb and Patrick Corrigan from the New York University School of Law and Patrick L. Warren from Clemson University’s John E. Walker Department of Economics, starts off by assuming that workers are rational, though perhaps not rational in the way you or I might consider to be rational. However, I’ll accept as logical their assertion that rational workers will prefer saving through an employer-provided plan, rather than accepting a job that does not provide such a plan. They also claim to provide an analysis that “provides novel explanations for the use of low default contribution rates in automatic enrollment plans, the shift away from defined benefit annuities toward lump sum distributions in defin