Nevin's Data "Points"

When it comes to qualified retirement plans, there are three kinds of people: people who are fiduciaries and know it, people who aren’t fiduciaries and know it, and people who are fiduciaries and don’t know it. Now, for the most part, those in the first category are in pretty good shape. Oh, there are a plethora of ways in which a fiduciary can fail to uphold his or her responsibilities under the Employee Retirement Income Security Act (ERISA)—but, in my experience, if you’re at least trying to do the right thing(s), and taking the time to document that effort, you’re in good shape. Still, even those who are trying to do the right things—and who embrace that role—don’t always fully appreciate the implications. The second category mostly tends to include those folks or firms that provide services to the retirement plan fiduciaries. Most enjoy that status because they don’t technically have any authority to do anything on their own; they just help those who do know what to do. Of co...

Last week, Senate Democrats unveiled a bill that would, among other things, enhance the Saver’s Credit – a provision which retains bipartisan support, even as the take-up rate disappoints. Here are six things that people who don’t get the Saver’s Credit often don’t “get.” The Saver’s Credit is, of course, a tax credit from the federal government for low- to moderate-income workers who are saving for retirement. For those who qualify, 1 in addition to the customary benefits of workplace retirement savings, the amount of the credit is 50%, 20% or 10% of retirement plan (or IRA or ABLE account) contributions depending on adjusted gross income. Credit ‘Limits’? And yet, some of the things that seem to be holding back the take-up rates could surely be addressed with a legislative “fix” – and here we’re talking about the relatively low income thresholds to which it applies, the fact that while it’s a credit, it’s not a refundable credit (and thus you have to have a fe...

Of  all the promising provisions in the SECURE 2.0 Act of 2022, one of the most expensive (as the federal government does math, anyway) is likely to be one of the most challenging to implement. It’s not effective till 2027, so there’s still some time to figure it out—but I’m talking about the new Saver’s Match—a significantly retooled and expanded version of the Saver’s Credit (which is more properly referred to, at least by the IRS, as “ Retirement Savings Contributions Credit ”).  As with the precursor Saver’s Credit, the Saver’s Match is focused on increasing the savings of lower-income workers by—in addition to what an employer may match—making a matching contribution from the federal government. The match has a maximum value of $1,000 at a rate of $0.50 per dollar contributed by a worker, up to $2,000 annually.  The Employee Benefit Research Institute (EBRI) has  estimated  (from tabulations of tax filers with W-2 (wage) income) that 69 million had inc...

Critics of the 401(k) have moved way beyond mere bad-mouthing—and are now openly advocating actions that would undermine support for, and participation in, those programs. It started with criticism of the 401(k) itself—how it was “never intended” to be a primary source of retirement income—as though that precluded the possibility. There were the insinuations that later became outright claims that—despite evidence to the contrary—401(k) plan benefits were “ upside down ” and that tax benefits accrued only to the rich. Then reports—based on small samplings of data—that employer matching contributions didn’t really impact/influence contribution levels—and that the match was…“ unfair ”—or “ exploiting naïve myopic workers .” More recently, there was the  pining for the defined benefit plan design , even though it never really provided the level of benefits promised for most—and even though the vast majority of workers in the private sector  never even had that as an option —and ev...

  Thanksgiving has been called a “uniquely American” holiday — and as we approach the holiday season, it seems appropriate to take a moment to reflect upon, and acknowledge — to give thanks, if you will. While it’s the celebration following a successful harvest held by the group we now call “Pilgrims” and members of the Wampanoag tribe in 1621 that provides most of the imagery around the holiday, Thanksgiving didn’t become a national observance until much later. On Oct. 3, 1789, George Washington issued his Thanksgiving proclamation, designating for “the People of the United States a day of public thanks-giving” to be held on “Thursday the 26th day of November,” 1789, marking the first national celebration of the holiday. However, subsequent presidents failed to carry forward this tradition.      Incredibly, it wasn’t marked as a national observance until 1863 — right in the middle of the Civil War, (also on Oct. 3) and at a time when, arguably, there was l...

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...

I was on a panel at our recent Plan Designs conference, and the topic of qualified default investment alternatives (QDIAs) came up. There was discussion about the Department of Labor’s proposed regulations on the subject; some observations about when we might expect to see final regulations; and ruminations from co-panelists Fred Reish and Mike Barry about ERISA’s embrace of the concepts of modern portfolio theory (MPT), and the importance of capital accumulation rather than capital preservation in making “appropriate” investment choices for participants that hadn’t, for whatever reason, elected to make their own. Then, a plan sponsor in the audience raised her hand and shared the experience of her plan—shared how they had carefully considered the alternatives of a stable-value investment alongside an asset-allocation alternative, and how they had decided on the former, and did so just before the market tanked in 2000. Her perspective was simply this: If they had chosen the asset-all...

 It’s not  all  about “the Benjamins,” but a recent analysis of the nation’s private retirement system certainly puts a lot of emphasis on the accumulation of aggregate assets in retirement plans. The Morningstar report—“ Retirement Plan Landscape Report, An In-Depth Look at the Trends and Forces Reshaping U.S. Retirement Plans ”—is extraordinarily diverse and comprehensive [i]  in its assessment—though while the report’s authors seemed to be striving for a balanced assessment, the overall sense was one of a leaky boat. No Surprises  There were some findings that seemed to surprise the authors that didn’t strike me as all that remarkable. Apparently (I hope you’re sitting down for this one) larger plans pay lower fees (expressed as basis points) than smaller plans. They are also more likely to invest in collective investment trusts (which tend to have lower fees, though that isn’t necessarily the case). What I  did  find surprising was ...