Nevin's Data "Points"

As the nation mourns the passing of former President Ford this weekend, it’s been interesting to think back on that period. Most of the coverage seems to run in the vein of “He deserves more credit than history has given him”—a nice way of saying that history really hasn’t given him much credit. That’s not unusual, of course. People are often not fully appreciated until well after they have passed from this mortal coil—and the dividends of presidential policies are often long-term investments. One thing he’s not often noted for—but that we in this business benefit from every day—is his signing of the Employee Retirement Income Security Act of 1974 (ERISA), less than a month after taking office. I wasn’t paying much attention to such matters in 1974. I was more focused on beginning my college education (and paying for same), and worrying how my dating life was going to survive having to pay 55 cents/gallon for gasoline (but relieved I no longer had to wait in line to do so). As presiden

Deals like the one announced on Friday by The 401(k) Company, Nationwide, and Schwab are the kind of thing that gives advisers—and plan sponsors—heartburn. Not that one in particular, I should hasten to add—one could have the same queasiness about the recent Great-West/US Bank deal (see Great-West Sweeps Up More 401(k) Business) , the sale of Southeastern Employee Benefit Services (see First Charter Lets Go of Recordkeeping Unit ), or just about any structural change at a 401(k) recordkeeper. The reasons for that angst are obvious, I would suspect. Change—even change for the better—is frequently disruptive to the human psyche. Most of us tend to drift into comfortable “ruts” of pattern, or perhaps habit—places where we know what to expect and, roughly anyway, when to expect it. And, at least in my experience, the more frazzled your existence, the more one pines for these oases of quiet and relative clarity. There are few things more disruptive to the peace or clarity of a 401(k) plan t

A few years back—when my kids still believed in the reality of Santa Claus—we discovered an ingenious Web site that purported to offer a real-time assessment of their “naughty or nice” status. Now, as Christmas approached, it was not uncommon for us to caution our occasionally misbehaving brood that they had best be attentive to how those actions might be viewed by the big guy at the North Pole. But nothing ever had the impact of that Web site – if not on their behaviors (they’re kids, after all), then certainly on the level of their concern about the consequences. In fact, in one of his final years as a “believer,” my son (who, it must be acknowledged, had been PARTICULARLY naughty) was on the verge of tears, worried that he’d find nothing under the Christmas tree but the coal and bundle of switches he surely deserved. One might plausibly argue that many participants act as though some kind of benevolent elf will drop down their chimney with a bag full of cold cash from the North Po

I was trolling around on the Internet last weekend, when I saw a story titled “ The Downsides to Your 401(k) .” Needless to say, I was intrigued by the headline (I’m sure that was the intention), which turned out to be a lead-in to an interview with Smartmoney.com Editor Ray Hennessey. There was an interesting pull quote designed to further whet the interest of the casual reader: "If your company goes belly-up, you're left with a lot of company match that you thought was automatic money, (and now) it's gone." Well, right off the bat, I’m thinking the real downside in this article is its portrayal of the truth—after all, a company’s bankruptcy doesn’t put the match at risk. So, I read on. Turns out, the pull quote was lifted out of context. The words were accurately quoted, but were presented without the benefit of an introductory sentence that clarified that the match put at risk was a match made in company stock. A situation that Hennessey said occurs “often.”

We got yet another call for 401(k) fee transparency last week. The latest – a report from the Government Accountability Office (GAO) at the behest of Congressman George Miller (D-California) – painted a relatively bleak picture of both the impact of fees on retirement savings, and on the ability of plan participants (not to mention plan sponsors and government regulators) to discern what they are paying for. Before the week was out, the Investment Company Institute (ICI) had published a report with a similar focus – but with a much different conclusion. For the most part, the GAO report didn’t plow any new ground. In fact, IMHO, any self-respecting retirement plan professional could have written the report (or at least bulleted its conclusions) in their sleep. The bottom line: Fees can have a huge impact on retirement savings, but few seem to know what fees they are paying, and they have to work hard to know what little they do know. In contrast, the ICI report conveyed the kind of cal

Like many of you perhaps, I suddenly realized this past week that this week is Thanksgiving. For me, 2006 has been an extraordinary year on fronts both personal and professional: turning 50, the death of my father, my 20th wedding anniversary, sending our first kid off to college, #2 turning 16, PLANSPONSOR’s first industry conference, a new adviser magazine…oh, and a little piece of legislation called the Pension Protection Act. Still, as I sit here today preparing to pick my mother up at the airport for her first Thanksgiving visit with us in the northeast – and look ahead to picking up my eldest at college next week – I’m struck by just how much there is to be thankful for. First and foremost, I’m thankful for a loving and patient family – who must all too frequently endure the intrusions of my career-long passion for this field into our daily lives. I’m thankful for the home I have found at PLANSPONSOR , and the warmth with which its loyal readers have embraced me, as well as the

However you feel about the results of last week’s elections, there’s little disputing that things are going to be different in Washington. Amazingly, though perhaps not surprisingly, I’m already getting invitations to presentations, or offers to send me assessments, on what all this change will mean for benefit programs generally, and retirement savings specifically. My initial reaction was a bit like when I walked into the mall last weekend and was confronted with Christmas displays – it’s too soon for this! I doubt that many went to the polls with pensions on their minds (even those of us who make our living supporting them), and with the ink on the Pension Protection Act of 2006 still damp, one is tempted to think that we have all the regulatory help we’ll need until after the next election – at least. Personally, I’m not expecting much out of this Congress, certainly not on pensions (does anyone really think that the momentary comity displayed for the television cameras will last?

If you have turned on a TV, walked by a radio, or driven down a residential street in the past month, you will, of course, be aware that our nation will go to the polls tomorrow. Certainly, politics has never been a pretty business, but I doubt that I would get much argument in stating that this particular political season has been as nasty, vitriolic, and personal as any in recent memory—including not a few of those ads where the candidate’s visage appears to say that he or she “approved this message.” Like a couple of bickering siblings, both sides protest either that they didn’t start it, or that it is the other side’s fault. Lowered to levels of political discourse that once would have gotten your mouth washed out with soap, the verbal free-for-all threatens to obfuscate not only the real issues in this election, but the truth itself. We’re all sick and tired of it—even when they’re dishing the dirt on the candidate we’re hoping is forced to slink off the public stage in disgrace c

This past weekend was Parent’s Weekend at the college where my eldest has now been in residence for the last two months. We’d had a great weekend, but as we went to check out of the hotel, I noticed that the final charges were considerably more than the rate we had been quoted when we made our reservations. Setting aside for the moment concerns that my 14-year-old had discovered the wonders of pay-per-view, closer scrutiny yielded the number I had anticipated—our room charge. But also included in the charges I was now expected to pay were a room tax, a city tax, and an occupancy sales tax. I suppose one could hardly fault the hotel for those additional charges – they had, after all, provided the room and facilities to my family for the agreed upon rate. I’ll bet that somewhere on their Web site, or perhaps even on the form I signed at registration, the existence of these additional taxes was acknowledged. However, I’m reasonably certain that the hotel was happy to have me think I was g

Last week, the elementary schools in Attleboro, Massachusetts, gained a bit of notoriety for their decision to ban kids from playing tag (more specifically, any unsupervised “chase” game). They weren’t the first to do so, but headlines like “Tag, You’re Out!” are just too tempting for journalists to turn their backs on. And, let’s face it, the notion of tag being “outlawed” is the kind of “you’ve got to be kidding me” story that people will read. The reason for the ban is simple: Recess is "a time when accidents can happen," was a quote attributed to Willett Elementary School Principal Gaylene Heppe, who approved the ban. Having had a dangerous encounter of my own on the school playground during sixth-grade recess (I still have the scars), I can attest to the veracity of the concern. Of course, no one really thinks this is about children’s safety. We all know – and, unfortunately, understand - that it’s about the lawsuits that such accidents will almost certainly engende

Last week, participants who had brought a company stock suit against their employer won a settlement. No real surprise there, you say? Well, actually, in approving the relatively modest $11 million settlement in the case of In re: Broadwing, Inc. ERISA Litigation, the court essentially said that plaintiffs should take the money and be glad they could get it—since their odds of winning (“prevailing on the merits” in legalspeak) were uncertain.* Now, admittedly, that might be something of an overstatement. In approving the settlement, the court basically did what courts are supposed to do in approving a settlement—they ran down a checklist of things that purport to establish that the settlement is fair, particularly in a class action, where most of the plaintiffs aren’t in the courtroom. And one of the conclusions courts are basically required to draw in approving such settlements is that it represents the best deal for a plaintiff under the circumstances. In Broadwing, the action w

Last week, another court rejected claims that a cash balance plan was age discriminatory (see “Cash Balance Plan Not in Breach of Age Discrimination Laws” ), though you could perhaps be excused for not noticing that result. In fact, my guess is that a random sampling of the adviser universe would reveal two things about cash balance plans: first, a great ignorance about what they are and how they work (see links below); and second, a general sense that they represent an illegal plan design. Over the past several years, the conversion – and litigation experience – of a single plan – IBM - has dominated the media’s coverage of these programs. Along the way, Congress has cut off funding for the Department of Labor to issue clarifying regulations on these programs (led by Congressman Bernie Saunders, I-Vermont, in whose state IBM is the largest employer), and the IRS quit issuing determination letters on these plans (basically an approval by the IRS that the plan document passes muster). T

There are many terrifying aspects of being a parent – but perhaps none as intellectually daunting as being asked to help with your children’s homework. See, even if you did well in school once upon a time – even if you can (or think you can) still remember how to solve a certain type of problem, the only way to “know” is to see if you have the “right” answer. And thank goodness, for parents (and, no doubt, students) everywhere, most math texts still carry the answers to the odd problems in the back. Last week, the Department of Labor provided a similar service – the “right” answer to a dilemma that has plagued plan sponsors and advisers for many years: the choice of an appropriate investment fund for participants who fail to designate one. In announcing the proposed rules , the DOL threw its support behind this solution – a qualified default investment alternative - as a means to foster programs like automatic enrollment (particularly the new safe harbor version contained in the Pensio

On September 11, 2006, while the nation was focused on the fifth anniversary of the 09/11 terrorist attacks, a St. Louis law firm launched its own “attack” on a wide array of 401(k) plan practices, primarily centered around the application, and reporting, of fees. However, unlike the terrorist attacks, this 09/11 event has been launched well below the normal media radar screens. In fact, even today, some two weeks after the complaints have been filed in court by the St. Louis-based law firm of Schlichter, Bogard & Denton, I don’t believe it has been picked up by any major media outlet. That a suit has been filed regarding revenue-sharing practices is hardly a surprise, of course – it’s not even the first (for example, see Nationwide ERISA Suit Survives Challenge ). Moreover, a number of notable ERISA litigation firms have, for some time, effectively solicited these claims from participants via postings on their respective web sites. However, what is most striking, IMHO (asid

One of my favorite Westerns is “Butch Cassidy and the Sundance Kid,” and one of my favorite parts of that movie is the part where they are being pursued – relentlessly pursued – after a particular train robbery by an unidentified posse. As they fruitlessly try one thing after another to shake their pursuers, the two outlaws’ frustration mounts, moving from a “can you believe it?” incredulousness at their ingenuity to a “now what are we going to do?” exasperation – a range of emotions conveyed several different times – in several different ways – by the same phrase, “Who ARE those guys?” In our industry, the pursued aren’t train robbers, but participants – or more accurately workers who could be participants. The posse trying to “catch” them includes employers, providers, and, yes, financial advisers. Over the years we’ve tried many things, with varying degrees of success, to get everyone who is eligible to save via these programs to do so: the logic of tax-advantaged savings, the al

Five years ago, I was in the middle of a cross-country flight, literally running from one terminal to another in Dallas, when my cell phone rang. It was my wife. I had been on an American Airlines flight heading for L.A., after all - and at that time, not much else was known about the first plane that struck the World Trade Center. I thought she had to be misunderstanding what she had seen on TV. Would that she had…. So that day, when family and friends were so dear and precious to us all, I spent in a hotel room in Dallas. It was perhaps the longest day - loneliest night - of my life. In fact, I was to spend the next several days in Dallas – there were no planes flying, no rental cars to be had – separated from home and family by hundreds of insurmountable miles for three interminably long days. When I finally was able to get a car and begin that two day drive home, it was a long, lonely drive, but it gave me a lot of time to think - to pray - and to treasure the things I was s

These are momentous times for our industry, particularly for financial advisers. The shift from employer-funded defined benefit plans to employer-fostered defined contribution models may present challenges for this nation’s long-term retirement security, but it surely plays to the advantage of a profession dedicated to helping plan sponsors construct the right programs, and participants make the best of them. Just as there is little question that those trends favor financial advisers, there is also no real challenge to the notion that you provide an invaluable service to these programs. It has been our privilege these past several years to lend a hand to your efforts—first via PLANSPONSOR magazine; then via PLANSPONSOR.com, the NewsDash, and this publication; and, more recently, via our education arm, the PLANSPONSOR Institute and our PLANSPONSOR Retirement Professional (PRP) designation. Next month, we will take that outreach a step further with PLANADVISER - a new publication and

I only discussed retirement investments with my dad once, and the conversation didn’t take place until he had already decided to retire. He had a pretty good idea about what he wanted to do – he just couldn’t figure out how to accomplish that via the all-too-typically complicated distribution request form. Consequently, at my mother’s instigation, he called in an “interpreter” – in this case, the son with the law degree. It was a complicated discussion. Since hundreds of miles separated us, he had to read the form to me (I suggested faxing, but that was “more trouble than it was worth”; I chose to assume that was a reference to his difficulty with operating the fax machine on his end, and not the quality of advice he was hoping to get from mine). Fortunately, there is something of a boilerplate design to most of these forms and, in reasonably short order, I was able to wrest an English version of his options from the document. Having outlined the options for him, I asked him if he

One of the “promises” of the newly enacted Pension Protection Act of 2006 (PPA) is that it will foster, if not encourage, greater levels of retirement plan participation. And while there are several areas that ostensibly facilitate this growth – notably the removal of EGTRRA’s sunset provisions and the expansion of investment advice – the thing that is really supposed to make a difference is automatic enrollment. So, how does the PPA encourage automatic enrollment? First, it resolves the current dilemma faced by plan sponsors in states that prohibit (or appear to) deductions from a worker’s pay without their explicit permission. While this has been a relatively recent concern, the certainty that federal, not state, law governs these transactions is a welcome relief, and one that is provided immediately. Will it persuade employers who were not already actively considering automatic enrollment? Probably not. The PPA also lays the groundwork for some much-anticipated clarity from the Depa

About a week ago, a friend of mine asked me how my retirement plan investments were doing. Now, we’ve had conversations about asset allocation from time to time over the years – we’ve even compared “answers” on our individual 401(k) plan choices – so it wasn’t as though the question was out of left field. The truth was, I hadn’t checked on them since early July – but I answered, “OK, I suppose – why?” As I waited for his response, two obvious answers to my question popped into my head. Either his account returns were sizzling, and he wanted to rub that in, or his account returns were not-so-impressive, and he was looking for some reassurance on the choices he had made in his account (that he was merely interested in the status of my retirement savings account didn’t really seem plausible under the circumstances). Then, I remembered – the last investment choice he made was to invest in a lifestyle fund – and, sure enough, he wasn’t thrilled with his return. There have been several s

During our recent family vacation, I decided to add the GPS (global positioning satellite) option to our rental vehicle. While I have never had one in my personal car, we were going to be traveling in some VERY unfamiliar territory, and at hours of the day when I didn’t want to be trying to read maps, much less trying to guess how far to the next gasoline station in the middle of nowhere. Over the long haul, it was a godsend. We got clear, quick, and for the very most part, accurate, directions to just about every location on our itinerary. Just about. Basically, the longer it had to react to the destination, the better it did. In close quarters – urban settings where the streets come up on you faster, and the opportunities to turn somewhat limited by traffic restrictions – well, let’s just say that my wife understands how I drive, and how I need to be directed - better than the satellites circling the earth, communicating with my car. The analogy isn’t perfect, but when it comes

Last week’s Congressional machinations brought to mind Otto van Bismarck’s comment that “Laws are like sausages, it is better not to see them being made.” I had just about given up on seeing anything emerge from this session. Frankly, most plan sponsors I had spoken with would have been just as happy to see no bill as a bad one – and most of them (that is to say, the ones who weren’t troubled airlines) were hard-pressed to see how a “good” one could emerge from what was on the table. The advice provisions in the House-passed bill will, no doubt, create some stirrings in your world – if enacted - but it is by no means yet certain that it will be (for why, see Pension Reform Takes an Unexpected Detour ). The encouragements surrounding automatic enrollment programs will almost certainly generate a bit of activity on that front, but I suspect the actual take-up rate will be relatively modest, certainly in the short-term. The participant information disclosures will probably generate mo

Like many of you, my job takes me away from home from time to time. For the most part, these are short jaunts, at least from a time standpoint. These days, it’s not unusual for me to make a cross-country trip – deal with business, and come back – all in the same calendar day. I get to visit some nice places but, frequently, all I actually get to SEE of those places lies between the target venue and the airport. Over time, like all good “road warriors,” I have learned how to pack, know what size bags work best with the carry-on restrictions, and have invested in a series of portable toiletries that never have to leave my travel bags. When lugging my laptop and assorted work materials was beginning to take its toll on my back, I even bought a special backpack. I can almost get up the morning of my departure and pack with my eyes shut (in fact, I’m sure that I did for some of those early flights). Oh, and I NEVER check bags. Then, last week, I did something I have seldom been able t

In this business, we spend a lot of time planning for, and talking about planning for, retirement security (and talking about helping others plan for retirement security). However, tomorrow’s version of retirement seems likely to be quite different from that image in the travel agency brochures—or that enrollment plan kit. This came home to me in a very real sense recently when I sat down with my mother to work up a budget that would last—the rest of her life! Now, I’ve done plenty of budgets in my life, both personal and professional. But even those that incorporated, in some form or fashion, elements of longer-term goals…bear in mind my eldest heads off to college this fall…have always tended to be a year-to-year process. Mom’s income isn’t getting any bigger—or not much bigger, anyway. There’s a serious dearth of promotional opportunities in retirement, after all. I will confess to a bit of anxiety ahead of the event. Like many families, while I knew some of the details of thei

At the end of two weeks on the road – the first for our Plan Designs 2006 conference , the latter a chance to spend time with the majority of our family that still lives in the Windy City – and an unplanned day in the office to “catch-up” on the things that don’t follow you via e-mail and voice mail, my kids (for whom the two weeks on the road actually constituted a vacation) were pressing to see the new “Pirates of the Caribbean” movie (in point of fact, they have been pressing for it ever since the release date was first published a year or so ago). Now, truth be told, I was predisposed to honor their request. Like many, I hadn’t expected much from the first installment (I hadn’t even realized it was a “first installment”) and, instead, I found myself having a better time at the movies than I had in a long time. Still, in the part of the world that I live, a night at the movies with my family (including that trip to the concession stand) for a prime-time movie viewing costs nearly $1

This week, of course, is the Fourth of July, the anniversary of the signing of the Declaration of Independence. While, these days, few would argue that the result we celebrate today remains largely unique in the history of the world, it is easy, looking back, to gloss over just how remarkable a sequence of events made this nation’s independence a reality. The bickering and machinations of Congress then were every bit as unpleasant, and occasionally unproductive, as the worst of today’s elected officials – even though, and perhaps in some measure because, hostilities had officially been underway since the so-called “shot heard round the world” the preceding spring. The men that gathered in Philadelphia that summer to bring together a new nation came from all walks of life, but it seems fair to say that most were men with something to lose. True, many were merchants (some wealthy, including President of Congress John Hancock) already chafing under the tax burdens imposed by British rule,

This past week I watched my (now not so) little girl graduate from high school, and just 24 hours before that, this proud papa was beaming at a ceremony where she garnered so many awards, she had trouble carrying them to the car. Just two days later we were driving her to a weekend orientation at the school that will be her new "home" come fall. Now, like most parents of teenagers, we feel that we have been practicing for Jennifer to leave home for some time now. She comes in from work, heads upstairs to do her homework - has to be summoned to meals – and, as soon as she is done ingesting her food, disappears back into her alcove. It's a bit like we are running a bed and breakfast, and she is a guest (except for the part where the innkeepers get paid, of course). In short, we, like our parents before us, have resorted to complaining about how little we see her. Except, of course, for those sporadic outbursts of emotion that inevitably flare up between kids who think