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...