Nevin's Data "Points"

Like most Americans who have health insurance (and most do), I’m reasonably happy with what I already have. And like many Americans, I’m willing to take the President at his word from the campaign trail—that if you like the insurance you have, you’ll get to keep it. But as I study the text in the two bills that will have to be merged to create legislation to fulfill that promise—well, I have to tell you, I’m not sure how that’s going to happen (1) . That matters, IMHO, not only in the here-and-now world of paying for health care versus saving for retirement (and there’s plenty of evidence to suggest that many participants are making those trade-offs), but even more so in the post-retirement world where those burgeoning health-care costs stand to siphon so much from nest eggs that are perhaps already insufficient. But make no mistake—I’m all for health-care reform, just not for what is currently proposed under that banner in Washington. “For” Score I’m all for some kind of safety ne

Editor’s Note: There’s so much going on in the world of retirement saving and investing that I never feel the need (or feel like I have the opportunity) to recycle old columns – but this one has a certain “evergreen” consistency of message that always seems appropriate – particularly at this time of year. 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, ha

In one of the more challenging economic years in memory, it is not surprising that the pace of change set in motion in defined contribution plans by the Pension Protection Act slackened. If anything, IMHO, it is remarkable that the adoption of devices such as automatic enrollment and contribution acceleration did not decline. That said, among a record number of respondents to PLANSPONSOR’s annual Defined Contribution Survey , the pace of automatic enrollment basically flatlined—just 30.8% of plan sponsor respondents said they now employ that approach (though more than half of the largest plans now do), compared with 29.8% a year ago. And, even after the encouragement afforded by the PPA, among those that have adopted automatic enrollment, only about four in 10 extended that to all workers (the rest applied it to newly hired workers only). Perhaps as a result, the average participation rate declined—slightly—to 72.3% this year from 73.8% a year ago, but was nearly unchanged from th

Several years back, we decided that our family was ready to upgrade to a high-definition TV (in fairness, that “decision” was in no small part predicated on the untimely “death” of the big-screen projection TV that we had purchased not too long after we married). So, I did what any reasonable consumer would do— – I went to my local appliance warehouse to see what was available. In short order, I was able to enlist the support of a trained professional (a “professional,”, it should be noted, who turned out to be younger than the TV that we were replacing). Not that he wasn’t helpful, after a fashion. But there in that “showroom,”, it was hard for me to see (or appreciate) all the subtle differences that purported to explain the occasionally significant variances in price. Moreover, he spoke in alien terms that were clearly something I was supposed to understand— – but didn’t. And, while I don’t mind probing for explanations, after a while, even the most diligent shopper gets tired

Those who were wondering when—or perhaps if—the issues raised in those revenue-sharing lawsuits would ever actually be tried got a strong, affirmative response last week. This time, the 8th U.S. Circuit Court of Appeals found triable issues of fact in a case involving Wal-Mart’s 401(k) plan (“ 8th Circuit Says Wal-Mart 401(k) Suit Requires Further Discussion ”), sending the case back for another hearing by the trial court that had dismissed issues raised in the lawsuit, while also taking the time (at least in a footnote) to distinguish some of its findings from a similar case (Hecker v. Deere) that had failed to clear the bar in another circuit (see " The 'Burden' of Proof "). But, IMHO, what distinguishes the ruling in Braden v. Wal-Mart Stores Inc. from all the revenue-sharing cases that have been adjudicated thus far is that the 8th Circuit judges were willing to concede that the plaintiff had alleged facts that, at least on the surface, were sufficient to support

Thanksgiving has been called a “uniquely American” holiday, and while that is perhaps something of an overstatement, it is unquestionably a special holiday, and one on which it seems a reflection on all we have to be thankful for is fitting. Here's my list for 2009 : First off, I’m thankful that the financial markets have stepped back from the precipice we were surely standing at a year ago. I’m thankful that the investment markets have recovered from the worst of the losses of 2008, even if we still have a long way to go. I’m thankful that so many Americans seem to be concerned about the nation’s fiscal health—and hopeful that those concerns will resonate with those who make decisions that affect it. I’m thankful that relatively few employers felt the need (or took the opportunity) to cut matching contributions this year—and even more thankful to see so many of those who did cut the match restore it. I’m thankful that so many employers have remained committed to their defined be

About a week ago, Caterpillar agreed to a $16.5 million settlement of one of those allegedly excessive fee/revenue-sharing lawsuits. It was the first of these suits—launched in September 2006—to come to some sort of “resolution” though, IMHO, it hardly qualifies as such (see “ Caterpillar Ready to Ink $16.5M Fee Suit Settlement ”). That said, the settlement’s terms were not just financial; it also included a series of changes in how Caterpillar agreed to administer the plan and monitor its investments. First off, during a two-year settlement period, Caterpillar agreed to "increase and enhance communication with employees about 401(k) investment options and associated fees,” as well as hiring an independent fiduciary (at least during that same two-year period)—and it has also apparently said that it would detail specific fees charged to participants. Caterpillar says it will avoid retail mutual funds as core investment options for the plans, and that the plan’s recordkeeping fe

I’m sure you’ve seen that commercial where a series of more-or-less everyday events and their price tags are presented, building to larger and more exotic events (and price tags) until they culminate with some extraordinary event—one that the announcer declares is “priceless.” As an industry, we have long worried about the plight of the average retirement plan participant who doesn’t know much (if anything) about investing, who doesn’t have time to deal with issues about their retirement investments, and who, perhaps as a result, would really just prefer that someone else take care of it, though it’s not always clear how much they value that effort. What gets less attention—but is just as real a phenomenon—is how many plan sponsors don’t know anything about investments, don’t have time to deal with issues about their retirement plan investments, and who, perhaps as a result, would also really just prefer that someone else take care of it. But how much are you willing to pay for that?

We made a provider change last week. We really hadn’t been focused on making a change, though the subject had come up from time to time. In fact, considering how long we had been thinking about making a change without actually doing anything about it, the change itself felt almost accidental in its suddenness. So sudden, in fact, that, in hindsight, I found myself wondering if we were “hasty”—perhaps too hasty. Make no mistake—we had been happy enough with our current provider, certainly at first. In fact, we had been with them for a number of years and had, over time, expanded that relationship to include a fully bundled package of services. That made certain aspects simpler, of course—though we discovered pretty quickly that the “bundle” presented more seamlessly than it actually was delivered. Still, net/net, we were ahead of the game financially, and certainly no worse on the delivery side; we were just a bit disappointed in the disconnect between the sale and the service leve

As I was listening to, and participating in, panels at our Future of Asset Allocated Funds conference in California this past week, I was struck again by how much things have changed in the past year. For example, at this conference a year ago, when we broached the notion of marrying a risk-based approach with a target-date offering, the general feeling seemed to be that that would be tantamount to taking a perfectly good, clean, and simple concept—and ruining it. This year, the room was not only ready for the idea, there was widespread enthusiasm for it. Similarly, a year ago, when we asked folks about the wisdom of putting a family of risk-based and date-based funds on the same retirement plan menu, well, the consensus would have been that you would be playing with fire in terms of confusing participants. This year, the notion not only seemed to be that it could be managed—but that it would be a real enhancement to the program. A year ago, the importance of understanding and being

Recently, Time magazine ran a story called “ Why It's Time to Retire the 401(k) .” For the most part, the article was little more than a tired rehash of criticisms that continue to be trucked out with disappointing regularity by those who, IMHO, should, by now, know better. Here’s my take on five “myths” that keep being told about the 401(k). You can’t save enough to retire on in a 401k. I’ll concede that when one looks at the “average” 401(k) balance today, it’s hard to imagine how anyone could live out the year, much less retirement, on that sum (1) . Even if you look at the average balance of a near-retiree (rather than an average that includes the accounts of 25-year old savers), it’s hard to see how most could live for another 20 years on that balance. That said, there’s a difference between saying you can’t save enough and you haven’t saved enough (2) . Every situation is unique, but ultimately, a voluntary savings system “suffers” from the reality that it is voluntary.

Asset-allocation fund solutions have, to put it mildly, exploded on the retirement plan scene—aided in no small measure by the sanction of the Department of Labor’s final regulations regarding qualified default investment alternatives (QDIA). However, the recent market turmoil has drawn a fresh, heightened scrutiny to the philosophy and structure of these popular defined contribution choices and, certainly for plan sponsors, reminded us all that there are differences—significant differences, in fact—in how these vehicles are constructed, how they are managed, and even the philosophies underpinning those designs. Now, the “right” answer for your program will, in many respects, be unique to your program. On the other hand, there are certain basic questions that plan sponsors should know the answers to in choosing an asset-allocation solution. Getting Started 1. Are we talking about lifestyle or lifecycle funds? The terms are used interchangeably all too often. However, funds that stru

I am admittedly something of a pension (and regulatory) geek, but when the SunAmerica Opinion was published (December 2001), it was clear that something big had just happened. Not only did the Labor Department sanction an arrangement that, for the first time, allowed an investment management firm to offer advice on its own funds and be paid for that advice—even if that advice impacted the compensation received—it made the effort to make that decision public; IMHO, signaling to the industry that the model sanctioned in the Advisory Opinion ) could serve as a blueprint for other investment firms (and advisers) to follow in those footsteps. Indeed, it was issued not as a prohibited transaction exemption in a specific situation (though that was what had been requested), but as an advisory opinion on the program’s structure. Sure enough, in the months that followed, it seemed as though just about every large DC provider put together some kind of program that, like the SunAmerica model,

Somewhere in the course of your professional life, you have no doubt heard (or used) the expression about what happens when you assume (1) . Well, over the past couple of weeks, I’ve heard a lot of discussion around target-date funds, most recently at the PLANADVISER National Conference (PANC). Without question, plan sponsors and participants—and perhaps not a few retirement plan advisers—were caught off-guard by the varied designs and resulting experiences of these popular investment offerings in recent months (2) . That many participants assumed these offerings were a no-maintenance solution to their retirement security is understandable, IMHO, certainly in view of how they were promoted by their manufacturers, sanctioned (from a design standpoint, anyway) by regulators, and positioned on retirement plan menus. But let’s face it, what happened in the markets last fall happened pretty much everywhere and to everyone (at least everyone who was invested in the markets). And, while the

Sitting in the audience at the ASPPA/DoL Speaks conference last week, I was reminded just how disruptive it can be to have a new boss. The conference, which, IMHO, remains unique in both the quantity and quality of access to Labor Department exports, featured many panelists it has been my pleasure to meet and get to know over the past several years. However we practitioners may struggle from time to time with the regulations and interpretations these folks put together, you don’t have to spend much time with any of them to appreciate just how smart, hard-working, and dedicated they are. Still, I can only imagine what it must have been like to have pressed (as they were surely pressed) to wrap up as much of the pending backlog of regulations in 2008. How it must have felt to see that last package—including the final regulations on investment advice—get all the way to the regulatory finish line, only to have it halted dead in its tracks (see White House Executive Order Snares Fee Disc

If you want to get a quick sense of just how fast time flies, consider that it was only a year ago this week that Lehman Brothers filed for bankruptcy—the same day that Bank of America announced its plans to acquire Merrill Lynch, and a day on which, not surprisingly, the Dow Jones Industrial Average closed down just over 500 points. That, in turn, was just a day before the Fed authorized an $85 billion loan to AIG—and that on the same day that the net asset value of shares in the Reserve Primary Money Fund “broke the buck.” This was made all the more surreal because it was going on while we—and several hundred advisers—were in the middle of our PLANADVISER National Conference. Let’s face it—no matter how busy or hectic your week has been, I’m betting it’s been a walk in the park compared to those times. The funny thing is, looking back (and armed with the prism of 20/20 hindsight), there were lots of signs of the trouble that eventually cascaded like a set of dominos, resetting not

Next week PLANSPONSOR and PLANADVISER will open nominations for our Retirement Plan Adviser of the Year awards. Each year we receive a number of inquiries from advisers about the awards, and many of these fall into a category I tend to think of as “exploratory”—feelers as to what we are looking for. Well, at its core, what we hope to acknowledge—and, thus, what we are looking for—hasn’t changed at all: advisers who make a difference by enhancing the nation’s retirement security, through their support of plan sponsor and plan participant information, support, and education. And, since its inception, we’ve focused on advisers who do so through quantifiable measures: increased participation, higher deferral rates, better plan and participant asset allocation, and delivering expanded service and/or better expense management. A Different World Of course, the world has undergone much change since we first launched those awards, and advisers now have an expanded array of tools at their dis

Being a plan fiduciary is a tough job—and one that, it’s probably fair to say—is underappreciated, if not undercompensated. In my experience, most who find themselves in that role (see “ IMHO: Duty Call ”) do an admirable job of living up to the spirit, if not the letter, of their responsibilities. Nonetheless, there are plenty of areas in which we could do a better job. In this week’s column, we’ll touch on the rest of my “10 things you’re probably doing wrong” list: 6. Thinking your plan qualifies for 404(c) protection—and misunderstanding what that means. Any number of studies suggest that many, perhaps most, plan sponsors think their plan meets the standards of ERISA 404(c ), a provision that ostensibly shields them from being sued for participant investment decisions, so long as certain conditions are met. On the other hand, industry experts are nearly uniform in their assessment that very few, perhaps no, plans meet those standards (though the courts have been somewhat more lib