Nevin's Data "Points"

Thanksgiving has been called a “uniquely American” holiday, and though that is perhaps something of an overstatement, it is unquestionably a special holiday, and one on which it seems appropriate to reflect on all for which we should be thankful. And so… I’m thankful that participants, by and large, continue to hang in there with their commitment to retirement savings, despite lingering economic uncertainty and competing financial priorities, such as rising health care costs and college debt. I’m thankful that so many employers voluntarily choose to offer a workplace retirement plan – and that so many workers, when given an opportunity to participate, do. I’m thankful that figuring out ways to expand that access remains, even now, a bipartisan concern – even if the ways to address it aren’t always. I’m thankful that so many employers choose to match contributions or to make profit-sharing contributions (or both), for without those matching dollars, many work...

Nobody likes to be thought of as “average” – so why do people spend so much time worrying about the “average” 401(k) balance? These averages are reported with some regularity by any number of providers (based on the records for which they have access), and sometimes by academics drawn from government databases. 1 The short (and less cynical) answer to “why” is most likely that the math is “easy.” You simply take the total assets (from whatever recordkeeper/plan balances you have), divide it by the number of participants in that group, and “voila” – you have an average. 2 Now, when you stop and think about it (and many don’t), you realize that doing so adds together the balances of individuals in widely different circumstances of age and tenure – everything from those just entering the workforce (and who have relatively negligible 401(k) balances) with those who may have been saving for decades. It can also, in the case of government databases, add together those that...

"Unintended consequences” are generally a bad thing. But not always. The 401(k), for example. This week we celebrated the birthday of the 401(k) – because it’s the anniversary of the day on which the Revenue Act of 1978 – which included a provision that became Internal Revenue Code (IRC) Sec. 401(k) – was signed into law by then-President Jimmy Carter. That wasn’t the “point” of the legislation of course – it was about tax cuts (some things never change) – reduced individual and corporate tax rates (pulling the top rate down to 46% from 48%), increased personal exemptions and standard deductions, made some adjustments to capital gains, and – created flexible spending accounts. But it did, of course, also add Section 401(k) to the Internal Revenue Code. That said, so-called “cash or deferred arrangements” had been around for a long time – basically predicated on the notion that if you don’t actually receive compensation (frequently an annual bonus or profit-shar...

Halloween is the time of year when one’s thoughts turn to trick-or-treat, ghosts and goblins, and things that go bump in the night. But what are the things that keep – or should  keep – plan fiduciaries up at night? Well, there are the things like… Getting Sued Plan sponsors will often mention their fear of getting sued (actually, their advisors frequently broach the topic), and little wonder. The headlines are (still) full of multi-million dollar lawsuits against multi-billion dollar plans, and if relatively few seem to actually get to a judge (and those that do have – to date – largely been decided in the plan fiduciaries’ favor), they nonetheless seem to result in multi-million dollar settlements. Oh, and not only has this been going on for more than a decade, the issues raised are evolving as well. As a plan fiduciary, you can be sued, of course; and let’s not forget that that includes responsibility for the acts of your co-fiduciaries, and personal liab...