Game Changers or (Just) Rearrangers?
In these extraordinary times, there’s a lot of change in the mix—and new legislative and regulatory developments that could be “game changers”—or perhaps not-so-much.
Even in the most normal of times, it’s customary for businesses in evaluating future prospects to consider/identify elements under a “SWOT” analysis: strengths, weaknesses, opportunities or threats—and the recent Summit Insider gave us a chance to see what is on advisor minds now—and for the days ahead.
For this year’s Summit Insider, we asked respondents[i] to weigh in on how they saw various portents of change: as a game changer, for good or ill, something about which much ado had been made without justification (those that are mere “rearrangers”)—or was it simply too soon to say?
Here’s what they thought about:
1. MEPs/PEPs (Multiple Employer Plans/Pooled Employer Plans)
40% - Too Soon to Say
38% - Positive Game Changer
20% - Much Ado About Not Much
12% - Negative Game Changer
Arguably one of the most-anticipated changes from the SECURE Act was the advent of (truly) “open” multiple employer plans (MEPs), rebranded and somewhat refined to what the legislation calls pooled employer plans, or “PEPs.” Long championed as a means to help close the coverage gap, particularly among smaller employers, by providing certain structural and cost efficiencies of scale—there are some details yet to be worked out by regulators (they aren’t effective until Jan. 1, 2021).
More recently, MEPs have found themselves in the crosshairs of litigators who allege that, despite those efficiency claims, some providers have charged that some have charged excessive fees and not fulfilled their fiduciary obligations. All of which may, despite a minority view as a game changer, left a slim plurality calling it “too soon to say.”
2. DOL’s Fiduciary Reproposal
37% - Too Soon to Say
26% - Much Ado About Not Much
26% - Positive Game Changer
11% - Negative Game Changer
Perhaps no regulatory undertaking in recent memory has occupied the focus of advisors—and advisor organizations—as the reconsiderations of the fiduciary rule. First in 2011, and then again in 2015, the Labor Department saw fit to reconfigure both ERISA’s fiduciary standard, the conditions under which a prohibited transaction exemption would be granted, and the type of retirement accounts to which those standards would be applied.
Whatever lies ahead for the proposal in the comment period and reconsideration—it’s doubtful that it would last long in its current form following a change in administrations. That, if nothing else, might explain the stance of respondents to this year’s Summit Insider—a plurality of which say it’s “too soon to say” what kind of impact it might have—or if it comes to life at all.
3. SECURE Act’s Expansion of Retirement Income Safe Harbor
54% - Positive Game Changer
27% - Too Soon to Say
15% - Much Ado About Not Much
3% - Negative Game Changer
Among its many changes, the SECURE Act contains three sections that, taken together, are expected to have a positive impact on the provision of retirement income products in defined contribution plans: the reporting of a monthly lifetime income amount on participant statements, allowing for the portability of “in-plan” lifetime income benefits, and an expansion of the safe harbor for the prudent selection of lifetime income providers.
The first is already in place among many providers (albeit not necessarily using the DOL’s proscribed method), the second kicks in only after an in-plan option is in place—but the third—additional insulation against what many see as the biggest stumbling block to plan sponsor adoption of these options—well, could that be a game-changer? Summit Insiders seem to think so.
4. E-delivery
86% - Positive Game Changer
4% - Much Ado About Not Much
3% - Too Soon to Say
1% - Negative Game Changer
When the Labor Department unveiled the final e-delivery rule in May, it was the culmination of years of hard work of advocacy. The timing was precipitous, coming in the midst of the COVID crisis that separated so many workers—and recordkeepers—from their offices. That timing may slow the full impact out of the blocks, but over a decade the Labor Department anticipated that the new safe harbor will save plans approximately $3.2 billion net, annualized to $349 million per year (using a 3% discount rate)—money that could well be better spent on retirement savings. That has the makings of a positive game changer—and that seems to be just how the Summit Insiders see it.
6. Printing/Showing Lifetime Income Disclosures on Statements
52% - Positive Game Changer
26% - Much Ado About Not Much
15% - Too Soon to Say
6% - Negative Game Changer
We’ve already noted the three lifetime income enhancements in the SECURE Act, and if this one is already in play with many recordkeepers (and therefore, perhaps explains why a quarter of Summit Insider respondents say it’s “not much”), it’s potential to help shift the focus from accumulation to decumulation is largely unquestioned.
Of course it remains to be seen what might emerge when the (still) interim final rule is finalized—and what changes recordkeepers that have already made the move to produce such illustrations on their own might have to embrace, and when. Still, there’s something to be said for consistency of approach—and universality of availability.
Said another way—it’s “show” time.
- Nevin E. Adams, JD
[i] Who Are the Summit Insiders?
Just over 400 advisor and home office “attendees” of the 2020 NAPA 401(k) Cyber Summit responded to this year’s Summit Insider. Just under a third (32%) had been a retirement plan advisor for more than 20 years, and a quarter had been for 15-20 years. There were, however, 14% who had less than 5 years experience in that role, and a nearly equal number (13%) that had been in the role for 5-10 years.
Their target markets were similarly diverse. About a quarter each targeted plans with less than $5 million in assets, between $5 million and $10 million, and between $10 million and $25 million. The remaining quarter were divided between market segments ranging from $25 million to more than $41 billion in assets.
Comments
Post a Comment