Nevin's Data "Points"

In recent years, the notion that the ways in which choices are presented to individuals — known as “choice architecture” — can influence their decisions, has been widely embraced. Well before the advent of the Pension Protection Act of 2006, the retirement plan industry had acknowledged the positive influences of those behavioral finance techniques on overcoming, or at least countering, certain human behaviors. Based on the evidence of several decades of adoption, we know that automatic enrollment — even with the ability to opt out — transforms voluntary participation rates of roughly 70% to near-unanimous participation. And yet, even with the structure and sanction of the PPA, today fewer than half of the roughly 7,000 plan sponsor respondents to the 2013 PLANSPONSOR DC Survey have implemented that design (large plans being significantly more likely to do so than smaller programs). Even plan sponsors that have adopted automatic enrollment tend to do so with a default deferral ra...

One of the first things you learn in any kind of ERISA primer is that, as a fiduciary, you are expected to conduct yourself either as if you are an expert, or hire someone to help you who is. This so-called “prudent expert” rule is, of course, a significantly higher standard than the one applied to mere common- law fiduciaries—in fact, it is generally described as the highest legal standard. Of course, plan sponsors have long relied on the help of experts—attorneys, third-party administrators, investment managers, and recordkeepers—if only because so much of what a plan sponsor must do in operating their retirement program requires their active involvement. Not so retirement plan advisers, who, for many plan sponsors, remain something of an optional enhancement to their program. That said, in an environment that remains a legislative, regulatory, and operational thicket for even the most active and engaged plan sponsor, it is a plan option that is rapidly becoming standard equipmen...

Next week we will launch our eighth annual search for the nation’s best retirement plan advisers. Each year, we receive a number of inquiries from advisers about the awards, many that 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 from when we first launched the award in 2005: 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. Now, we’ve always tried to be very transparent about the award, and the process that underlies the selection. That said, I know that some ...

PLANSPONSOR’s National Conference last week featured a series of panels titled “Five Things You Need to Know About…” focused on a series of topics. One of those was qualified default investment arrangements (1) , or QDIAs—and while the “five things” that follow are somewhat different from the list presented by that panel, what follows was certainly inspired by the discussion. Here’s my list: (1) You don’t need to have a QDIA to get 404(c) protection. IMHO, one of the most marvellous things about the Pension Protection Act’s defined contribution provisions was that they weren’t imposed on plan sponsors. They provided clarity, structure, guidance, and, yes, protection on things like automatic enrollment, contribution acceleration, and default fund choices—but didn’t require that you embrace these concepts, unless, of course, you hoped to benefit from the protections associated with adhering to those structures. Sure, IMHO, it’s a lot easier to obtain 404(c) protection under the umbre...

Ours is an industry of fairly recent invention–one that is, in many respects, only just beginning to emerge from the growth pangs of adolescence. Ours is an industry constantly and dramatically evolving–and one that all too often seems relentlessly driven to push us forward to the next challenge, through the next legislative overhaul, and onto the next wave of tumult in the markets, sometimes in the same six-month period. For plan sponsors, change is not only the order of the day, it is the day. That certainly has been true for the 15 years during which PLANSPONSOR has been published. But if the pace is relentlessly forward, there are nonetheless those among us who have a vision that stands out from the crush of the day, who provide a better way for the rest of us, either through thoughts or deeds, to succeed in helping bring about a more secure future for those who depend on us. As our 15th anniversary approached, we began thinking about those individuals--individuals who have mad...

Two years ago, I wrote about the “next level” in defined contribution designs: a growing interest on the part of plan sponsors in focusing on service elements like participation rates, deferral amounts, and appropriate asset allocation—a precursor, if you will, for the designs that would eventually come to a fuller fruition in the Pension Protection Act. Since then, there have been any number of industry surveys that tout the boom in automatic plan designs—as does ours. And yet, despite the pickup in automatic enrollment programs—23.1% of those 5,500 employers responding to PLANSPONSOR’s 2007 Defined Contribution Survey now have these programs in place compared with 17.1% a year ago—it has yet to manifest itself noticeably in participation rates. The average participation rate reported was 72.7%, and while that is higher than the 70.1% in the 2006 survey, it remains short of the 74.9% reported in 2005—before such programs were the hot trend(1). One explanation for the modest uptick...

Looks like the pension crisis is finally over. Well, the funding part of the crisis, anyway. No fewer than three separate studies * were published this past week that essentially said that the pension plans of larger employers are either fully or nearly fully funded again. For several years now, we’ve been struggling with the impact of the so-called “perfect storm” on pension plans. The catchy nomenclature was borrowed from the 2000 film by the same name (which, in turn, was pulled from the 1997 book on which it was based)—a reference to the 1991 Halloween Nor’easter that resulted from the unusual combination of several forces of nature to create an exceptionally powerful storm across a very large area. A storm—nearly a hurricane—that caught many off-guard. The so-called perfect storm for pension plans also resulted from an unusual confluence of factors—a slumping investment market, the “vacation” from funding that many plans took during a period when soaring investment returns ...

This past week, we passed the “anniversary” of the commencement of bombing strikes in Operation Desert Storm (1991). Now, I was too old—and my kids too young—to have been directly impacted by that action. But I’ll always remember that night. I was living in North Carolina at the time, and had been invited by a co-worker to my first NCAA basketball game at the “Dean Dome” at the University of North Carolina. Tickets had been hard to come by, and Chapel Hill was a nearly three-hour drive from where I lived (and on a “school” night, to boot)—but I was excited at the prospect. My friend and I got there early—grabbed some refreshments, found our seats, and sat down to watch the warm-ups. We were only about 10 minutes to tip-off when they made the announcement about Desert Storm—and the resulting decision to cancel the game. Now, unless it is a playoff game, or a remarkably close contest, people have a tendency to exit such events early to “beat the rush.” In this case—and I don’t know...