Nevin's Data "Points"

 When the Labor Department issued last month what it called “new guidance” that it further described as “the first time the department’s Employee Benefits Security Administration has issued cybersecurity guidance”—well, I, for one, was expecting… guidance.  However, rather than an advisory opinion, information letter or even a field assistance bulletin, it turned out instead to be three documents outlining what were termed “ best practices  for maintaining cybersecurity.” The issue of cybersecurity has, of course, loomed large in recent months, reportedly emerging as a focus in Labor Department audits  and as a point of contention [i]  in participant lawsuits. In fact, even the preamble to the final e-delivery regulations  stated a year ago that “…the Department expects that many plan administrators, or their service or investment providers, already have secure systems in place to protect covered individuals’ personal information.”  ...

Over the past several years, a growing amount of attention has been focused on the decumulations of defined contribution plan balances in retirement. Much of that focus has, of course, been driven by concerns that those individuals won’t have enough resources accumulated to fund those retirements. More recently, there has been a sense that one way to help provide a different perspective on these retirement savings would be to provide participants with an estimate of what their current or projected savings would produce in terms of a retirement income stream. In May 2013, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) published an advance notice of proposed rulemaking (ANPRM) focusing on lifetime income illustrations. Under that proposal, a participant’s pension benefit statement (including his or her 401(k) statement) would show his or her current account balance and an estimated lifetime income stream of payments based on that balance. As noted in ...

Last week the Government Accountability Office (GAO) issued two reports focused on 401(k) plans: one on target-date funds, the other on potential conflicts of interest. As seems to be its custom in such reports, the GAO communicates its conclusion in the titles: “Key Information on Target Date Funds as Default Investments Should Be Provided to Plan Sponsors and Participants” and “Improved Regulation Could Better Protect Participants from Conflicts of Interest”—and, IMHO, there’s little controversy in those statements. The reports themselves offer a great informational primer on target-date fund designs and issues (you’d be surprised how many plan sponsors still don’t quite grasp the concept of “glide path”) as well as the fee structures and revenue-sharing components that underlie the 401(k) retirement savings system. Both reports acknowledge that efforts are already under way to remedy the shortfalls the reports identified in both, while at the same time promoting solutions to those...

Last week, the Department of Labor reissued its proposed regulation on participant fee disclosure. Those familiar with the last proposal (put out by the prior Administration—see “ EBSA Finishes Regulatory Package with Participant Disclosure Proposal ”) will doubtless find this one to be a modest improvement (see “ EBSA Releases Final 401(k) Fee Disclosure Rule ”). Aside from the passage of time, this version incorporates additional input from the retirement plan community, financial services regulators, and even participant focus groups—most of it good, and all of it interesting. 1 The rule itself is worth a read for, IMHO, it offers valuable insights not only into the suggestions made, but into the Labor Department’s reaction and response to those comments. As always, the devil lies in the final details, but one senses a strong interest in balancing the desire to give participants more information to make better decisions with the practical realities attendant in providing trans...

Last week, during our PLANADVISER National Conference , I asked a panel of four plan sponsors if their current adviser was a fiduciary—and if that status mattered to them. It’s not the first time I’ve asked that question; in fact, I have asked it of these plan sponsor panels at each of our four such conferences to date (although the plan sponsors were, of course, different). I ask it for one simple reason: While I sense a certain unanimity of opinion on the matter in retirement plan adviser circles, plan sponsors frequently have a more nuanced view. Sure enough, this year a plan sponsor panelist not only said that his adviser wasn’t a fiduciary, but that he wasn’t at all sure why that mattered. In fact, he wondered aloud why an adviser would want to go to jail with him if something went awry. Now, you could tell that many of the advisers in the room were surprised, perhaps stunned, by that statement. And yet, IMHO, that plan sponsor demonstrated what I felt was a pretty insi...

Remember when it used to be quiet in July? Not so this past week, with the announcement of two major retirement industry acquisitions, a significant update on fee disclosure regulations, and a ruling in a revenue-sharing case that could have far-reaching implications. On the two industry acquisitions, LPL’s absorption of National Retirement Partners (NRP) will surely be of most interest to the adviser community (see LPL Acquiring National Retirement Partners ). LPL, which had only recently launched an IPO (and is thus literally in a “quiet period”), has struggled for some time with its retirement plan focus, while NRP has had its own share of issues in the wake of the recent financial crisis. LPL’s backing should certainly prove to be restorative for NRP’s positioning, and it’s hard to imagine that a newly constituted retirement-focused unit at LPL under Bill Chetney’s leadership won’t provide a clarity of focus for LPL’s efforts in this space. Plan sponsors may feel a greater immed...

Recently, the Internal Revenue Service (IRS) announced that it was sending a questionnaire out to about a thousand 401(k) plan sponsors. The IRS said it developed the questionnaire because of the “critical role 401(k) plans play in our private retirement system” (see “ IRS Provides 401(k) Questionnaire Details ”). Make no mistake: It’s going to take some effort to respond to the questionnaire—and respond you must. Described as a “compliance check,” the IRS notes that “failure to complete the Questionnaire will result in further enforcement action.” So, what does the IRS want to know? Well, there’s a lot of information to be gathered about the plan from plan years going back to 2006: the number of employees, participants, their deferral levels, eligibility standards, service and age requirements, the existence and administration of loans and hardship withdrawals, the results of nondiscrimination tests, the determination of top-heavy status, the level(s) of match, and any changes to t...

On Friday, the Department of Labor, as part of the White House’s Middle Class Task Force, formally unveiled a couple of initiatives. The “new” one—and the one likely to capture the attention of the retirement plan community over the next several weeks—deals with investment advice for participants (see “ DoL Proposes New Advice Rule ”). At a high level, the DoL has taken a major step back from the position it took in the final regulations on the subject put together—by the DoL—in 2008 before being halted, and then withdrawn last November by the new Administration (see “ IMHO: Executive Order ”). They also, IMHO, seem to have taken a step back from the admonitions of the Pension Protection Act of 2006 (PPA) to draft regulations that would craft an exemption to ERISA’s prohibited transaction rules that have long barred the ability to be compensated for advice on a basis that might vary according to the recommendations of the adviser 1 . Withdrawal “Symptoms” Now, many (including, appar...

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...