Nevin's Data "Points"

I’ve been on the road a lot over the past several weeks – and I’ve noted a remarkably diverse range of prices in gasoline across various locales. I think it’s fair to label gasoline a “commodity [i] ” – what the dictionary describes as “a reasonably interchangeable good or material, bought and sold freely as an article of commerce.” Oh, sure – you may have a preference for one brand or another, you may not care for the political allegiances of their ownership… but when push comes to shove, it usually comes down to price – because, after all, when it comes to gasoline, it’s pretty much the same stuff. For years, recordkeeping services – complex and difficult as they can be to provide accurately and consistently (not to mention profitably) – have been characterized (some might say disparaged) as a “commodity,” while fee compression (and the aforementioned complexities) continue to fuel consolidation in that industry. Honestly, as a former recordkeeper, I’ve never...

The year we began publishing PLANADVISER was a big year in many ways for me – it marked my twentieth wedding anniversary, it was the year my father passed away, the year my eldest went off to college for the first time, and also the year that “catch-up contributions” became an item of more-than-passing interest to me. In recent weeks, I’ve had occasion to think back on those past five years, and all that has transpired – the Pension Protection Act, QDIAs. the back-and-forth on fiduciary advisers, the first wave (and subsequent flurry) of revenue-sharing lawsuits, the growing emphasis on transparency and disclosure, the growth – and questions about – target-date funds, the “normalization” of a fiduciary role for retirement plan advisers, and more recently, the back-and-forth on an expanded fiduciary definition. Like many of you, I can still recall the tumultuous news of September 2008 – all hitting during our PLANADVISER National Conference that year. While it’s fun and interesting to ...

I was late to the NetFlix game—switching over only when my local Blockbuster closed its doors. Honestly, I was more than a little skeptical about paying to rent movies while spending most of the month waiting for the mail carrier to shuffle things back and forth. Those fears (along with concerns drawn from early stories about people being sent movies at the bottom of their list, rather than the newer, hotter releases) have turned out to be mostly a non-issue. More recently, I “discovered” the firm’s online library of free movies—and while I would say that most of them SHOULD be free (some you should be paid to sit through), I have enjoyed having that “extra” feature. Sure, there were times when the Internet delivery speed wasn’t optimal, or when a movie would time out a third of the way through, but heck, it was free. Until, of course, NetFlix announced a change in pricing policy, a change that would cut the cost of the traditional movie rental service, but that would charge—and ch...

There were three big disclosure announcements last week. The first two were the pushback of the effective date for 408(b)(2) fee disclosures to April 1, 2012, from the previously announced effective date of January 1 of that year. In the same announcement, the Department of Labor also delayed the compliance date for the participant level fee disclosure regulation for most plans to May 31, 2012 (a month ago, the DoL had said that information would have to be made available no later than April 30)—which, from a practical standpoint, means that the information must be provided by August 14, 2012 (45 days after the end of the second quarter in which the initial disclosure is required)(see “ Borzi Chats about Upcoming Definition of Fiduciary Rule ”). Those delays are, doubtless, of some relief to the provider community. They’re not pushed back far enough to significantly delay the beneficial impact of the disclosures (though this is not the first time they have been pushed back), but I’m...

The underlying theme of last week’s PLANSPONSOR National Conference was “measuring up,” a reference not only to the need to measure the performance and outputs of a retirement plan’s designs, but also to the opportunity to increase and enhance it in the process. Of late, fees are very much on everyone’s mind, as we all prepare for a new series of plan, and ultimately, participant, disclosures. Just ahead of those disclosures, the industry has launched a new generation of plan fee benchmarking services. Each looks at different things, each has its own set of weightings and assumptions, and each draws from a different source. But for my money, here are 10 things you should know about any service that purports to help you benchmark your plan: What is the source of the database that serves as a point of comparison? Is the database itself large enough to be relevant? Does it include relevant points of comparison with your program in terms of plan size, industry, and/or geographic loca...

Without question the retirement plan industry has prospered from the long-standing practice of relying heavily – and in some situations, completely - on asset-based fees. Now, you can certainly argue that that has resulted in plans paying for services they would not otherwise have engaged, and that it has, in some cases, led to plans paying more than they might if they had been more cognizant of the dollars expended. Indeed, one can argue that the imbedding of those fees inside the fund structure has made it easy, perhaps too easy, for the industry to collect its tolls without drawing the kind of scrutiny they were entitled to. On the other hand, that structure has made it easier for the industry to provide a broad-based level of sophisticated services to plans of all sizes, and has doubtless made it possible for plans to contemplate hiring an adviser that, regardless of the need and/or benefit, would otherwise have been discouraged by an explicit charge for those services. That said...

Over the past couple of years 401(k) evaluation service BrightScope has made quite a splash. Early on, most folks I spoke with were quite keen on what was being undertaken by the firm. 401(k) fees were unfortunately still mystery meat to many plan sponsors, and thus a service that purported to help them make sense - not only of what they paid, but how it compared to other programs - looked to be a godsend. As time has worn on, there have been questions and concerns. The data that underlaid Brightscope’s computations was drawn from government files – and while that made it “official”, it apparently didn’t always mean it was accurate, and it surely didn’t make it timely (though the latter is getting better all the time). Moreover, BrightScope employs a proprietary methodology that relies on certain weightings and assumptions that not everyone would agree with – but then, it’s a proprietary methodology, after all. If you don’t like it, or don’t think it does a fair job of representin...

As Valentine’s Day looms, you have perhaps seen those increasingly ubiquitous advertisements for a certain online florist. Now, I’ve used that particular service on many an occasion over the past several years; they are not only convenient, they deliver a quality product, and on time (yes, some “assembly” is required). In sum, I’ve used them before and will doubtless use them again. That said, if you’ve been lured to their Web site by their ads touting a dozen roses for $19.99—well, let’s just say you could be in for a surprise. See, that advertised price doesn’t include a vase (well, not a pretty one, anyway), the delivery charge (which, depending on when you want it delivered, adds another 50%, or more, to the price), not to mention the standard “care & handling” charge of $3 (regardless of when you want it delivered). A guaranteed morning delivery on Valentine’s Day is another $15. Oh, and if you’ve procrastinated until the last week or so, you’ll find an additional $9.99 ch...

Last week I mentioned a revenue-sharing case that could have far-reaching implications. That case, Tibble v. Edison International, was decided earlier this month (see “ Court Buys Retail vs. Institutional Share Fee Claims ”) and, IMHO, is a very interesting case for several reasons: First, most of these cases have been tossed before they actually got to trial; second, this one was decided in the plaintiff/participant’s favor (and that’s a rarer occurrence than much of the coverage and “chatter” would indicate). Moreover, here the court was far less deferential to the plan fiduciary decisions than other districts have been1. But what I found most interesting about this case wasn’t the decision or the court’s rationale, though both will certainly have ramifications beyond this case. Nor, in large part, were the plaintiffs’ arguments any more compelling than in previous actions. In fact, like many of the revenue-sharing/excessive-fee cases filed since 2006, the plaintiffs here made a...

For all the fuss about fees, a recent friend of the court filing by the Department of Labor reminds us that it’s not just what you pay, it’s what you get for what you pay. The amicus brief had the DoL once again weighing in on another in the series of revenue-sharing suits that have kept the industry stirred up since the first wave was filed in 2006. Once again, the DoL was expressing its sense that there were real, and triable, issues in the case, this one involving Exelon Corporation (see “ Solis Asks Court to Overturn Exelon Excessive Fee Case Decision ”). The DoL had previously expressed similar concerns about a similar dismissal in the same judicial district in a case involving Deere & Co. (see “ Hecker Fee Case Prompts Exelon Suit Dismissal ”)—a dismissal that was affirmed by the appellate court, and that the U.S. Supreme Court has refused to reconsider. Those concerns weren’t enough to influence the appellate court in the Hecker case, though it did result in a judicial ad...

Two weeks ago, the Department of Labor and the U.S. Treasury turned to the retirement plan community for some input on how to “enhance retirement security for workers in employer-sponsored retirement plans through lifetime annuities or other arrangements that provide a stream of income after retiring.” Now, part of what the DoL is trying to figure out (see Feds Call for Lifetime Income Product Public Comment ) is why the take-up rate on annuities (technically “lifetime annuities or other arrangements that provide a stream of income after retiring”) is so dismal—not just because many see them as a superior way to ensure that “stream of income,” but because some are hoping that, if it can be made more available as a distribution option (perhaps even a default distribution option), more participants will take advantage of it. There are good reasons for the inquiry. We all know that most participants with a non-retirement-related distributable event (such as a job termination) tend to ha...

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...

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...

One of the most common—and consistent—inquiries I receive (via e-mail, anyway) is from readers looking for help in choosing a plan provider. I am always flattered by the request, and always try to do my best to point them to the resources we have on our site (our annual Defined Contribution Survey and the annual Recordkeeping Survey are quite popular). Still, there is only so much help one can offer without a fuller understanding of the current needs of the program, as well as the goals and objectives set for the future. Furthermore, providers, like plan sponsors, have "personalities" and, in my experience, sometimes the chemistry that a good relationship needs to thrive just is not there, even when the plan's needs are reasonable and the provider's capabilities are top-notch. Yes, picking the best provider for a retirement plan is one of the most important decisions a plan sponsor can make—both in terms of fulfilling their fiduciary obligation and in what might affec...

Recently the 7th Circuit responded to requests that it reconsider its opinion in the revenue-sharing/”excessive fee” case of Hecker v. Deere (see “7th Circuit Panel Limits Ruling’s 404(c) Effects” ). The case, of course, was one of the earliest in the litany of those cases to be filed in 2006, and the only one (thus far) to reach the appellate level. To date, the courts have, with little exception, dispensed with these cases harshly. Not that they aren’t entitled to do so, of course, and not that this particular generation of filings isn’t deserving of such treatment, IMHO. From the beginning, the plans targeted seemed better-designed to fill the pockets of plaintiffs’ counsel, if for no other reason than large employers frequently figure that it’s cheaper to settle than to fight (see “IMHO: Fighting Words” ). That said, the courts—including the 7th Circuit—seem to have a more “generous” view of what it takes to earn the protections of ERISA 404(c) than most ERISA lawyers I know. ...

“It was a gray, chilly morning in midtown Manhattan and a line of unemployed, mostly white-collar workers, stretched for blocks around the Radisson Hotel. More than 1,000 middle managers, stockbrokers, consultants, secretaries and receptionists had come hoping to find a job. It was called a career fair, but there was no merriment - only a whiff of desperation.”—Intro to “60 Minutes” segment, “401(k) Recession.” By now, you have no doubt either watched, had recommended to you, or at least heard about the “60 Minutes” special that ran a week ago Sunday. If you haven’t watched it yet, you should. Forewarned is forearmed, as they say. No, it wasn’t very long (less than 15 minutes), but it was certainly enough to fuel the fires of those who are anxious to put the 401(k) out of our misery. Short as it was, you could basically cleave the segment into two propositions: that retirement savings shouldn’t be invested in stocks (or least not so much in stocks), and that fees—and hidden fees a...

Like many, perhaps most, Americans I have viewed the unraveling “Bonusgate” scandal with a mixture of disgust and incredulity. Essentially, the federal government, operating in crisis mode to restore the financial system and markets to “normal” - extracted through a kind of political blackmail (“you have to approve this now without questioning, or this will be on your hands”) enormous sums of money that they handed over, largely without condition, to allow certain firms to stay in business. Those firms, right or wrong, are still in business – and, much to the consternation of the American public, have then proceeded to conduct business as usual. That, of course, means honoring their financial obligations and – like it or not – that includes those now-infamous bonuses. Of course, the American public is struggling to understand how a company that is so badly off it has to take on millions, and in AIG’s case, billions, of taxpayer dollars, can afford such apparent “largesse”. And, of ...