Nevin's Data "Points"

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...

We had wrapped up a very successful half-day adviser event ahead of our annual Awards for Excellence dinner last week. As we closed up the session, a co-worker of mine commented to me as an aside, “Nobody ever told me I needed to be saving 12% before.” Now, this co-worker has nothing to do with our magazines, or the content that fills our Web sites and newsletters. He just happens to work at a company that, among other things, publishes information about retirement plans. He’s a participant in our benefit plans, of course—and so he has probably been exposed to all the same types of education and savings materials as anyone (perhaps more). He’s a smart guy (he’s pursuing his MBA at night), tech-savvy, and he pays attention. And yet, it wasn’t till he was effectively sitting there as a fly on the wall in a room full of the nation’s best retirement plan advisers that he overheard someone put forth a specific savings-target figure. Now, like any good plan sponsor, I can explain that. ...

Having been born in the Midwest, lived a quarter of my life in the South, and now another sixth in the Northeast, I can tell you—people are different. However, having worked for huge firms and considerably smaller ones, I can also tell you that, when people come together in groups, they are not as different as you might think (or hope, as the case may be). There is a “common wisdom” in our business that suggests that all plan sponsors are, more or less, alike; that large plans are the inevitable early adopters of trends that, sooner or later, trickle down to plans of all sizes. Consequently, those who make their living trying to discern trends and patterns frequently focus on the behaviors in evidence at larger programs—figuring that, in three years or so, those same characteristics will emerge across the spectrum. There’s some logic to that perspective, IMHO. Plan fiduciaries frequently draw comfort and solace from the experience of others, and smaller programs can hardly be faulte...

Change is a reality of life. Establishing and maintaining benefit programs that are competitive and distinctive requires an awareness of trends in the marketplace, in the population, in the legislative and regulatory worlds, and in the needs of the workers that your plan sponsor clients hope to attract and retain. While product development and enhancements can certainly play a role, there are also the overarching issues that drive and shape those developments. Here are 10 of which you should be aware. Sandwich “Spread”? Much has been written about the impact of the retirement of the Baby Boomers, the so-called Silver Tsunami. Every day, hundreds—even thousands—in that generational bloc do indeed leave the ranks of the employed, though not always by choice. Still, many are staying—or making plans to stay—longer than they might have chosen in less-stressful times. Indeed, the Boomers increasingly find themselves with a new labeling—the “sandwich” generation—in which they are not only...

A little different take this week - or at least different medium. This talking points podcast is with me, where I talk about the results of our annual Defined Contribution Survey – and the things to keep an eye on for 2010. You can listen to it HERE

A year ago, with the financial world feeling still very much on the precipice, and with the 2008 election results still ringing in our ears, I noted that “the impact on much-improved defined benefit plan funding levels—and on the confidence of retirement savings plan participants—has been severe, and potentially serious. We are all inclined to wonder (hope?) if, like 1987, the market will find its way back to solid footing before year-end—and worried that 1929 will be the better analogy.” Well, as we head into 2010, it seems fair to say that this is not a repeat of 1987 and—not yet, anyway—a second Great Depression. Here’s a look at the trends that were on our mind this past year – and are just over the horizon. Doctor Bill? Curing Health Care Where we are : Aside from the financial crisis and unemployment, health care has been the great issue of the past year and remains so as we go to press. That the current system needs reform is scarcely an issue for debate anymore—but what c...

I’m sure you’ve seen that commercial where a series of more-or-less everyday events and their price tags are presented, building to larger and more exotic events (and price tags) until they culminate with some extraordinary event—one that the announcer declares is “priceless.” As an industry, we have long worried about the plight of the average retirement plan participant who doesn’t know much (if anything) about investing, who doesn’t have time to deal with issues about their retirement investments, and who, perhaps as a result, would really just prefer that someone else take care of it, though it’s not always clear how much they value that effort. What gets less attention—but is just as real a phenomenon—is how many plan sponsors don’t know anything about investments, don’t have time to deal with issues about their retirement plan investments, and who, perhaps as a result, would also really just prefer that someone else take care of it. But how much are you willing to pay for that? ...

We made a provider change last week. We really hadn’t been focused on making a change, though the subject had come up from time to time. In fact, considering how long we had been thinking about making a change without actually doing anything about it, the change itself felt almost accidental in its suddenness. So sudden, in fact, that, in hindsight, I found myself wondering if we were “hasty”—perhaps too hasty. Make no mistake—we had been happy enough with our current provider, certainly at first. In fact, we had been with them for a number of years and had, over time, expanded that relationship to include a fully bundled package of services. That made certain aspects simpler, of course—though we discovered pretty quickly that the “bundle” presented more seamlessly than it actually was delivered. Still, net/net, we were ahead of the game financially, and certainly no worse on the delivery side; we were just a bit disappointed in the disconnect between the sale and the service leve...

I am admittedly something of a pension (and regulatory) geek, but when the SunAmerica Opinion was published (December 2001), it was clear that something big had just happened. Not only did the Labor Department sanction an arrangement that, for the first time, allowed an investment management firm to offer advice on its own funds and be paid for that advice—even if that advice impacted the compensation received—it made the effort to make that decision public; IMHO, signaling to the industry that the model sanctioned in the Advisory Opinion ) could serve as a blueprint for other investment firms (and advisers) to follow in those footsteps. Indeed, it was issued not as a prohibited transaction exemption in a specific situation (though that was what had been requested), but as an advisory opinion on the program’s structure. Sure enough, in the months that followed, it seemed as though just about every large DC provider put together some kind of program that, like the SunAmerica model, ...

Being a plan fiduciary is a tough job—and one that, it’s probably fair to say—is underappreciated, if not undercompensated. In my experience, most who find themselves in that role (see “ IMHO: Duty Call ”) do an admirable job of living up to the spirit, if not the letter, of their responsibilities. Nonetheless, there are plenty of areas in which we could do a better job. In this week’s column, we’ll touch on the rest of my “10 things you’re probably doing wrong” list: 6. Thinking your plan qualifies for 404(c) protection—and misunderstanding what that means. Any number of studies suggest that many, perhaps most, plan sponsors think their plan meets the standards of ERISA 404(c ), a provision that ostensibly shields them from being sued for participant investment decisions, so long as certain conditions are met. On the other hand, industry experts are nearly uniform in their assessment that very few, perhaps no, plans meet those standards (though the courts have been somewhat more lib...

It’s now been nearly three weeks since our Plan Designs conference in Chicago and, once again, I got so many interesting ideas, so much good information—well, I’m still making notes from my notes. For those who weren’t able to participate this year, here’s a sampling—and here’s hoping you will be able to join us in 2010! Participants who are automatically enrolled are even more inert than those who took the time to fill out the form. 92% of participants defaulted in at a 6% deferral do nothing. 4% actually increase that deferral rate. The Obama Administration does not want to mandate a government retirement solution—but it might provide one. Concerns about cost and control that target-date fund managers wield are generating a new interest in customized solutions. The key to successful retirement savings is not how you invest, but how much you save. Even if a plan has a plan adviser that is a fiduciary, the plan sponsor is still a fiduciary. Most plans don’t comply with ERISA 404(c). ...

We hadn’t gotten very far into the agenda of our Plan Designs conference last week when a plan sponsor asked the question that, IMHO, is on a lot of people’s minds these days. And while I don’t remember her exact words, the essence was this: “What can you say to participants who no longer trust their 401(k)?” As we explored the question, we learned that her firm matched dollar-for-dollar up to 5%—a VERY generous match (particularly these days)—and yet, despite that, she said she has participants who are dropping out of the 401(k)—and/or talking about dropping out of the 401(k)—with an eye toward simply investing in a bank CD (not the music kind). Now, before you ask, yes, her plan uses a financial adviser—and, yes, that financial adviser and her provider, and, so far as I could tell, she had worked hard to communicate all the “proper” messages. Her plan participants had been reminded about market cycles, reassured about the ability to get a “bargain” with their new contributions, co...