Nevin's Data "Points"

“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...

ERISA’s 404(c) has long been held out by some as something of a magic talisman: Comply with its strictures, they claim, and you have an iron-clad defense against participant lawsuits —and, IMHO, the implication is a defense against ALL participant lawsuits. Of course, any number of ERISA experts will tell you that it is nearly impossible to satisfy those strictures, certainly not for every transaction (and mind you, 404(c) is transactional protection)—not that that seems to dissuade plan fiduciaries from trying, nor plan advisers from purporting to help them achieve that end. Nor are plan fiduciaries, or the participants and beneficiaries they support, ill-served by those efforts. That said, I have long been surprised at how broadly the judiciary has been willing to extend those protections. Good news if you’re the plan sponsor getting sued, of course—but not-so-good if you’re a plan fiduciary looking for some consistency in the law. The most recent example was Hecker v. Deere (see ...

Last week, I attended a media briefing sponsored by BGI titled “Restoring Confidence: Saving the Future of Retirement.” That session featured insights from some new participant research, some perspectives about the current plan-trends landscape, some thoughts on annuitization in 401(k)s, and even some thoughts from a congressman who knows more than a little about pensions and 401(k)s. Some random thoughts from, and stimulated by, that session: • Research conducted by the Boston Research Group (BRG) (and sponsored by BGI) indicates that 33% of participants have put off looking at their statements because of the recent financial turmoil. I’m betting a like number never looks at their statements anyway. • No news is actually bad news. Not only can participant statements provide some much needed motivation to do (more of) the right things, people might be surprised to see how well their accounts have held up. • People have seen so many reports about how poorly indexes like the Dow an...

Those who try to figure out when certain trends reach a tipping point—who try to figure out when things have crested, the beginning of the end of the beginning—should note that we may have reached that point about three weeks ago—when I started “tweeting.” And, no, I wasn’t commemorating the arrival of spring by making bird calls. “Tweeting,” if you haven’t heard, is reportedly now all the rage as a means of communication. Well, sort of. See, you “tweet” by establishing an account on twitter.com (it’s free). And, once there, you can keep everybody up to date on what you’re doing. Well, sort of. What you actually do is update everybody who has signed up for your updates (“followers”). And, by update, what I mean is that you can tell those following your activities what you’re doing…in 140 characters (or less). Not 140 words…140 CHARACTERS. About half the length of this paragraph…. Now, I’ve been aware of Twitter and its capabilities for some time now. But, for a guy who long ...

As if retirement savers didn’t have enough problems, last week Fidelity Investments reminded us how much money we’re going to need for health care. According to Fidelity’s annual estimate, an average couple retiring in 2009 would need $240,000 set aside by age 65 in order to pay for health-care expenses in retirement (see “ Retiree Health Care Estimate Jumps 6.7% ”). Worse, that’s up from $225,000 in 2008—and even worse, the 2009 figure is 50% higher than the $160,000 Fidelity estimated in 2002 would be required. Even those workers who still have employment-based retiree health benefits to supplement Medicare, but who must pay their own premiums, need to set aside a hefty amount, according to a 2008 EBRI report; men would need between $102,000 and $196,000 in current savings (50th and 90th percentiles, respectively), while women would need between $137,000 and $224,000, respectively, due to their greater longevity, according to the report (see “ EBRI Pinpoints Retiree Health Expenses ...

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 ...

A survey published this past week by Fidelity noted that workers cited health insurance, retirement savings plan matching contributions, and dental insurance as the three most important benefits, with health insurance ranking as No. 1. That study (see Workers Underestimate Cost of Providing Health Benefits ) offered some interesting perspectives on health care and the expenses associated with that benefit. The good news was that workers very much prize this benefit – and in large part (72%) believed that what they got through their workplace was better than, or at least as good as, what most other companies offer. That said, more than half (61%) noted that they were paying more than they once did, but were getting the same – or less – in terms of benefits than they did in 2007. However, a more striking finding in that Fidelity study, IMHO, was that more than half (53%) thought that that health insurance benefit was costing their employer less than $5,000/year, when a more typical r...

A couple of months ago, I started getting e-mails from readers curious about the announcements of plans reducing and/or suspending their matching contributions. As the weeks passed—and the number of reports grew—so did the inquiries. Those first inquiries were clearly seeking assurances that the announcements did not constitute a trend, that this was still just something a (very) few employers were embracing. Indeed, that was my sense of things (see " IMHO: Trend Spotting ", borne out not only by one of our weekly surveys (see " SURVEY SAYS: What Are Your Plans for Your Match? ", but also in a couple of industry reports as well (see " 83% of Employers Surveyed do not Expect Employer Contribution Changes "—and I was happy to provide those assurances (and links to those surveys) to any and all who asked. However, in recent weeks, those inquiries have taken on a different tone; this new wave of inquiries seems to be seeking validation, if not vindication. ...

I saw an interesting event headline the other day. It said simply, “Trust is an economic stimulus package.” A short, and somewhat simplistic, assessment to be sure. And yet, IMHO, one that may well lie at the heart of our current economic turmoil; trust – or perhaps more accurately, the lack thereof. Trust was surely at issue when the financial system ground to a halt last fall, with investors anxiously pulling back funds from institutions that were similarly concerned about the financial integrity of those to which they had extended credit. In response, the federal government first tried to broker deals between troubled firms and what turned out to be soon-to-be-troubled firms…and then decided to sit on the sidelines when the second “opportunity” emerged, leaving everyone to wonder if the government would step in or not – and if so, how (and how much)? Under stress (if not duress), the first big bailout was pressed through – but the articulated plan for its dispersal was abruptly ...

I’ve spent most of my life, certainly my adult life, confident that Americans, certainly in large part, are reasonable and rational. I have not, unfortunately, always been as sure of certain subsets of the population, notably politicians. On numerous occasions during the political season just past, as one outrageous claim after another was laid at the feet of one candidate or another (and sometimes both), I heard (and was heard to utter) “rebuttals” of a sort—“They’d NEVER do that,” for example, or at least, “They’d never get away with that.” Granted, sometimes I’d say those words—and yet wonder if, this time, “they” actually might. One’s position on such things is inevitably interwoven with one’s comfort with the idea, of course. “Anything’s possible” can be both an anthem of positive change and an ominous portent of doom. Those were the kinds of reactions that last fall’s hearings on the impact of the markets on retirement engendered, certainly in terms of the reactions to comme...

We got another verdict on those infamous revenue-sharing lawsuits last week. Not a verdict in the sense of a Perry Mason trial, perhaps - but we did have two sides presenting their case to a judge who, once again, basically felt that the plaintiffs didn’t make their case. Personally, I find this entire class of revenue-sharing lawsuits abhorrent. Not that I don’t think there are some real issues to be had with regard to how some plans are being charged, and how some of those revenue-sharing arrangements are perhaps being abused. Rather, I resent them because, in large part, I think the cases brought to date—at least as I understand the facts—are probably not where the real problems lie. They do, however, represent huge piles of money—and if you’re a contingent-fee lawyer, that is (to borrow Willie Sutton’s famous phrase) “where the money is.” Consequently, back in 2007, when U.S. District Judge John Shabaz of the U.S. District Court for the Western District of Wisconsin tossed—and...

In one of the more memorable sound bytes of the Presidential campaign just past, candidate Obama tried to explain the rationale underpinning his economic philosophy as a belief that we should “spread the wealth.” Of course, it remains to be seen just how much wealth will be spread, and to whom (and from whom) – but, like it or not – there are also certain redistributive principles at work in our retirement plans. And while I think it’s fair to say that no new ground was broken, a recent paper, “The Structure of 401(k) Fees,”,published by the Center for Retirement Research (CRR) at Boston College, highlighted the potential inequities that current fee structures may be imposing on plan participants (see “ Disclosure not the Only Issue with 401(k) Plan Fees ”). Setting aside for a moment whether the fees charged are fair, the paper highlighted a fact that, while obvious, is not always intuitive: When asset-based fees are the order of the day, as they surely still are for most retirement...

Much has been made in recent weeks over the so-called Ponzi scheme foisted on the investing public by Bernie Madoff. The classic elements are all there: the promise of future returns that are, in reality, fueled by new investors lured by the promise of future returns that are…well, you know. Of course, the perpetrators of these schemes manage along the way to siphon off their cut from the flow of funds. Human beings fall prey to such schemes all the time, and for a variety of reasons: gullibility, greed, and sometimes a simple willingness to trust the wrong people. Madoff, whose role in worsening the current economic crisis is still surely underappreciated, managed to play on those tendencies better and for longer than most. We’ve already seen some $350 billion worth of government bailout absorbed by the system like so much water into a thirsty sponge. And, since that didn’t work, the answer apparently is to double down—and then some. Which, IMHO, calls to mind a comment cand...

Those who had been waiting anxiously (or nervously) for that final wave of regulations from the Department of Labor will have (get?) to wait a bit longer, it appears. Just hours after the inauguration of President Barack Obama, White House Chief of Staff Rahm Emanuel issued a memorandum ordering a temporary moratorium on any regulations set to be published in the Federal Register “until it has been reviewed and approved by a department or agency head appointed or designated by the President after noon on January 20, 2009.” (see White House Executive Order Snares Fee Disclosure, Advice Regs ). That “snared” pending DoL proposed directives requiring service providers to disclose “fees, compensation, and conflicts of interest” to fiduciaries of 401(k) and other benefit plans (see “ EBSA Puts Out Provider Fee Disclosure Proposal ” ), as well as a fee disclosure regulation for participant-directed individual account plans, which Labor had published in proposed form last July (see “ EBSA F...

A couple of weeks back, I got an e-mail from Robert Powell, who writes on personal finance for MarketWatch, and he asked an interesting question: specifically, what, in my opinion, were the top five retirement priorities that the Obama Administration should focus on? Now, that’s a more complicated question than you might think at first glance. For instance, if you were to ask me what ONE thing should be dealt with, I could probably pull something hugely critical out of the air. Not that it wouldn’t be hard to come up with just one thing—but there’s a certain clarity to that process. However, once you get going, it’s harder than one might think to keep the list to five. Furthermore, there are LOTS of little things that you know would make the system better, but if you can only come up with five—and five for presidential-level involvement, no less—well, you also tend to focus on the big picture. In any event, here’s my list: (1) Focus on expanding coverage with the ACTIVE involvement...

A few decades ago, I suffered a nasty skiing accident. I was “bored” (the course was, overall, beneath even my modest skill levels), it was late in the afternoon, and—as humans are sometimes wont to do—I found myself trying to make the course more challenging by doing something stupid. Actually, by doing something stupid three times (which, by some definition, is doing something really stupid)—when “fate” intervened and kept me from breaking my neck…by breaking my leg. It was a difficult lesson to learn (more accurately, it was a difficult way to learn the lesson); I spent the next six months in the middle of a Chicago winter in a cast—much of it in a cast that encased my entire leg, which also happened to be the leg you need to drive. I learned a lot as a result of that experience—but one thing that never, even for a second, occurred to me was to blame the icy slope, the skis, or the tree I slammed into, though all surely played a significant role in the final result (…perhaps i...

Here’s a headline you won’t see this week: “Nobody Cut Their 401(k) Match Today.” That’s right, even though there is a very good chance that it will be an accurate statement on just about every day, I’m betting it won’t even make its way into the business briefs section, much less a newspaper headline. Not that employers aren’t making decisions to cut back on, or even suspend, their 401(k) match. On the other hand, you don’t have much trouble keeping up with that activity. Regardless of plan size or industry, these days, pretty much any plan that takes that step can count on making headlines—and every article beneath those headlines spends at least a sentence or two recounting the latest list of 401(k) match casualties. Even in our publications, sadly. Let’s face it, it’s “news.” With such incessant coverage, it’s hard to shake a sense that we have the makings of a trend—particularly for plan sponsors. Indeed, for employers looking for some respite in one of the more challenging e...

As a parent (or even a mentor), sooner or later, you’ll wind up sharing tales of the way things “used to be.” Whether it’s a tale of the proverbial five-mile walk to school in the snow (“uphill, both ways”), the challenges of adjusting a tinfoil-laden TV antenna to obtain a decent black-and-white picture on one of four channels, or the days of laboring to get a quarterly valuation completed by six weeks AFTER the valuation cycle, the story-telling traditions of humankind are part of what makes us – well, human. By sharing a sense of where we have been, we all gain a better sense of the importance of where we are – and an appreciation (hopefully) for the progress that we’ve made. Now, according to a recent survey, it seems that we may well be on our way to a day when participant direction of their investment accounts seems as quaint a notion as a quarterly transfer. The aptly, if somewhat inelegantly, titled “ 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2007 ...