Nevin's Data "Points"

Over the weekend, I reacquainted myself with that episode of the HBO miniseries “John Adams” titled “Independence.” As a writer and editor, I watched with a special appreciation the part where Benjamin Franklin and John Adams are “tweaking” Thomas Jefferson’s draft—and the pain in the latter’s face as his “precisely chosen” words were modified. All in all, a modest sacrifice, to be sure. But I, for one, could feel his pain. That said, anyone who has ever found their grand idea shackled to the deliberations of a committee, who has had to kowtow to the sensibilities of a recalcitrant compliance department, or who has simply suffered through the inevitable setbacks all too frequently attendant with human existence must have at least a modest appreciation for the trials that confronted not only that document’s authors, but those then living in these not-yet-united states. Without question, 1776 is one of those turning points in history, not just for this nation but, in the course of tim...

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...

“When the going gets tough, the tough get going,” or so goes the old saying. It’s a saying with the requisite amount of bravado to stiffen one’s upper lip and shore up one’s resolve as we plough through yet another tough market cycle; a period in which, by all traditional measures, “alternative” investments should be a good place to seek shelter from the storm. This time may be different, of course. Real estate, one of the most popular (at least in terms of its presence in pension portfolios), served to set off most of the recent market tumult, and is still struggling to make its way back (though one should be careful about the level to which one expects it to return). Private equity, writ large, feels a more precarious move at present, and hedge funds—well, many no longer live up to the name, despite their fee structures. There are, of course, a growing number of alternatives to stocks and bonds—the traditional standard against which an investment is deemed to be “alternative”—but...

I participate in a number of LinkedIn groups (and “sponsor” a couple). In one of those groups last week, a member said they were interviewing potential new 401(k) recordkeepers/advisers—and asked a provocative question: What is the one question that you will be sure to ask the next time that you interview potential 401(k) providers? Of course, we all know that the search for a new provider entails a lot more than a single question. And, as I skimmed my way through the suggestions that had already been proffered, there were a number of important and familiar inquiries; things having to do with the fees charged, fee disclosure, the quality of support staff, willingness to stand in as a plan fiduciary…. These are all important—so important, in fact, it was hard to imagine that they wouldn’t be routinely included in even the most casually composed RFP. Having read the question—and skimmed the answers—I was about ready to move on. Ironically, the way this question was phrased (or at leas...

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...

As a parent, you spend a lot of time telling your kids what to do, and perhaps more time than you think you should convincing them that it was their idea. If you’re lucky, you get to watch them make the “right” choices on their own—and to see them turn out well in the end. What you really try to avoid doing, certainly as they enter adulthood, is to make those decisions for them. With defined contribution plans, over the last three decades or so, mostly we told workers what to do (or at least what people very much like them should do). And, despite a lot of hand-wringing to the contrary, most did. There were, of course, “holdouts”—a stubborn and/or inattentive group that resisted those entreaties, at least up until the point at which we did the right thing “for” them by automatically enrolling them in these programs. One might have thought that their resistance was thoughtful, perhaps principled, and maybe economic—and yet, survey after survey shows that those who were defaulted in...

I’ve been a huge “Star Trek” fan all the way back to when I had to watch the original episodes on a tiny black-and-white, 13-inch television set with rabbit ear antennas (and, yes, adorned with aluminium foil). Unlike most of my friends at the time, my favorite character was Mr. Spock, whose understated strength, brilliant mind, and quiet commitment to logic had an appeal to a young kid who fancied himself to have all those attributes (thankfully, my ears weren’t pointed). Perhaps as a result, early on, I mastered the “infamous” Vulcan salute that many people struggle to perform unassisted (it consists of raising your hand and spreading your fingers apart between the middle and ring finger), and the Vulcan greeting/blessing that accompanied the gesture—“Live long and prosper”—always struck me as being as elegant as it was simple. While we all hope to prosper and live long, a recent Issue Brief released by the Center for Retirement Research at Boston College reminds us of the financia...

While the markets were in an apparent freefall last week, I could hear former Treasury Secretary Hank Paulsen on the TV in the next room telling (lecturing?) the Financial Crisis Inquiry Commission that the problems that led to the 2008 meltdown could, and should, have been dealt with sooner, and that we could, and should, have moved faster—and with more to stave off the crisis. The criticism then—as it was last week in Europe—was that this was a time to act, not to think; that if we didn’t act—act now, act decisively, and without question—well, the results would be catastrophic. It is a theme that runs through Paulsen’s recent book, “On the Brink,” as he drags the reader from one impending crisis to another during those fateful weeks of 2008. In Paulsen’s retelling, those who back his “need for speed” are thoughtful and prescient; those who don’t, well, their motivations are generally painted as either blinded to the seriousness of the situation or hopelessly ideological. From the...

Here’s a question to ask yourself: “Why do you offer a 401(k) plan?” I’m guessing that many, perhaps most of you, would say simply, perhaps without giving it much thought, “to attract and retain good employees.” That’s what more than half of the plan sponsors canvassed in a recent Wells Fargo survey said (see “ Survey Suggests Gaps in Plan Sponsor Goals, Roles ”), and it’s one of the top reasons cited by none other than the Department of Labor ). I’m guessing a similarly high number of you might say you “have” to offer the plan as part of your benefit offerings to be competitive. In fact, I was surprised that 45% of the respondents to that Wells Fargo survey indicated that a primary goal of the program was to provider workers with the means to arrange for a financially sound retirement. Not that that isn’t in the back of plan sponsor minds; I just don’t think it looms large as a rationale for the time, energy, and expense of establishing and keeping these programs in place. Still, ...

I have always taken seriously the notion that news and information should be presented “straight”, and without commentary. But there are times when it’s hard not to just scratch your head and say “huh?” or laugh out loud at some of the stuff that comes across our news desk. Here’s a (somewhat cynical) sampling from just the past couple of weeks: CONFIDENCE MIEN? A nationwide survey by Citi and conducted by Hart Research Associates found that 44% of investors report being confident in their ability to retire in financial security as they had planned ( said another way, that’s nearly half who DO feel that confident ) . More than a third (36%) said they might need to adjust their plans ( so, do two-thirds not see any need to do so? ), and ( a mere ) 16% said they are not confident in their ability to retire in financial security. Must be a lot of rich uncles out there… MORE “NOTHING” DOING. Throughout one of the most stressful and volatile markets in memory, the vast majority of ...

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...

About two months ago, the Department of Labor asked the public for some insights on retirement income via a request for information, or RFI. The RFI sought input on what it termed a “broad range” of topics, including the pros and cons of distributing benefits as a lifestream of income, why lump sums are chosen more often, what kind of information participants need to make informed decisions on retirement income products, their ideas about participant disclosures of retirement income, and developments in the marketplace (1) . The comment period is just about two months old now, and with 30 days left, I thought it might be interesting to see what kinds of comments have come in (the Labor Department posts these comments on their Web site (2) ). The good news—nearly 500 comments! The not-so-good news—as broad as the DoL’s scope of inquiry was, very few of the comments really seemed to be on point. Now, in point of fact, I saw very few comments (yet) from providers, industry organizations...

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...

There are in this--or perhaps any—business certain moments of epiphany that shed light and clarity, Moments where complexity becomes simplicity, where the shining light of comprehension illuminates what had, until that very moment, been hopelessly “confuddled”. On the subject of retirement income, my moment of clarity came at the end of a conversation with my then soon-to-be-retiring father who was trying to sort through his options regarding his various savings programs and distribution options. At the end of what I hoped was an educational and enlightening discussion of his options and trade-offs, their upsides and potential downsides, when I was sure that I had been able to unwind and demystify the maze and presented him with a straightforward presentation of alternatives, there was this long pause—and then, he turned to me and, as politely as he could, said, “I just want to know how much money I’ll have to live on every month.” It’s been many years since that conversation, but, I...

I don’t know if you’ve gotten to this point in your year yet, but we’ve started doing taxes in our household. Now, tax season’s not quite the arduous experience it once was—not since that fateful “encounter” with the AMT a couple of years back, along with a year replete with a variety of “special” events, that finally persuaded me that it was a better use of my time to enlist the services of an expert. Still, there is the process of gathering the requisite information from which that expert can do his thing (aided in no small part by the order in which my better half keeps our financial house), and it provides a good opportunity to get a 30,000 foot perspective on how we spend (and invest) our money. This year—as in most years—I was astounded at how much of our household income is absorbed by various taxes—federal, state, local/property, and, yes, FICA (which I consider a tax—but that’s a subject for another day). Indeed, while I have an opportunity to see most of these reduce my tak...

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...