Nevin's Data "Points"

For all the good press and positive results that automatic enrollment gets, one might well expect that every plan would embrace it. And yet today, nearly a decade after the passage of the Pension Protection Act, many still don’t. So, why don’t all plans use automatic enrollment — and what can you do about it? Here are the primary objections that I have heard from plan sponsors — and some possible responses. Cost. The simple reality is that automatic enrollment “works,” which is to say that overnight, it has the very real potential of transforming a long-standing plan participation rate of 67% or 75% to 95% or greater. The other simple reality is that when you take that likely increase in participation rate (generally from 70% to 95% or so), and then figure out the increase in matching dollars that would result — well, it can be a sudden budget jolt, particularly when you think about it applying to an employee population that is likely more tenured and highly compensated. Per...

Working with retirement plans is a complicated, challenging and constantly changing process. That said, there are certain constants — and things that bear repeating and/or reconsidering from time to time. Since I published my first list of 15 last fall (one of my most popular, as it turns out), I’ve gotten several very good suggestions — and had an epiphany or two. Here are a few (more) points to ponder: Cheaper isn’t always better, unless it’s the only difference. Sometimes you do get what you pay for — but not always. If you’re not doing anything “wrong,” you probably aren’t doing anything much. You can spend a lot of money in court being right. A fund whose allocation is based solely on date of retirement is sure to miss something, but not as much as a fund whose allocation doesn’t take that into account. If you don’t know how much you’re paying, you’re likely paying too much. Don’t assume that those who aren’t saving via your workplace retirement plan know what they ...

Ours is a business where surveys and trends often shape not only perceptions, but policy — though sometimes the conclusions drawn, and even the premise itself — make me go “huh?” Here’s a sampling: Citing a drop in deferral rates as a failure of automatic enrollment. Every so often a personal finance writer will stumble across an industry survey that shows that the average deferral rate in 401(k) plans has declined, a problem they attribute to automatic enrollment adoption. We all know what is going on here ; individuals who take the time to fill out a form and enroll in the plan manually tend to defer at a higher rate than do those who are automatically enrolled, the latter typically at a modest 3% rate. On the other hand, automatic enrollment has a dramatic impact on raising the participation rate. The rest is just math — more people, saving at lower rates = a lower average deferral rate. Now, those individuals automatically enrolled at a 3% rate may draw down the average de...

Will your portfolio pick up with the Panthers, or will it get bucked by the Broncos? That’s what adherents of the so-called Super Bowl Theory would likely predict. The Super Bowl Theory holds that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall. It’s a “theory” that has been found to be correct nearly 80% of the time — for 39 of the 49 Super Bowls, in fact. It certainly proved to be the case this past year, following Super Bowl XLIX, when the New England Patriots bested the Seattle Seahawks 28-24 to earn their fourth Super Bowl title. It also “worked” in 2014, when the Seahawks bumped off the Denver Broncos, a legacy AFL team, and in 2013, when a dramatic fourth-quarter comeback rescued a victory by the Baltimore Ravens — who, though representing the AFC, are technically a legacy NFL team via their Cleveland Browns roots. Admittedly, the fact ...

This is the time of year when resolutions for the cessation of bad behaviors and the beginning of better ones are in vogue. Here are mine for plan sponsors. Put your fund menu on a diet. Though it is a point often made with jellies and ice cream, a long-standing behavioral finance tenet is that more choice doesn’t lead to better decisions. So what’s with those burgeoning 401(k) investment menus? Plan sponsors tend to offer more than 11 investment options in their DC plans, with 38% offering 11 to 15 options and 45% offering more than 16 options, according to the Rocaton/Pensions & Investments 2015 Survey of Defined Contribution Viewpoints study, which polled more than 400 plan sponsors and other industry professionals. Odds are that you have funds on your menu that either aren’t being used or being used widely — options that contribute little other than clutter to your investment review and to the decisions of your participants. Take a look — your retirement plan menu should...

A few years back — when my kids still believed in the reality of Santa Claus — we discovered an ingenious website. This was a website that purported to offer a real-time assessment of your “naughty or nice” status. Now, as Christmas approached, it was not uncommon for us to caution our occasionally misbehaving brood that they had best be attentive to how those actions might be viewed by the big guy at the North Pole. But nothing ever had the impact of that website — if not on their behaviors (they were kids, after all), then certainly on the level of their concern about the consequences. In fact, in one of his final years as a “believer,” my son (who, it must be acknowledged, had been particularly naughty that year, and he knew it) was on the verge of tears, worried that he’d find nothing under the Christmas tree but the nuggets of coal in his stocking he so surely deserved. Bad Behaviors? With so many reports purporting to chronicle the sorry state of retirement confidence...

My single memory of venturing out on Black Friday to shop came at the instigation of my “little” sister, who has long undertaken such forays. Nor was this to be a random shopping expedition — armed with circulars and coupons, she directed me and my two brothers with the fervor and furor of General Patton as to which stores we were to invade, the objective(s) of these intrusions, and in some cases, the line(s) in which we would take up residence while she pursued items she (apparently) did not trust to the pursuit of mere amateurs. Shopping for a new provider is not something one would normally compare with a Black Friday foray, but if you have a plan sponsor — or plan sponsor prospect — who’s thinking about shopping for a new provider, here’s a list they may find useful. Make a list — and yes, check it twice. In an area fraught with as much potential complexity as searching for a retirement plan provider, it’s easy to think you’ll learn what you need to look for by simply going...

The Five Ws (or as they are sometimes called, Five W’s and one H) are questions whose answers are considered basic in information gathering in a variety of settings. There are a lot of questions that plan fiduciaries should ask, but here are five W’s and an H that every new plan fiduciary — or every “old” fiduciary who is new to a plan — should ask. Who are the (other) plan fiduciaries? Fiduciary status is based on your responsibilities with the plan, not your title. If you have discretion in administering and managing the plan, or if you control the plan’s assets (such as choosing the investment options or choosing the firm that chooses those options), then you are a fiduciary to the extent of that discretion or control. And, if you are able to hire a fiduciary, then you’re (probably) an ERISA fiduciary because the power to put others in a position of power regarding plan assets is as critical — and as responsible — as the ability to make decisions regarding those investments ...

Thanksgiving is a special time of year — and one on which it seems fitting to reflect on all for which we should be thankful. Here’s my 2015 list: I’m thankful that so many employers voluntarily choose to offer a workplace retirement plan — and that so many workers, given an opportunity to participate, do. I’m thankful that so many employers choose to match contributions or to make profit-sharing contributions (or both). Without those matching dollars, many workers would likely not participate or contribute at their current levels — and they would surely have far less set aside for retirement. I’m thankful that the vast majority of workers defaulted into retirement savings programs tend to remain there — and that there are mechanisms (automatic enrollment, contribution acceleration and qualified default investment alternatives) in place to help them save and invest better than they might otherwise. I’m thankful that trends that suggest that more plan sponsors are extending tho...

Several weeks back, I wrote a column entitled, “ 5 Things Millennials Need to Know About Saving for Retirement .” But what about those at the brink of retirement? Retirement seems close — perhaps too close for the comfort of Boomers, some of whom have already begun cycling into retirement. In fact, the youngest element of this cohort (born in 1964) is now already 51, and it’s said that 10,000 Boomers roll into retirement every day. That said, whether you’ve been saving or not, or not saving enough — here are six things Boomers need to know about saving for retirement. 1. Social Security won’t be as much as you think it will be. When you were your kids’ age(s), you too were likely disdainful about the long-term prospects for Social Security (and hey, your kids weren’t around for the  real  funding crisis back in the early 1980s!). That said, you’re not only close enough to collecting; many of you are probably in the age group where when politicians talk about making c...

Beyond the tax advantages to saving for retirement on a pre-tax basis, the ability to watch those savings grow without paying taxes until they are actually withdrawn, there is another savings incentive with which many are not as familiar. It’s the so-called Saver’s Credit, and it’s available to low- to moderate-income workers who are saving for retirement. For those who qualify, in addition to the customary benefits of workplace retirement savings, it could mean a $1,000 break on your taxes — twice that if you are married and file a joint return! That said, just 24% of American workers with annual household incomes of less than $50,000 are aware of the credit, according to the 15th Annual Transamerica Retirement Survey. However, that’s twice as many as found by the 11th Annual Transamerica Retirement Survey. Here are some things you may not know about the Saver’s Credit: The official name for the Saver’s Credit is actually the Retirement Savings Contributions Credit. A wide v...

A frequent commentary on today’s plan designs is that they are more focused on accumulation than the eventual spend-down of those savings. It’s said that defined contribution plans too often not only facilitate lump-sum distributions, but, in design at least, encourage them. And yet, despite a growing awareness of the importance of retirement income planning, PLANSPONSOR’s 2014 DC Survey  finds that nearly half of plan sponsors offer no income-oriented products to their participants. Here’s five reasons plan sponsors give for not offering retirement income options. 1. There is no legal requirement to provide a lifetime income option. Let’s face it, it’s a full-time job just keeping up with the plan provisions, standards, participant notices and nondiscrimination tests that are required by law. The notion that a plan sponsor would, in the absence of a compelling motivation take on extra work, and work that carries with it additional financial and fiduciary responsibility a...