Nevin's Data "Points"

Do plan sponsors really know what participants want? Back in the early 1990s, there was a very popular “self-help” book on relationships titled “Men Are From Mars, Women Are From Venus.” The basic premise, of course, was that men and women have different means and styles of communication – that, in essence, they might as well be from different planets (hence the title). It suffers, as most such works do, from over-generalizing (to say the least – the hidden points system ostensibly maintained by each gender struck me as truly bizarre, even in the 1990s) – but it no doubt stimulated some relationship conversations, and if it opened some of those doors – well, that’s a good thing. The relationship between plan sponsors and participants isn’t generally fraught with the same layers of complexity, but every so often a survey comes out that makes me think otherwise. The latest was a report by American Century which surveyed (separately, but both during Q1 2019) 1,500 re...

I’ve never played the lottery. But there are days… I tell myself it’s because I know how remote the odds are, that the rules are too complicated, that they “feed” on the aspirations of people who should be spending their money on “better” things – and even that I don’t have enough “lucky” numbers to bet on consistently. But those are rationalizations. The simple fact, despite the screaming billboards and nightly news reminders about the size of the latest “mega” jackpot, is that I simply find it inconvenient. Oh, it’s not like I never frequent the convenience stores or even grocery checkouts that these days beg for the cash/credit card that hasn’t yet been put away. I’ve never really regretted walking away from those “temptations.” And yet…     As an industry, we spend a lot of time focused on a wide variety of considerations that impact the likelihood of having a financially satisfying retirement. But what about those who don’t have access to a...

A recent federal court decision should remind us all of the importance of plan committee education. The case involved a suit by participants in the SunTrust 401(k) plan (see Is Fiduciary Responsibility Retroactive? ) that challenged the initial selection of, and subsequent acquiescence with, an ostensibly imprudent plan investment menu. The court’s decision focused on one aspect of the case: the liability of “new” plan committee members for actions that predated their involvement on the committee, but continued after their involvement. The court, in a decision that will likely be viewed favorably by new committee members, excluded them from liability for committee moves that predated their participation, at least to the extent they lack “actual knowledge” of imprudence. Along the way to that determination, Judge Orinda D. Evans of the U.S. District Court for the Northern District of Georgia incorporated the testimony of those new committee members as to t...

While I am sure there was a period in my youth when I wanted to be a fireman, a cowboy, or maybe even a professional athlete, my earliest memories are of wanting to be an astronaut. Never mind that my odds of becoming a professional athlete were, even then, considerably better than those of joining the nation’s elite group of astronauts. It was evident even to me early on that I lacked the athletic acumen for a career in sports – but it took years for me to appreciate what would have been required for me to satisfy NASA’s requirements (and be able to rationalize that the “real” reason was that I was too tall). It was a magical time for our nation’s space program. There was a plan, three separate programs (Mercury, Gemini and Apollo) to help us get there, and a vision – as President John F. Kennedy said in May 1961 – of “achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth.” There was also a sense of n...

There have been many different solutions put forth over the years to remedy the nation’s retirement ills, but regardless of your perception of the coming crisis (including those who believe such notions are overblown), there is a constant in every estimation of our retirement future.[1] Yes, I’m talking about Social Security. Indeed, we rely on the inevitability of those benefits with a certainty generally accorded only to death and taxes (both of which play a significant role in Social Security eligibility and claiming, as it turns out). And yet, for all its centrality in planning, Social Security faces its own funding crisis, or is projected to, according to the trustees of the program, in a report formally titled, “The 2019 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. ” That the program will run short of funds is no secret, with the only variable being at what exact poi...

This week we’ll commemorate Independence Day – but with all of freedom’s lessons, there are certain things that plan committees (still) have in common with the Second Continental Congress. Certainly anyone who has ever found their grand idea shackled to the deliberations of a committee, or who has had to kowtow to the sensibilities of a recalcitrant compliance department, can empathize with the process that produced the Declaration of Independence we commemorate this week. Consider these similarities: Committee members should understand their obligations – and the risks. Those that gathered in Philadelphia that summer of 1776 came from all walks of life, but it seems fair to say that most had something to lose. True, many were merchants (some wealthy, including President of Congress John Hancock) already chafing under the tax burdens imposed by British rule, and perhaps they could see a day when their actions would (eventually) accrue to their economic be...

Our industry has long disparaged the apparent “overindulgence” 1 of participants in the stock of their employer as a retirement investment. However, for plan fiduciaries – and those who advise them – there may be a more pressing concern. Anyone who has been paying attention to 401(k) plan litigation these past several years knows that a common trigger – perhaps the most common trigger – for litigation is the presence of company stock in the plan; more specifically, the presence of company stock that has sharply declined in value. In fact, these days no sooner does some big earnings surprise or unanticipated business calamity make the headlines than the plaintiffs’ bar is out “trolling” for potential clients. And let’s face it, a 401(k) plan is a class action litigant’s dream – potentially thousands of similarly situated and comparably injured plaintiffs in one place (so to speak).   But if the instances of litigation have been numerous, the odds of success –...

A recent headline screamed that 401(k) savings rates have “stagnated” – but that’s missing the point. Several of them, actually. “Stagnated” in this case apparently means that the average savings rate in 2018 — both employee and employer contributions — was 10.6%, roughly the same as the 10.4% rate reported in the survey in 2004. The point seems to be that, despite roughly a decade of automatic enrollment and other plan design enhancements, Americans aren’t saving any more. That’s a perfectly obvious point to draw from those two datapoints – in this case from the recent 2019 How America Saves report from Vanguard which, while it only covers plans recordkept by Vanguard, the experience of 1,900 plans and 5 million participants in the survey always provides some interesting insights. First a couple of basics; what do you suppose the odds are that we have the same plans (and participants) in the 2004 and 2019 surveys? Exactly. So, while it may not be apples to or...

The headline in a recent  New York Times  piece cautions that “Confusing Options May Be Coming to Your 401(k). It Could Cost You.” Those “confusing options”? Retirement income. And, ironically, they might undermine support for the most significant piece of pro-retirement legislation in a decade. In fairness, the article  begins by acknowledging to its readers that there might soon be some “welcome changes to the rules governing their retirement savings plans,” but quickly moves on to take to task the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 , which not only brings with it those welcome changes, but a key element that has some consumer advocates all atwitter (literally) – a fiduciary safe harbor for the selection of a lifetime income provider. For years the retirement industry has bemoaned the lack of a lifetime income option in defined contribution plans. Indeed, for all the vaunted talk of the so-called “DB-ificat...

Life has many lessons to teach us, some more painful than others – and some we’d just as soon be spared. But as graduates everywhere look ahead to the next chapter in their lives, it seems a good time to reflect on some lessons learned along the way. It’s handy to know at least a little about sports and the weather. Paying the minimum due on your credit cards is dumb. Be willing to take all the blame – and to share the credit. Know that there actually  are  stupid questions. Try not to be the one asking them. Shun those who are cruel to others – and don’t laugh at their “jokes” – sooner or later, you’ll be a target. Never say you’ll never. “Bad” people eventually get what’s coming to them, though you may not be around to see it. Always sleep on big decisions. When it seems too good to be true, it’s generally not good nor true.  Never let your schooling stand in the way of your education. Sometimes the grass on the othe...

Whether you are a Game of Thrones aficionado – or haven’t watched a single episode – there are lessons to be learned nonetheless. Last week I recounted some fiduciary admonitions from the HBO series. Turns out there are words of wisdom for individual retirement savers as well. Check these out. “When you play the game of thrones, you win or you die. There is no middle ground.” All the way back in Season 1, Cersei Lannister explained what has certainly been a theme for the series as a whole. That said, retirement isn’t a game of thrones, nor is it precisely a “win or die” scenario. We all die, eventually of course (no “wights” here), but there are those who “win,” at least if you consider those who have sufficient resources to fund retirement as “winning.” The non-partisan Employee Benefit Research Institute (EBRI) has previously  found  that current levels of Social Security benefits, coupled with at least 30 years of 401(k) savings eligibility,...

I was late to the Game of Thrones – and though its final season seems a bit “rushed” – there has been plenty to not only watch, but mull over in its eight-season run. And yet, as the series wound to a close on Sunday night, I kept thinking there were some lessons for retirement amidst the mayhem. ‘A man’s gotta have a code.’ Sandor Clegane (a.k.a., the Hound) had some of the best quotes during the series run (though most of them are not “printable” here). This is one for the ages, and while he drew this particular line in a conversation with Arya Stark about his choice between being a thief (not OK) and a murderer of young boys (OK?), for Sandor, he did at least have a personal, if not, “professional,” boundary which governed his actions. Of course, plan fiduciaries have not one, but two to keep in mind: ERISA – and the Internal Revenue Code. ‘No one can survive in this world without help. No one.’  Jorah Mormont’s words of wisdom to his “Khal...

Mothers give us a lot, not the least of which is life itself. But as I was reading through all the accolades on social media over the weekend, I couldn’t help but be reminded of all my mother gave me. As is the case in many families, “Mom” was our family’s CFO. See, like many in his generation, my dad wanted to hold the checkbook, but it was Mom who always made sure that there was money in the account. She’s the one who started setting aside money from her paycheck in her 403(b) plan at work – and continued to do so, even when my father was convinced they couldn’t afford it – and made no secret of that opinion. Or did until he got a glimpse of the statement that showed Mom’s retirement account growth – and then, inspired by that example – he began setting money aside for retirement as well. Not surprisingly, Mom was the one who encouraged me to start saving in my workplace retirement plan as soon as I was eligible – and while I wasn’t always smart enough to ta...

Plan sponsors often gloss over the reality that they are ERISA fiduciaries – or think that if they have hired an advisor, they’ve basically hired a stand-in for that responsibility. But there’s another mistake that even the most well-intentioned make – with remarkable frequency, based on what I hear from advisors. In the marketplace, it’s normal – even expected – that firms extend more favorable terms and/or discounts to those who do business with them across various offerings. But those “normal” practices can cause you trouble when it comes to doing business with ERISA-governed plans. Here’s how:   If you make decisions regarding the plan or plan assets, you’re an ERISA fiduciary. 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), you are a fiduciary to the extent of that discretion or control. Ditto if you ...