Viewpoints: Opinion and Commentary
People within and out of the industry speak out on a variety of issues related to 401k's. One of our most interesting areas, but remember, opinions expressed here are those of the author and do not necessarily reflect the positions of 401khelpcenter.com.
Summary: In this interview with Barbara Roper, Consumer Federation of America's director of investor protection, she deals with questions like, what is the most obvious reason we should have a fiduciary standard, why is the biggest fear not that regulators don't act, but that they do, and what's the one thing all 401k plan sponsors should ask their adviser?
Source: Fiduciarynews.com, May 2013
Summary: Through all the debate and posturing over a universal fiduciary standard, one simple question remains -- What is so onerous, so unfair, about requiring that anyone that provides financial or investment advice to the public must always put the public's interest ahead of their own financial interests?
Source: Prudent Investment Adviser Rules, May 2013
Summary: BlackRock Inc.'s Laurence D. Fink, head of the world's largest asset manager, says U.S. employers should be required to put money aside for their employees' retirement, similar to Australia's superannuation system. In Australia, employers must contribute at least 9% of part-time and full-time employees' income into accounts that belong to workers.
Source: Benefitnews.com, May 2013
Summary: A 401k plan is a tool, nothing more and nothing less. There is no evil in a 401k plan; just neglectful plan sponsors, participants, and providers that make a 401k plan look like a losing gamble.
Source: Rosenbaum Law Firm, May 2013
Summary: "'The Retirement Gamble' took a look at some of the reasons so many Americans are financially unprepared for retirement. I make a brief appearance, but much of the program is spent profiling regular Americans who are trying to get by and doing the best that they can to prepare for an uncertain future. The show clearly outlines the challenges faced by people trying to navigate an opaque, fractured, and confusing system. My takeaway? That we need to continue to do all we can to encourage people to save and to promote transparency and accountability to better serve all retirement savers."
Source: U.S. Department of Labor, April 2013
Summary: Author writes, "As an advocate for 401k participants I should be grateful that Frontline produced ['The Retirement Gamble'].... Unfortunately, not only did the episode inaccurately portray the biggest flaws in the plans as high fees and risky stocks and not the puny employer contribution rate but it depended on input from Teresa Ghilarducci -- an academic whose employer offer a generous retirement plan -- who has literally proposed making everybody's 401k plan worse."
Source: Huffingtonpost.com, April 2013
Summary: The following is a statement from Brian H. Graff, Executive Director & CEO of The American Society of Pension Professionals & Actuaries in response to the PBS Frontline program "The Retirement Gamble."
Source: Asppanews.org, April 2013
Summary: The fact that other countries are drawing from what has worked in the United States is a tremendous validation of the defined contribution system in place today. The U.S. must continue building on that system to produce even better outcomes for a greater number of people while preserving what is working, especially current tax incentives.
Source: Principal.com, April 2013
Summary: How about this idea: Repeal the tax break associated with 401ks, IRAs, and similar tax-sheltered plans. Substitute automatic enrollment for the subsidies. Eliminating the subsidy would boost the government’s budget by some $100 billion a year. Daniel Shaviro, a professor of taxation at New York University Law School, laid out the logic in a blog post and subsequent conversation.
Source: Businessweek.com, April 2013
Summary: Liability exposure is due in large part to a misunderstanding regarding the protections offered by ERISA's 401k/404(c) so-called safe-harbors. It is the author's experience that plan sponsors confronted with potential liability claims immediately claim that they are absolutely immune from any liability due to said safe-harbors. The mood quickly changes when the truth about 401k/404(c) safe harbors is explained.
Source: Prudent Investment Adviser, April 2013
Summary: President Barack Obama's budget proposal, which would end tax deferral of contributions to individual retirement accounts when they accumulated $3.4 million in assets, sounds reasonable on the surface, but it raises many concerns.
Source: Investmentnews.com (free registration may be required), April 2013
Summary: The administration views certain savings for retirement to be a tax loophole. The just released budget, in its Overview, states: "[The budget] ends a loophole that lets wealthy individuals circumvent contribution limits and accumulate millions in tax-preferred retirement accounts." There is no acknowledgement that these dollars are subject to ordinary income tax when withdrawn nor is there an explanation of how these wealthy folks get around contribution limits which apply regardless of income.
Source: Benefitsbryancave.com, April 2013
Summary: First proposed in 2007 by the DOL, Regulation 408(b)(2) was hailed as a game-changer for the 401k industry. The thought was that plan sponsors and participants who had for years been blind to the hidden costs of their retirement plans would suddenly see the light and that implementation of the regulation would result in a massive upheaval of the status quo. Fast-forward to 2013. 408(b)(2) went into effect last July and the 401k world looks radically ... the same. What happened to changing the game?
Source: RIAbiz.com, April 2013
Summary: Despite the rebound of the stock market, it continues to be a challenging environment for stewards of institutional assets. Catherine Gordon, principal, Vanguard Investment Strategy Group, examines the challenges institutional investors face in shifting economic times.
Source: Vanguard.com, April 2013
Summary: A Boston College economist, Alicia H. Munnell, and her colleagues have estimated that more than half of Americans are saving too little to support an adequate lifestyle if they plan to retire at 65. To fix this, we need to do two things. First, make payroll retirement savings plans available to everyone. Then, add empirically proven design features to them, making it easier for workers to make good choices. In other words, improve the plans' choice architecture.
Source: NYtimes.com, April 2013
Summary: Retirement plan and the retirement plan industry are fluid, which means what is good today maybe not good for tomorrow. You can never be too complacent because losing your client or your competitive edge is just around the corner.
Source: Rosenbaum Law Firm Blog, April 2013
Summary: While the notion of voluntary informed consent is a familiar concept in bio-medical ethics, this column applies this patient-physician issue to the 401k advisor-plan sponsor relationship and that a moral hazard often exists in both relationships. The author argues that Wall Street not only fights against a fiduciary standard to address this moral hazard, but the amended Rule 408(b)(2), the SEC and FINRA also exacerbate the hazard.
Source: Prudentchampion.com , March 2013
Summary: Alicia Munnell, director of the Center for Retirement Research at Boston, says the tendency to push high-fee products is common among broker-dealers and was the motive behind the Department of Labor's 2010 proposals to eliminate 12b-1 fees. She calls for a more direct approach, one that actually bans actively managed, high-fee funds from any type of account that receives favorable treatment under the Internal Revenue Code to encourage retirement saving.
Source: Marketwatch.com, March 2013
Summary: Author write, "On the front page of the Washington Post on March 11, 2013, Michael Fletcher connects different the life expectancies of the poor and rich to the debate over whether Social Security should provide more years of retirement support as people live longer. He mistakenly leaves the impression that adjusting the retirement age for increases in life expectancy hurts the poor the most. In fact, such adjustments take more away from the rich. Let me explain how."
Source: Governmentwedeserve.org, March 2013
Summary: Commentator writes, "Why are the folks who advise sponsors of 401k plans in such denial that these plans currently don't walk, talk or quack like regular pensions? ... Given that most Boomers who are duped into retiring will run out of money within five or 10 years we are facing the biggest economic catastrophe since the Great Depression. We've got to tackle the gridlock on Capitol Hill and give hard-working Americans the retirement they deserve."
Source: Retirement-solutions.us, March 2013
Summary: The Washington Post on Feb. 17 published yet another article on the 401k system. Fueled by academic studies with a clear anti-401k agenda, these articles, the author writes, "seem to revel in the entirely unsubstantiated failure of current workplace retirement plans.... [T]he anti-401k agenda is founded on a series of persistent myths...that simply do not reflect the reality of America's retirement plan: the 401k."
Source: Napa-net.org, February 2013
Summary: Data and academic research overwhelmingly show that Americans are taking care to prepare for retirement. Americans today have a record $19 trillion in assets earmarked for retirement. That's in addition to Social Security, which provides a bedrock retirement foundation for all working Americans. This positive story, however, doesn't come through the doom and gloom that pervades the media.
Source: Investment Company Institute, February 2013
Summary: Larry Zimpleman, chairman, president and chief executive officer of the Principal Financial Group writes, "A new report on 401k plan loans and withdrawals has spurred a number of articles in the media and, in some cases, significant misunderstanding. One article in particular in the Washington Post paints a distorted picture alleging that 'widespread breaching' of 401k accounts is on the rise and is 'undermining' retirement security. Hold on a second."
Source: Principal.com, February 2013
Summary: What appears to a be a short-term decision that might adversely affect retirement preparation may actually be a long-term decision to enhance retirement security with a mortgage paid off or higher earnings potential. In sum, we don't know that these decisions represent a "breach" of retirement security--or a down payment.
Source: EBRI.org, January 2013
Summary: We are optimistic that a bright future lies ahead for retirement, despite all the concerns that Americans feel today, but history holds some important takeaways for plan sponsors, advisors to plan sponsors, and asset managers who seek to provide a better road to retirement.
Source: Alliancebernstein.com, January 2013
Summary: Behavioral economists have figured out that human psychology has profound effects on the way in which people make decisions about a wide variety of things, including how to save for retirement. If policy makers want to boost the number of small-business owners saving sufficiently for their retirement, they need to incorporate this information into the design of small-business owners' retirement plans, not just make more types of plans available.
Source: Reuters.com, January 2013
Summary: "most sponsors are not equipped to fulfill DOL's mandate other than to obtain the information, read it and ask questions if something is not understood. Some reasonable middle ground is needed, especially with regard to smaller plans. This is a time when employees need to save for retirement. No rule, even one with good intentions, should be allowed to create a "run to the exits.'"
Source: Napa-net.org, January 2013
Summary: "One might think of lots of good policy reasons for this expansion (like reducing plan leakage; giving participants greater flexibility for retirement planning), but Congress did not pass this law for good policy reasons. It passed it to raise revenue, plain and simple."
Source: Benefitsbryancave.com, January 2013
Summary: Buried in the fiscal cliff deal is a small provision with big political significance: The bill makes it much easier for ordinary Americans to convert traditional 401k retirement accounts into Roth accounts. The only problem is that it's highly unlikely to raise that much revenue in the long term--in fact, it's at best likely to break even and at worst be a big revenue loser, tax experts say.
Source: Washingtonpost.com, January 2013
Summary: There has been much debate since the passage of Dodd-Frank on whether all financial service providers ought to be held to a fiduciary standard and necessarily put the interests of their clients ahead of their own. Here is one thing that isn't debatable when it comes to plan sponsors choosing a 401k service provider: "Let the buyer beware!"
Source: Prudentchampion.com , December 2012
Summary: Just as Dorothy and friends believed that they could rely on the Wizard to get back home, many retirement plan sponsors believe they can rely on their 401k service providers to help them fulfill their fiduciary duties. Like the Wizard who used elaborate props to make himself appear great and powerful, some retirement plan providers would also like you to "Pay no attention to that man behind the curtain."
Source: Prudentchampion.com , December 2012
Summary: The rise of registered investment advisors in Chicago means the city, once viewed as a very secondary financial center to New York and the Bay Area, is coming into its own in a big way.
Source: RIAbiz.com, December 2012
Summary: Spread profits earned by insurance companies on general account stable value funds still remain hidden to plan sponsors. The issue has taken on new importance for participants in retirement plans such as 401k plans and 457(b) plans with the DOL's implementation of the disclosure regulations under the ERISA earlier this year.
Source: Morningstar.com , December 2012
Summary: As federal lawmakers look for ways to reduce the federal government's massive deficit, group retirement plans are certain to be targeted. While lawmakers' scrutiny is welcome and appropriate, it should be conducted with caution. The cost of a wrong move eroding needed retirement income could far exceed the benefit of potential deficit reduction.
Source: Businessinsurance.com, December 2012
Summary: To qualify for favorable tax treatment, employer provided retirement plans, including the 401k, must meet a long list of "plan qualification requirements." These requirements are what provide Congress and regulators the ability to influence the design of retirement plans.
Source: Forbes.com, December 2012
Summary: Sen. Tom Harkin, D-Iowa, proposes to improve pension coverage and retirement security by building a chair. That is, he would add a fourth leg to the shaky proverbial three-legged stool that defines the current retirement system to shore it up. He calls his idea Universal, Secure and Adaptable Retirement Funds. But is it needed?
Source: Pension and Investments, November 2012
Summary: Are Congress and the Obama administration getting ready to balance the budget on the backs of the nation's retirees? If history, a bipartisan report and the rumblings of Washington are any indication, then workers across America better be prepared from some sad news.
Source: Fiduciarynews.com, November 2012
Summary: As hard as times are for investors in Best Buy's shares, far grimmer is the plight of the 110,000 employees participating in the company's approximately $1 billion 401k plan. Not only do they have to worry about possibly losing their jobs if the company can't right itself, their so-called retirement plan is heavily invested (17%) in company stock.
Source: Forbes.com, November 2012
Summary: Author writes, "Ever wonder why the retirement advisor community, the Department of Labor and the AARP never seem to see eye to eye? While the animosity between the industry and the Feds is one thing, the seemingly benign and pro-retiree AARP continues to build a divide between the public and retirement professionals - and a new study seems to reiterate one particularly burdensome sticking point."
Source: Benefitspro.com, November 2012
Summary: "Where there are multiple sins and flaws, as there are in today's retirement system, there are multiple opportunities for improvement. So as we work toward the ideal of "The New Pension Plan" just described -- with pension funds helping to shape the future of capitalism -- here are five specific recommendations toward that end."
Source: FA-mag.com, November 2012
Summary: Expected - or totally unexpected - the outcome of Tuesday's federal election has certainly stirred up plenty of opinions in the retirement and financial world. Here's a smattering of some of the early response from industry associations.
Source: Benefitspro.com, November 2012
Summary: Technical definitions of a fiduciary taken from other contexts do not necessarily apply to the DC world. But the new elite DC advisors will act like "stewards" through a whole series of activities that show they are putting their clients' interests first.
Source: Napa-net.org, October 2012
Summary: Are you a fiduciary or not? While this appears to be a straightforward question that can be answered with a "yes" or "no," Louis Harvey suggests that covered service providers have engaged in childish games that take obfuscation to unprecedented levels with their answers.
Source: Dalbar, October 2012
Summary: Many people have proposed changes to our retirement system in order to hopefully prevent a retirement crisis from hitting millions across the nation. If you were in charge, what would you do to fix this problem?
Source: Zacks.com, October 2012
Summary: The legislative and regulatory activity since 2008 has been focused on increasing the fiduciary level of care to the investment market, motivated by the belief that investors are being injured - in spite of the protections that have been in place for decades. The superficial assumption is that investors will benefit from a fiduciary level of care.
Source: Fiduciaryregistry.com , October 2012
Summary: There is no clarion call in the national party platforms of Republicans and Democrats for a robust fiduciary standard, or even the faintest hint of one anywhere in the presidential campaign. Trying to find a discernible pattern in congressional votes or agency decisions continues to reaffirm studies concluding that the standard remains grossly misunderstood by the public, notwithstanding its critical importance to society. Thus when we look at the election results on Nov. 6, we should not read too much into them with regard to the fiduciary standard.
Source: FI360.com, October 2012
Summary: One of the most pervasive myths in the investing universe -- and one that impacts the world of 401k plan sponsors and investors the most -- states that "lower expense ratio mutual funds perform better than higher expense ratio mutual funds."
Source: Fiduciarynews.com, October 2012
Summary: When a plan sponsor goes to evaluate potential 401k service providers, will they be able to determine and understand how much their plan will cost? Author says, "Unfortunately, this can be quite difficult, as many providers have tried to gain a competitive edge by playing 'proposal games.'"
Source: 401khelpcenter.com, October 2012
Summary: The Senate Committee on Health, Education, Labor & Pensions ("HELP") held a hearing on what Sen. Tom Harkin (D-IA), the HELP Committee's Chairman, refers to as the "retirement crisis." If Harkin is successful in pushing his proposal through Congress, it could have a greater impact on the current retirement system than he proposes.
Source: Bryan Cave, September 2012
Summary: Given that DB and DC pension arrangements are exposed to different risks, it makes sense to have defined contribution plans as a component of the nation's retirement system. Thus, the problem is not that the U.S. ended up with defined contribution plans in the private sector but rather that 401ks are the most extreme individualistic form of a defined contribution plan.
Source: Marketwatch.com, September 2012
Summary: Yet we repeatedly see critics calling for 401ks to be reformed or replaced. The conventional wisdom in some circles is that the shift toward 401ks and defined-contribution plans has been harmful to Americans' retirement security. That "wisdom" is wrong.
Source: San Francisco Chronicle, September 2012
Summary: In evaluating 408(b)(2) disclosures, it is amazing to see how many openly violate a key provision of the regulation. The larger question is what the consequences are for such flagrant violation of a regulation that requires disclosure of reasonably expected compensation?
Source: Dalbar Blog, September 2012
Summary: The Director of the Rotman International Centre for Pension Management thinks it's time to quit the DB vs. DC argument, and come up with a new breed of pension plan.
Source: Ai-cio.com, September 2012
Summary: A recent New York Times column contains a slew of mischaracterizations regarding recent developments around money market funds. Author deals with some of the misconceptions continuing to swirl around money market funds.
Source: Investment Company Institute, September 2012
Summary: Anyone who believes that the marketplace for 401(k) plan services has been competitive over the past three decades or that there have not been widespread systemic abuses in the retirement savings industry, should study closely what Fidelity admits it did for four years from 2004 through 2008.
Source: Forbes, September 2012
Summary: Plan sponsors who seek out guidance from an independent retirement plan consultant, a TPA, a financial advisor or an ERISA attorney should actually listen to that guidance and use that guidance as a template in making informed fiduciary decisions.
Source: Rosenbaum Law Firm PC, September 2012
Summary: 401k plan sponsors tended to choose between two months to revisit the basics of their plan -- September and January. Since it is September, you may be starting your own plan review. Here are three things you might consider.
Source: Fiduciarynews.com, September 2012
Summary: Just because something about retirement plans is nicely done by an advisor, a third party administrator, or even an ERISA attorney, doesn't mean that they actually have the experience or skill set to accomplish the services they are promising to plan sponsors.
Source: Rosenbaum Law Firm PC, August 2012
Summary: The DOL has tried, through rulemaking, to simultaneously expand and make more consistent who is a fiduciary and when. The issue becomes even more complicated, though, if and when you try to coordinate that issue under ERISA with similar, but not identical, obligations imposed by the SEC.
Source: Boston ERISA Law Blog, August 2012
Summary: A nationally-offered "model" low-cost, conflict-free 401k plan which employees can ask for by name and employers can easily provide is long overdue. It's not hard to devise retirement plans that are good for workers--provided all parties involved (including employers and vendors) are committed to that goal.
Source: Forbes, August 2012
Summary: As massive numbers of Baby Boomers approach and reach retirement age, more and more Americans face the challenge of funding a secure retirement. Meeting that challenge can hinge on knowing the answer to what can be a vexing question: How much retirement savings is enough?
Source: Vanguard, August 2012
Summary: The true metric is now whether employees are actually achieving retirement readiness. Employers are taking their role as fiduciaries more seriously. The new environment requires a well rounded retirement plan and communication strategy that not only educates employees on their benefit, but gets them to use it effectively, which is challenging for many plan sponsors.
Source: Benefitspro.com, August 2012
Summary: The DOL's Rule 408(b)(2) now requires service providers to divulge those sometimes hidden fees that can pose such peril to 401k investors. Unfortunately, the DOL has not come up with an easy-to-read template for service providers to follow. Instead, much to the confusion of many plan sponsors, particularly those in smaller plans, service providers have found creative ways to "technically" disclose fees without making them easy to find.
Source: Benefitspro.com, August 2012
Summary: The changes? No reforms at all to the drastically underfunded 401k plans. Employers who don't offer a 401k plan would have to set up a retirement plan in which employers must withhold an unspecified portion of their employees' pay and deposit it to "privately-run, hybrid pension plans." In addition, employers would have to make "modest contributions" to employee accounts. And Social Security payments will be boosted by a measly $60 a month. This is bold?
Source: Huffingtonpost.com, July 2012
Summary: The voluntary system should be judged as just that, a voluntary system. The data makes it clear that voluntary employer-based plans are, in fact, leading to a great deal of real savings accumulated to supplement Social Security.
Source: Employee Benefit Research Institute, July 2012
Summary: Three requirements are at the core of ERISA Section 408(b)(2). These requirements are for responsible plan fiduciaries to ensure that services which are paid for by participants are 1) necessary, 2) reasonable and 3) that the cost is reasonable.
Source: ERISAfeedisclosure.com, July 2012
Summary: The July 12 issue of Fortune includes an article "Is your 401k ripping you off?" David Wray writes, "The continued unwillingness of those in the media to properly report on 401k fees astounds me."
Source: Plan Sponsor Council of America, July 2012
Summary: Few people believe that they can turn the stock market into some kind of get-rich-quick scheme. And given the enormous obstacles involved in trying to day-trade retirement funds, the author is reasonably confident that 99% of plan participants will never even attempt it.
Source: Reuters, July 2012
Summary: Many in the industry have expressed concerns with the popular press's ongoing assault on mutual fund expense ratios. This overly-simplistic and false analysis may thwart the Department of Labor's efforts to level the playing field among 401k investment products.
Source: Fiduciarynews.com, July 2012
Summary: Letter states that the positions set forth in Question and Answer 30 ("Q&A-30") have potentially enormous costs and adverse effects on the retirement plan system -- costs and impacts that the authors believe need to be further developed and considered as part of a public notice and comment process.
Source: American Benefits Council , June 2012
Summary: Speech by Paul Schott Stevens, President and CEO of Investment Company Institute, on the future of retirement and the substantial role that 401k plans will play in building that future.
Source: Investment Company Institute, June 2012
Summary: In a blog post dated May 30th, 2012 on an ASPPA/NTSAA blog (there is no author for the post) a blunder was made while attempting to post misleading information regarding data that the Los Angeles Unified School District released.
Source: Meridian Wealth Management, June 2012.
Summary: While stable value returns have been declining due to the low interest rate environment, they continue to offer a considerable premium over money market funds for defined contribution investors. And, they are an excellent diversifier for a 401k investment portfolio.
Source: Plan Sponsor Council of America, June 2012.
Summary: The Wall Street Journal article, "Retiring Baby Boomers Find 401k Plans Fall Short," published over the weekend, seems to blame the tool used to save for retirement rather than the user or provider of the tool itself.
Source: 401khelpcenter.com, February 2011.
Summary: A recent court case decision in California threatens to "upset the applecart" with regard to accepted fiduciary practices. Although all but one charge was dismissed, the plaintiffs did score a win that might surprise you. What went wrong for the defendants?
Source: 401khelpcenter.com, October 2010.
Summary: An article recently published in a retirement plan industry journal addressed criticisms of the construction of Target-Date Retirement portfolios that are based on a "through" retirement approach. The term "through" retirement implies that the glide-path, the formula by which the portfolio's asset allocation rebalances over time, carries through retirement to death. This strategy is contrasted by the "to" retirement approach, in which the glide-path is designed to end, or become static, at retirement, as opposed to death. Which is right, retirement or death?
Source: 401khelpcenter.com, April 2010.