Greg Judd

c, You probably won't get much hearing for group legal around these parts, & multiple posts about it will only annoy people. Anyone who's been on the sell side of benefits for more than a couple of years has been pitched. It does fit with some businesses/workforces, but it's not the 'killer app' for most brokers/agents or employers.

we agree, Jon. But you knew that.... Kirk, that situation you've described...hooo, man! That's called a 'heist' isn't it?

[Edited by Greg Judd on 09-20-2000 at 02:46 PM]

Rick Meigs' post is most pertinent here. Sponsors are moving towards paying admin fees, not away. Come the next market downdraft (the current 'calm''s probably not enough to spur participants to get outraged about fees), Congress will jump-start its inquiries into 401k fee shenanigans, & some sponsors will be scrambling to scrape the egg off their face (pun intended of course) while frying hard to retain participants in the face of the bad publicity. Some asset managers have made noises about offering admin services for 'free' or near-free if your current assets are attractive enough, as a switching inducement. Haven't heard as much about this over the past few months, but I'd watch that carefully, too--nothing's free.

Pax, was gonna go with persiflage, but couldn't choose between "f" or "ph"....

So typical of our profession that what should be a matter of basic business propriety is allowed to devolve to pettifoggery. IMHO, any plan sponsor whose internal legal counsel sees fit to make a federal case out of such an issue, given the facts presented here--regardless of the backing they've gotten from their cronies at the outside firm (think the outside firm would protest if in-house counsel had a strong opinion in the opposite direction?)--should consider recruiting for new counsel. This is a corporate political skirmish, with a small p. Of course, whether reduced attendance at the plan's enrollment meetings would be bad for the plan, and the plan's participants, is moot.... And alternatives for boosting attendance and/or participation would be outside the corporate counsel's imaginative sphere.... [spoiling for a fight--who, me?]

Looks like what's shaping up is a good 'real life' test of whether law follows life, or the other way around....

tschenk, I'm relieved that I don't have to smack you concerning this post... That precept is helpful when examining, predicting, and 'improving' individual financial actions. Problem arises when we try to make public policy that way. Dave started a separate thread today (ews Analysis -- Pension Reform: Making a Bad Situation Worse?)that takes off from an article in which the author basically rips the history of US public pension policy. He 'proves' that the US's policy of promoting pension plan creation via tax incentives has robbed the poor to give to the rich, citing statistics to the effect that "some 53 percent of currently employed workers have no pension coverage, and 48 percent of retirees have no private pension income". The concerns expressed in the current thread--that too many people will make too many bonehead investment moves too often, so creating a victim class Dickie Scruggs only dreams of--are tangled up with the concerns to be discussed in the News Analysis thread, one of which is: should pension policy aim at wealth redistribution, or is it all about incentives for wealth creation (rather than after-the-fact rewards to the wealthy)?

tschenk, can't go with you on the assumptions you list here--except that "there's the making for some unprecedented litigation...". First, what's now 401ks, weren't, back when. No one assumed 'real' pension plans would go away--though a surprising number predicted as much. 401ks were no more expected to be the sole best hope for retirement income security than was Social Security. Further, few talked about the need for 401k participants to acquire investing discipline & skills. Investment choices & means of control were limited, if they existed at all. 401ks emerged out of plans most eligible workers thought of as bonus programs--sources of money for buying holiday presents--see Brooks' breakdown of who left money in them, vs cashing out. Our very recently emerged daily balance, universe of investment options environment certainly contributes to obscuring the view of where we came from, and may well impair sensible efforts to improve on existing policy.

Brooks, terrific precis of the run-up to modern-day 401ks. I managed somehow to obscure my own point, which was only that the 401k we know--& discuss--today grew out of something having quite different objectives & expectations. Further, that one sign of that is the prevalence of plans that employ company stock to fund the company contribution/match. These suckers really weren't designed for diversification of risk. Accomodating those issues isn't too hard design-wise, but getting peoples' minds right--sponsors' as well as participants', and maybe public policymakers' as well--is another matter. I always liked the variant 'deemer'. Deemer deemer deemer!

Hi Julie, Funny you mention that "company stock in 401k plan" topic--it's been the latest tack over in the High Explosives thread: http://benefitslink.com/boards/index.php?showtopic=6896 Other background info can be found in this piece by Jane Bryant Quinn, and in many other pieces--well, ok, at least this other one, driven recently by the kind of events summarized in this 3/2000 CBS Marketwatch article". DOL's had hearings on related issues within the past couple of years; you can probably pick up good stuff at DOL's PWBA site.

Bang on the dot, John. Employees will vote on such bonehead policies with their feet--or in increasing numbers, & with increasing vehemence (if not reason), via this kind of 'lectronic soapbox. More than a few companies are likely to experience their own version of IBM's cash-balance conversion imbroglio over the coming years.

Brooks, that Worth article you mentioned sounds good, but the link you posted is a dead-end, unfortunately. Do you have its title by chance? re: Anybody out there feel the company may have a huge legal problem? Does anybody feel that 404© offers any protection at all in this type case? Does anybody (else) feel that these facts and circumstances may even constitute a breach of ERISA fiduciary responsibility, per se? The short answer's "no, but". The 401k plans of today basically owe their existence to 2 forces: tax laws providing favorable treatment to profit-sharing plans, & Ted Benna. The objectives of profit-sharing plans were (& arguably are) not coincident with plans aimed at providing employees with tax incentives for long-term capital accumulation for income at retirement. So, 401ks evolved out of existing 'retirement-oriented' programs that encouraged use of company stock as a centerpiece of employer funding. Not right or wrong, just the way it is. Though participants in plans where the company match is in company stock aren't as locked in today as they were in the early days, there are certainly further steps that might be taken to enable participants to diversify appropriately. Employers & employees should certainly coax their congressional representatives to hear their positions & legislate as necessary. We may only hope we aren't marched into "better" results at the muzzle end of the 'policymaking' weaponry wielded by Dickie Scruggs & co--else we end up with no overarching policy at all.

Re: that interesting-looking NBER report, I'm no expert on study design, but that big bump in trading frequency could be quickly attributed to lots of biasing factors unless the guys who did the study controlled very carefully for the composition of the 'have brokerage option/don't have it' groups they analyzed. Of course, if I wasn't too cheap to pay the $5 to get the whole report, I could put some teeth into my quibbling.... tschenk, based on your initiation of this fine thread, & the high caliber of your posts & replies, I'm prepared to concede my self-nomination & hand you the Prexy job unchallenged. Serve well!

John, I'm not questioning the rigor of your legwork--just noting that based on stats I've seen (compiled by FRB, I believe) re: historical equity/debt performance, the gap may be narrower than 6 or so percentage points. Kiplinger's ok in my book--the family shared a lot of wealth with the patriarch's (& my) collegiate alma mater. The central point, on which we seem to agree, is that an investor's choice of the mix that will result in 'successful' investment performance is subjective--whatever the theoretical 'best' economic outcome may be. Tell you what, I'll let you be right on the data aspects of this one--if you'll let me be President. 8^)

While I might quibble over the spread between John G's hypothetical bond/stock portfolios (historical differences in real rates of return, while significant, are not as great as suggested there), I agree entirely with his observation concerning the two-headed nature of this thread. Investing isn't an academic exercise. People need to live with their choices, day after day. That process inures them, over time, to the financial possibilities their own preferences for risk present. They like (some grow to like) what they can get. Said another way, investment success & investment performance are not identical. John says it all (well, if you add tschenk's remarks to John's, THEY say it all) here: "...I don't feel my approach to risk/reward should be imposed on anyone. Some folks would be very happy with a lower amount that they were more confident they would achieve. I do think companies should make sure participants understand their options and the significant range of possible results." Fortunately, showing the range of possible results can be done in a number of ways, & better than is done now most of the time. As for understanding their options, once the vendor reps are locked out of the room, it gets easier to communicate the basics.

A buckshot response to what's gone before: 1) One theme that seems to undergird many of this thread's well-articulated posts is that how investment assets are allocated is the key to participants' ultimate 'success'. Bunk. The key is participation. The difference between too-conservative investor (a) & uncannily prescient investor (B)'s portfolios over 20/30 years will certainly be noticeable--but not nearly as great as the difference between the NON-investor and the less-successful of [a] or (B). 2) underlying Dick Quinn's heartfelt suggestion-- "Seems to me it's time to go the next step and start giving participants what they have needed ofr many years and that is some advice they can consider for asset allocation that has chance of getting them where they need to go." is the notion that someone knows just what that 'some advice' is with precision, & that there's a financial goal toward which they 'need' to go, other than 'more later than I have now'. After persuading someone that it's in their interest for them to invest for their long-term needs, & that a 401k plan is one handy way for them to do so, a brief illustration of how different allocations of invested assets may change investment outcomes is a fine idea (BTW, such illustrations can be done quite easily & well with Financial Engines' tools, and with as much success using a handful of overheads & a tutored presenter). But only after they've decided they're long-term investors, & are in the plan. 3) Now that you've read all my blather, note that tschenk's already summed up the thread here: "People need to realize their limitations, and act accordingly - without further burdens and liability on their employers to do so. If they want to the employer to be responsible here, then the empoyer shold go back to professionally managed pools of assets...."

A modest rejoinder to Kip Kraus's assertion that "The average 401(k), 403(B), or any other plan participant will never be able to figure out how best to invest their pension funds. Regardless of all of the available invest advice, the majority of employee funds are still invested in the least riskiest investments offered under their plans..." can be found in the evidence gathered by EBRI & Jack Van Derhei in their excellent 401(k) Plan Asset Allocation, Account Balances, & Loan Activity, 1998. The report suggests among other things that: 1) people may be smarter with their invested assets than we might give 'em credit for. Evidence from Hewitt's 401k Index reinforces this notion--401k participants don't seem to be trying market-timing stunts in any large numbers, or dollar amounts; 2) the chronic overweighting (among publicly traded firms' 401k plans) of company stock probably contributes to the sensation of overly conservative investment decisionmaking that Kip & others have referenced; 3)the startling volume of 401k loan activity indicates people may be DUMBER with their invested assets than we might give 'em credit for(!). There's plenty of room for better investment education, for 401k as well as other avenues of investing, but I'd urge everyone not to sell the money smarts of the average US worker short. [Edited by Greg Judd on 08-29-2000 at 08:07 PM]

Re: the treatment of employer securities as part of your lump-sum distribution, see IRS Publication 575, p. 21 or thereabouts.

As a former legislative staffer (state level), my instinct is always to look for the subterranean motives behind proposal of such legislation. This looks like a Democrats-only initiative, which means Harkin has no aspirations for its passage. That should mean he wants something from DOL which, as Kirk suggests, is ostensibly the outfit that should be advocating for participants' interests. My hunch is Harkin's constituency doesn't line up well with DOL's; he gains nothing from extending its domain, & loses nothing by proposing creation of a 'competing' entity--and may gain indirectly from it. How? Since he sits on a body that oversees DOL, DOL may find it valuable to horse-trade with him concerning this issue ("we have a bill that may accomplish some/all of your goals; How might we persuade you to table your own initiative?") I confess I haven't read the bill in detail, and my conjectures are totally academic. Still, my bottom line is that this dog barks, but won't hunt. An aside: Senator Harkin's website is...what it is. Can anyone find his Committee assignments mentioned anywhere there?

Assuming it wasn't provided, employee should if possible get the calculation worksheet with as much detail as is available. Presuming the plan sponsor's not up to something, this kind of info's often provided along with "the number" [the payment amount]. I agree with PAX--most employees are flat clueless re: DB plans--and when they do "understand" them, they "know" they wuz robbed; witness the uproar over cash balance plans.

No putdown of our competitors intended, but it doesn't appear that either of the firms mentioned provide facsimilies of filings for single-employer plans (neither does my firm). Robin, if you'd like, send me an email with some client identifier info (firm name, address, EIN if available) & I'll check our data files for the filing you're trying to locate. Free, of course. At that price it can't hurt to get a second opinion. Greg Judd gjudd@biginsights.com benefits information group [This message has been edited by Greg Judd (edited 06-29-2000).]

The handiest source of info I've found on HIPAA developments is HIPAAdvisory.com, which has the following story about the House's 6/13 vote to withhold funding for work on the individual identifier (the health care provider & facility identifiers are going forward). The story begins "On Tuesday, the U.S. House of Representatives passed Congressman Ron Paul's amendment to an appropriations bill which will prohibit the federal government from imposing a "uniform standard health identifier" on the American people."

I'm not clear why this matter wouldn't be a valid bargaining subject under existing federal labor law. I'd urge your contacts to check & doublecheck this point.

Hi Bob, Fringe Facts gets good reviews from many. I've never had occasion to use BSI's wares, so I can't speak from direct experience. FF began life as benefit statement software, but in its recent incarnations, it essentially enables firms to create a 'personalized' benefits manual. [This message has been edited by Greg Judd (edited 06-21-2000).]