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Employee Benefits Jobs
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Webcasts and Conferences
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[Guidance Overview]
DOL's Expansion of the Definition of Investment Advice (or 'Fiduciary')
"The DOL's position is that the suitability standard is not sufficient to prevent the rendering of conflicted advice that it believes costs retirees billions of dollars in inappropriate fees. The brokerage industry contends, in part, that the cost of compliance with the new rule, the enhanced risk of litigation, and the fact that fees must necessarily be higher to provide advice on an individual basis make the rule unworkable and that small plans and small investors will lose the ability to obtain investment advice and to continue to work with a trusted advisor. At a minimum, compliance with the new rule is expected to alter the way that brokerage houses do business."
(Benefits Bryan Cave)
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[Guidance Overview]
Proposed DOL Regs Include Major Changes to Fiduciary Advice Definition (PDF)
6 pages. "The changes proposed by the DOL to the fiduciary definition will expand the universe of individuals and entities viewed as investment advice fiduciaries to ERISA retirement plans and IRAs. While the proposal includes some helpful exceptions to the application of the new fiduciary definition, these exceptions are relatively narrow. As a result, certain sales activities, and consulting, recordkeeping, participant education and valuation services that do not currently give rise to fiduciary status, would do so under the proposal."
(Groom Law Group)
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[Guidance Overview]
EBSA Issues Regs -- and More -- on Fiduciary Definition and Duty (PDF)
"With the objective of preventing conflicts of interest from influencing the advice given to plans, participants, beneficiaries and IRA owners -- while maintaining the availability of needed investment advice -- EBSA is creating new PTEs and amending several existing ones.... EBSA indicates that the centerpiece of these exemptions is intended to allow an advisor or firm (or both) substantial freedom in maintaining existing preferred compensation practices[.]"
(Ascensus)
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[Guidance Overview]
Is Your Rollover Business at Risk Under Proposed Fiduciary Plan?
"Adding rollovers and IRAs to the definition of fiduciary duties, the U.S. Department of Labor's new proposed rule could have a huge impact on firms in a fast-growing and profitable segment of the retirement savings industry. The new proposal will permit broker commissions if certain conditions are met for those advising individuals or small plans rolling over from company 401(k) plans to particular IRAs. The inclusion means that broker dealers and advisors would have to disclose, for instance, if a client would be putting their money in an investment vehicle with a higher fee[.]"
(On Wall Street)
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DOL's Fiduciary Advice Definition Proposal: The Regulatory Impact Analysis (PDF)
"Section 7 of the RIA discusses the regulatory alternatives that the DOL considered before settling on the 2015 Proposed Regulation. Although it appears that DOL considered a number of alternatives, some appearing more credible than others, DOL concluded that that none would protect plan and IRA investors as effectively as the 2015 Proposed Regulation."
(Groom Law Group)
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Why Employers Need a Gap Analysis
"Conducting a gap analysis helps to ensure that plans are being administered in accordance with ERISA and the Code. A gap analysis can also ensure that the plan operates more efficiently, and, as a result, can help to minimize plan costs. When a compliance problem is discovered during a gap analysis, the problem can often be 'corrected' using one of the compliance programs sponsored by the DOL or [IRS]. The cost of utilizing a government sponsored compliance programs is significantly less than correcting a compliance issue discovered by a government agency on audit."
(The Wagner Law Group)
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Borrowing from the Future: 401(k) Plan Loans and Loan Defaults
"[An] administrative dataset tracks several hundred plans over 5 years, showing that 20% borrow at any given time, and almost 40% do at some point over five years. Employer policies influence borrowing behavior, in that workers are more likely to borrow and borrow more in aggregate, when a plan permits multiple loans. [The authors] estimate loan default 'leakage' at $6 billion annually, more than prior studies."
(Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)
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Simplifying Choices in Defined Contribution Retirement Plan Design
"This paper tracks how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu, tiering options in an easier-to-understand format.... [S]treamlined participants' new allocations exhibited significantly lower turnover rates and expense ratios; based on reasonable assumptions, this could lead to additional aggregate savings for these participants over a 20-year period of $20.2M, or in excess of $9,400 per participant."
(Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)
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Lessons for Public Pensions from Utah's Move to Pension Choice
"This paper explores what happened when the state of Utah moved away from its traditional defined benefit pension. Instead, it offered new hires a choice between a conventional defined contribution plan, versus a hybrid plan option having both a guaranteed benefit component and a defined contribution plan shifting investment risk to employees. We show that some 60 percent of new hires failed to make any active choice and, as a result, they were automatically defaulted into the hybrid plan. Slightly more than half of those who made an active choice elected the hybrid plan.... [E]mployees who failed to actively elect a primary retirement plan were also far less likely to enroll in a supplemental retirement plan, compared to new hires who made an active plan choice."
(Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)
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The Retirement Income Challenge: Deferred Income Annuities Before Retirement (PDF)
"Setting assets aside before retirement to buy a DIA places a portion of the retirement portfolio into a bond-like financial vehicle and these funds should be viewed as such when evaluating the overall asset allocation ... When a retirement plan allocates a portion of its assets to a DIA, the average cost of retirement is reduced by softening the financial blow of a long lifetime or poor market returns. The purchase of a DIA before retirement is particularly valuable for clients who would have maintained a stock allocation lower than 70%.... [S]hort deferral DIAs can reduce the cost of funding retirement, provide longevity protection, and provide important behavioral benefits to clients concerned about near retirement market performance."
(Northwestern Mutual)
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Delaying Commencement of Social Security vs. Buying a QLAC -- Which Is the Better Strategy?
"Both strategies involve generation of mortality credits by virtue of mortality risk pooling that you don't get when you self-insure.... The bet inherent in both of these strategies is won only if the individual lives longer than average. The QLAC strategy is a bigger bet in this regard than the Social Security deferral strategy with a potentially bigger mortality credit payoff for those who live past age 85.... On the other hand, Social Security provides survivor benefits and inflation protection not provided by the QLAC."
(Ken Steiner, FSA Retired)
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SEC Member Calls Fixed income Annuities Dangerous, Wants Fed Scrutiny
"SEC Commissioner Luis A. Augilar ... cited FIAs as among a group of complex securities that pose dangers to individual investors, even though FIAs are insurance products regulated by the state. The SEC has previously attempted to regulate FIAs as securities by enacting Rule 151A, but a federal court threw out the rule in 2010 and Congress barred the agency from regulating the products."
(InsuranceNewsNet.com)
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[Opinion]
Memo to Industry: Get Behind Fiduciary Rule
"Leaving aside the overblown rhetoric -- really, all American savers, including people with a deposit account in a bank, will suffer if brokers adhere a fiduciary standard?--the critics of a fiduciary rule have a point. There are some protections for investors who receive poor broker-provided advice on their retirement accounts. And smart people can poke some holes in the Administration's economic arguments in favor of the fiduciary rule.... [T]he issue comes down to the harm that can and does come to individual retirement investors in the absence of the fiduciary rule."
(Morningstar)
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[Opinion]
Save Our Retirement Coalition's Initial Statement on Rule Protecting Americans' Retirement Savings
"Although some Wall Street interests are attacking the rule already, those attacks ignore numerous provisions specifically designed to accommodate their concerns.... This rule promises to be a major improvement over the status quo, which allows too many financial professionals to offer self-serving investment advice at the expense of their clients' retirement security."
(Save Our Retirement Coalition, via Pension Rights Center)
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Press Releases
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