Retirement Plan Blog

02 | 5 | 2010 Posted By Jerry Kalish

Our friends at Employee Benefit News Legal Alert published one of those "must read" articles. Attorney Cynthia Marcotte Stamer writes Tough Times Are No Excuse for ERISA Shortcuts.

Ms. Stamer correctly points out that irrespective of the business hardships that plan sponsors are facing, the Department of Labor (DOL) will aggressively pursue enforcement if they perceive that a plan sponsor has failed take the necessary steps to protect plan participants.

Here are three key points she makes:

1. Many employers don't understand their fiduciary responsibilities and potential liabilities associated with sponsoring a retirement plan.
2. Plan sponsors frequently incorrectly assume that they can rely upon retirement plan service providers to ensure that their fiduciary responsibilities are being met.
3. Plan sponsors in other cases don't realize that they meet ERISA's functional definition of a fiduciary.

For comprehensive and understandable resources on what this "fiduciary stuff" is all about, check out The Fiduciary Education Campaign, a compliance assistance initiative of the Employee Benefits Security Administration (EBSA), the DOL agency responsible for fiduciary oversight.

Employee Benefit News Legal Alert is just one of the free resources provided by Employee Benefit News. Here's a link to check them out.

01 | 29 | 2010 Posted By Jerry Kalish

That was the title of a blog post I wrote exactly one year ago today when Brightscope, Inc., an independent data analytics company launched their 401k ratings disclosure website.

It featured  the BrightScope Rating™, a quantitative 401(k) plan rating developed by BrightScope, Inc. in partnership with some of the country's top independent fiduciaries, finance professors, and 401(k) experts. BrightScope Ratings™ take into account over 200 unique data inputs per plan and calculate a single numerical score to define 401k plan quality at the company level.

In noting that it was the nation’s first online 401(k) rating system, I ended my post by saying, As for me, I’m still thinking about the implications of this innovation. Could be huge.

So I thought it would be interesting to see exactly the progress this start-up company has made over the past year.

Here’s a brief quantitative look-back. Then: 5 employees, now: 22. Then: 800 401(k) plans rated, now: 34,000 401(k) plans rated. Then: a few hundred page views a day, now: approximately 12,000 a day.

The buzz about BrightScope started from their initial press release and has been fueled by media coverage in both mainstream and trade media.

Since the beginning of 2009, the Company has launched the following products:

• July 2009: Plan Management Dashboard for corporate plan sponsors
• September 2009: Advisor Central for retirement-plan advisers
• January 2010: Personal 401(k) Fee Report for 401(k) participants.

They have arrived in the middle of the “perfect storm”: increased Congressional scrutiny and involvement in 401(k) plans, stepped up regulatory focus by the Department of Labor, and everyone’s concern about the adequacy of retirement income – or lack thereof.

Only time will tell the extent to which Brightscope will impact the 401(k) plan industry. But impact it they will. Year 2 should be very, very interesting.

01 | 23 | 2010 Posted By Jerry Kalish

That's the title of a press release I received this week from Cogent Research, a market research and strategic consulting firm based in Cambridge, Massachusetts about the results of their 2010 Investor Brandscape™ report.

According to Cogent, Fidelity Investments has forfeited its position as both the number one distributor and mutual fund provider to key rivals Charles Schwab and Vanguard. Cogent said it is because of significant shifts in brand perceptions, household penetration, as well as changes in investor loyalty.

The Cogent report which is based on a representative survey of 4,000 affluent and high net-worth investors in the United States reveals a decline in the number of investors using 401(k) plans. In fact, for the first time ever, affluent investors now report having more dollars allocated to IRAs than to employer-sponsored retirement plans.

In an interview Meredith Lloyd Rice, an author of the report, made the following key points.

• The proportion of investors that hold a 401(k) has gone down significantly. As of Oct. 2009, she said, only 59% of investors’ surveyed hold an employee-sponsored retirement account, down from 70% in Oct. 2008.
• The population is also aging and those closer to retirement are rolling over their employee-sponsored retirement plans into IRAs, another reason for the decrease in participation in 401(k) plans.
• Younger investors are more likely to start their own businesses or freelance and aren’t necessarily working in traditional full-time jobs that offer employee-sponsored retirement plans.
• High unemployment is also cutting into contributions.

In big picture terms, the results of this report aren't about market share or brand loyalty. Rather, It's how the intersection of our aging population, higher unemployment, and lower 401(k) participation is impacting retirement security - or lack thereof.

01 | 10 | 2010 Posted By Jerry Kalish

That's the poster from the not so good 1979 movie, The Shape of Things To Come. You kinda get the picture from the tagline Beyond the earth... Beyond the moon... Beyond your wildest imagination!

The movie was an adaptation of  the 1933 science fiction novel, The Shape of Things To Come, by H.G. Wells which speculates on future events from 1933 until the year 2106.

My own prognostications for the future are not nearly as expansive. But rather limited to the world of 401(k) for 2010. Here's a link to my January 2010 column in Employee Benefit News, The Shape of Things To Come for 401(k) Plans. 

12 | 31 | 2009 Posted By Jerry Kalish

It’s that season of the year. No, not the obvious holiday season, but the award show season. And I’ve got my own called, The Retirement Plan Year in Review: The Good, The Bad, and The  Ugly.

The reference is, of course, to Sergio Leone's classic 1966 movie, considered the greatest of the Italian spaghetti westerns, starring Clint Eastwood (the Good), Eli Wallach (the Bad), and Lee Van Cleff (the Ugly).

And so with apologies to the afore-mentioned director and actors, here are my 2009 nominations in each of the three categories.

• The Good: Increased Consumer Spending
• The Bad: Job Losses
• The Ugly: Early Retirements Hurt Social Security System and Many Recipients

You can see the entire "award show" in my December, 2009 column in Employee Benefit News.

So for 2009, that's a wrap.

Best wishes for a healthy, happy, and prosperous New Year.

12 | 26 | 2009 Posted By Jerry Kalish

Welcome to Adam Pozek and his new blog, Pozek On Pension to the cadre of retirement plan bloggers. He is Vice President, Consulting Services for Sentinel Benefits & Financial Group.

In the few posts Adam has published so far, he provides context for what’s happening with retirement plans with a point of view.

And here’s one that immediately caught my eye as a response to a plan sponsor or advisor “shopping” for a retirement plan administrator. I’ll simply link them to Adam’s post, Is Cheapest Always Best?

Right on!

12 | 16 | 2009 Posted By Jerry Kalish

Our blogging buddy, attorney Bob Toth, blogging from a ski slope in Quebec province, discussed the demise of defined benefit pension plans, Continuing the DB Demise Discussion. He notes that there are only 19,000 defined benefit plans now being covered by the PBGC.

The context in which Bob writes is what is generally perceived to be “Corporate America”. He quotes Nassim Nicholas Taleb from his book, The Black Swan: The Impact of the Highly Improbable:

Consider the following sobering statistic. Of the five hundred largest U.S, Companies in 1957, only 74 were still part of that select group, the Standard and Poor’s 500, forty years later. Only a few had disappeared in merger; the rest either shrank or went bust.

But that’s Corporate America as it used to be. From my vantage point, Corporate America is small business owners, and defined benefit plans are very much alive and well with new plans being adopted.

Just like Fleetwood Mac who after many years apart are back together, defined benefit pension plans are back and better than ever. Here is a presentation I did last year on that theme. 

11 | 29 | 2009 Posted By Jerry Kalish

The Employee Benefit Research Institute (EBRI), an independent non-partisan research organization, in their annual Retirement Confidence Survey (RCS) has been asking workers how confident they are in having enough money for a comfortable retirement since 1993.

And in today’s economy, it should be no surprise that EBRI reported The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer. The Executive Summary stated

Workers who say they are very confident about having enough money for a comfortable retirement this year hit the lowest level in 2009 (13 percent) since the Retirement Confidence Survey started asking the question in 1993, continuing a two-year decline. Retirees also posted a new low in confidence about having a financially secure retirement, with only 20 percent now saying they are very confident (down from 41 percent in 2007).

The 2009 RCS reports that workers who have lost confidence in their ability to secure a comfortable are responding as follows:

• 81% have reduced their expenses
• 43% are changing the way they invest
• 38% are working more hours or a second job
• 25% are saving more money , and
• 25% are seeking advice from a financial professional

Sounds reasonable, yes? But here’s the rub. The RCS concludes that faulty assumptions and a lack of planning still hinder the ability of many Americans to realistically assess the preparations they need to take to ensure a financially secure retirement.

And that’s the problem that Frank Armstrong, III and Paul B. Brown address in their new book, Save Your Retirement: What To Do If You Haven’t Saved Enough or If Your Investments Were Devastated by the Market Meltdown.

So what’s so special about this book amidst the glut of books about retirement planning? Simply this. It reflects the real life experience of the authors in contrast to the media-created “investment experts” for many of whom the current recession is their first.

Frank Armstrong has more than 35 years of experience in the securities and financial services industry and is the founder and principal of Investor Solutions, Inc., a fee-only registered investment advisor, based in Miami. Paul Brown is a longtime contributor to the New York Times and co-author of the best selling retirement plan guide Grow Rich Slowly. He is a financial expert for ThirdAge.com, the popular website devoted to the concerns of people over age 40.

There’s nothing magic in their book. It’s just basic, old-school financial management in which Armstrong and Brown respond directly to what I call the “new financial realities” by showing battered investors

• Where to move their savings
• How to recalculate what they’ll really need to retire
• How to assess when they can now afford to retire
• How they should change their approaches to investing
• How to use the federal tax system to save more
• What to expect from Social Security now

So if you’re one of those people worried about how and when you can afford to retire, then this book can be an excellent guide. Here's a link to Amazon if you want to purchase the book, and you can also subscribe to Frank's companion blog, Sink or Swim.

You can also check out other book reviews I’ve done: Josh Itzoe's timely Fixing The 401(k); Fran Hawthorne's controversial Pension Dumping: The Reasons, The Wreckage, The Stakes for Wall Street; and Christian Jarrett’s and Joannah Ginsburg’s This Book Has Issues - Adventures in Popular Psychology.