What Americans want from a retirement plan
With a new Administration and a new Congress about to take over, we’re going to start to see the think tanks and not-for-profit organizations issuing research and recommendations regarding public policy for retirement plans.
One of those organizations is the National Institute on Retirement Security (NIRS), a not-for-profit organization whose stated mission is to “encourage the development of public policies that enhance retirement security in America”.
Last week the NIRS released a national public opinion survey that reveals widespread retirement insecurity among Americans. More than eight out of ten Americans are worried about their ability to retire, and 71% indicated they feel it is harder today to retire as compared to previous generations.
No surprises and caused no doubt by current economic conditions and the current state of employer sponsored retirement plans, i.e. the demise of defined benefit plans and the large declines in 401(k) balances.
The survey, Pensions & Retirement Security: A Roadmap for Policy Makers (PDF, 39 pages), was commissioned by the NIRS and conducted by Matthew Greenwald and Associates, the public opinion and market research company.
Public policy considerations aside, there was some important information regarding what Americans want from a retirement plan. The survey indicated that
- Americans want portability, followed by employer contributions, continuation of benefits for a spouse after death, and a regular check that cannot be outlived.
- Respondents are less interested in managing investments.
- Americans want to take individual responsibility/control over their retirement savings and trust themselves most, but they tend to be less interested in managing their investments and often say 401(k) savings are a “gamble.”
- Americans are divided as to whether retirement plans should allow loans against retirement savings.
Are you listening plan sponsors and retirement industry?
Posted In 401(k) Plans , 403(b) Plans , Cash Balance Plans , Individual Retirement Accounts , Pension Plans , Public Employee Plans , Publications , Social SecurityComments / Questions (0) | Permalink
Employee Benefit Research Institute (EBRI) relaunches website
If you are in the business of benefits or otherwise need independent non-partisan research information, you should be pleased with the news that the Employee Benefit Research Institute (EBRI) has relaunched and updated its website. The improved site makes it easier to access EBRI's treasure trove of research made available free to the public. You can check it out here.
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December 2008 Client Briefing: FAQs on Fiduciary Liability Insurance
Introduction
My last post was a year-end ERISA fidelity bond reminder. ERISA does not require liability protection; the only mandatory insurance is an ERISA Fidelity bond to protect the plan assets from losses due to misuse or misappropriation. The ERISA Fidelity bond protects the plan assets. Without fiduciary liability insurance, who protects the fiduciaries?
Executive Summary
The new retirement plan environment referred to in the headline includes a recent case unanimously decided by the U.S. Supreme court that has significant implications for plan fiduciaries.
On February 20, 2008 in LaRue v. DeWolff Boberg & Associates, Inc., et al., the Court ruled 9-0 that
Section 502(a)(2) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), does not provide a remedy for individual injuries distinct from plan injuries, but that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in one or more, but not all, participants’ accounts.
In non-legalese, the Court held that individual participants in a defined contribution plan can
sue for a breach of fiduciary duty that results in a loss to the participant’s own account, even if not all participants’ accounts have similar losses.
No one knows, of course, whether we will see an increased in lawsuits against fiduciaries, but many ERISA attorneys predict that LaRue’s victory means that there is likely to be a significant increase in litigation involving 401(k) plans, and that plan fiduciaries may be confronted with a variety of claims brought by plan participants seeking to recover losses to their individual accounts.
In this new environment, we think that fiduciaries should think in risk management terms and consider whether they should purchase fiduciary liability insurance.
This Benefit Briefing will provide you with answers to frequently asked questions (FAQs) to help you decide whether you should purchase fiduciary liability insurance.
Posted In 401(k) Plans , 403(b) Plans , Cash Balance Plans , Employee Stock Ownership Plans , Pension Plans , Public Employee Plans , PublicationsComments / Questions (0) | Permalink
BizBox by Slate, a blog for business owners
I'm pleased to announce that I am now a regular contributing author for BizBox by Slate, a special promotion by OPEN from American Express. I'm one of 5 contributors whose focus is helping business owners manage and grow their businesses. Come visit us.
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Defined benefit plan seminar handout available for download
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Here is the link to my presentation handout (43 pages, PDF) for the August 5, 2008 Seminar, Defined Benefit Pension Plans: What's Old is New Again and better than ever. This was a 3 hour continuing education seminar sponsored by the Lanny D. Levin Agency, Inc., a General Agent for the Guardian Life Insurance Company.
If you're wondering about the picture up top, that's Fleetwood Mac ("new website coming soon") who after many years apart are getting back together and will be touring next year. And just like defined benefit pension plans: what's old is new again and better than ever.
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ESOP as an Exit Strategy: Presentation to Chicago Bar Association Financial Institution Committee
See full-size imageExit strategies for business owners - particularly the baby boomers - is a matter to which they are giving increased attention. And so are their attorneys. Yesterday I participated in a continuing education program sponsored by the Financial Insitution Committee of the Chicago Bar Association for its members on this topic.
Our particular focus was ESOP as an Exit Strategy. I was joined by Grant McCorkhill, a Partner at Holland & Knight who specializes in transactional matters; and David Blum, a commercial banker and Vice President of First American Bank, an ESOP lender. We discussed:
- Exit Strategies for the Business Owners
- ESOP Essentials
- How an ESOP Gets Done
Click here to download a copy of our presentation (PDF, 20 pages).
Posted In Employee Stock Ownership Plans , Publications , Seminars and Speaking EngagementsComments / Questions (0) | Permalink
"What Women Need to Understand About Retirement", new eBook available
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No phone, no email, no fax, no worries. Priceless
Gone scrambling. Back in two weeks. Posted In 401(k) Plans , Employee Stock Ownership Plans , Individual Retirement Accounts , Pension Plans , Pension Protection Act of 2006 , Public Employee Plans , Publications , Seminars and Speaking Engagements
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Guest Column about 401(k) Improvements in Pension Protection Act
Here is a link to a recent guest column I wrote, New Law Good News for 401(k) Sponsors (PDF) that appeared in the Enterprise Forum, the on-line publication for executives of privately-held companies published by WWJ•950 NEWSRADIO, CBS Radio in Detroit, Michigan. It's published weekly. Present company excluded, there is good information here for private companies. You can check it out using this link. Posted In 401(k) Plans , Publications
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The Economics of Providing 401(k) Plans: Services, Fees, and Expenses
The Investment Company Institute, November 2006
Executive Summary
- 401(k) plans are a complex employee benefit to maintain and administer and are subject to an array of rules and regulations. Employers offering 401(k) plans typically hire service providers to operate these plans, and these providers charge fees for their services.
- Employers and employees generally share the costs of operating 401(k) plans. As with any employee benefit, the employer generally determines how the costs will be shared.
- About half of the $2.4 trillion in 401(k) assets at year-end 2005 was invested in mutual funds, primarily in stock funds. Mutual funds are required by law to disclose a large amount of information, including information about fees and expenses and portfolio turnover.
- 401(k) investors in mutual funds tend to hold low-cost funds with below-average portfolio turnover. Both characteristics help to keep down the costs of investing in mutual funds through 401(k) plans.
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New guide to 401(k) distributions available from IRS
Executive Summary
Distributions from 401(k) plans can be complicated and confusing. The IRS has just made available a this resource guide that covers the basics of 401(k) distributions. Each topic has a link to the applicable Internal Revenue Service publication.
Posted In 401(k) Plans , Pension Protection Act of 2006 , Publications
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Who's your employee: inquiring minds and the IRS want to know
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You can call them independent contractors and pay them as such, but they may actually be employees.
This matter is especially timely now as many retirement plans (and health insurance plans) have January 1st employee enrollments. It’s critical that workers be treated correctly for tax compliance purposes.
If someone is an employee, then the employer must withhold income tax, withhold and pay Social Security and Medicare taxes, and pay unemployment tax. In addition, he or she may be eligible and have to be included in benefit plans. However, the employer generally does not have any of these obligations for an independent contractor.
Penalties and interest can pile up if someone is incorrectly treated as an independent contractor. And in the case of a retirement plan, the employer would have to make up the benefits the individual would have received as an employee. And it can be expensive as Microsoft found out.
If in doubt, any doubt, seek guidance from your CPA or attorney. This is one of those "kids, don't try this at home" situations.
Posted In 401(k) Plans , Pension Plans , Publications
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Client Briefing: FAQs on Roth 401(k)
Executive Summary:
With the uncertainty now removed about the Roth 401(k)’s fate, many retirement plan sponsors are now adding this option to their 401(k) plans. Those plan sponsors that haven’t should consider adding it in order to:
- Provide participants with the opportunity to diversify their future tax burden, and
- Keep their plans competitive with other employers.
Posted In 401(k) Plans , Publications
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For Business Owners and Their Advisors: FAQs on 412(i) Pension Plans Updated for the Pension Protection Act
Executive Summary:
A 412(i) defined benefit pension plan, referred to in IRS regulations as an "insurance contract plan", is the only defined benefit plan that is exempt from the minimum funding requirements of Section 412 of the Internal Revenue Code. This type of plan, therefore, enjoys certain advantages over the traditional defined benefit plan and is worth exploring if you are the owner of a small business.
These advantages create a plan that, compared to a traditional defined benefit plan, will produce:
- Larger initial deductions;
- More stability in the contribution level;
- Simpler plan administration; and
- A secure promise of future benefits guaranteed by an insurance company.
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December 2006 Client Briefing: Pension Protection Act Changes
Executive Summary:
Called the most significant retirement plan legislation since ERISA, the Pension Protection Act of 2006 (PPA) signed into law on August 17, 2006 makes important changes affecting both defined benefit and defined contribution plans.
While much of the attention in the popular press has been focused on the defined benefit funding aspects of the new law, we believe that the most far reaching impact will be on profit sharing and 401(k) plans. And for the most part highly favorable to plan sponsors and participants.
Future Briefings will provide you with details of the Act’s provisions affecting such areas as:
- Safe harbor default investments
- Investment advice for participants
- New fiduciary liability relief
- Tax planning opportunities
Posted In 401(k) Plans , Publications
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