Report from the 5th Annual Employee Benefit Advisers Forum

By Jerry Kalish on Posted in 401(k) Plans, Audio/Visuals, Events, Seminars and Speaking Engagements

Earlier this week, over 125 brokers, consultants, advisers attended the 5th Annual Employee Benefit Adviser Summit in Boca Raton, Florida. Looking Into The Future: What You and Your Clients Will Look Like.  

Here’s a link to Employee Benefit Adviser’s report, Advisers Find Opportunities in Change at EBA Summit. My own presentation at one of the breakout sessions, Looking Into The Future: What Your Clients and Your Business follows: 

Employee Benefit Adviser Summit – September 28, 2010

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Roth 401(k) communication still needs work

By Jerry Kalish on Posted in 401(k) Plans

Pictured up top is one of several seminar invitations that the national marketing company, Seminar Direct, makes available to financial professionals who want to promote their services through direct mail and seminars. 

In this case, it’s Roth IRAs, first made available by Congress in 1997 under the Taxpayer Relief Act. For the most part the financial industry has done a pretty good job of educating the individual investor. The Investment Company Institute (ICI), the national association of U.S. investment companies, reports in their research paper, The U.S. Retirement Market, First Quarter 2010, 17 million households now have Roth IRAs totaling $215 billion.  

Roth 401ks? Not so good. Since the January 1, 2006 effective date, employer adoption has been slow. Only about 31% of 401k plans have added the Roth 401k as a savings option. Further, only 7% of 401k investors with access to a Roth 401(k) use one. 

These statistics baffle Michael J. Francis, President of Milwaukee-based Francis Investment Counsel LLC, who was quoted in a recent article in 401 helpcenter.com: 

The financial planning community cheered when this powerful wealth accumulation tool was finally made available," said Francis. "Yet it has been largely ignored by the vast majority of employers and 401k savers. I attribute this apathy to lack of information."

It’s a sentiment echoed by Carla Fried who writes in CBS Money Watch, Gen Y & Employers: A Failure to Communicate on Roth 401(k) Benefits?. 

Maybe the tide is turning. A recent Hewitt study, The Role of Roth 401(k) in Retirement Savings, indicates that a growing number of large employers are adding a Roth 401(k) or Roth 403(b) option with more expected to implement them in subsequent years.

Our own client experience has been similar, many of whom took the opportunity to add Roth 401(k) as part of the EGTRRA restatement process. 

But Mr. Francis and Ms. Fried are correct. Plan sponsors need to do a better job of communicating Roth 401(k) to plan participants. Especially if the Senate provision to permits Roth conversion with a 401(k) plan becomes law which the American Society of Pension Professionals & Actuaries (ASPPA) discusses in their recent news release, ASPPA Applauds Passage of Roth Conversion Provision. 

For further information on Roth 401(k)s, here is a link to our 2006 FAQs, Giving Employees A Choice.

Is greed still good?

By Jerry Kalish on Posted in 401(k) Plans, Defined Benefit Pension Plans, Small Business

A little over a year ago, I postulated on the the psychology behind today’s economy.

The old economy, I said, was personified in the classic “Greed is good” speech by Gordon Gekko as played by Michael Douglas in the 1987 Oliver Stone classic, Wall Street.

Gekko returns in Stone’s sequel, Wall Street: Money Never Sleeps. It’s different this time. Today’s economy is made up of people that Jay Suhr calls “The Cautionary Generation”.

You’ll have to wait until September 24 to see the movie, but you can read about it now in my blog post, The Return of Gordon Gekko, in the Small Business Advocacy Blog of which I am the Editor.

Small Business Advocacy Council launches new blog

By Jerry Kalish on Posted in Small Business

There’s a new blog out there, and it’s one uniquely focused on small business and business owners. It’s sponsored by the Small Business Advocacy Council (SBAC). Here’s our mission statement:

The Small Business Advocacy Council (SBAC) was established to give small business owners, their employees and those with whom they conduct business a voice in local, state and federal politics. The SBAC is a non-partisan 501 (c) (6) not-for-profit political organization, whose goal is to advance advance the causes important to small businesses.

Additionally, the group seeks to strongly support our members by providing networking, advertising and promotional opportunities that will sustain those that care enough to stand with small business and hard-working Americans.

I say "our" because I am a member and the Editor of the new blog which is appropriately called the Small Business Advocacy Blog. 

If you’re a business owner, consider joining us. Here’s how. 

The Isely Brothers and the IRS

By Jerry Kalish on Posted in 401(k) Plans, Audio/Visuals

Those are the great Isely Brothers pictured off to the left whose music I grew up with. Memories of which were brought back to me by an article written by a kindred pop culture soul.

And with no disrespect intended, in of all places, a big Washington, D.C. law firm. It’s David Fuller, a Partner in Morgan Lewis’s Employee Benefits and Executive Compensation Practice, who edits their firm’s Payroll & Perks Bulletin Board.

In their recent issue, David writes about the IRS attempt to collect post bankrupcy taxes and interest from the Isley Brothers. You really had to be there to get all the references. So here’s David’s post, Is It Worth It to Twist and Shout reposted with his permission in it’s entirety with links supplied by me.

Three of the brothers composing the famous R&B group the Isley Brothers filed for bankruptcy. The bankruptcy trustee made payments of more than $3 million to the IRS and the Isleys thought they had once again found Smooth Sailing—until the IRS decided The Heat Is On and took action to collect post-petition taxes and interest.

The Isleys then tried to Fight the Power and challenged the allocations of the tax payments. The Third Circuit this month upheld the dismissal of the Isley Brothers’ complaint challenging the IRS’s allocation of payments.

Marvin Isley, who passed away on June 6, was not part of the dispute. What It Comes Down To as the Isleys would say, is that taxpayers must be well prepared and well represented when challenging the IRS.

Just because you think It’s Your Thing (and you can “Do what you wanna do”) doesn’t mean the IRS will agree.

There’s really not much I can add to David’s post except to take it on home with a video of the afore-mentioned Twist and Shout as recorded by the Isely Brothers in 1962. And for you young-uns out there, that thing on the spindle is a 45 rpm record.   

https://youtube.com/watch?v=bAwED0fMRbw%3Ffs%3D1%26hl%3Den_US%26rel%3D0%26color1%3D0x2b405b%26color2%3D0x6b8ab6

 

The new retirement plan currency: interfacing the payroll system with 401(k) administration

By Jerry Kalish on Posted in 401(k) Plans, Employee Benefit News columns

Pardon the pun, but more employers are indeed achieving cost and operating efficiencies when the payroll system and 401(k) administration can directly talk to each other.

In the unconnected world, there are a multitude of steps that need to be done in order to get the employee’s 401(k) contribution into the 401(k) recordkeeper’s platform. With an integrated system, all of this takes place electronically, and the employer is removed as the middleman.

The result? Many employers have regained as much as 50 to 100 hours annually – time which could now be spent on strategic organizational matters.

You can read more about how employers are achieving these kinds of results in our Special Report: Interfacing 401(k) and Payroll. 

401(k) fees: not just the who and how much, but the what

By Jerry Kalish on Posted in 401(k) Plans, Employee Benefit News columns

Unlike the money belt pictured above, the dollars charged for 401(k) services will start to become more apparent under the recently published Department of Labor Interim Final Regulation on Improved Fee Disclosure. 

Going forward, I’ll be commenting on the new rules as they start to impact service providers, plan sponsors, and employees. That’s I call the "who" and "how much" part of retirement plan fees.

But for now, don’ forget that there is also the "what" part which is subject to one of the basic qualification requirements. That is, the plan must be established and maintained by the employer for the "exclusive benefit" of the employees and beneficiaries.

That means that the plan cannot pay for expenses that are considered to be the responsibility of the employer. These are called "settlor" expenses. On the other hand, expenses that relate to the fiduciary’s administration of the plan can be paid out of plan assets. These are called "operational expenses". 

You can find the details about what expenses can (and can’t) be paid with 401(k) plan assets in my recent column in Employee Benefit News.

Reengineering Health Care (Book Review)

By Jerry Kalish on Posted in Book Reviews

This is a blog about retirement plans. So why, you might ask, am I reviewing a book about health care? I’m certainly not an expert on this complicated topic. But I am an expert on paying for it as a business owner, as a health care consumer, and an expert on watching client business owners and their employees also deal with it. And as costs and premiums continue to escalate, seeing these same employers and employees shift dollars more into health care at the expense of retirement savings.

So what’s the solution? In the view of many experts, it’s not legislation that will fix health care system in the form of the recently passed Patient Protection and Affordable Care Act (PPACA). Indeed, one expert, Paul Kasriel who is Senior Vice President and Director of Economic Research at The Northern Trust, says the PPACA “primarily represents a redistribution of income from the young and healthy to the under-65 less healthy.”

Others more cynical point to the new 10 percent tax on all indoor tanning sessions starting July 1 as part of PPACA.

Jim Champy and Harry Greenspun, M.D. provide a different approach in their new book, REENGINEERING HEALTH CARE: A Manifesto for Radically Rethinking Health Care Delivery. You may remember Jim Champy as the co-author with Michael Hammer of the 1993 book, RENGINEERING THE CORPORATION: A Manifesto for Business Revolution.

The earlier book certainly lived up to its title as it went on to change the thinking on how companies should structure work. In the process, their book sold more than 3,000,000 copies world wide, spent more than a year on The New York Times Best Seller List, and was translated into 17 languages.

Champy and Greenspun apply the same pioneering reengineering methodology to show that the health care industry is rife with opportunity for radical redesign to enhance quality and lower costs dramatically. Reengineering can improve the system in ways that government can’t by focusing on three main areas:

  • How technology can create more seamless, accessible, valued, and sustainable health care systems and avoid technology’s pitfalls.
  • How processes focusing on prevention and wellness and less on chronic disease and hospitals can better meet needs of patients.
  • How the skills and behavior of the people who deliver health care can be tapped to replace outmoded ways with the talent, hopes, and ideas of a new generation.

From my vintage point as a business owner and health care consumer, my vote is for reengineering rather than "reform". Here is a link to the book at Amazon if you want to make up your own mind and a link to its predecessor. 

401(k) plan sponsors asking “Can you hear me now?”

By Jerry Kalish on Posted in 401(k) Plans

I could have gone with Verizon’s "Can You Hear Me Now" Guy as my visual metaphor for this blog post.

But then I found out that there isn’t one “Can You Hear Me Now" Guy but many. Verizon has a thick rulebook which Gizmodo reports spells out the rules on how Guy should dress and comport himself during public appearances.

While I didn’t exactly feel betrayed by learning about multiple Guys, it did trigger a similar feeling back in the 60s when we booked the Drifters for a college party. The Drifters that did show up weren’t the Official and Sole Authentic Original Drifters, but another group using the same name.

So I decided to go in a different direction for today’s visual metaphor -old school – with the picture of Don Adams as Maxwell Smart, Agent 86, in the classic TV series, Get Smart. (Infinitely better than the recent movie and definitely not the first “Smart Phone” – sorry about that).

What I’m visualizing is the 401(k)helpcenter.com article about a recent study which reveals why plan sponsors select, stick with, and switch plan providers. What they are reporting on is The Briskin Consulting Study of Small-Retirement-Plan Sponsors Advice. The study’s conclusion is that “assistance, not investment performance, drive satisfaction and attrition among small-plan sponsors.”

No surprise here. The retirement plan industry is no different than any other service industry. Clients change service providers because of lack of service. In the small retirement plan market (however defined), I’ve seen service issues in situations in which providers have:

  • Exited the market
  • Outsourced poorly
  • Changed service models
  • Receiving compensation without providing commensurate services

The Briskin Study refers to the end result as attrition. I call it opportunity.

Revisiting communicating 401(k) and Marshall McLuhan

By Jerry Kalish on Posted in 401(k) Plans, Audio/Visuals

Our friend Roger Wohlner, a fee-only financial planner, who blogs at Chicago Financial Planner, sent me an email after reading the Marshall McLuhan reference in yesterday’s post, Communicating 401(k): Is the Medium the Message?

Roger reminded me about McLuhan’s cameo in Woody Allen’s classic 1977 firm, Annie Hall. Thanks, Roger. The rest of you may enjoy it also. 

https://youtube.com/watch?v=9wWUc8BZgWE%26hl%3Den_US%26fs%3D1%26color1%3D0x2b405b%26color2%3D0x6b8ab6%26border%3D1

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