What Americans want from a retirement plan

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, Defined Benefit Pension Plans, Individual Retirement Accounts, Public Employee Plans, Publications, Social Security

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?

One more reason to consider a commuter transit benefit

By Jerry Kalish on Posted in Commuter Benefits

Over the past few months, I’ve blogged about how employers can sponsor a commuter transit benefit to help employees cope with higher commuting costs to pay for those expenses on a pre-tax basis under Section 132 of the Internal Revenue Code. The employer can also receive tax benefits since generally there are no payroll-related taxes involved.

But there may also be an important non-tax reason to consider – stress in the workplace. Dwight A. Hennessy, Department of Psychology, Buffalo State College writes about that in his article, The Impact of Commuter Stress  on Workplace Aggression, that appeared in the September 5, 2008 on-line issue of the Journal of Applied Social Psychology, Here is the Abstract

Immediately following their regular commute to work, participants completed questionnaires regarding state driver stress and anger during that commute. Then, immediately following completion of that work day, they completed a state version of the Workplace Aggression Scale. As state driver stress increased, the frequency of both expressed hostility and obstructionism increased (independently) during that work day, butS only among male employees. In contrast, overt aggression during that work day was greatest among males who were higher in physical aggressiveness as a general trait characteristic. The present study highlights the interactive nature of traffic and workplace environments, in that negative experiences in the traffic environment may spill over for some individuals to influence nondriving events.

Hat Tip to Dr. Christian Jarrett, Editor, of the British Psychological Society’s Research Digest blog. 

Two new ESOP blogs launched

By Jerry Kalish on Posted in Employee Stock Ownership Plans

The Tribune bankrupcy notwithstanding, ESOPs are doing very well in this country. Behind the headlines are the vast majority of sucessful ESOPs sponsored by closely-hald companies. You can follow what’s happening with ESOPs through two new blogs that have just come on-line.

Hat Tip to Marc Mathieu, Secretary General, European Federation of Employee Share Ownership (EFES). 

Employee Benefit Research Institute (EBRI) relaunches website

By Jerry Kalish on Posted in Publications

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.

Self-employed retirement plan options: SEP, SIMPLE, or “Solo-K”

By Jerry Kalish on Posted in 401(k) Plans, Individual Retirement Accounts, Posts on SLATE, Self-Employed

Over at Slate’s BizBox blog, a special promotion by Open from American Express, I posted an article that discusses the financial advantages of a “Solo-K” for someone who is self-employed.

In fact, “Solo-K” is not specifically mentioned in the Internal Revenue Code. It’s a name given by some unknown, creative marketing person to describe a profit sharing plan with a 401(k) provision for the self-employed business person. Check out The Wonderful Solo-K.

Fixing The 401(k): Book Review

By Jerry Kalish on Posted in 401(k) Plans, Book Reviews, Pension Protection Act of 2006

I was one of those commentators who ended last year on a “glass half empty” note when I characterized the 2008 retirement plan year as The Good, the Bad, and the Ugly. Some commentators like Mark Miller were much more direct. Mr. Miller ended the year in his column that appears on his website, RetirementRevised, by writing 2008 ends with alarming retirement benefit trends.

But this is a new year when we can look ahead – and indeed, look ahead with optimism. The present retirement plan system can be fixed. And whether or not changes are made on either the legislative or regulatory level, or waiting for whenever the economy improves, the process can and should start now.

Josh Itzoe is among those of us that believe that many of the “broken” retirement plans, i.e., 401(k) plans, can be fixed by plan sponsors and other fiduciaries. Josh is both a CFP® and AIF® and is a Principal of Greenspring Wealth Management, Inc., a registered investment advisory firm and Independent Fiduciary in Towson, MD.

And to the point of this post, Josh is also the author of a recently published book, Fixing The 401(k): What Fiduciaries Must Know (And Do) To Help Employees Retire Successfully. So what’s so special about this book amidst all of the many 401(k) books out there. Here’s how Matthew D. Hutchison, MS, CPC, AIFA®, CRC®, answers that question in his Forward to the book.

There are many books about 401(k) plans. There are hundreds of thousands of professionals who want to invest your 401(k) assets. Very few of them, unfortunately, embrace a “participant first” approach to delivering retirement plan services. That is what makes this book so special. It is focused on one thing: Protecting future participant benefits. The goal of this book is to serve the best interests of nearly fifty million individual participants.

Those of us who have been around 401(k) plans for a while know who Matthew Hutcheson is. He’s an Indepenent Fiduciary himself and a published author and internationally recognized authority on retirement plans and their associated fiduciary issues. He’s also testified before Congress on these matters.

There’s nothing magic in Josh’s book. It’s just basic, old-school procedural prudence, the process by which fiduciaries act solely in the best interests of plan participants and their beneficiaries. It’s not only good risk management for fiduciaries, it’s just good management period.

 Here are some of the areas that Josh covers in his book:

  • The basic fiduciary responsibilities outlined under ERISA.
  • The roles, responsibilities, and motivations of the various people/companies involved in selling and servicing these plans.
  • Which questions to ask and what information to gather in order to uncover and reduce the various fees and expenses associated with 401(k) plans.
  • How to design a 401(k) plan to deliver successful outcomes.
  • How to help employees use the plan most effectively.

So if you’re a plan sponsor concerned about both your personal responsibilities and your participants’ retirement security, then this book can be an excellent guide.  Here’s a link to Amazon if you want to purchase the book. You can also follow Josh through his new blog of the same name, Fixing The 401(k).  

Il Buono, il brutto, il cattivo: The 2008 Retirement Plan Year in Review

By Jerry Kalish on Posted in 403(b) Plans, Audio/Visuals, Cash Balance Plans, Defined Benefit Pension Plans, Individual Retirement Accounts, Public Employee Plans

That’s the title of Sergio Leoni’s 1966 movie considered the greatest of the Italian spaghetti westerns. We know it in this country, of course, as The Good, The Bad, and The Ugly.

The movie starred Clint Eastwood (the Good), Eli Wallach (the Bad), and Lee Van Cleff (the Ugly). And just like the movie,  the year 2008 had The Good, The Bad, and The Ugly for retirement plans.

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

The Good

My vote goes to the Pension Protection Act of 2006 ("PPA") as it plays out for 401(k) plans through Department of Labor and Internal Revenue Service regulations. In our December, 2006 Client Briefing, we discussed how the PPA:

  • Eliminated the sunset provisions for benefit and contribution limits due to expire in 2010.
  • Extended the Roth 401(k) provision also due to expire in 2010.
  • Encouraged employee savings through automatic enrollment.
  • Expanded hardship provisions.
  • Required faster vesting of employer contributions.
  • Mandated more frequent benefit statements with more disclosures
  • Required diversification of investments in employer stock for participants in certain plans.

And now two years after passage of the PPA, the new provisions are continuing to enhance 401(k) plans for employees.

The Bad

The Bad is in the form of two disturbing trends.

  • Reduction or elimination of employer matching contributions.
  • Increased layoffs.

Disturbing because of the possible long-term implications for retirement savings. With the decline of defined benefit plans, 401(k) plans have become "it" as the method by which employees save for retirement. Most employees are behind now, and if these trends continue, "catch-up" will be difficult or even impossible.

The Ugly

Hands down, Ugly goes to the impact of the stock and bond market meltdown on employees’ 401(k) accounts. Top Gold News recently described the current situation as financial chaos undermines 401(k) plans. Add that to concerns about Social Security funding, and we’re beginning to see a rethinking of our retirement system.

Both the academics and the politicians have begun to examine how the system can be improved in which most of the risk now is in the hands of employees who are feeling extremely vulnerable.  Expect this issue to go public after President-Elect Obama is inaugurated and the new Congress convenes.

So for 2008, that’s a wrap. Now queue the trailer with that great theme music by Ennio Morricone. 

https://youtube.com/watch?v=Xj0gJTGL93Q%26color1%3D0xb1b1b1%26color2%3D0xcfcfcf%26feature%3Dplayer_embedded%26fs%3D1

Sociopaths in business

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, Defined Benefit Pension Plans, Employee Stock Ownership Plans, Individual Retirement Accounts, Public Employee Plans

  

 

 

 

 

 

 

 

 

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Parking spaces as a leading indicator of customer and client services

By Jerry Kalish on Posted in 401(k) Plans, Cash Balance Plans, Defined Benefit Pension Plans, Employee Stock Ownership Plans, Posts on SLATE

Over at Slate’s BizBox blog, a special promotion by Open from American Express, I posted an article that discusses one of the things it takes for business owners to be able to make retirement plan contributions. Check out Be A Park-Down-The-Street-Businessperson.

December 2008 Client Briefing: FAQs on Fiduciary Liability Insurance

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, Defined Benefit Pension Plans, Employee Stock Ownership Plans, Public Employee Plans, Publications

A Risk Management Tool for Fiduciaries in A New Retirement Plan Environment Updated for the Pension Protection Act of 2006 (PDF)

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. 

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