'Things', Remembered - 2018

It is something of a tradition this time of year to look back, to reminisce about past events and lessons learned, and sometimes to look ahead – and who am I to buck that trend?

Here’s a look back – and some “things” that I hope will help lay the groundwork for a productive and prosperous 2019 for both you, and those you serve.

5 Things of Which Plan Fiduciaries Need to Be Aware
Whoever said ignorance was bliss surely wasn’t talking about fiduciary litigation.

5 Key Industry Trends You May Have Missed
Here are five key trends highlighted in the Plan Sponsor Council of America’s 60^thAnnual Survey of Profit-Sharing and 401(k) Plans that you may have missed.

7 Reasons Retirement Income Solutions Stall
A recent report suggests that participants are “clueless” about decumulation. And who can blame them?

6 Things Those Who Don’t Get the Saver’s Credit Don’t ‘Get’ About the Saver’s Credit 
Here are six things that people who don’t get the Saver’s Credit – and sometimes those who try to help them take advantage – often don’t “get.”

5 Things Plan Sponsors Should Know Before Hiring an Advisor 
Before making a decision to hire an advisor – or for that matter, any decision involving the plan – here are some key considerations that plan fiduciaries should bear in mind.

5 Steps to Retirement Security 
From October: While it might not be on your calendar, in the spirit of National Retirement Security Week – which arguably should be EVERY week – here are five things that can provide just that.

5 Plan Committee Lessons from the Second Continental Congress
Anyone who has ever been on, or tried to lead, an investment committee can surely appreciate these lessons drawn from the experience of the founding fathers…

5 Things That (Should) Scare Plan Fiduciaries 
Halloween is the time of year when one’s thoughts turn to trick-or-treat, ghosts and goblins, and things that go bump in the night. But what are the things that keep – or should keep – plan fiduciaries up at night… all year long?

8 Things to Know About the State of Financial Wellness
For all the buzz around financial wellness, a new survey suggests there is (still) a long way to go.

Here’s wishing you all a very happy and prosperous 2019!

- Nevin E. Adams, JD

Are Your Retirement Savings Naughty? Or Nice?

A few years back – when my kids were still “kids” – and believed in the reality of Santa Claus – we stumbled across an ingenious website.

This was a website that purported to offer a real-time assessment of one’s “naughty or nice” status.
Now, as Christmas approached, it was not uncommon for us as parents to caution our occasionally misbehaving brood that they had best be attentive to how their actions might be viewed by the big guy at the North Pole.

But nothing we ever did or said had the impact of that website – if not on their behaviors (they were kids, after all), then certainly on the level of their concern about the consequences. In fact, in one of his final years as a “believer,” my son (who, it must be acknowledged, had been particularly naughty that year) was on the verge of tears, distraught that he’d find nothing under the Christmas tree that year but the lump of coal and bundle of switches he surely “deserved.”

Naughty Behaviors?

When one considers the various surveys that, on the one hand, suggest relatively modest retirement preparations, alongside others that purport to find high degrees of confidence in retirement finances, one can’t help but wonder if American workers imagine that some kind of benevolent elf will drop down their chimney with a bag full of cold cash from the North Pole. They behave as though, somehow, their bad savings behaviors throughout the year(s) notwithstanding, they’ll be able to pull the wool over the eyes of a myopic, portly gentleman in a red snowsuit, or perhaps pull off some kind of compounding “magic” with some last-minute savings scramble.

Not that they actually believe in a retirement version of St. Nick, but that’s essentially how they behave, even though, like my son, a growing number evidence some concern about the consequences of their “naughty” behaviors. Also, like my son, they tend to worry about it too late to influence the outcome – and don’t ever change their behaviors in any meaningful way.

Ultimately, the volume of presents under our Christmas tree never really had anything to do with our kids’ behavior. As parents, we nurtured their belief in Santa Claus as long as we thought we could (without subjecting them to the ridicule of their classmates), not because we actually expected it to modify their behavior (though we hoped, from time to time), but because we thought that children should have a chance to believe, if only for a little while, in those kinds of possibilities.

We all live in a world of possibilities, of course. But as adults we realize – or should – that those possibilities are frequently bounded in by the reality of our behaviors. And though this is a season of giving, of coming together, of sharing with others – it is also a time of year when we should all be making a list and checking it twice – taking note, and making changes to what is naughty and nice about our savings behaviors.

Yes, Virginia, there is a Santa Claus – but he looks a lot like you, assisted by “helpers’ like the employer match, your financial adviser, the investment markets, and tax incentives to save.

Happy Holidays!

- Nevin E. Adams, JD

Incredibly, the Naughty or Nice site is still  online (at http://www.claus.com/naughtyornice/index.php.htm) – so check it out – ’cause you just never know…

8 Things to Know About the State of Financial Wellness

For all the buzz around financial wellness, a new survey suggests there is a long way to go.

These days there’s not much argument against the premise behind pursuing financial wellness. The notion is that bad financial health contributes to (and/or causes) a bevy of workplace woes: stress, which can lead to things like lower productivity; bad health and higher absenteeism; and even a greater inclination toward workplace theft, not to mention deferred retirements by workers who tend to be higher paid and have higher health care costs.

But if there is little argument that financial wellness is a worthwhile goal for workers – and one worth supporting by employers – the recent Financial Wellbeing Employer Survey from the Employee Benefit Research Institute (EBRI) suggests that we have a ways to go.

Here are some key takeaways from that survey of 250 employers:

1. HR is leading the charge.

The most commonly cited primary champion for financial wellness was Human Resources (55%), followed (distantly) by a senior executive (21%). Human Resources was also cited as the most common secondary champion of these initiatives (26%). Fittingly, then, “communication from HR” was the most commonly cited means of encouraging employees to use financial wellness initiatives (39%), more than double the next highest (monetary incentives, at 19%).

2. The need tends to be gauged by traditional measures.

The most common approach reported in evaluating a need for financial wellness was examining existing employee benefit/retirement plan data such as deferral rates, average balances and loan frequency/amount. Nearly two-thirds of respondents (63%) had taken this step; a distant (48%) second was surveying workers.

Dead last? Creating a financial well-being score or metric (14%).

3. Motivations vary by employer size.

Midsized employers – those with 2,500 to 9,999 employees – were most likely to say they offer these initiatives to improve their workers’ overall satisfaction (67%).

However, the largest employers (>10,000 employees) were most likely to cite increased employee productivity (37%) – and being a differentiator from their competitors (27%).

Size also matters in availability; three-quarters of firms with 10,000 or more employees offered financial wellness initiatives at the time, compared with (just) 49% of smaller firms.

4. Measures of success are varied – and (still) somewhat subjective.

Improved overall worker satisfaction scored as the top measure of financial wellness initiatives (39%), (very) closely followed by reduced employee financial stress (38%). Worker satisfaction with the financial wellness initiatives and improved employee retention tied for third place (33% each).

However, “improved workforce management for retirement” – cited frequently as a key ROI attribute – was mentioned by a mere 10%.

5. Cost is a key consideration.

Cost was the top consideration (50%) cited by employers in determining whether to offer financial wellness benefits – though a close second was interest among employees (46%).

Little wonder that cost loomed large since more than two-thirds (68%) of respondents stated that current or prospective financial wellness initiatives are or would be employer-paid – a figure that increased to 85% among those with a high level of concern about the financial wellness of their workforce.

6. Most employers are not (yet) spending a lot.

While there was a wide range in cost cited for financial wellness initiatives (bear in mind, there was also a wide range in the definition of what constituted a financial wellness initiative), 43% reported the annual cost per employee of current financial wellness initiatives as $50 or less – and a full quarter (26%) did not know the cost.

On the other hand, the one in five firms that defined their financial wellness programs as “holistic” cited an average cost of more than $500 per employee.

7. But then, the programs’ scope is (still) pretty modest.

Only about 1 in 10 of those surveyed offer emergency savings vehicles or accounts, debt management services, or student loan repayment subsidies or consolidation/refinancing services.

Employee discount programs were the most common financial wellness benefit offered. These include cell phones, travel and entertainment; tuition reimbursement; and financial planning education, seminars and webinars.

8. We’ve only just begun.

Despite all the “buzz” around the topic, a majority of the employers surveyed characterized their programs as pilot programs (38%) or periodic or ad hoc programs (32%).

Even among employers with a high level of concern about the financial wellness of their workforce, only about a quarter (27%) characterized their financial wellness initiatives as “holistic.”

A long way to go, indeed.

- Nevin E. Adams, JD
 
See also: “What Plan Sponsors Want to Know About Financial Wellness” and “Building a Bottom Line on Financial Wellness.”

What Happens In Vegas…

What are you waiting for?

So, have you registered for the NAPA 401(k) Summit? Hundreds already have. What about you?

I know it’s still a ways off (though April will be here before you know it). Maybe you’re waiting till after the holidays (it won’t be any cheaper). Maybe you don’t care about the convenience of being at the host hotel? Or maybe you’re just one of those who winds up putting things off till the very last minute (I feel your “pain”). One thing I’m sure of – if you’re serious about working with retirement plans – it’s only a matter of time until you do…or risk spending the rest of the year hearing from those who did about the amazing event you missed.

So why should you commit NOW to the NAPA 401(k) Summit?

First off, by now you know that this is the only retirement plan advisor conference developed by plan advisors for plan advisors. The proof of that is, quite literally, in the program that has been developed – for you. This year, as in years past, the steering committee (98% are advisors) has been hard at work for months, developing the program, fleshing out the agenda, lining up speakers, and assigning session “owners” to make sure that you get maximum bang for your buck in terms of information, interaction, and session quality.

Are you worried about helping your clients through a DOL audit? We’ve got you covered. Not sure how to best set a reasonable fee for your services? No problem. Want to incorporate HSAs into your focus? Check. Thinking about selling – or merging – your practice? Expanding your team? Benchmarking? We’ve got your back. Worried about litigation? Cybersecurity? Check, check. No “pay to play” — just the most timely topics, the best speakers, the most dynamic sessions. And nobody, and I mean nobody, brings “the Hill” to the Summit like NAPA!

Secondly, if you’re focused on networking, Summit “After Dark” has literally transformed the concept into a true advisor “experience.” If you’ve been there, you know what I mean. If you haven’t, trust me, you don’t know what you’re missing (though doubtless you’ve heard).

What’s (Really) Different

Beyond all those important reasons, there are two other major considerations in attending this year’s NAPA 401(k) Summit. There is the critical issue of legislative and regulatory reform. The mid-terms have shifted the balance of power – and believe it or not, the prospects for retirement reform might have just improved. What remains to be seen is if the outcome will be positive. And that doesn’t take into account what might emerge on the regulatory side from the Labor Department, the SEC, or both. Regardless – you will want – and need – to know what is afoot, and there is no better place for you to do that than the NAPA 401(k) Summit.

But among all the things that really (really) set the NAPA 401(k) Summit apart – one thing stands out, this year more than most. Quite simply, it is that – and unlike EVERY other advisor conference out there – your NAPA 401(k) Summit registration helps support the activities of NAPA – YOUR advocacy, information and education organization – not the bottom line of some corporate media organization or private equity firm.

That’s right – in addition to the insights, information, networking that you may get at some other events, your attendance at the NAPA 401(k) Summit is, and remains, a unique investment in your future – and the future of your profession.

It is, quite simply, a great way – perhaps the best way – to put your money where your mouth is.

So, go ahead – register for the NAPA 401(k) Summit. Today. While you’re thinking about it. Now. You’ll be glad you did.

Because, this time, anyway – what happens in Vegas won’t stay there…

Everything you need to know is at www.napasummit.org.

See you in Vegas!

- Nevin E. Adams, JD

6 Things Those Who Don’t Get the Saver’s Credit Don’t ‘Get’ About the Saver’s Credit

Last week, Senate Democrats unveiled a bill that would, among other things, enhance the Saver’s Credit – a provision which retains bipartisan support, even as the take-up rate disappoints. Here are six things that people who don’t get the Saver’s Credit often don’t “get.”

The Saver’s Credit is, of course, a tax credit from the federal government for low- to moderate-income workers who are saving for retirement. For those who qualify,¹ in addition to the customary benefits of workplace retirement savings, the amount of the credit is 50%, 20% or 10% of retirement plan (or IRA or ABLE account) contributions depending on adjusted gross income.

Credit ‘Limits’?

And yet, some of the things that seem to be holding back the take-up rates could surely be addressed with a legislative “fix” – and here we’re talking about the relatively low income thresholds to which it applies, the fact that while it’s a credit, it’s not a refundable credit (and thus you have to have a federal income tax against which it can be offset), and that you have to file on Form 1040, rather than on Form 1040-EZ (which many, perhaps most, lower income individuals use).

That said, the Transamerica Center for Retirement Studies’ 18th Annual Retirement Survey found that two out of three American workers are unaware of the Saver’s Credit. And so, as we near the end of the tax year, and look to possible withholding changes for 2019, here are some things people who might be eligible for the Saver’s Credit don’t always “get” about it.

There are two deadlines for contributions.

To qualify for the Saver’s Credit, contributions must be made to 401(k)s, 403(b)s, 457s or the federal government’s Thrift Savings Plan by the end of the calendar year. However, retirement savers have until April 15, 2019, to make an IRA contribution that could qualify them for the Saver’s Credit for tax year 2018.

A wide variety of retirement savings contributions qualify.

The Saver’s Credit can be taken for contributions to a traditional or Roth IRA, 401(k), SIMPLE IRA, SARSEP, 403(b), 501(c)(18) or governmental 457(b) plan, as well as voluntary after-tax employee contributions to qualified retirement and 403(b) plans. However, rollover contributions aren’t eligible for the Saver’s Credit – and eligible contributions may be reduced by any recent distributions from a retirement plan or IRA.

The income limits are higher for 2019.

The income limits for those eligible for the Saver’s Credit were adjusted higher for 2019 – to $64,000 (from $63,000 in 2018) for a married individual (a table outlining those changes, as well as the limits for 2018 and 2019 is available here).

You have to have a federal income tax bill to get the tax credit.

It’s a tax credit, not a deduction – a dollar-for-dollar reduction of tax liability. However, if the standard or itemized deductions or personal exemptions eliminate tax liability, you can’t claim the Saver’s Credit. Moreover, it can’t be carried forward to the next year. Nor can you get a tax refund based only on the amount of the credit.

You have to file your taxes on Form 1040.

And complete Form 8880, the aptly named “Credit for Qualified Retirement Savings Contributions” to get the credit. That’s right, the Saver’s Credit is (still) not available via the 1040-EZ form (though there have been legislative attempts to remedy that situation – including the bill introduced last week.

You only get credit if you file for it.

It’s not too late to save and get “credit” for doing so – make sure the participants you work with, and plan sponsors you work for, are aware of it.

Additional information about the Saver’s Credit from the IRS is available here.

- Nevin E. Adams, JD
 
Footnote

1. In addition to the income limits, to be eligible for the Saver’s Credit, individuals must be age 18 or older; not a full-time student; and not claimed as a dependent on another person’s return. ↩