tag:blogger.com,1999:blog-330143252024-03-16T07:00:31.531-04:00planadviser* ponderingsthis blog is about topics of interest to plan advisers (or advisors) and the employer-sponsored benefit plans they support. *It doesn't have a thing to do (any more) with PLANADVISER magazine.Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.comBlogger793125tag:blogger.com,1999:blog-33014325.post-43586567308666481372024-03-16T07:00:00.001-04:002024-03-16T07:00:00.241-04:00The 'Luck' of the Irish<p> <span style="color: #333332; font-family: source-sans-pro-regular, sans-serif; font-size: 16px; letter-spacing: 0.400001px;">As St. Patrick’s Day approaches, I’m reminded of a trip my younger brother and I made with my grandparents to the Great Smoky Mountains. </span></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Now, my grandparents had made many trips to that area, but it was a new experience for me and my brother. To this day I remember a hotel that had a pool with a breathtaking view of the mountains, another sitting right on a rushing stream—and some kind of trading post that had a big black bear outside. <br /></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiN23r8ZDWExhWwriago4bLDuN64imio55Ea4gxvLzNUgMN3yLYnFRUHXdut94AJLVIDWeMUr-Cn97yhD9JUpp6l9BJMHTIpE6jW-F6wvUk7ZZB-R-tQLMuBZHiT29w3W1kLvrZBdp0o7dOIitf3qLuVvqmXeUA17kRB2hU0AenQjb30ZvctWjGA/s1080/luck%20of%20the%20irish.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="669" data-original-width="1080" height="198" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiN23r8ZDWExhWwriago4bLDuN64imio55Ea4gxvLzNUgMN3yLYnFRUHXdut94AJLVIDWeMUr-Cn97yhD9JUpp6l9BJMHTIpE6jW-F6wvUk7ZZB-R-tQLMuBZHiT29w3W1kLvrZBdp0o7dOIitf3qLuVvqmXeUA17kRB2hU0AenQjb30ZvctWjGA/s320/luck%20of%20the%20irish.jpg" width="320" /></a></div>Throughout the trip, my brother and I would try to get a sense of where the next day’s adventures would take us as we followed along in one of those big fold out roadmaps. But in response to our repeated inquiries as to our next stop, my grandfather would demur, saying only that he was relying on “the luck of the Irish” to find us a place to stay for the night. To this day, I’ve no idea if he truly was or not (the Irish in my heritage doesn’t come from his side of the family, but from my grandmother)—but we always found a place to stay for the night—and comfortable, though certainly not luxurious, accommodations, to boot (not always in the first place we pulled in to, however). There’s some disagreement as to whether or not there IS such a thing as the luck of the Irish (more specifically as to whether that’s good or not-so-good luck), but I can’t come up on St. Patrick’s Day without remembering that trip and my grandfather’s reference<a href="https://www.napa-net.org/news-info/daily-news/luck-of-irish#_edn1" id="_ednref1" name="_ednref1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a>. <p></p><h3 style="border: 0px; box-sizing: border-box; color: #1b2837; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.71429rem; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0px; line-height: 2.05714rem; margin: 0px; overflow-wrap: break-word; padding: 0px; vertical-align: baseline;">A New ‘Mission’</h3><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That all came back to me some years back when I was driving with my family near the Grand Canyon. We hadn’t planned to be there until the following day, but our plans worked out differently, and we started talking about being AT the Grand Canyon for sunrise, and, in a rare burst of spontaneity, all of a sudden it became something of a “mission.” I remember sharing gleefully with my kids my grandfather’s vacation mantra. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Well, as it turned out, our commitment to the new “objective” notwithstanding, it took longer to get there than I had thought, and when, sometime after 10 pm, after finding there was “no room at the inn” (literally) at an embarrassing number of places (and this after filtering the ones we called on the way and got the same answer), we began to seriously contemplate the possibility of spending the night in a hotel…parking lot.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Our lack of “planning” made for a chilly night at the Grand Canyon, though we spent it in a camper park, not a hotel parking lot. It was a miserable night, to be sure—SO miserable (it gets very cold in the desert at night) that it made it very easy for us to attain our primary objective—to see the Grand Canyon at sunrise (albeit unbathed and somewhat disheveled)—something we’d almost certainly never done if we’d actually gotten into a warm hotel bed that night. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">My grandfather was a great storyteller, though you couldn’t always tell when he was pulling your leg. As a consequence, I’ve no idea if my grandfather was at all stressed about not finding a motel in the Tennessee foothills the way I was out in the middle of the Arizona desert (in the middle of the night). </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That said, it seems that lots of American workers are heading toward their potential retirements with no real idea as to whether or not there will be suitable accommodations at the end of that journey. While there are—and have long been—plenty of surveys out there that reveal concerns about that possibility, there’s little to suggest that those concerns are motivating action, or even some time spent considering the possibilities. It’s as though they, like my grandfather, are relying on “the luck of the Irish.”</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">As St. Patrick’s Day approaches, there will be parades, the gathering of four-leaf clovers (which aren’t as rare as you may have been led to believe), and plenty of unnaturally green beverages, not to mention references to leprechauns and their pots of gold. Indeed, tradition says that if you catch a leprechaun, he can be coerced into giving you some gold—but tradition also holds that they’re hard to catch, and even harder to hang on to. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">As one might well imagine, a comfortable retirement without planning and action will be. </p><div style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b><i> - Nevin E. Adams, JD</i></b><hr align="left" size="1" style="border-bottom: 0px; border-image: initial; border-left: 0px; border-right: 0px; border-top-color: rgb(171, 187, 201); border-top-style: solid; box-sizing: border-box; height: 1px; margin: 1em 0px; padding: 0px;" width="33%" /><div id="edn1" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"> </p><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i>[i] Apparently, its origins go back to the 1800s here in the U.S., and a preponderance of Irish settlers here that fared well during the California Gold Rush.</i></p></div></div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-77092566583983840392024-03-09T07:00:00.001-05:002024-03-10T16:18:14.201-04:00A Penchant for Pensions?<p> <span style="color: #333332; font-family: source-sans-pro-regular, sans-serif; font-size: 16px; letter-spacing: 0.400001px;">I’m not sure how old I was when I first saw “Night of the Living Dead”—but I have long been intrigued by stories of a zombie apocalypse—where mindless beings inexplicably rise from the dead, with no memory of their past, just a relentless (and apparently insatiable) hunger for…well, “us.”</span></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That is perhaps an unfortunate comparison to <a href="https://www.napa-net.org/news-info/daily-news/teresa-ghilarducci-confirms-proposal-create-federal-401k-would-remove-employers" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">last week’s hearing</a> by the Senate Health, Education, Labor and Pensions (HELP) Committee, one ostensibly held to focus on how we were going to stave off the retirement “crisis” by…bringing “back”<a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_edn1" id="_ednref1" name="_ednref1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> defined benefit plans.<a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_edn2" id="_ednref2" name="_ednref2" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[ii]</a></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">There were two fundamental premises underlying the hearing; first that there is, in fact, a retirement crisis, and second, that the restoration of defined benefit plan designs would remedy that situation. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy3qgPS6LWOfXjO4obn_1h6mNmMo3xRm9xwoR5Q0GL0q58ytWUnshMP8tbYPlPT258iOSV_3ZwlydRvx7LU0vXrAM36HYExgiUcZbLb7r1CJeWAVG3vCrrVwMBymBOHHhFMMS1lAhky8k60AA28F8ihu4xMz0caKsNglTALmiYvutcYF1FoBp6Qw/s900/zombies.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="506" data-original-width="900" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy3qgPS6LWOfXjO4obn_1h6mNmMo3xRm9xwoR5Q0GL0q58ytWUnshMP8tbYPlPT258iOSV_3ZwlydRvx7LU0vXrAM36HYExgiUcZbLb7r1CJeWAVG3vCrrVwMBymBOHHhFMMS1lAhky8k60AA28F8ihu4xMz0caKsNglTALmiYvutcYF1FoBp6Qw/s320/zombies.jpg" width="320" /></a></div><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">There remains in many circles (including last week’s hearing) a pervasive sense that the defined contribution system is inferior to the defined benefit approach—a sense that seems driven not by what the latter actually produced in terms of benefits, but in terms of <a href="https://www.napa-net.org/news/managing-a-practice/3-pervasive-retirement-industry-myths/" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">what it promised</a>. Even now, it seems that you have to remind folks that the “less than half” covered by a workplace retirement plan was true even in the <a href="https://www.napa-net.org/news/managing-a-practice/industry-trends-and-research/the-good-old-days/" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">“good old days”</a> before the 401(k), at least within the private sector. And when it comes to defined benefit plans, it was <span style="border: 0px; box-sizing: border-box; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><em style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">significantly</em></span> less than half.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">And while you can (eventually) wrest an acknowledgement from those familiar with the data, almost no one EVER talks about how few of even those covered by those DB plans put in the time required to vest in their full pension (particularly prior to the Tax Reform Act of 1986, which accelerated vesting schedules). Those who demonize the 401(k) are <u style="border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">never</u> asked to speak to the “coverage gap” that was actually wider when defined benefit structures were “in vogue,” nor called for an accounting of the shortfall between the actual benefits delivered versus the “promise.” And yet, those 401(k) critics in last week’s hearing—with a straight face—held forth on how much better things would be…if only defined benefit plans would come back.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Don’t get me wrong—defined benefit plans continue to serve a valued societal purpose (not the least of which the income they provide my 93-year-old mother, though given the state’s finances, she remains concerned how long they will last), though they tend to work “better” in the public sector and among unionized workforces, where one’s profession and job tenure tend to be less volatile. That said, it’s not like there was some kind of cataclysmic event that wiped them out overnight in the private sector. Rather, their demise was one of a hundred painful “cuts”—all well-intentioned, of course. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">There were (and are) premiums to provide insurance backing for plans that “fail,” disclosures to try and avoid (unexpected) failures, demands for a full accounting of the potential financial obligations those plans represented for the organizations that sponsor them, and finally a demand that those financials be moved from footnotes to the corporate balance sheet itself. At any number of points along that continuum, one could well understand and appreciate why employers would choose to step away from that burden—and they did. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Moreover, with few exceptions they were able to do so without opposition from employees—who typically didn’t (and largely still don’t) appreciate the cost or benefit of a promise that won’t come to fruition until years, if not decades, beyond the date they expect to be employed by the firm making that promise. And that ignores a criticism highlighted by several in the hearing—that these programs aren’t always well-managed or funded to provide those promised benefits. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Yes, a fully funded, fully vested benefit that you’ve paid nothing for is certainly a good thing. Little wonder that a recent survey (by one of those firms represented at the hearing) suggested a massive public clamoring for the alleged panacea of these programs. And considering the plethora of headlines proclaiming the dire straits of today’s retirees, who can be faulted for clinging to a benevolent notion of a simpler time when someone else worried about such things?</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">All that said, there was little in the way of actual data at the hearing to suggest that a return of DB (certainly at the expense of the 401(k)) would actually resolve the issues. Mostly the witnesses focused on the alleged shortcomings of the current system (albeit with some sharp differences in conclusions, and a <a class="ext" href="https://www.help.senate.gov/download/greszler-testimony-senate-help-retirement-crisis-228241" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">brief debate about the different results one gets from actual data</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span> versus surveys reliant on what people think in terms of establishing whether or not there is an actual crisis), alongside some optimism that SECURE and SECURE 2.0 had laid the groundwork for potential improvement in coverage, sufficiency and decumulation options. If there was a consensus, it might have been that we need to address the projected shortfalls in Social Security benefits—and, truly, if that isn’t, then we really will be looking at a crisis.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">The thing that makes cinematic zombies so terrifying is that there are so many of them—and that they keep getting up and pursuing you no matter how much damage you inflict.<a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_edn3" id="_ednref3" name="_ednref3" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iii]</a> That, and they manage to “convert” more with a simple bite. Let’s face it—a truly serious look at the retirement “crisis” would acknowledge that under traditional vesting definitions and job turnover rates in the private sector, defined benefit designs are, at best, a dubious solution. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">A penchant has been described as an irresistible attraction, as someone having a “penchant” for taking risks. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">A more practical one would be to look at a system that is already in place and working for those with access—and talk about ways to make THAT reality a reality for all.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><b>- Nevin E. Adams, JD</b></p><div style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> <hr align="left" size="1" style="border-bottom: 0px; border-image: initial; border-left: 0px; border-right: 0px; border-top-color: rgb(171, 187, 201); border-top-style: solid; box-sizing: border-box; height: 1px; margin: 1em 0px; padding: 0px;" width="33%" /><div id="edn1" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_ednref1" id="_edn1" name="_edn1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> In fairness, there are still defined benefit plans about, even in the private sector—though they are considerably fewer than they were a generation ago, and many are frozen or in termination status. </i></p></div><div id="edn2" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_ednref2" id="_edn2" name="_edn2" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[ii]</a> The hearing was titled and you can still listen to a recording of it here, "<a class="ext" href="https://www.help.senate.gov/hearings/taking-a-serious-look-at-the-retirement-crisis-in-america-what-can-we-do-to-expand-defined-benefit-pension-plans-for-workers" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">Taking a Serious Look at the Retirement Crisis in America: What Can We Do to Expand Defined Benefit Pension Plans for Workers</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span>."</i></p></div><div id="edn3" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/penchant-pensions#_ednref3" id="_edn3" name="_edn3" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iii]</a> Well, except for the occasional well-placed headshot.</i></p></div></div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-91384611569251701942024-03-02T06:30:00.006-05:002024-03-02T06:30:00.136-05:00 ‘Positive’ Thinking: Why Small Businesses That Offer a 401(k) Do So<p></p><p>Last week we explored the reasons why small businesses DON’T offer a
retirement plan to their workers. But there are quite different—and
positive—reasons for choosing to do so.</p>
<p>The obstacles that keep most small businesses from offering a retirement plan to their workers are an assortment of factors, <a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau" target="_blank">real and (somewhat) imagined</a>. There ARE <a href="https://www.napa-net.org/news-info/daily-news/small-biz-owners-seemingly-unaware-401k-start-credits" target="_blank">remedies</a> for those concerns,<a href="https://www.napa-net.org/news-info/daily-news/positive-thinking-why-small-businesses-offer-401k-do-so#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>
but mediation of those concerns doesn’t seem to be a factor in the
motivations of small businesses that DO choose to offer a plan.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_tGjC6uSUE-8vYaKtMaXk0OcBTScfw-ZzrzILraDR61aHU-UF0Ow-n-Z-srO0bTehFLPY0KH-U79_4A-wPsJy-ChQrqNizh8aY503vF-kZMUx3IOKXkQLu2mJ5yZeXdCMmzn6jpGB0Yjb25G6Uu99B5eeOrLkqCfNWmkGulo04hN8NyxpxPTVwg/s360/business-plan-action.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="240" data-original-width="360" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_tGjC6uSUE-8vYaKtMaXk0OcBTScfw-ZzrzILraDR61aHU-UF0Ow-n-Z-srO0bTehFLPY0KH-U79_4A-wPsJy-ChQrqNizh8aY503vF-kZMUx3IOKXkQLu2mJ5yZeXdCMmzn6jpGB0Yjb25G6Uu99B5eeOrLkqCfNWmkGulo04hN8NyxpxPTVwg/s320/business-plan-action.jpg" width="320" /></a></div><br /><p></p>
<h3>Reasons ‘Able’</h3>
<p>According to that <a class="ext" href="https://www.ebri.org/retirement/content/small-business-retirement-survey--policy-knowledge-and-reasons-for-offering-or-not-offering-a-retirement-plan" target="_blank">recent survey</a><span class="ext"></span>
by the Employee Benefit Research Institute (EBRI) and Greenwald
Research, when the small business owners who offer retirement plans were
asked the reasons that they do so, factors associated with attracting
and retaining workers were the most prominent. Indeed, the vast
majority—more than 9 in 10 of the small business owners<a href="https://www.napa-net.org/news-info/daily-news/positive-thinking-why-small-businesses-offer-401k-do-so#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>—said that a reason they offer a plan is the positive effect on employee attitude and performance. </p>
<p>According to the report, 90% said that a competitive advantage for
the business in employee recruitment and retention is a reason for
offering a plan. In fact, nearly a third (30%) said the positive effect
of offering a plan is the MOST important reason, though nearly as many
(25%) cited the competitive advantage as the most important reason.</p>
<h3>Tax ‘Tacts’</h3>
<p>Not that tax benefits and preferences weren’t factors; roughly
two-thirds of the small business owners said that tax advantages for key
executives and allowing the owner to save for retirement on a
tax-deferred basis were (also) reasons for offering a plan, though only
about 5% of the small business owners cited each of these as the <em><u>most</u></em> important reason.</p>
<p>The bottom line is there are any number of good, positive
reasons—benefits for workers and business owners alike—for offering, and
participating in, a workplace retirement plan. Unfortunately, there are
also any number of reasons to put off doing so—not enough time, worries
about the expense, confusion about the options, inertia, and that
all-too-human inclination to put off big decisions for another day.</p>
<p>Then again, aren’t those the same reasons often put forth to justify not saving for retirement?</p><p><b><i>- Nevin E. Adams, JD <br /></i></b></p>
<p><i>See also: <a href="https://www.napa-net.org/news-info/daily-news/5-reasons-why-your-small-business-should-offer-retirement-plan" target="_blank">5 Reasons Why Your Small Business Should Offer a Retirement Plan | National Association of Plan Advisors (napa-net.org)</a></i></p>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><a href="https://www.napa-net.org/news-info/daily-news/positive-thinking-why-small-businesses-offer-401k-do-so#_ednref1" id="_edn1" name="_edn1" title="">[i]</a> Notably the tax credits included in SECURE 2.0.</p>
</div>
<p><a href="https://www.napa-net.org/news-info/daily-news/positive-thinking-why-small-businesses-offer-401k-do-so#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a>
While those small business owners seem committed to the offering, the
survey DID find some points of confusion with regard to the obligations
associated with that undertaking. Turns out the one statement the survey
asked about plan design requirements that was not true had the highest
percentage of business owners agreeing with it; two-thirds (63%) of
these owners thought that employer contributions were always
automatically vested (in fairness, those who didn’t offer a plan were
even more mistaken—and that WAS cited as a reason for not offering a
plan).</p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-594145022220563422024-02-24T07:00:00.001-05:002024-03-10T16:26:44.309-04:00Closing the 401(k) Coverage Gap: The ‘Better’ Business Bureau<p> <span style="color: #333332; font-family: source-sans-pro-regular, sans-serif; font-size: 16px; letter-spacing: 0.400001px;">The solution to the coverage gap lies through small business—but only about a third have been approached in the past year about offering one, according to a new survey.</span></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That’s not exactly a new revelation—any number of surveys and government data throughout the years indicates that the vast majority of large(r) employers already offer a workplace retirement plan.<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn1" id="_ednref1" name="_ednref1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> The coverage “gap” so often held out as a sign of “failure” by the critics of the 401(k) lies almost exclusively among smaller employers. Which means that closing it will require a focus on small business—and understanding the “resistance.” </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW3Dz3bB7yeq8VqkScbeRDO6qi0Xef2AYaQQHBN-A7P3kL0-tmnRGmPzlzeu_NHFn2vk9CeTp4PDw_QF37qk3zNWx_sslN2sMNK8p5yc58F6XRxnigfB5SdDaY6el3A3S46csY-_z-bROZ5XgDynW2sALWxHDAZrcuOR_Hu7saRks-YQWrkLu_Gg/s1001/small%20business.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="720" data-original-width="1001" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW3Dz3bB7yeq8VqkScbeRDO6qi0Xef2AYaQQHBN-A7P3kL0-tmnRGmPzlzeu_NHFn2vk9CeTp4PDw_QF37qk3zNWx_sslN2sMNK8p5yc58F6XRxnigfB5SdDaY6el3A3S46csY-_z-bROZ5XgDynW2sALWxHDAZrcuOR_Hu7saRks-YQWrkLu_Gg/s320/small%20business.jpg" width="320" /></a></div><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">At the outset, it’s worth acknowledging a certain truism about small plans (the kind small businesses set up)—they are sold, not bought. Consequently, it was disappointing to see that datapoint about just 31% of the businesses that do not currently offer a plan having been approached in the last 12 months about offering one.<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn2" id="_ednref2" name="_ednref2" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[ii]</a> </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That survey finding was included in a <a class="ext" href="https://www.ebri.org/retirement/content/small-business-retirement-survey--policy-knowledge-and-reasons-for-offering-or-not-offering-a-retirement-plan" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">recent report</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span> by the Employee Benefit Research Institute (EBRI), along with the Center for Retirement Research at Boston College and Greenwald Research. Asked why they weren’t offering a plan, the vast majority (74%) said that their business was either too new or too small. That said, among the highly cited reasons for not offering a plan, nearly as many (72%) said required company contributions are too expensive (yes, they mistakenly assumed company contributions were required<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn3" id="_ednref3" name="_ednref3" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iii]</a>), 70% said their revenue is too uncertain to commit to a plan, and 70% said it costs too much to set up and administer. In sum, most of the resistance came down to financial factors—and considering the failure rate of most small businesses, that’s hardly surprising.<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn4" id="_ednref4" name="_ednref4" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iv]</a> </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Indeed, asked about factors that would encourage them to establish a plan, the most cited reason (by 79%) was an increase in the business’s profits. But the next set of reasons most cited as likely to get small businesses to offer a plan were business tax credits for starting a plan (75%) and a plan with low administrative requirements and/or no employer contributions (74%).</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Now, in that context, consider that among the small business owners not offering a plan, almost three-quarters (72%) said they were <u style="border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">NOT</u> aware<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn5" id="_ednref5" name="_ednref5" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[v]</a> of tax credits up to $5,000 being available to cover the costs of starting a retirement plan—though 78% said the tax credits would make it at least somewhat more attractive to offer a plan<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn6" id="_ednref6" name="_ednref6" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[vi]</a>—and more than a quarter (28%) said it would make it MUCH more attractive!<a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_edn7" id="_ednref7" name="_ednref7" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[vii]</a></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">The good news is, courtesy of the tax incentives in the SECURE 2.0 Act of 2022 (and the ability to shatter some myths about plan design), we have a message that could make a real difference in plan adoption—one that would be good for business—and your business—as well.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><b><i>- Nevin E. Adams, JD</i></b></p><div style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> <hr align="left" size="1" style="border-bottom: 0px; border-image: initial; border-left: 0px; border-right: 0px; border-top-color: rgb(171, 187, 201); border-top-style: solid; box-sizing: border-box; height: 1px; margin: 1em 0px; padding: 0px;" width="33%" /><div id="edn1" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref1" id="_edn1" name="_edn1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> From 2010–2023, the fraction of establishments with less than 50 workers who offered a retirement plan ranged from 42%–52%. For establishments with 50–99 workers, 70%–79% offered a plan, and 78%–91% of establishments with 100 or more workers offered one. See Bureau Labor Statistics, “Employee Benefits in the United States, March 2023,” Historical Tables. <a class="ext" href="https://www.bls.gov/ebs/publications/employee-benefits-in-the-united-states-march-2023.htm" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">https://www.bls.gov/ebs/publications/employee-benefits-in-the-united-sta...</a><span style="font-family: inherit;"><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span></span>. </i></p></div><div id="edn2" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref2" id="_edn2" name="_edn2" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[ii]</a> However, the small businesses with 50–100 employees were much more likely to have been approached, with 58% saying they had been. On the other hand, that’s roughly (only) half.</i></p></div><div id="edn3" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref3" id="_edn3" name="_edn3" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iii]</a> The researchers commented that it was interesting that “the one statement that was not true had the highest percentage of business owners agreeing with it, as 63% of these owners agreed that employer contributions were always automatically vested. In both cases, those offering a plan were more likely to agree with the statements than those that did not offer a plan. Thus, it appears that small business owners don’t understand the potential flexibility in offering an employment-based retirement plan, which is not unexpected, as larger employers typically have experts or access to experts on benefits that would not be available to smaller businesses.”</i></p></div><div id="edn4" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref4" id="_edn4" name="_edn4" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[iv]</a> Somewhat surprisingly, the administration being too burdensome and the possibility of being out of compliance with government regulations or held liable for investment decisions made by employees—obstacles often targeted in legislation and regulatory safe harbors—were the LEAST likely to be cited as a reason for not offering a plan.</i></p></div><div id="edn5" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref5" id="_edn5" name="_edn5" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[v]</a> Awareness of these tax credits was different by the size of the business, as 50% of the small business owners with 50–100 employees were aware of the tax credits vs. less than 25% of the small business owners with fewer than 50 employees. Businesses with 10–19 employees were the most likely to say that the tax credits would make it at least somewhat more attractive to offer a plan.</i></p></div><div id="edn6" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref6" id="_edn6" name="_edn6" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[vi]</a> Despite being lower ranked than the attraction and retention of workers, roughly two-thirds of the small business owners said that tax advantages for key executives and allowing the owner to save for retirement on a tax-deferred basis are reasons for offering a plan—though only about 5% of the small business owners cited each of these as the <span style="border: 0px; box-sizing: border-box; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><span style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">most</span></span> important reason.</i></p></div><div id="edn7" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/closing-401k-coverage-gap-%E2%80%98better%E2%80%99-business-bureau#_ednref7" id="_edn7" name="_edn7" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[vii]</a> Half (51%) of small business owners offering a plan were not aware of the Saver’s credit/match—while 83% of those not offering a plan weren’t aware—though 69% of the small business owners said the Saver’s credit made offering a retirement plan at least somewhat more attractive. </i></p></div></div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-87649301213821291812024-02-17T07:00:00.001-05:002024-03-10T16:40:13.915-04:00Love and Money<p> <span style="color: #333332; font-family: source-sans-pro-regular, sans-serif; font-size: 16px; letter-spacing: 0.400001px;">How well do you (think you) know your significant other?</span></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">The passage of time—shared experiences and the process of getting to know each other reveals much—and yet I learned something new about my partner of some four decades just last week!</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">That brought to mind one of the favorite game shows of my youth was <a class="ext" href="https://youtu.be/RymY9wIlCeI?si=49mxluUePiUX_XNt&t=1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">The Newlywed Game</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span>. The show featured four couples—all of which were to have been married less than two years. Each of the contestant couples were separated—then asked a series of questions designed to test these newlywed couples’ knowledge of each other, and in some cases their collective memories (and willingness to share publicly). Points were assigned based on answers that matched—but the most memorable, of course, were the missed matches—and the inevitable response of the spouse who was absolutely CERTAIN of the response of their partner. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnjUn7vAENSReun_X-giWCd01TUPnjOonXdAKSfTOAJ9RIuRI0fvDGvYRaaq5W3Yg6-z3LVcFtw2jhL9MUulx49gbBvMOh0jfpCJ0ANv2ZLBLDYG8S9ABz_6eBjvw38VPk2UgnbnuLcFF4KXflVZxKMgQ6outC7dvPCl7CZW9NGdO0jkVnDk64Eg/s612/couple.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="408" data-original-width="612" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnjUn7vAENSReun_X-giWCd01TUPnjOonXdAKSfTOAJ9RIuRI0fvDGvYRaaq5W3Yg6-z3LVcFtw2jhL9MUulx49gbBvMOh0jfpCJ0ANv2ZLBLDYG8S9ABz_6eBjvw38VPk2UgnbnuLcFF4KXflVZxKMgQ6outC7dvPCl7CZW9NGdO0jkVnDk64Eg/s320/couple.jpg" width="320" /></a></div><p></p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Now, a year of marriage is arguably not long enough to know EVERYTHING about your partner. But, and with Valentine’s Day looming, a couple of industry surveys remind us that, while money can’t “buy me love,” it can be a relationship “breaker.”</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Indeed, a new survey by <a class="ext" href="https://www.empower.com/the-currency/life/americans-spending-habits-valentines-day" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">Empower</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span> asserts that spending habits (38%) and budgeting (33%) are the money topics most likely to lead to disagreements in relationships followed by financial priorities/goals (20%). Over a third of couples (37%) say money is a big relationship stress point, with Gen Zers feeling the most strain around financial issues (48%). Retirement planning/savings, while on the disagreements list, was pretty far down—cited by only 10%—though one assumes that is largely because of its relatively distant timing impact(s).</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><a class="ext" href="https://newsroom.fidelity.com/pressreleases/love---money--most-couples-give-themselves-high-marks-in-communication--yet-fidelity-study-reveals-h/s/c15df94d-f289-4d2d-bb10-85424c803f8e" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" target="_blank">Fidelity Investments’ 2024 Couples and Money</a><span class="ext" style="background-attachment: initial; background-clip: initial; background-image: url("extlink.png"); background-origin: initial; background-position: right center; background-repeat: no-repeat; background-size: initial; border: 0px; box-sizing: border-box; font: inherit; margin: 0px; padding: 0px 12px 0px 0px; vertical-align: baseline;"></span> study notes that 45% of partners admit they argue about money at least occasionally—and more than 1 in 4 couples identify money as their greatest relationship challenge. Fidelity’s survey is interesting in that it—like that old Newlywed Game show—surveys couples individually before bringing their answers together to analyze and identify where couples are doing well with their communication and finances. Those couples give themselves high marks on that score—with nearly 9 in 10 claiming they communicate well or very well with their partner.</p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">On that account, the Fidelity report notes that more than a third of couples miss the mark when it comes to how much income their significant other makes—and more than a quarter (27%) admit to being often frustrated by their partner’s money habits, but say they let it go for the sake of keeping the peace. More than half—but just over half (54%) cite as their top financial concern having enough money saved for retirement. Only about half (57%) work together on making decisions about retirement savings and other long-term goals.<a href="https://www.napa-net.org/news-info/daily-news/love-and-money#_edn1" id="_ednref1" name="_ednref1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> The good news is more than half of respondents feel very good or excellent about their financial health and 27% of Boomers say building a financial plan together is their love language. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">Inevitably couples are comprised of individuals who have different interests and aptitudes—and money and finances, in particular, can be a sensitive subject. We’re often caught between a fear of being judged—or convinced that judgement is required in order to achieve financial order, but worried that expressing that concern will lead to arguments—or worse. It’s something to bear in mind this Valentine’s Day amidst all the candy, flowers and romantic dinners. </p><p style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;">One thing seems certain, however; just as healthy long-term relationships are built on trust and openness—so are their healthy finances.</p><div style="border: 0px; box-sizing: border-box; color: #333332; font-family: source-sans-pro-regular, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variant-position: inherit; font-variation-settings: inherit; letter-spacing: 0.400001px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b><i>- Nevin E. Adams, JD </i></b><hr align="left" size="1" style="border-bottom: 0px; border-image: initial; border-left: 0px; border-right: 0px; border-top-color: rgb(171, 187, 201); border-top-style: solid; box-sizing: border-box; height: 1px; margin: 1em 0px; padding: 0px;" width="33%" /><div id="edn1" style="border: 0px; box-sizing: border-box; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; box-sizing: border-box; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; letter-spacing: 0.025em; line-height: 1.37143rem; margin: 0px 0px 1rem; padding: 0px; vertical-align: baseline;"><i><a href="https://www.napa-net.org/news-info/daily-news/love-and-money#_ednref1" id="_edn1" name="_edn1" style="border: 0px; box-sizing: border-box; color: #4480e0; font-family: source-sans-pro-bold, sans-serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.14286rem; font-stretch: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: 700; letter-spacing: 0.035em; line-height: 1.37143rem; margin: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;" title="">[i]</a> When it comes to having a vision for retirement, Fidelity found that couples are mostly aligned on how they want to be spending their time—with family, friends, traveling, and their hobbies—though about half (53%) of couples who have not yet retired express conflicting views on how much they need to have saved to retire.</i></p></div></div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-14991243112080131782024-02-10T07:00:00.001-05:002024-02-10T20:29:51.923-05:00 Could Your 401(k)’s Fate Rest on the Winner of Super Bowl 58?<p></p><p>Will your 401(k) be chopped by the Chiefs—or find gold with the 49ers?</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>That’s what adherents of the so-called Super Bowl Indicator<a href="https://www.napa-net.org/news-info/daily-news/could-your-401k%E2%80%99s-fate-rest-winner-super-bowl-58#_ftn1" id="_ftnref1" name="_ftnref1" title="">[1]</a>
would likely conclude, after all. It’s a “theory” that when a team from
the old National Football League wins the Super Bowl, the S&P 500
will rise, and when a team from the old American Football League
prevails, stock prices will fall.</p>
<p>It’s a “theory” that has been found to be correct nearly 80% of the
time—for 41 of the 57 Super Bowls, in fact. Not that it hasn’t been
tackled short of the goal line. <br /><br /></p>
<h3>Portfolio Prognostications</h3>
<p>One needs to look back no further than last year’s victory by the
(original AFL) Kansas City Chiefs that, according to the Indicator,
should have predicted a portfolio predicament for the S&P 500—but
wound up with a 25% gain for the year. Or the year before that when the
victory by the Los Angeles Rams “should” have been a portent of good
times, only to see the S&P 500 slump more than 19% for its biggest
loss since 2008. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizVtwAW-vh0QaHapbKMAewPhvWTrAStG2alTYIeG5OwqtyeJx_H315QXfbRvn8PlnladZ6lHx74KeGgd1o9UFwvBvH9BBKUBD_tHdVPNzoDWmX5C6Z5n0Ikyard7pWu7hzz4eOrlXshorGTow1rQGoOYPyIm7K-AcA5VOa4tPqT9nxXRJ6fiWamA/s640/super%20bowl%2058.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="430" data-original-width="640" height="215" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizVtwAW-vh0QaHapbKMAewPhvWTrAStG2alTYIeG5OwqtyeJx_H315QXfbRvn8PlnladZ6lHx74KeGgd1o9UFwvBvH9BBKUBD_tHdVPNzoDWmX5C6Z5n0Ikyard7pWu7hzz4eOrlXshorGTow1rQGoOYPyIm7K-AcA5VOa4tPqT9nxXRJ6fiWamA/s320/super%20bowl%2058.jpg" width="320" /></a></div><p></p>
<p>And while the previous year’s victory by the NFC’s Tampa Bay
Buccaneers bolstered the premise behind the “theory,” the year before
that the win by these same Kansas City Chiefs—who have become something
of a regular in the big contest—over the then-NFC champion San Francisco
49ers undermined its track record (or did your 401(k) miss that 18.4%
rise in the S&P 500?). Or how about the year before <strong>THAT</strong>
when the AFC’s New England Patriots (who once upon a time were the
AFL’s Boston Patriots) bested the NFC champion Los Angeles Rams—but the
S&P 500 was up more than 30% that year (2019).</p>
<p>Or, looking the other way, the year before that a win by the NFC
champion Philadelphia Eagles against the AFC champion Patriots turned
out to be a loser, marketwise, with the S&P 500 down more than 6%
(though for most of the year it was quite a different story). Ditto the
year before, when the epic comeback by those same AFC champion Patriots
against the then-NFC champion Atlanta Falcons failed to forestall a 2017
market surge.</p>
<p>Now, one might think that the real “spoiler” to this market “theory”
is the New England Patriots (who not so long ago were perennial Super
Bowl participants)—but the year before that, the AFC’s (and original
AFL) Broncos’ 24-10 victory over the Carolina Panthers, who represented
the NFC, also proved to be an “exception.”</p>
<h3>Market Makings</h3>
<p>Indeed, one might well wonder why, in view of that consistent string
of “exceptions” that we’re still talking about this “theory”—but, as it
turns out, that’s an unusual (albeit consistent) break in the streak
that was sustained in 2015 following Super Bowl XLIX, when the AFC’s New
England Patriots (yes, they show up a lot) bested the Seattle Seahawks
28-24 to earn their fourth Super Bowl title.</p>
<p>It also “worked” in 2014, when the Seahawks bumped off the legacy AFL
Denver Broncos, and in 2013, when a dramatic fourth-quarter comeback
rescued a victory by the Baltimore Ravens—who, though representing the
AFC, are technically a legacy NFL team via their Cleveland Browns roots.
This is where things start to get confusing, as the Ravens, who were
the Browns moved to Baltimore in 1995 (though the NFL still views them
as an expansion team) filling the hole left by the then-Baltimore Colts’
1984 “dead of night” move to Indianapolis.</p>
<p>Admittedly, the fact that the markets fared well in 2013 was hardly a
true test of the Super Bowl Theory since, as it turned out, both teams
in Super Bowl XLVII—those Ravens and the San Francisco 49ers—were,
technically, NFL legacy teams.</p>
<p>However, consider that in 2012 a team from the old NFL (the New York
Giants) took on—and took down—one from the old AFL (the New England
Patriots—yes, those New England Patriots… again). And, in fact, 2012 was
a pretty good year for stocks.</p>
<h3>Steel ‘Curtains’?</h3>
<p>On the other hand, the year before that, the Pittsburgh Steelers
(representing the American Football Conference) took on the National
Football Conference’s Green Bay Packers—two teams that had some of the
oldest, deepest and, yes, most “storied” NFL roots, with the Steelers
formed in 1933 (as the Pittsburgh Pirates) and the Packers founded in
1919. According to the Super Bowl Theory, 2011 should have been a good
year for stocks (because, regardless of who won, a legacy NFL team would
prevail).</p>
<p>But, as some may recall, while the Dow gained ground for the year, the S&P 500 was, well, flat (dare we say “deflated”?).</p>
<p>And then there was the string of Super Bowls where the contests were
all between legacy NFL teams (thus, no matter who won, the markets
should have risen):</p>
<ul><li>2006, when the Steelers bested the Seattle Seahawks;</li><li>2007, when the Indianapolis Colts (those old Baltimore Colts) beat the Chicago Bears 29-17;</li><li>2009, when the Pittsburgh Steelers took on the Arizona Cardinals (who had once been the NFL’s St. Louis Cardinals); and</li><li>2010, when the New Orleans Saints bested the Indianapolis Colts,
who, as we’ve already remarked, had roots dating back to the NFL legacy
Baltimore Colts.</li></ul>
<p>Sure enough, the markets were higher in each of those years.</p>
<p>As for 2008? Well, that was the year that the NFC’s New York Giants
upended the hopes of the AFL-legacy Patriots (yes, those Patriots) for a
perfect season, but it didn’t do any favors for the stock market. In
fact, that was the last time that the Super Bowl Theory didn’t “work”
(well, until last year, the year before last—oh, and the year before
that—and the year before…).</p>
<h3>Patriot Gains</h3>
<p>Times were better for Patriots fans in 2005, when they bested the
NFC’s Philadelphia Eagles 24-21. Indeed, according to the Super Bowl
Theory, the markets should have been down that year—but the S&P 500
rose 2.55%.</p>
<p>Of course, Super Bowl Theory proponents would tell you that the 2002
win by the New England Patriots accurately foretold the continuation of
the bear market into a third year (at the time, the first accurate
result in five years). But the Patriots’ 2004 Super Bowl win against the
Carolina Panthers (the one that probably nobody except Patriots fans
and disappointed Panthers advocates remember because it was overshadowed
by the infamous “wardrobe malfunction”) failed to anticipate a fall
rally that helped push the S&P 500 to a near 9% gain that year,
sacking the indicator for another loss (couldn’t resist).</p>
<h3>Bronco ‘Busters’</h3>
<p>Consider also that, despite victories by the AFL-legacy Denver
Broncos in 1998 and 1999, the S&P 500 continued its winning ways,
while victories by the NFL-legacy St. Louis (by way of Los Angeles) Rams
(that have since returned to the City of Angels) and the Baltimore
Ravens (those former “Browns”) did nothing to dispel the bear markets of
2000 and 2001, respectively.</p>
<p>In fact, the Super Bowl Theory “worked” 28 times between 1967 and
1997, then went 0-4 between 1998 and 2001, only to get back on track
from 2002 on (though “purists” still dispute how to interpret Tampa
Bay’s 2003 victory, since the Buccaneers spent their first NFL season in
the AFC before moving to the NFC).</p>
<p>Indeed, the Buccaneers’ move to the NFC was part of a swap with the
Seattle Seahawks, who did, in fact, enter the NFL as an NFC team in 1976
but shuttled quickly over to the AFC (where they remained through 2001)
before returning to the NFC.<a href="https://www.napa-net.org/news-info/daily-news/could-your-401k%E2%80%99s-fate-rest-winner-super-bowl-58#_ftn2" id="_ftnref2" name="_ftnref2" title="">[2]</a>
And, not having entered the league until 1976, regardless of when they
began, can the Seahawks truly be considered a “legacy” NFL squad?</p>
<p>Bear in mind as well, that in 2006, when the Seahawks made their
first Super Bowl appearance—and lost—the S&P 500 gained nearly 16%.</p>
<h3>Some fun facts to share about the game:</h3>
<p>The 2023 game drew between 113 million and 115.1 million viewers—making it the most-watched U.S. telecast of all time.</p>
<p>The 49ers are 5-2 in previous Super Bowl appearances. The Chiefs are
3-2. The two teams have met in the Super Bowl before—in 2020, when the
Chiefs came from behind to beat the 49ers in Super Bowl LIV. Early odds
have the 49ers a slight favorite, by about 2.5 points. </p>
<p>This happens to be the first Super Bowl ever played in the state of
Nevada (11 states have hosted—knew you’d want to know), and while
everyone is saying Las Vegas, it’s actually (technically) taking place
in Paradise, Nevada. </p>
<p>The Chiefs have been designated the home team for the game—and will
be wearing red. The team wearing white jerseys in the Super Bowl has won
16 of the last 19 Super Bowls, including the Chiefs in 2023 (though the
last time Kansas City won before that they were wearing red).</p>
<p>Among other things (whether Taylor Swift will make it to the game on
time), you can (even) bet on the color of the Gatorade that will be
dumped on the winning team's coach.</p>
<p>All in all, and particularly in view of the exciting playoff games
that have led up to it, it looks like it should be a good game.</p>
<p>And that—whether you are a proponent of the Super Bowl Theory or
not—would be one in which regardless of which team wins, we all do!</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<div>
<hr align="left" size="1" width="33%" />
<div id="ftn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/could-your-401k%E2%80%99s-fate-rest-winner-super-bowl-58#_ftnref1" id="_ftn1" name="_ftn1" title="">[1]</a>
An alternate theory linking the Super Bowl to stock market performance
in reverse fashion postulates that Wall Street’s results can be used to
predict the outcome of the game. According to this theory, if the Dow
rises from the end of November until Super Bowl game day, the team whose
full name appears later in the alphabet will win. Some people have too
much time on their hands…</i></p>
</div>
<div id="ftn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/could-your-401k%E2%80%99s-fate-rest-winner-super-bowl-58#_ftnref2" id="_ftn2" name="_ftn2" title="">[2]</a>
Note: Seattle is the only team to have played in both the AFC and NFC
Championship Games, having relocated from the AFC to the NFC during
league realignment prior to the 2002 season. The Seahawks are the only
NFL team to switch conferences twice in the post-merger era. The
franchise began play in 1976 in the NFC West division but switched
conferences with the Buccaneers after one season and joined the AFC
West.</i></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-84728416067943254222024-02-03T07:30:00.001-05:002024-02-04T23:42:13.467-05:00 How to Craft a 401(k) Crisis<p></p><div class="content clearfix">
<div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even"><p>Last
week an article in an industry publication led with the title “401(k)
experiment has failed, fueled U.S. retirement crisis, labor economist
says.”</p>
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5wXrsaZ1UnuSfDCVw9UXJaYCOm8392UPgzB4ggx8wgi7mWqXK0Nt0s3GNrVJaANXYveJgQsjy_BAAV7CrhwVlXRfLzad8kfLLh55MktDpRMfxbvGmQfF0y7Cn3UPm3jkIy20ArqFqzo9xoVuWCgx9lkoN3QjQ3n4A8ozb37CuYaddt4n17IvGOQ/s1000/glidepath.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="667" data-original-width="1000" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5wXrsaZ1UnuSfDCVw9UXJaYCOm8392UPgzB4ggx8wgi7mWqXK0Nt0s3GNrVJaANXYveJgQsjy_BAAV7CrhwVlXRfLzad8kfLLh55MktDpRMfxbvGmQfF0y7Cn3UPm3jkIy20ArqFqzo9xoVuWCgx9lkoN3QjQ3n4A8ozb37CuYaddt4n17IvGOQ/s320/glidepath.jpg" width="320" /></a></div>In
what I am sure generated a fair number of “clicks” that turned out to
be the pronouncement of none other than Professor Teresa Ghilarducci,
teeing up a new book<a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>—one
that she says aims to review the last 10 years of research by multiple
entities on something she’s labeled the “liminal” period of life—that
apparently intended to refer to an “intermediate” stage of life.
According to the article, she is taking aim at certain assumptions that
are made with regard to retirement investing/saving between the ages of
55 and 70. Bad assumptions, apparently.<br /><p></p>
<p>Now, considering that Professor Ghilarducci has written an entire
book on this particular subject, extrapolation from a short interview
about it (particularly when someone else did the interview) is a
hazardous undertaking. But in <a class="ext" href="https://www.pionline.com/defined-contribution/401k-experiment-has-failed-fueled-us-retirement-crisis-labor-economist-says" target="_blank">that article</a><span class="ext"></span>—based
on the upcoming book—she asserts that “experts and professionals and
policymakers” have got it wrong; in this case “wrong” appears to be
thinking that when people get to be about 62 and realize they don’t have
enough resources to do so—they’re simply counseled to work longer. She
also takes issue with the advice promulgated by a number of experts (and
advisors) that folks should postpone taking their Social Security
benefits—something she says (in the article) that “does not speak to the
lives of most Americans.”</p>
<p>On the latter point (and I hope you’re sitting down), I completely agree.<a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
The logic in that advice is based on a solid strategy designed to
maximize Social Security benefits—but increasingly is “buddied” by
financial professionals/experts with the approach of using what may be
inadequate retirement savings to bridge living expenses between leaving
the workforce for good and age 70. That said, and as the article
acknowledges, the decision to leave the workforce for good often isn’t a
choice, which not only shortens the accumulation opportunity, but
extends, and thus undermines the ability to stretch those savings.
Particularly when that happens late in one’s career, there’s no question
it creates problems, and surely for some, financially insurmountable
ones.</p>
<p>While that apparently isn’t the focus of the book, those type
misapplications do seem to be at least a contributing factor to the
crisis Ghilarducci perceives. More than that, she apparently sees an
overarching theme at work here. In the interview she says that some
unnamed “experts and professionals and policymakers” have embraced this
notion if you find yourself later in your career short of funds, you
simply have to work longer—a presumption she claims is further
undermined by the debt carried by those heading into retirement. THIS
she says is undermining retirement security, though in the article she
lays the fault for this (“much of the loss of their security”) on the
loss of defined benefit plans, before proceeding to label the 401(k) an
“experiment,” and a “failure”—labels she has applied to these programs…<a href="https://www.napa-net.org/search/site/ghilarducci" target="_blank">repeatedly</a>. </p>
<p>On this, as you might imagine, we disagree. Now, I’ve got no beef
with the comfort of a federally insured and well-funded defined benefit
plan, particularly those in the private sector that traditionally
required no involvement with<a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a>
or investment by individual participants. Of course, even at the height
of their popularity, fewer than a third of private sector workers were
ever covered by those plans, and only about 1 in 8 of those ever met the
service length criteria to fully vest in those benefits. As retirement
coverage “experiments” go, those are surely shortcomings.</p>
<p>Indeed, when you consider the coverage gaps left by the defined
benefit “system,” I don’t know where we’d be without the 401(k)—or, more
precisely, I do—and it wouldn’t be a good place. </p>
<p>Those of us who actually work with real people know that this
so-called “broken” system works amazingly well—for those who have access
to it—including, most especially, those at the lower end of the income
scale.<a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_edn4" id="_ednref4" name="_ednref4" title="">[iv]</a>
Academics routinely target the well-off in their criticisms, but ignore
the needs of middle-income households for whom Social Security will
almost certainly not be… enough. And they routinely completely discount
and/or ignore the role that the current tax preferences play in
fostering the formation and maintenance of these retirement plans. With
all its admitted imperfections, thanks to this “failed experiment,” tens
of millions of Americans now have trillions of dollars of retirement
savings set aside…and they—and their employers—have done so voluntarily,
deferring, not avoiding, tax obligations. </p>
<p>No, as “experiments” go, it seems to me that the real failure is that
not enough Americans have the opportunity to do so. And we’re working
on that.</p>
<div><b> - Nevin E. Adams, JD</b><br /><hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_ednref1" id="_edn1" name="_edn1" title="">[i]</a> Titled “Work, Retire, Repeat: the Uncertainty of Retirement in the New Economy.”</i></p>
</div>
<div id="edn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a> In the interests of full disclosure, the author considered, but did NOT defer taking his Social Security benefit until age 70. </i></p>
</div>
<div id="edn3">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a> So little involvement, in fact, that surveys routinely still find ridiculously high number of individuals think they have one. </i></p>
</div>
<div id="edn4">
<p><a href="https://www.napa-net.org/news-info/daily-news/how-craft-401k-crisis#_ednref4" id="_edn4" name="_edn4" title="">[iv]</a>
I have never understood the notion that the “rich” are gaming the
system with the maximum (in 2024) $23,000 annual 401(k) contribution
(not including the $7,500 in catch-up contributions for those over age
50), often less due to the limits of non-discrimination testing.</p>
</div>
</div>
</div></div></div> </div>
<div class="link-wrapper">
<ul class="links links--inline node__links"><li class="comment_forbidden first last"><br /></li></ul> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-83116631604609379462024-01-27T06:30:00.001-05:002024-02-04T23:38:31.133-05:00A 'Cure" Worse than the Disease?<p></p><p>Last week, a trio of academics rolled out a plan to “save” Social Security—by undermining the 401(k).</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>Their “<a href="https://www.napa-net.org/news-info/daily-news/eliminate-401k-tax-preferences-fund-social-security-biggs-munnell" target="_blank">plan</a>”
is diabolically simple, though not unique. They’d just take away the
tax preferences that support and encourage employment-based retirement
plans—and “give” that money to Social Security. </p>
<p>It was admittedly an odd combination—Alicia Munnell, director and
founder of the Center for Retirement Research at Boston College (which
often <a href="https://www.napa-net.org/news-info/daily-news/covid-19-retirement-story" target="_blank">has pretty negative things</a> to say about the private retirement system<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>),
and Andrew Biggs, a senior fellow at the American Enterprise Institute,
who has traditionally been a voice of reason on such matters—pointing
to <a href="https://www.napa-net.org/news-info/daily-news/scary-%E2%80%98sensational%E2%80%99-headlines-mar-retirement-income-good-news" target="_blank">actual tax filing data</a>
to refute claims of a retirement crisis. Then again, Biggs, a former
principal deputy commissioner of the Social Security Administration, and
now a Senior Fellow at the American Enterprise Institute, has recently
been <a href="https://www.napa-net.org/news-info/daily-news/simple-sorta-social-security-solvency-fix" target="_blank">nominated</a> by President Biden to serve on the Social Security Advisory Board. </p>
<p>Now there’s no question Social Security needs help if it’s to provide
the benefits promised generations of American workers into the future.
</p>
<h3>Some Assumptions <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYyExS47lA6ND6vgeSv4Zt1i9LXn4AidnMupG75O-Sox2zKvJGVhCK-iTNW1gUgkafONufZuNguF3epxXtEYRHxE1FjWLitBIeZyyB9boQYMoiWsiPu_KsMm0pSRuqY1xQWWxAAPqqsalIVjhiwpg6D3rRmaUufvFdoSV3J7aQkMJ_R_XB0-l8Tw/s1000/breaking%20copier.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="667" data-original-width="1000" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYyExS47lA6ND6vgeSv4Zt1i9LXn4AidnMupG75O-Sox2zKvJGVhCK-iTNW1gUgkafONufZuNguF3epxXtEYRHxE1FjWLitBIeZyyB9boQYMoiWsiPu_KsMm0pSRuqY1xQWWxAAPqqsalIVjhiwpg6D3rRmaUufvFdoSV3J7aQkMJ_R_XB0-l8Tw/s320/breaking%20copier.jpg" width="320" /></a><br /></h3>
<p>That said, their underlying premise in crafting this “solution”<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
is that the tax incentives of the current private retirement system do
little, if anything, to encourage participation. This conclusion seems
to be based on “an economist’s lifestyle model”—previous reports by the
CRR—and (now old) data from a <a class="ext" href="https://ebriorg.wordpress.com/2013/02/08/missed-behaviors/" target="_blank">study of Danish workers</a><span class="ext"></span>
in a system that bears little resemblance to our own in terms of
baseline assumptions and workplace demographics to conclude that savings
behaviors won’t be impacted. </p>
<p>They also choose to ignore the enormous <a href="https://www.napa-net.org/news-info/daily-news/opt-out-rates-above-30-falling-ca-il-saving-plans" target="_blank">opt-out rates</a>
among the state-run IRA programs that are three to four times that of
those in the private system—state-run IRA programs that, it bears
noting, lack the tax incentives of the 401(k). Oh, and then certain
assumptions (SO many assumptions) are applied to estimate the “cost” to
the government of the tax deferrals. </p>
<p>That—and they completely gloss over the reality that these
preferences are a DEFERRAL, not a forbearance of tax liability—unlike
the tax preferences that riddle the federal income tax code at present,
and which represent an actual, permanent “loss” to the federal
government in terms of tax revenues. </p>
<h3>And Some Presumptions</h3>
<p>But the biggest assumption they make—and it’s a BIG one—is that the
lack of tax incentives will have no impact on the decision of employers
to offer these programs, or to contribute to them. This happens to be a
common assumption among those who reside in, or commune with the Beltway
environs, most of whom it appears have never actually spoken to an
actual employer.</p>
<p>Let’s face it, on an individual level, the incentives for
higher-income workers, though real, are relatively modest. But then, and
at odds with the assumptions of this paper, the <strong><u>true</u></strong>
behavior subsidized by the tax preferences isn’t those individual
contributions, but the very creation and maintenance of these plans by
employers—that would otherwise be disinclined to take on such burdens in
the first place, much less support and incentivize participation with
things like the employer match. Ignored as well are the
non-discrimination testing mechanisms that bound in the contributions of
higher paid relative to the so-called non-highly compensated<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a>—and encourage dynamics like the employer match.</p>
<p>Remember as well that actual data supports the notion that even
modest income workers—those making between $30,000 and $50,000 a
year—are somewhere between 12 and 15 times more likely to save for
retirement if they have access to a plan at work versus doing so on
their own. Sure, perhaps the wealthiest would save on their own
regardless—but without the plan established by the employer, those in
the lower income brackets almost certainly would not. </p>
<p>Let’s be honest; the 401(k) is the only way we have ever gotten
working Americans to save for retirement—and they, and the employers
that underwrite those programs, have done so voluntarily. Those who have
access to those programs are doing well. The only problem with the
401(k) is that not enough working Americans have access to one. </p>
<p>Common sense dictates that you don’t fix something that’s broken by
breaking something that’s working. And this “solution” would likely do
just that.</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<div> <div id="edn1"><p><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_ednref1" id="_edn1" name="_edn1" title="">[i]</a> … and has a <a href="https://www.napa-net.org/news-info/daily-news/ebri-report-calls-out-pew-crr-retirement-conclusions" target="_blank">record</a> of relying on <a href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6" target="_blank">questionable data</a> to craft <a href="https://www.napa-net.org/news-info/daily-news/gaps-retirement-savings-gaps">conclusions</a>.</p>
</div>
<div id="edn2">
<p><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a> <a class="ext" href="https://crr.bc.edu/the-case-for-using-subsidies-for-retirement-plans-to-fix-social-security-2/" target="_blank">The Case for Using Subsidies for Retirement Plans to Fix Social Security</a><span class="ext"></span></p>
</div>
<div id="edn3">
<p><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98cure%E2%80%99-worse-disease#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a> See <a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98upside%E2%80%99-potential" target="_blank">"Upside" Potential</a></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-69581921533529276092024-01-20T06:30:00.001-05:002024-01-20T06:30:00.141-05:00 ‘Nothing’ Doing About Social Security?<p>Despite
long being called the “third rail” of American politics, Social
Security—or more precisely its viability—has reemerged as an issue in
the 2024 presidential campaign.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBE-3jKl2Iqh3K77CGlFxj1tqQwwlBiBfLd8nXENyAyykius80twEJ8pn5Ypb5BtWVtC4QpsmIKxxi2MadobUzlWAP-KM5QPdLBHfotV-Diln2Ih-Jm65EEbk735D5ESReVVdCZ_0xgFFYbBRJw6bxbRyj6hTYZTgDCXUCzoz9iEbhB5bYKDVXow/s750/ostrich-head-in-sand.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="738" data-original-width="750" height="315" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBE-3jKl2Iqh3K77CGlFxj1tqQwwlBiBfLd8nXENyAyykius80twEJ8pn5Ypb5BtWVtC4QpsmIKxxi2MadobUzlWAP-KM5QPdLBHfotV-Diln2Ih-Jm65EEbk735D5ESReVVdCZ_0xgFFYbBRJw6bxbRyj6hTYZTgDCXUCzoz9iEbhB5bYKDVXow/s320/ostrich-head-in-sand.jpg" width="320" /></a></div>It
came up most recently in a mini-GOP debate between former U.N.
ambassador/South Carolina governor Nikki Haley and Florida governor Ron
DeSantis. Haley reaffirmed her previous statements that changes would be
required to shore up the financial viability of that system (and,
arguably more critically, Medicare)—taking pains to emphasize that she
wasn’t calling for changes that would impact current/close-to-retiring
individuals. <br /><p></p>
<p>For his part DeSantis—to whom the question was initially
posed—maintained that there was no need to raise the age for full
retirement benefits (apparently due to COVID’s impact on life
expectancy), as though that were the only potential remedy required<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>
(he did express confidence that something would be worked out
long-term). And both former President Trump and President Biden have
locked in on a “no changes” stance—criticizing any notion of reform as
doing a disservice to seniors.<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a></p>
<p>What’s weird to me<a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a>
is that those who seem to blithely embrace the “no changes needed”
mantra aren’t getting the follow-up question; “but if we don’t change
anything, won’t benefits have to be cut?”</p>
<p>Look, I’m now on the collection side of that equation—having
contributed to that system what the law said I (and my employer(s)) had
to in order to receive a certain benefit decades in the future. The
notion that I would have done that for more than four decades only to
then have my “promised” benefits reduced does NOT appeal to me in the
slightest. Particularly since, going back to the 1980s, my withholding
taxes were increased, my full retirement age extended, and my ultimate
benefits are now means-tested (a.k.a. “reduced”)—ostensibly to avert a
current and future such crisis.</p>
<p>But if the math that we’re presented with is accurate, there’s no way
we can maintain the “status quo” on benefits without some
change(s)—presumably to those who, like I was in 1983, are several
decades away from collecting benefits. In fact, the Social Security
Board of Trustees has <a class="ext" href="https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html" target="_blank">projected</a><span class="ext"></span>
that the looming 2037 “shortfall” means that changes equivalent to an
immediate reduction in benefits of about 13%, or an immediate increase
in the combined payroll tax rate from 12.4% to 14.4%—or some combination
of these changes—would be “sufficient to allow full payment of the
scheduled benefits for the next 75 years.” </p>
<p>Without a doubt, Social Security is most certainly the biggest
retirement assumption—by individuals, retirement planners and
legislators alike. At a time when we’re working to broaden coverage, to
expand the impact of automatic plan design features, and the reach of
state-run IRA programs, we know that as valuable, even essential, as
those steps might be in broadening and deepening the success of the
private retirement system—they won’t be “enough” if we don’t shore up
the baseline foundation upon which the nation’s retirement security is
currently predicated. Those who oppose “reform” without acknowledging
the need for change may find that a popular point of view—but it’s
really just whistling past the proverbial graveyard. </p>
<p>That said, and whatever the presidential aspirants espouse, it will
be up to Congress to remedy the situation. That’s not a recipe for hope,
mind you—but it is a reality check. </p>
<p>While Social Security reform may not be at the top of your list of
candidate considerations, I’d argue it should be on that list—for those
you support, those you love—and you.</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<div>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
Outside the debate hall he has previously supported making those
benefits tax free—essentially eliminating the “means-testing” provisions
currently in place that tax benefits above certain income levels.</i></p>
</div>
<div id="edn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a>
Vivek Ramaswamy (while still a candidate) basically says no cuts for seniors—and even hints at a
reduction in current levels of “means” testing—but ultimately positions
that as a boon for the economy, which will help put Social Security on a
firmer financial setting, and then at least partially privatize Social
Security. </i></p>
</div>
<div id="edn3">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/%E2%80%98nothing%E2%80%99-doing-about-social-security#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a>
What’s also weird to me is that it’s hard to find anybody who seems to
think the problem won’t get fixed at some point—though the definitions
of “fixed” vary—and nobody is willing to hazard a guess on who’s going
to step up, much less when or how.</i></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-33463511254988981242024-01-13T07:00:00.002-05:002024-01-14T22:27:03.343-05:00 Is It (Finally) Finally Time?<p>Two headlines on NAPA Net caught my eye this past weekend—provocative “what if” type questions.</p>
<p>I’m talking about “<a href="https://www.napa-net.org/news-info/daily-news/will-retirement-income-solutions-finally-break-through-2024" target="_blank">Will Retirement Income Solutions Finally Break Through in 2024?</a>” and “<a href="https://www.napa-net.org/news-info/daily-news/will-managed-accounts-finally-take-hold-qdias" target="_blank">Will Managed Accounts (Finally) Take Hold as QDIAs?</a>”
Both, of course, included the word “finally” in the title(s)—no doubt
because the underlying premise has been touted in previous years, but
(mostly) come to naught. And yet even now, both were basically based on
predictions of organizations/individuals that have—as my friend John
Sullivan put it—“a dog in the fight.”</p>
<p>More specifically, the <a href="https://www.napa-net.org/news-info/daily-news/will-retirement-income-solutions-finally-break-through-2024" target="_blank">former</a>
finds heightened plan sponsor interest expressed (in an
annuity-friendly trade survey)—and provisions in the original SECURE
Act. And the <a href="https://www.napa-net.org/news-info/daily-news/will-managed-accounts-finally-take-hold-qdias">latter</a>
finds a similar level of interest by plan sponsors in trading out
target-date funds as QDIAs for managed accounts—on a premise that fees
in the latter will decline and that recordkeepers will be able—and plan
participants willing—to incorporate more personalization in their
models.<a href="https://www.napa-net.org/news-info/daily-news/it-finally-finally-time#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0ZkSz8fZV7QX3YPNwl1m37S73w83EdB_gRwOqbXGpmnSWAy7Ebjb7VMc56r6cCnlh8aObGQ3RakCCOQ8oTCxNUsEqEObeNxL4JPfFZbzCwNzBjV5qV0Ni8RSJ3qXWsXMIi1ZcPdnEFu_Zh2IsEwaUv7VE5KXtu2iXzbvhnrkPedKbrIHDBl43HQ/s612/watching%20clock.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="407" data-original-width="612" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0ZkSz8fZV7QX3YPNwl1m37S73w83EdB_gRwOqbXGpmnSWAy7Ebjb7VMc56r6cCnlh8aObGQ3RakCCOQ8oTCxNUsEqEObeNxL4JPfFZbzCwNzBjV5qV0Ni8RSJ3qXWsXMIi1ZcPdnEFu_Zh2IsEwaUv7VE5KXtu2iXzbvhnrkPedKbrIHDBl43HQ/s320/watching%20clock.jpg" width="320" /></a></p>
<p>Not that having a vested interest in the outcome precludes one from
accurately assessing future trends—though it seems prudent to accept
those particular forecasts with a grain of salt. Indeed, one might argue
that the current disappointment in adoption—and take-up rates—of these
programs is, at least to some degree inspired by what often seems the
unbridled optimism of firms/organizations on those prospects reported as
a fait accompli!</p>
<p>Don’t get me wrong; there’s little argument that both developments
could represent a significant enhancement in the retirement prospects of
401(k) savers—if properly designed, priced and implemented. </p>
<p>All of which leaves the industry at large proclaiming the need for
these “evolutions”—and yet scratching our collective heads wondering why
the take-up rates are so…disappointing. Now, you can’t really be
surprised that product advocates are inclined to see a bright future for
their wares—indeed, predicting an "expansion" of interest seems like a
no-brainer (particularly if one demurs on a specific definition as to
how much). But let’s be honest; plan sponsors will NOT be sued for not
offering retirement income—there is, quite simply, no legal obligation
to do so. On the other hand, managed accounts that aren’t truly
personalized will—and have—been sued for costs that exceed allegedly
comparable target-date fund options. </p>
<p>Indeed, where things often fall apart lies in the reality department
in those details—or in skepticism about the realities of those details.
Retirement income as a concept is a laudable goal of retirement
plans—but concerns remain about the efficacy of the solution, not to
mention its cost and portability. Ditto managed accounts which, in any
number of situations, appear to be little more than an expensive
target-date fund—so much so that advisor-respondents to <a href="https://www.napa-net.org/news-info/daily-news/what%E2%80%99s-top-mind-retirement-plan-advisors" target="_blank">the 2023 NAPA Summit Insider</a> characterized them as a <strong><em><u>negative</u></em></strong> game changer. </p>
<p>That said, and to the premise of the articles cited above, this is
not the first time that those bright futures have been predicted.<a href="https://www.napa-net.org/news-info/daily-news/it-finally-finally-time#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
There are, of course, any number of reasons/rationalizations for those
past disappointments—but I’m not sure this time will actually be any
different (feel free to push back in the comments section). More's the
pity because I think your average participant could surely use help on
these fronts.</p>
<p>Let’s face it; TDFs were "easy" (arguably easier than they should
be)—and they solved a here-and-now problem. Retirement income remains
"hard"—and (eventually) solves a problem for workers, but not plan
sponsors. Quite the opposite—as it creates difficulty for the plan
sponsor in the here-and-now. There's progress on that front, for
sure—but likely not (yet) enough to matter. </p>
<p>As for managed accounts—it seems to me their prospects rely on two
developments: (1) plan sponsor willingness to replace their TDF QDIAs
with managed accounts (and that’s by no means certain, despite
Wilshire’s enthusiasm); or (2) the realization of the personalization
promise of those options. At that latter point, it would seem to speak
not only to the expressed need of participants, but to the ability for
plan fiduciaries to provide more than the “blunt instrument” of a
target-date fund. What remains to be seen is if plan fiduciaries will be
willing to trade en masse the “comfort” of the pack’s TDF adoption for
the variability of truly individualized portfolio management in a
default option? </p>
<h3>What It Will Take</h3>
<p>Despite what may seem pessimism on those prospects, I think the key
to shifting the needle of adoption against those impediments will
require that plan sponsors who HAVE made those adoption decisions be
willing to talk about it. Consider <a href="https://www.napa-net.org/news-info/daily-news/shifting-401k-%E2%80%98balance%E2%80%99">IBM’s recent announcement</a>
regarding trading off its matching 401(k) contribution for an employer
cash balance contribution. While it’s an innovative shift, it’s not
likely to be widely adopted—and yet for weeks after that one plan
sponsor announcement, the industry was all a buzz for the
possibilities…of a return to defined benefit plan designs. </p>
<p>So, if you are—or have—a plan sponsor client that has embraced,
adopted (and hopefully implemented) a vibrant, highly personalized
managed account solution—or a retirement income option for participants
on the menu—we want, no <strong><em>need</em></strong>, to hear from
you. We need to know that it’s more than just a good idea; we (all) need
confirmation that it’s practical, efficient and appreciated. </p>
<p>Failing that, we’re likely to continue to wonder if it’s (finally) finally time…again.</p><b> - Nevin E. Adams, JD </b><br /><hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/it-finally-finally-time#_ednref1" id="_edn1" name="_edn1" title="">[i]</a> The trends report here also envisions an uptick in interest in retirement income options.</i></p>
</div>
<p><i><a href="https://www.napa-net.org/news-info/daily-news/it-finally-finally-time#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a>
It might help to set (more) realistic expectations. Rather than these
periodic surveys/reports which “transform” mere expressions of interest
into presumptive action, we need to acknowledge (as most of us do, at
least in person) that these are complicated decisions—and decisions that
are being made in the midst of a highly litigious environment. </i><br /></p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-665594381322296272024-01-06T07:00:00.001-05:002024-01-07T11:41:27.303-05:00 (Not-So) ‘Common’ — Wisdom<p>There
is a “common wisdom” in our business that suggests that all plan
sponsors are, more or less, alike; that large plans are the inevitable
early adopters of trends that, sooner or later, trickle down to plans of
all sizes.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>Consequently,
those who make their living trying to discern trends and patterns
frequently focus on the behaviors in evidence at larger
programs—figuring that, in three years or so, those same characteristics
will emerge across the spectrum.<br /></p>
<p>There’s some logic to that perspective—and at least anecdotal
evidence to support it. Human beings—including plan
fiduciaries—frequently draw comfort and solace from the experience of
others, and smaller programs can hardly be faulted for adopting plan
designs and approaches that have been “vetted” by programs with more
copious resources.</p>
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-CVY9UsVf5AIZrKVGNbWWSolqD3mzPYCHRSGMbSZ5f50DijSmkQtvjQwjcWZzuWVukHvl2qHMRA2GReGEyvg5I4JT8ekVCT1GPM_R16JQ5HcpHW4s6ABDde3jCvnAdGw6z8uf40loHSx3FFehmnrlydJCTxcGUj9UjQc3vmJrisNJiV7INc9bhw/s900/stacking%20dolls.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="579" data-original-width="900" height="206" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-CVY9UsVf5AIZrKVGNbWWSolqD3mzPYCHRSGMbSZ5f50DijSmkQtvjQwjcWZzuWVukHvl2qHMRA2GReGEyvg5I4JT8ekVCT1GPM_R16JQ5HcpHW4s6ABDde3jCvnAdGw6z8uf40loHSx3FFehmnrlydJCTxcGUj9UjQc3vmJrisNJiV7INc9bhw/s320/stacking%20dolls.jpg" width="320" /></a></div>Sure enough, there are areas in which larger programs once
dominated—but over time those variances have disappeared. For example,
according to the Plan Sponsor Council of America’s 66<sup>th</sup>
Annual Survey of Profit-Sharing and 401(k) plans, there is now
essentially no difference in the availability of Roth options (more than
90% across the board do), and no longer any difference in permitting
catch-up contributions (also about 90% for both the largest and smallest
plans)—and just about the same percentage of workers took advantage of
this feature. Nearly all plans of all sizes accept rollovers from other
plans—while just under half of plans of all sizes encourage roll-ins.
And while it’s hardly common, in-plan annuity options are to be found at
about 1 in 10 plans, regardless of size.<p></p>
<p>That said, I have always found it dangerously simplistic to assume
that small plans will, inevitably, follow along eventually in the
footsteps of their larger cousins.</p>
<p><strong>‘Less’ Likely</strong></p>
<p>On the other hand, consider that—and this has long been the case—that
the smallest employers (those with less than 50 employees) were
significantly less likely to offer automatic enrollment than the largest
programs—those with 5,000 or more workers (28.9% versus 71.8%),
according to the Plan Sponsor Council of America’s 66<sup>th</sup> Annual Survey of Profit-Sharing and 401(k) plans.<a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a> </p>
<p>There’s also a big gap in opening the door to participation; more
than three-quarters (77.9%) of those larger employers now offer
immediate eligibility, versus just 30.4% of smaller employers, and 37%
of those with 50-199 workers. Indeed, the most common for smaller
employers remains a year. Similarly, to receive matching contributions,
two-thirds (62.2%) of the largest plans allow them immediately, while
just 28% of smaller employers do—and 45.7% overall. Therein lies some of
the danger in relying solely on the aggregate responses in discerning
trends—like averages in any assessment, they can obscure considerable
variances in the underlying responses.</p>
<p>Note that the largest plans were also significantly more likely
(93.1%) to report having an investment policy statement (IPS) than were
the smallest plans (though more than two-thirds of those did). There’s
some irony to be found in the reality that while just over a third of
the smallest employers have 26 or more fund options available on the
menu, only half as many (17.1%) of the largest have that many (roughly a
third have 11-15). Smaller plans were also notably less likely to
review those options; only half did so on a quarterly basis, compared to
81% of the largest programs.</p>
<p><strong>Advisor Attributes</strong></p>
<p>There were also differences in advisor compensation; the vast
majority (81.1%) of the largest programs are using a fixed fee, while
only about a quarter of the smallest are (60% of those are using a
percentage of assets basis). Robo-advisors were much more typical (28%)
at the largest plans than the smaller programs (7.8%). The smallest
plans were notably more reliant on advisors<a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
for retirement committee plan education (75.9%), while the largest
plans were more likely to lean on an ERISA attorney (68%) than an
advisor (37%). </p>
<p>The largest plans were notably more likely (6.4%) to be considering a
change to provider or advisor in 2024 than the smallest (2.7%). On the
other hand, 6% seemed to be a pretty solid response across the board.</p>
<p>Having worked for huge firms—and considerably smaller ones—I can tell
you that, when people come together in groups, they are not as
different as you might think (or hope, as the case may be). That said,
resources and priorities differ and often diverge. Those who target
specific niches—be they industry, geographic or plan size—are well
advised to be alert to the potential divergence from the “common wisdom”
of industry trends.</p>
<p>After all, we may all be alike—but that doesn’t mean we’re all the same.<a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a></p>
<div><b><i>- Nevin E. Adams, JD
</i></b><hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
Though that’s likely at least partially attributable to the
preponderance of safe-harbor plan designs—73.5% of smaller employers
were safe harbor plans, compared with 36.7% of larger employers.</i></p>
</div>
<div id="edn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a>
This actually was the case for all plan sizes other than 5.000+, with
somewhere between three-quarters and two-thirds of responding employers
noting that the advisor provided that education.</i></p>
</div>
<div id="edn3">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/not-so-%E2%80%98common%E2%80%99-%E2%80%94-wisdom#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a> Of course, to see those plan size breakdowns, you need the full report—details on how to obtain it can be found at <a class="ext" href="https://www.psca.org/research/401k/66thAR" target="_blank">https://www.psca.org/research/401k/66thAR</a></i><span class="ext"></span></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-8113357223191457352023-12-30T07:00:00.002-05:002024-01-01T22:58:16.815-05:004 Fiduciary Resolutions for 2024<p><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A
brand new year awaits us – and with the New Year comes an opportunity
to assess and reassess – for some when, resolutions for the cessation of
bad behaviors and the beginning of better ones are in vogue. Here are
some for plan fiduciaries for 2024 – that could benefit plan outcomes
for years to come. </span> <br /></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">See if your target-date options are over-weight(ed)</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Flows
to target-date funds have continued to be strong – and little wonder,
what with their positioning as the qualified default investment
alternative (QDIA) of choice for most 401(k)s. That said, the vast
majority of those assets are still under the purview of an incredibly
small number of firms – nearly all of which (despite marketing brochures
to the contrary) appear to share very similar views as to what an
appropriate glidepath is supposed to look like – and nearly all of which
have embraced the notion that a target-date is little more than a speed
bump along the “through” target-date glidepath. <br /></span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A
target-date fund is, of course, a plan investment. Like any plan
investment, if it fails to pass muster, a plan fiduciary would certainly
want to remedy that situation, including removing the fund if necessary
(don’t take my word for it – that’s coming straight from the Labor
Department). Particularly in view of recent market volatility, it’s
worth (re)examining the asset allocations – and perhaps most
significantly those that are applied to target dates that are near-term –
and ask yourself – should an individual within five years of retirement
have that much invested in those options? </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Look,
the reasons cited behind TDF selection run a predictable gamut:
price/fees, performance (past, of course, despite those disclaimers),
platform (as in, it happens either to be their recordkeepers or
compatible with their program) – and doubtless some are actually doing
so based on an objective evaluation of the TDF’s suitability for their
plan and employee demographics. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpd68usA7pcK9aiAKlQnocxo3ikMxaqDCjaxLQc45qlJEE3C-f6b1bkf955wTznD-Y3Jk72FSMyK935ATDR4VcMxVEycKjofX4DDtqTvX_yxn8s__1iqb009vCf8lIitfMYBnDFRp1jDLrMM-VEOrZP5aNtbCEyQDLKz-BHKnD-awmbjbPGmXUyA/s244/resolutions.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="148" data-original-width="244" height="148" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpd68usA7pcK9aiAKlQnocxo3ikMxaqDCjaxLQc45qlJEE3C-f6b1bkf955wTznD-Y3Jk72FSMyK935ATDR4VcMxVEycKjofX4DDtqTvX_yxn8s__1iqb009vCf8lIitfMYBnDFRp1jDLrMM-VEOrZP5aNtbCEyQDLKz-BHKnD-awmbjbPGmXUyA/s1600/resolutions.jpg" width="244" /></a></div><p></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Whatever
your rationale, it’s likely that things have changed – with the TDF’s
designs, the markets, your plan, your workforce, or all of the above –
and it’s probably (past) time you took a fresh look. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Pump up the default rate in your auto-enrollment plan</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </strong></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">While
a growing number of employers are auto-enrolling workers in their
401(k) plan, one is inclined to assume that, a decade and change after
the passage of the Pension Protection Act, if a plan hasn’t done so by
now, they likely have some very specific reasons. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">But
for those who have already embraced automatic enrollment, those are
plans that have (apparently) overcome the range of objections: concerns
about paternalism, administrative issues, cost – some may even have
heard that fixing problems with automatic enrollment can be – well,
problematic (though things have gotten a little easier on that front). </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With
more than a couple of decades of experience under our belts (a third of
that under the auspices of the Pension Protection Act of 2006), we know
a couple of things. First, 3% isn’t “enough” (ironically, that is
probably what accounts for its popularity – it’s small enough that it
wasn’t thought to spur massive opt-outs by automatically enrolled
participants). We also know (or should) that the auto-enrollment safe
harbor of the PPA calls for a minimum starting deferral of 3%, which is a
floor, not a ceiling. And finally, that – at least according to any
number of industry surveys – a default contribution rate twice as high
as the prevalent 3% would likely not trigger a big surge in opt-out
rates. However, there is a great deal of difference in the retirement
outcomes between the two. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">On
an encouraging note, more than half of the respondents to the 66th
Annual Survey of Profit-Sharing and 401(k) Plans now have an initial
default contribution rate in excess of 3% - and nearly as many (27.6%)
have a rate of 6% as do (29.2%). </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Give </strong><a class="editor-rtfLink" href="https://www.napa-net.org/news-info/daily-news/reenrollment-if-first-you-don%E2%80%99t-%E2%80%98succeed%E2%80%99" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">reenrolling</strong></a><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> a second thought</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">There
is a natural human tendency to apply change from a point in time
forward, to apply a new approach in plan enrollment, like automatic
enrollment only prospectively, to workers who join the company after the
point in time at which it is effective, rather than retroactively. And
sure, workers who have had their chance to enroll voluntarily may well,
in their refusal to do so, have spoken their intent not to participate
at a previous point in time. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, that was then and this is </span><a class="editor-rtfLink" href="https://www.napa-net.org/news-info/daily-news/if-first-you-don%E2%80%99t-succeed%E2%80%94-case-401k-re-enrollment" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">now</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.
If they don’t want to participate, it’s easy enough to opt-out. But
maybe they didn’t fill out that form the last time because they forgot
to, because the investment menu was too complicated or intimidating, or
maybe the valid reason(s) they had then no longer applied. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Regardless, don’t you owe them the same opportunity that you are giving your new hires? </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Develop a plan budget</strong></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Most
financially-focused New Year’s Resolutions focus on spending (less) or
saving (more)—and the really thoughtful ones do both—all tied around the
development of a budget that aligns what we have to spend with what we
actually spend. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Most
(many?) plans have a budget when it comes to the expenditures that
require corporate funding. Less clear is how many establish some kind of
budget when it comes to what participants have to spend. Now, granted,
what they pay will vary based on any number of …variables—but an
essential part of ensuring that the fees paid by the plan (for the
services provided to the plan) is knowing how much—and for what. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">At
some level, that means not only keeping an eye on things like expense
ratios, the options with revenue-sharing and the availability of
alternative share classes (or options like CITs)—but it also means
having an awareness not only of the plan features but the usage rates of
those plan features. </span></p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </p>
<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Because when it comes to retirement plans, there often IS a direct link between spending less and saving more. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b><i>- Nevin E. Adams, JD</i><br /></b></span></p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-88893756144578444602023-12-23T07:30:00.004-05:002024-01-01T21:08:03.649-05:00 You Better Watch Out…<p>“You better watch out, you better not cry, you better not pout…”</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtKGG37nuL2VacIzbsO_gfmEgJ8ZAHQS8oSs-Z_YYT6AKZLXvW-q50XclBDtDDi2cLWYVOVXyScMMz6XDzvT_0ePjNRIFb2QBllc3AVb9Ba1GWHQ5BE6L1oD1KI6Ep1E_A8a62tiNFmC_BfWs_vvJZqX7BlZTXHZ_61B8t-5y0ADY4eT5H6ekx6g/s2100/Naughty%20Christmas.jpeg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1680" data-original-width="2100" height="256" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtKGG37nuL2VacIzbsO_gfmEgJ8ZAHQS8oSs-Z_YYT6AKZLXvW-q50XclBDtDDi2cLWYVOVXyScMMz6XDzvT_0ePjNRIFb2QBllc3AVb9Ba1GWHQ5BE6L1oD1KI6Ep1E_A8a62tiNFmC_BfWs_vvJZqX7BlZTXHZ_61B8t-5y0ADY4eT5H6ekx6g/s320/Naughty%20Christmas.jpeg" width="320" /></a></div>
<p>Those
are, of course, the opening lyrics to that holiday classic, “Santa
Claus is Coming to Town.” And while the tune is jaunty enough, the
message—that there’s some kind of elfin “eye in the sky” keeping tabs on
us—has always struck me as just a little bit… creepy.</p>
<p>That said, once upon a time, as Christmas neared, it was not uncommon
for my wife and I to use those images to caution our occasionally
misbehaving brood that they had best be attentive to how their (not
uncommon) misbehaviors might be viewed by the big guy at the North Pole.</p>
<p>In support of that notion, a few years back—well, now it’s quite a
few years back—when my kids still believed in the (SPOILER ALERT)
reality of Santa Claus, we stumbled across an ingenious <a class="ext" href="http://www.claus.com/naughtyornice/index.php.htm" target="_blank">website</a><span class="ext"></span>
that purported to offer a real-time assessment of their “naughty or
nice” status. Indeed, nothing we said (or did, or threatened) ever 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.</p>
<p><br />In fact, in one of his final years as a “believer,” my son (who, it must be acknowledged, had been <strong><em>particularly</em></strong>
naughty that year) was on the verge of tears, worried that he’d find
nothing under the Christmas tree but the lump of coal he so surely
“deserved.”<a href="https://www.napa-net.org/news-info/daily-news/you-better-watch-out%E2%80%A6#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a></p>
<p>In similar fashion, most of those responding to the ubiquitous
surveys about their retirement confidence and preparations don’t seem to
do much in the way of rational responses to the gaps they clearly see
between their retirement needs and their savings behaviors. Not that
they actually believe in a retirement version of Stst. Nick, but that’s
essentially how they behave—or more accurately, don’t. </p>
<p>I’m talking about the majorities who—asked to assess their retirement
confidence—express varying degrees of doubt and concern about the
consequences of their “naughty” behaviors—but like my son in that week
before Christmas, they tend to only worry about it—far too late to
influence the outcome.</p>
<p>Ultimately, the volume of presents under our Christmas tree never
really had anything to do with our kids’ behavior, of course. 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 expected it to modify their behavior (though we hoped,
from time to time), but because we believed that kids should have a
chance to believe, if only for a little while, in those kinds of
possibilities.</p>
<p>This is, of course, a season of giving, of coming together, of
sharing with others. However, 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 lives, our relationships
with others, and yes, our financial wellness.</p>
<p>So, yes, Virginia, there <strong><em>IS</em></strong> a Santa
Claus—but he looks a lot like you, assisted by “helpers” like your
workplace retirement plan, the employer match, and your retirement plan
advisor.</p>
<p>Happy Holidays!</p>
<p><b><i> - Nevin E. Adams, JD</i></b><br /></p>
<p><em>p.s.: I am happy to report that the “naughty or nice” site is
still active. I’m even happier to report that, as of this writing, yours
truly was rated “super nice,” with the following notation: “Has been
nice most of the year (not just near Christmas)! Makes others happy.
Could share a little more, however. Politeness is sometimes very good.
Can be great listener.”</em></p>
<div>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><a href="https://www.napa-net.org/news-info/daily-news/you-better-watch-out%E2%80%A6#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
Fortunately for him (and our parental piece of mind), the site does
allow for multiple evaluations—and my son was able to keep trying until
he got a more “soothing” response.</p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-79825543403989718662023-12-16T07:00:00.004-05:002024-01-01T21:22:14.295-05:00Making a Move<p>My
wife and I are in the process of moving to a new home—and it occurs to
me that the process of changing homes is a lot like changing
recordkeepers. Here’s how.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p><strong>Know What You’re Looking For</strong></p>
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikp4gjYFPwdmTWtl7zXqU4YACOGTiJsMhyphenhyphenHtOhGm_HR5Y1F1MHq7aliRBKu281ZcXJHjSujoS9QPJFHHBZXl9A-fQPNpRejUe4_JUMquLyFmLalWkj-rGyP1LZRZ6UBlh67AxfbyJiIAc1ts0P_KoxaSV25bTtybBGCM9f_MAA8CmDlxik64xwIQ/s2592/IMG_0079.JPG" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1936" data-original-width="2592" height="239" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikp4gjYFPwdmTWtl7zXqU4YACOGTiJsMhyphenhyphenHtOhGm_HR5Y1F1MHq7aliRBKu281ZcXJHjSujoS9QPJFHHBZXl9A-fQPNpRejUe4_JUMquLyFmLalWkj-rGyP1LZRZ6UBlh67AxfbyJiIAc1ts0P_KoxaSV25bTtybBGCM9f_MAA8CmDlxik64xwIQ/s320/IMG_0079.JPG" width="320" /></a></div>We’ve made about a half dozen moves during our 37-year marriage—all
driven by work, anchored by commuting concerns, and—in all but the first
and last—school considerations. However, this particular move (my wife
swears it’s the last one) literally started with a blank sheet of paper
and a “so where would you like to live” conversation. Several
conversations, actually. For this move, our high-level priorities
involved climate (we’re not fans of snow, hurricanes, wildfires, or
earthquakes), ready access to good healthcare (we’re not getting any
younger), and proximity to cultural activities/things to do (we’re not
THAT old). Indeed, with no particular ties to our current residence, and
no external anchoring factors like grandchildren to consider (those
with four legs don’t really “count”), we had a quick “oceans or
mountains” discussion—and agreed on the latter.<br /><p></p>
<p>Having established that high-level target, we then proceeded to look
for specific houses—and that’s where things got tricky, in no small part
because of the current “fluidity” in the real estate market. That said,
the house we bought in 2011 to accommodate us, three kids and four dogs
(that’s not a typo) was way more than the two of us (and just two dogs)
now require. The multiple flights of stairs in our home that were once
“interesting” were now a potential concern (particularly as they
required scaling every time our dogs wanted to answer nature’s call).
Oh, and there was the matter of price. </p>
<p>That said, we had a geographic target, some guardrails for housing
considerations, and while the latter in particular certainly limited our
field of consideration(s), it made it easy(er) to conduct preliminary
searches online—and ultimately to provide guidance to our realtor.</p>
<p>Effectively—and prudently—searching for a new recordkeeper requires a
similar discipline. Simply pushing out a sample RFI or RFP with no
clear idea of what you’re looking for (or looking to fix) will likely
only confuse, complicate, and extend the process—and in all likelihood
leave you with nothing but a general frustration. That means knowing
what you like (and don’t) about your current situation, and doing just a
bit of blue-skying as to things you’d really like to be able to
consider. Who knows, that could be possible, even with your current
provider… but you might need to ask.</p>
<p><strong>Don’t Rely on the Marketing Brochures (or the Flowery RFP Responses)</strong></p>
<p>As our targeted area was several hundred miles away, we did a LOT
online (following the aforementioned driving around part), and relied
pretty heavily on Zillow, where we found lots of good information about
the properties, and generally speaking dozens of photographs. That said,
it was pretty obvious that the written descriptions were almost pure
marketing—flowery hyperbole that, from time to time, was good for a
laugh if nothing else. </p>
<p>The pictures did play a role in our reviews—until we discovered that
while a picture may be worth a thousand words, the chosen angle and lens
can make a room (or yard) look bigger than it is—and a neighbor’s
home…vanish. Indeed, our own listing—though pictures were taken on a
cloudy day, were “brightened” via photoshop. A picture may be worth a
thousand words—but it pays to see things with your own two eyes. </p>
<p>As for recordkeeping “homes,” one can hardly blame marketing/sales
for putting their offerings’ best promotional foot forward in any
commercial endeavor. In fact, those materials may well make statements
or performance claims that are 100% accurate, and even understated.
But—as was the case with our visualizations, I wouldn’t take any at face
value without some level of validation.</p>
<p><strong>Consider a Site Visit</strong></p>
<p>As I noted, our previous moves had all been driven by considerations
such as my commute, and we often had to make decisions based on distance
and economics, rather than an appreciation for the characteristics of
the community. Oh, we'd driven around with a realtor, and done some
research online—but we never had (or at least felt we had) enough time
to really get to experience what it would be like to live there.</p>
<p>While we were somewhat familiar with our targeted area (eastern
Tennessee), that was mostly as tourists, and we hadn’t really had a
chance to experience the surrounding communities—where we would actually
live. So, earlier this year we made it a point to go spend some time
driving around and getting a sense of the various communities. In the
process we were able to rule out some as being too remote, others as
being too built up, and still others that looked considerably different
in person than they did on paper. We weren’t ready to make a decision
yet, but having gotten a feel for the realities “on the ground,” it
allowed us to better focus our online considerations later.</p>
<p>Admittedly, site visits to providers aren’t always instructive.<a href="https://www.napa-net.org/news-info/daily-news/making-move#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>
Let’s face it, however linear and production-flow oriented it may be,
this business doesn’t generally lend itself to an assembly line
visualization—and walking past row after row of (nearly) identical
cubicles might not tell you a lot, however eloquent your guide(s). There
is, however, something to be said for actually seeing the place where
the “sausage” is made, to see how folks get along, to see the
environment in which they operate. </p>
<p><strong>Hire a Professional ‘Inspector’</strong></p>
<p>Some (perhaps all?) states require an inspection of the property by a
licensed inspector. That said, the inspectors we’ve hired over the
years have been distressingly inconsistent in the quality and
thoroughness of their review (ditto the realtors we’ve engaged, but
that’s a story for a different time)—and, generally speaking, (much)
less discerning (it seems) than those engaged by the individuals buying
OUR house(s). </p>
<p>That said, this last round our inspector did a world-class review of a
property that we’d likely have purchased absent his findings. He went
places we didn’t (and in some cases, couldn’t), brought to our attention
things I hadn’t considered—and in that process not only documented
potential issues, he also noted which were minor and those that would
require significant expenditures. Now, admittedly that’s what he was
SUPPOSED to do—but we’ve paid more only to have others do less (and then
later paid more to remedy the issues they should have identified). It
saved us time and money, and I am thrilled that he also did the
inspection on the house we chose next. </p>
<p>There’s a lot that goes into making a change in providers, and it
requires information and expertise that most plan sponsors don’t have,
and don’t really have an opportunity to become expert in. Change can be
difficult, but a change that makes a bad situation worse, or that belies
the promises in the marketing brochures and sales pitch—well, that can
be a nightmare—albeit one that frequently doesn’t manifest itself right
away. All the more so in view of the fiduciary responsibility—and
personal liability—for decisions that aren’t in the best interests of
plan participants and beneficiaries.</p>
<p>In sum, you’re not required to be an expert in such matters—but ERISA
requires that, if you’re not, you engage the services of those who are.
And that’s an essential element in “making a move” to a new home—or
deciding not to.</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<div>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/making-move#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
Failing that, there’s something to be said for the perspective of
experts who HAVE made that visit—and/or the references of current (and
preferably EX) clients. </i></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-44008818033203000252023-12-09T07:30:00.001-05:002023-12-09T07:30:00.149-05:00When You Assume...<div class="reader-article-content reader-article-content--content-blocks" dir="ltr">
<p class="ember-view reader-content-blocks__paragraph" id="ember5396">
Over the years, so-called personal finance experts have provided
valuable information—but also a smattering of misinformation—but I can
think of none quite as egregious as some remarks recently made by Dave
Ramsey.
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5397">
By now I’m sure you’ve heard—or heard about—his “counsel” with
regard to acceptable retirement withdrawal rates—and his disparagement
of the “supernerds” who would dare to disagree with him. As for that
counsel, at a high level,<span class="white-space-pre"> </span><a class="app-aware-link " data-test-app-aware-link="" href="https://twitter.com/mbontrager5/status/1722478848573329702" target="_self">Ramsey maintains</a><span class="white-space-pre"> </span>that
an 8% withdrawal rate is not only doable, but sustainable. All you have
to do is be invested 100% in equities—oh, and assume a 12% return.<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_edn1" target="_self">[i]</a>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5398"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-ZCqXsgz1Cc4pYG4ZhWHRWG-cujEQbyZ9zFCoBLLdYPPVTPTPLVlMrrIlGwkvQI6nTGB7kHJOUBzDLoeWbg__rr8QaTyIAhbxdk9uEWX5qk83h8THSDc2P7i8hTy0Agj2pmvRIayTRbSV7rMc4p0n1GS1cdE4sc8WDDQGJQUIdCzeUYu2exD8Gw/s757/assumptions-spss.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="631" data-original-width="757" height="267" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-ZCqXsgz1Cc4pYG4ZhWHRWG-cujEQbyZ9zFCoBLLdYPPVTPTPLVlMrrIlGwkvQI6nTGB7kHJOUBzDLoeWbg__rr8QaTyIAhbxdk9uEWX5qk83h8THSDc2P7i8hTy0Agj2pmvRIayTRbSV7rMc4p0n1GS1cdE4sc8WDDQGJQUIdCzeUYu2exD8Gw/s320/assumptions-spss.jpg" width="320" /></a></div>
Of course, such machinations have always been predicated on
assumptions—about inflation, about market returns and, most notably,
about the length of life itself. That said, this didn’t become a
specific focus—a so-called “rule of thumb”—until 1994, when financial
planner William Bengen<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_edn2" target="_self">[ii]</a><span class="white-space-pre"> </span>claimed<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_edn3" target="_self">[iii]</a><span class="white-space-pre"> </span>that
over every rolling 30-year time horizon since 1926, retirees holding a
portfolio that consisted 50% of stocks and 50% of fixed-income
securities could have safely withdrawn an annual amount equal to 4% of
their original assets, adjusted for inflation without… running out of
money.<br /><span class="white-space-pre"> </span>
<p></p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5399">
That said, even though it was predicated on a number of
assumptions that might not be true in the real world—a 30-year
withdrawal period, a 50/50 portfolio mix of stocks and bonds,
assumptions about inflation—oh, and a schedule of withdrawals unaltered
by life’s changing circumstances—well, with the return of inflation as a
reality (rather than a theoretical construct), it now seems that
there’s an annual scramble to reassess that “safe” withdrawal rate.
Indeed, a couple of years back a Morningstar<span class="white-space-pre"> </span><a class="app-aware-link " data-test-app-aware-link="" href="https://www.morningstar.com/lp/the-state-of-retirement-income" target="_self">paper</a><span class="white-space-pre"> </span>challenged
its conclusions in view of “current conditions”—opining that “using
forward-looking estimates for investment performance and inflation,” the
Morningstar authors said that the standard rule of thumb should be
lowered to 3.3% from 4%.
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5400">
That said, this is something of a moving target, and a few weeks ago Morningstar<span class="white-space-pre"> </span><a class="app-aware-link " data-test-app-aware-link="" href="https://www.morningstar.com/lp/the-state-of-retirement-income" target="_self">moved</a><span class="white-space-pre"> </span>the
target back to 4% (after having opined that a starting safe withdrawal
rate for a 30-year horizon with a 90% probability of success was 3.3% in
2021 and 3.8% in 2022). Enter Dave Ramsey and HIS assumptions that
allegedly support a much higher rate (though I don’t recall him offering
a probability figure of savings lasting as long as your life<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_edn4" target="_self">[iv]</a>).<span class="white-space-pre"> </span>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5401">
Now, in fairness, even the Morningstar folks allow for some
variance in “safe” withdrawal rates—explaining that the increase from
2022 in this “highest safest starting withdrawal percentage” for a
30-year horizon with a 90% probability of success “owes largely to
higher fixed-income yields, along with a lower long-term inflation
estimate.” Moreover, they assert that it’s predicated on assumed
portfolios that hold “between 20% and 40% in equities and the remainder
in bonds and cash”—which is, in itself, a fairly sizeable range.<span class="white-space-pre"> </span>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5402">
There’s been plenty of evidence—both empirical and
anecdotal—that retirement “spends” aren’t nice, even streams. Life’s
circumstances change, of course—and our health care, and health care
costs, are notoriously variable. There’s a sense that the pace of
spending earlier in retirement is more like that anticipated in most
retirement education brochures—travelling and such—but that pace slows
down as we do.<span class="white-space-pre"> </span>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5403">
At its core, once you stipulate certain assumptions about the
length of retirement, portfolio mix/returns, and inflation, a guideline
like the 4% “rule” is really just a mathematical exercise. A 4% “rule”
may be simplistic, but it’s also simple—and when it comes to getting
your arms around complex financial concepts and distant future events,
there’s something to be said for that.<span class="white-space-pre"> </span>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5404">
But—and as Dave Ramsey’s response should remind us—when you
“assume” … (or when others assume on your behalf) make sure you
understand the assumptions required to make it “work”—and perhaps more
importantly, the likelihood/probability that those assumptions will be a
reality. </p><p class="ember-view reader-content-blocks__paragraph" id="ember5404"><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5405">
<span class="white-space-pre"> </span>
</p>
<hr />
<p class="ember-view reader-content-blocks__paragraph" id="ember5406">
<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_ednref1" target="_self"><em>[i]</em></a><em><span class="white-space-pre"> </span>One of the more humorous—and insightful—rebuttals on all this came from SRP’s Jeanne Sutton:<span class="white-space-pre"> </span></em><a class="app-aware-link " data-test-app-aware-link="" href="https://www.linkedin.com/feed/update/urn:li:activity:7130951358609838080/" target="_self"><em>https://www.linkedin.com/feed/update/urn:li:activity:7130951358609838080/</em></a>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5407">
<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_ednref2" target="_self"><em>[ii]</em></a><em><span class="white-space-pre"> </span></em><a class="app-aware-link " data-test-app-aware-link="" href="https://www.forbes.com/advisor/retirement/four-percent-rule-retirement/" target="_self"><em>https://www.forbes.com/advisor/retirement/four-percent-rule-retirement/</em></a>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5408">
<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_ednref3" target="_self"><em>[iii]</em></a><em><span class="white-space-pre"> </span>See<span class="white-space-pre"> </span></em><a class="app-aware-link " data-test-app-aware-link="" href="http://www.portfolioconstruction.com.au/obj/articles_perspectives/retailinvestor.org_pdf_Bengen1.pdf" target="_self"><em>www.portfolioconstruction.com.au/obj/articles_perspectives/retailinvestor.org_pdf_Bengen1.pdf</em></a>
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember5409">
<a class="app-aware-link " data-test-app-aware-link="" href="https://www.napa-net.org/news-info/daily-news/when-you-assume%E2%80%A6-0#_ednref4" target="_self"><em>[iv]</em></a><em><span class="white-space-pre"> </span>That said, Morningstar’s John Rekenthaler has—and you can read that analysis<span class="white-space-pre"> </span></em><a class="app-aware-link " data-test-app-aware-link="" href="https://www.morningstar.com/retirement/an-8-retirement-withdrawal-rate" target="_self"><em>here</em></a>
</p>
</div><p> </p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-3606559400535799402023-12-02T07:00:00.004-05:002023-12-11T19:22:57.105-05:00Are There Boogeymen in the New Fiduciary Proposal?<div class="content clearfix">
<div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even"><p>Like
many of you, I have spent a fair amount of time over the past couple of
weeks reading and analyzing the impact and import of the new fiduciary
rule proposal—not to mention the legal pundits who seek to tell us what
they think it means, or might mean, regardless of what the proposal
actually says.</p>
<p>At
a high level, it seems to me (and several well-regarded ERISA
attorneys) that retirement plan advisors who are today operating under
the auspices of PTE 2020-02 should have little to worry about under the
new proposal. Indeed, the biggest controversies around the proposed rule
seem to be extending the reach of PTE 2020-02 to organizations and
entities that hadn’t previously had to adhere to those requirements. <br /></p>
<p>But if you’re already doing so—and surely if you’re a retirement plan
advisor you are—there’s little of concern in the proposal. In fact, you
might well draw comfort from the possibility that entities and advisors
that have competed with you for rollover business would have to adhere
to the same rules and disclosures that are now part of your business,
painful though it may have been to adopt them at the time. Of no small
consequence is that recommendations to plan sponsors regarding which
investments to include in 401(k) and other employer-sponsored
plans—advice that is not subject to the SEC’s Regulation Best Interest
and right now is not required to be in the customer’s best
interest—would be.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8H5xXH2ImqOa1uG8GDlQ70lwP6kvayNx42JDrKX1z03CLfmzvL3rJYDYH4r3LlzBu2qvn4roqQXQp4S0xqHYPxqn56SaUXcL9gtjdNP6UeqECCz4wn0pnGE9Fy_ly-LL9yyS7z6roOA8xNPujOdydIK2Dq2Z_yzaq_sbjOWLemMpdyN-XdUxsbg/s612/boogie.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="440" data-original-width="612" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8H5xXH2ImqOa1uG8GDlQ70lwP6kvayNx42JDrKX1z03CLfmzvL3rJYDYH4r3LlzBu2qvn4roqQXQp4S0xqHYPxqn56SaUXcL9gtjdNP6UeqECCz4wn0pnGE9Fy_ly-LL9yyS7z6roOA8xNPujOdydIK2Dq2Z_yzaq_sbjOWLemMpdyN-XdUxsbg/s320/boogie.jpg" width="320" /></a></div><p></p>
<p>Make no mistake, this is a new and considerably revised proposal. One
that appears to not only have acknowledged the things that led a
federal district court to vacate the 2016 rule—but to actively address
and remedy those missteps. </p>
<p>That said, rumors abound, and some law firms (certainly those that
represent the interests of those who would be newly subject to new
regulations) have, to my read anyway, been inclined to see plenty of
clouds in the silver linings—and to characterize the new proposal as
basically being a resurrection of the old one (to that end, the
Halloween unveiling made for plenty of “zombie” references)—in the
process imagining things that aren’t actually “there.” </p>
<p>Perhaps the most pernicious is one that they admit isn’t there—but
argue it might be; the so-called “private right of action”—which means
simply that individuals would be able to sue on their own for a breach
of the law. The concerns harken back to comments made during the
controversy concerning the 2016 rule that the fiduciary rule was not
only opening a new door for litigation, but that the Labor Department
was perhaps even counting on it. </p>
<p>Now, on this, and other points in the new proposal, the DOL
acknowledges both the issues raised in the vacating of the rule by the
Fifth Circuit, and the deliberate steps they’ve taken to avoid those
issues in the new proposal. “The 2016 Rulemaking was significantly
different than the current rulemaking,” the DOL explains in the preamble
to the proposed rule, “in that it imposed a fiduciary obligation on
virtually all investment recommendations specifically directed to
retirement investors, imposed demanding contract and warranty
requirements in the IRA market, which gave investors a direct cause of
action against firms and advisers for breach of the Impartial Conduct
Standards, and represented a significant break from the then-existing
regulatory baseline.”</p>
<p>To be sure, there is already a cause of action for fiduciary breaches
under ERISA for recommendations to plans and participants—and there’s
no question that while under a recent decision in a Florida district
court, rollover recommendations are not considered fiduciary
recommendations under current law—but will be under the proposed rule.</p>
<p>That said, in considering this latest proposal, one notable DC law firm <a class="ext" href="https://www.morganlewis.com/pubs/2023/11/a-rose-is-a-rose-dols-new-fiduciary-proposal-is-the-same-as-the-vacated-2016-rule" target="_blank">says</a><span class="ext"></span>,
for example that the proposal includes “strong enforcement mechanisms,
including provisions that give the DOL oversight and authority over
firms’ individual retirement account (IRA) business and (although DOL
claims otherwise<a href="https://www.napa-net.org/news-info/daily-news/are-there-boogeymen-new-fiduciary-proposal#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>)
a potential private right of action.” That’s right—even though the
Labor Department specifically says otherwise, this law firm has chosen
to read between the lines and see the potential for something the DOL
explicitly denies. </p>
<p>In fact, the Labor Department clearly states in a footnote in the
preamble of the proposed rule that (the underline is mine, for emphasis)
“<u>Unlike the PTEs that were a part of the 2016 Rulemaking, these PTEs
do not, and the amendments would not, include required contracts or
warranties that the Fifth Circuit objected to.” </u> </p>
<p>The footnote goes on to explain that “these prohibited transaction
exemptions also do not exempt a party from status as a fiduciary, and
therefore, the proposals do not affect the scope of the regulatory
definition of an investment advice fiduciary. Rather, the exemption
proposals involve an exercise of the statutory authority afforded to the
Department by Congress to grant administrative relief from the strict
prohibited transaction provisions in Title I and Title II of ERISA for
beneficial transactions involving plans and IRAs.”</p>
<p>Now, the standard of care for “conflicted” recommendations to plans,
participants and IRAs is the Best Interest Standard—a combination of
the prudent man rule and duty of loyalty. If the “conflicted”
recommendation isn’t in the best interest of a retirement investor, the
protection of the prohibited transaction exemption (PTE) is lost and the
advisor isn’t permitted to be legally compensated. That said, the best
interest standard in the PTE isn’t actionable.</p>
<p>Another critical “boogeyman” that proposal critics claim to have seen
there is an undermining of the ability to enforce arbitration clauses
as a precursor to litigation. I say “conjured” because—unlike a
controversial provision in the 2016 rule that barred the use of the Best
Interest Contract Exemption (BIC) if advisory contracts included an
arbitration requirement—there is no mention or reference to that in the
current proposal. </p>
<p>There’s plenty still to analyze and evaluate in this new proposal—and
arguably not as much time to do so as we might prefer. Here’s hoping
most of that time and energy is spent on the things that are actually in
the proposal instead of imaginary “monsters” that aren’t. </p>
<div><b><i> - Nevin E. Adams, JD
</i></b><hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/are-there-boogeymen-new-fiduciary-proposal#_ednref1" id="_edn1" name="_edn1" title="">[i]</a> Their exact words.</i></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-25129708739176441542023-11-22T07:00:00.001-05:002023-11-22T07:55:19.951-05:00A 'Retirement' Thanksgiving<p></p><p></p><div class="content clearfix">
<div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even"><p>Thanksgiving
has been called a “uniquely American” holiday—and so, even in a year in
which there has been what seems to be an unprecedented amount of
disruption, frustration, stress, discomfort and loss—there remains so
much for which to be thankful. And as we approach the holiday season, it
seems appropriate to take a moment to reflect upon, and acknowledge—to
give thanks, if you will.</p>
<p>While
it’s the celebration following a successful harvest held by the group
we now call “Pilgrims” and members of the Wampanoag tribe in 1621 that
provides most of the imagery around the holiday, Thanksgiving didn’t
become a national observance until much later. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq5SiOGpT-jQWIIdlcDJwpPH9rri4Cb4BzoqwAQYXw07dyYCXduNcefp4ZDXCHb1S8zF5lLGo7S8Fb0qBD27NZl1f2_ONlnlTrAr8-dkS5ycGUVHSF4smhRmFEj_95GEcOmw_XI0MAY0earH1_vGPQJmMftFpW8ldPRoUcf7ROCwvZgMJal14Vzg/s677/ThanksgivingThanksCraft_H.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="451" data-original-width="677" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq5SiOGpT-jQWIIdlcDJwpPH9rri4Cb4BzoqwAQYXw07dyYCXduNcefp4ZDXCHb1S8zF5lLGo7S8Fb0qBD27NZl1f2_ONlnlTrAr8-dkS5ycGUVHSF4smhRmFEj_95GEcOmw_XI0MAY0earH1_vGPQJmMftFpW8ldPRoUcf7ROCwvZgMJal14Vzg/s320/ThanksgivingThanksCraft_H.jpg" width="320" /></a><br /></p>
<p>Incredibly, it wasn’t marked as a national observance until
1863—right in the middle of the Civil War, and at a time when, arguably,
there was little for which to be thankful. Indeed, President Abraham
Lincoln, in his proclamation regarding the observance, called on all
Americans to ask God to “commend to his tender care all those who have
become widows, orphans, mourners or sufferers in the lamentable civil
strife” and to “heal the wounds of the nation.”</p>
<p>We could surely stand to have some of that today. </p>
<h3>My List</h3>
<p>With all of the strife and turmoil in our world, there remains much
for which we can all be thankful. And in this, my first year of
“retirement”—well, the list seems even longer this year. </p>
<p><em>I’m once again thankful that so many employers (still)
voluntarily choose to offer a workplace retirement plan—and,
particularly in these extraordinary times, that so many have remained
committed to that promise. I’m hopeful that the encouragements of
prospective legislation, if not the requirements of same, will continue
to spur more to provide that opportunity.</em></p>
<p><em>I’m thankful that there are provisions in SECURE 2.0 that will further, and perhaps dramatically, encourage plan adoption.</em></p>
<p><em>I’m thankful that so many workers, given an opportunity to
participate in these programs, (still) do. And that, under new
provisions in SECURE 2.0, those who gain new access to those programs
will be automatically enrolled, if not immediately, then in 2025.</em></p>
<p><em>I’m thankful that the vast majority of workers defaulted into
retirement savings programs tend to remain there—and that there are
mechanisms (automatic enrollment, contribution acceleration and
qualified default investment alternatives) in place to help them save
and invest better than they might otherwise.</em></p>
<p><em>I’m thankful for new and expanded contribution limits for these
programs—and hopeful that that will encourage more workers to take full
advantage of those opportunities, even if the increases aren’t as big as
last year’s (on the other hand, inflation isn’t as high, either).</em></p>
<p><em>I’m thankful for the Roth savings option that, for all the
negative press and focus on the accounts of a few wealthy individuals,
provides workers with a choice on how and when they’ll pay taxes on
their retirement savings. There’s a LOT to be said in favor of tax
diversification, particularly the way benefits like Social Security and
Medicare are means-tested.</em></p>
<p><em>I continue to be thankful that participants, by and large,
continue to hang in there with their commitment to retirement savings,
despite lingering economic uncertainty, rising inflation, and competing
financial priorities, such as rising health care costs and college
debt—and that their employers continue to see—and support—the merit of
such programs.</em></p>
<p><em>I’m thankful for the strong savings and investment behaviors
(still) evident among younger workers—and for the innovations in plan
design and employer support that foster them. I’m thankful that, as
powerful as those mechanisms are in encouraging positive savings
behavior, we continue to look for ways to improve and enhance their
influence(s).</em></p>
<p><em>I’m thankful that our industry continues to explore and develop
fresh alternatives to the challenge of decumulation—helping those who
have been successful at accumulating retirement savings find prudent
ways to effectively draw them down and provide a financially sustainable
retirement. Trust me, knowing how much your retirement income will be
is an essential element in knowing when you can retire.</em></p>
<p><em>I’m thankful for qualified default investment alternatives that
make it easy for participants to benefit from well diversified and
regularly rebalanced investment portfolios—and for the thoughtful and
ongoing review of those options by prudent plan fiduciaries. I’m hopeful
(if somewhat skeptical) that the nuances of those glidepaths have been
adequately explained to those who invest in them, and that those nearing
retirement will be better served by those devices than many were a
couple of decades ago.</em></p>
<p><em>I’m thankful that the state-run IRAs for private sector workers
are enjoying some success in closing the coverage gap, providing workers
who ostensibly lacked access to a workplace retirement plan have that
option. I’m even more thankful that the existence of those programs
appears to be engendering a greater interest on the part of small
business owners to provide access to a “real” retirement plan.</em></p>
<p><em>I’m thankful that figuring out ways to expand access to workplace
retirement plans remains, even now, a bipartisan focus—even if the ways
to address it aren’t always.</em></p>
<p><em>I’m thankful that the ongoing “plot” to kill the 401(k)… (still)
hasn’t. Yet. Let’s face it, it has a new name, and some new
supporters—but… </em></p>
<p><em>I’m thankful for the opportunity to acknowledge so many
outstanding professionals in our industry through our Top Women
Advisors, Top Young Retirement Plan Advisors (“Aces”), Top DC Wholesaler
(Advisor Allies), and Top DC Advisor Team lists. I am thankful for the
blue-ribbon panels of judges that volunteer their time, perspective and
expertise to those evaluations.</em></p>
<p><em>I’m thankful that those who regulate our industry continue to
seek the input of those in the industry—and that so many, particularly
those among our membership, take the time and energy to provide that
input.</em></p>
<p><em>I’m thankful to (still) be part of a team that champions
retirement savings—and to be a part of helping improve and enhance that
system.</em></p>
<p><em>I’m thankful for those who have supported—and I trust benefited
from—our various conferences, education programs and communications
throughout the year—particularly at a time like this, when it remains
difficult—and complicated—to undertake, and participate in, those
activities. </em></p>
<p><em>I’m thankful for the involvement, engagement, and commitment of
our various member committees that magnify and enhance the quality and
impact of our events, education, and advocacy efforts. </em></p>
<p><em>I’m also thankful for the development of professional education
and credentials that allow the professionals in our industry to expand
and advance their knowledge, as well as the services they provide in
support of Americans’ retirement. </em></p>
<p><em>I’m thankful for the consistent—and enthusiastic—support of our event sponsors and advertisers.</em></p>
<p><em>I’m thankful for the warmth, engagement and encouragement with
which readers and members, both old and new, continue to embrace the
work we do here.</em></p>
<p><em>I’m thankful for the team here at NAPA, ASPPA, NTSA, ASEA, PSCA
(and the American Retirement Association, generally), and for the
strength, commitment and diversity of the membership. I’m thankful—even
in “retirement”—to continue to be able to make a “difference.” I’m
especially thankful to have a friend and true professional like John
Sullivan ready, willing and able to step in as Chief Content Officer.
There are few experiences more miserable than having a job you love
taken over by someone who doesn’t. I’m thankful, so thankful that hasn’t
been the case here. </em></p>
<p><em>I am, of course, thankful for being able to “retire”—to kick back
a bit. While I continue to get good-natured ribbing about how I don’t
know how to “retire,” this first year of not working full-time has been a
blessing in so many ways. I’m especially grateful to my wife for her
encouragement and support throughout nearly four decades (amidst a LOT
of sacrifices) and look forward to this next chapter in our lives. </em></p>
<p><em>But most of all, I’m once again thankful for the unconditional
love and patience of my family, the camaraderie of an expanding circle
of dear friends and colleagues, the opportunity to write and share these
thoughts—and for the ongoing support and appreciation of readers… like
you.</em></p>
<p>Wishing you and yours a very happy Thanksgiving!</p>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-70243847957191958422023-11-18T06:30:00.003-05:002023-11-18T06:30:00.142-05:00 Shifting the 401(k) ‘Balance’?<p></p><p>A
week or so ago, I came across an announcement that IBM was making
changes to its 401(k). More specifically that, effective next year they
were going to replace their matching contribution in their 401(k) with
an employer contribution to a cash balance plan.<a href="https://www.napa-net.org/news-info/daily-news/shifting-401k-%E2%80%98balance%E2%80%99#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>
In the days that followed, the news was picked up in a couple of
different trade publications—the implication being that this might be
signs of a new shift in plan design. Heck, even Teresa Ghilarducci <a class="ext" href="https://www.forbes.com/sites/teresaghilarducci/2023/11/10/ibm-shocking-new-type-of-pension-is-the-old-defined-benefit-plan/?sh=1cbea4013391" target="_blank">weighed in</a><span class="ext"></span>, championing the “evolution” to a defined benefit structure from the “flawed” 401(k). She never misses an “opportunity.”</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>Readers
here are likely familiar with the basic concepts of a cash balance
design. Technically a defined benefit plan, it’s generally referred to
as a “hybrid” because it also has a number of participant-friendly
aspects that it shares with a defined contribution plan, notably an
account balance (though it’s a “notional” one) that is shared with
participants. The benefits accumulate somewhat evenly over time, rather
than being more service “back-loaded” as traditional pension plans tend
to be. But just like a traditional DB plan, cash balance plans are
funded by the employer on an actuarial basis, and the investments are
employer-directed, ostensibly with an eye toward the benefit obligations
that are accruing. Also, some cash balance plans are insured by the
Pension Benefit Guaranty Corporation (PBGC), just like traditional
pensions (and yes, the employer has to pay premiums).<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6fhGnV94eYSYHVCuPE1t9T2__gd3HejYuiIOlfWBAJ1t4dMjEdq4bSNT5iQLb1i3f15UKuMFL2D2oIZrSLYCn6FZLsFm3zB71-Jfd0EyVc-tW6DlgXoegFTzd0eg5fnAUvXifGSvHhdPYY1fR4o8obd-EGvrDMznN7lTtnuI21LMseI_fV1K0xQ/s877/balance.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="500" data-original-width="877" height="182" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6fhGnV94eYSYHVCuPE1t9T2__gd3HejYuiIOlfWBAJ1t4dMjEdq4bSNT5iQLb1i3f15UKuMFL2D2oIZrSLYCn6FZLsFm3zB71-Jfd0EyVc-tW6DlgXoegFTzd0eg5fnAUvXifGSvHhdPYY1fR4o8obd-EGvrDMznN7lTtnuI21LMseI_fV1K0xQ/s320/balance.jpg" width="320" /></a><br /></p>
<p>Of course, cash balance designs aren’t new, nor are they new at IBM,
which (in)famously shifted to one from a traditional defined benefit
plan back in the late 1990s. I say “infamously” because it triggered a
couple of participant lawsuits from individuals who thought their
benefits had been reduced in the move—an age discrimination suit they
won, only to lose on appeal. That said, even in finding for IBM the
appellate court acknowledged that older workers were generally correct
in perceiving "that they are worse off under a cash-balance approach"
because such a plan eliminated the possibility of earning larger
benefits as they neared retirement. "But removing a feature that gave
extra benefits to the old differs from discriminating against them," the
judge wrote. </p>
<p>That controversy notwithstanding, cash balance plans have, in recent
years, proven to be quite popular—particularly among smaller employers
because they provide more funding flexibility than a traditional DB
plan, and the potential for better benefit accumulation than the
non-discrimination and top-heavy test limits often allow with defined
contribution plans, such as a 401(k). But what IBM has done—basically
replacing its 401(k) match with a cash balance plan contribution does
appear to be unique—and worth noting.</p>
<p>As for IBM, while external perspectives on the announcement appear to be largely <a class="ext" href="https://www.morningstar.com/retirement/has-ibm-built-next-generations-401k-plan" target="_blank">positive</a><span class="ext"></span>,<a href="https://www.napa-net.org/news-info/daily-news/shifting-401k-%E2%80%98balance%E2%80%99#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
it remains to be seen how it will be accepted by those it is ostensibly
designed to benefit. Some have already commented that the loss of a
match will reduce incentives to save in the 401(k)—others that the
resulting diminishment in the 401(k) balance will undermine the amounts
available for loans and hardships, though that arguably isn’t the
purpose for those 401(k) savings, either. On the other hand, all
eligible IBM employees stand to get this employer contribution, not just
those who contribute to the 401(k) (though with what is said to be a
97% participation rate, it seems that few are left out at present,
though we don’t know their contribution rates). You don’t have to be a
cynic (though it helps) to imagine that IBM has done the math here, and
that the change is either neutral, or inures favorably to their bottom
line.</p>
<p>People tend to forget that the contributions defined in a defined
contribution plan can be (re)defined each plan year—and while reductions
are rare, they are not unprecedented. That said, even in rolling this
new benefit out, IBM has (according to an internal communication memo
posted online) acknowledged a reduction; “IBMers will also receive a
one-time salary increase to offset the difference between the IBM
contributions they are currently eligible to receive in the 401(k) Plan
and the new 5% RBA pay credit”—though arguably that’s trading a pre-tax
benefit for one on which taxes will be due immediately. </p>
<p>While it’s certainly an interesting move—by a company with a history
of interesting benefit moves—and, despite the enthusiastic response of
Professor Ghilarducci, it seems unlikely to catch on more broadly.
Retirement savers have not only long understood and appreciated not only
the value of an employer match, and so seem unlikely to embrace
“losing” that to new plan they don’t understand, however even the
tradeoffs are presented. As for plan sponsors—well, inertia is a
powerful force in plan design as well—and a big design change that
requires sensitive (and likely) ongoing communication will almost surely
give pause to even the most innovative.</p>
<p>That said, it should serve as a reminder that plan designs can, and
should, serve multiple purposes. It will be interesting to see how this
one pans out.</p><p><b><i>- Nevin E. Adams, JD </i></b>
</p><div><hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/shifting-401k-%E2%80%98balance%E2%80%99#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
It’s actually referred to as a Retirement Benefit Account (RBA), though
the description fits a cash balance plan, and it’s described as being
offered “within IBM’s Personal Pension Plan.”</i></p>
</div>
<div id="edn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/shifting-401k-%E2%80%98balance%E2%80%99#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a> Not exclusively, of course—there’s <a class="ext" href="https://www.linkedin.com/posts/phillip-hulme_pension-ibm-money-activity-7125536854233288704-FFmG/?utm_source=share&utm_medium=member_desktop" target="_blank">cynicism</a><span class="ext"></span> to be found with regard to IBM’s true motives here. </i></p>
</div>
</div>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-38058018724977198982023-11-11T06:30:00.002-05:002023-11-11T06:30:00.183-05:00Checking Your 401(k) Smoke Detectors<p></p><p>Daylight
saving time doesn’t really live up to its name—but as you’re resetting
clocks, anxiously awaiting the realignment of circadian rhythms and
changing smoke detector batteries, it might be a good time to
(re)consider the following.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p><strong>Do you have fiduciary liability insurance?</strong></p>
<p>I’m NOT talking about the Fidelity Bond required of every ERISA plan
(this protects the plan and its participants from potential malfeasance
on the part of those who handle plan assets. In fact, the plan is the
named insured in the fidelity bond). I’m also NOT talking about the
corporate governance policies that many organizations have in place for
actions undertaken by organization officials. These may not cover you,
and they very likely won’t cover actions taken as an ERISA plan
fiduciary even if you are covered. </p>
<p>What you need to check for is something called Fiduciary Liability
Insurance. This policy typically protects the plan’s fiduciaries from
claims of a breach of fiduciary responsibilities—an important protection
since ERISA plan fiduciaries have personal liability, not only for
their actions, but for the actions of their co-fiduciaries. Just
remember; the cost of the insurance can be paid by the employer or by
the plan fiduciary—but not from plan assets. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgw4-x_BGRvCDhQsNIfRWs03nkBN7Aj-mXr0nKlnDG2oQEjce1HPeUOhMETGM-3zHPBIhceVS_aJ_PEQTZkApdxe-xnaNhZY3VjXUgUbLSgKYCGd7cS43B6bPAr9xYOV8RuGFm1kDNvj7FFnHj37OoXjiySV-G5pn6ZV4VYHSmRLBsE0ChfV1Diow/s600/smoke%20detector.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="400" data-original-width="600" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgw4-x_BGRvCDhQsNIfRWs03nkBN7Aj-mXr0nKlnDG2oQEjce1HPeUOhMETGM-3zHPBIhceVS_aJ_PEQTZkApdxe-xnaNhZY3VjXUgUbLSgKYCGd7cS43B6bPAr9xYOV8RuGFm1kDNvj7FFnHj37OoXjiySV-G5pn6ZV4VYHSmRLBsE0ChfV1Diow/s320/smoke%20detector.jpg" width="320" /></a></p><p></p>
<p><strong>Do you have an investment policy?</strong></p>
<p>Note that I said investment POLICY, not an investment policy
STATEMENT. While plan advisers and consultants routinely counsel on the
need for, and importance of, an investment policy statement (IPS), the
reality is that the law does not require one, and thus, many plan
sponsors—sometimes at the direction of legal counsel—choose not to put
one in place.</p>
<p>Of course, while the law does not, in fact, specifically require a
written IPS—think of it as investment guidelines for the plan—ERISA
nonetheless basically anticipates that plan fiduciaries will conduct
themselves as though they had one in place. And, generally speaking,
plan sponsors (and the advisors they work with) will find it easier to
conduct the plan’s investment business in accordance with a set of
established, prudent standards—if those standards are already in
writing, not crafted at a point in time when you are desperately trying
to make sense of the markets.</p>
<p><strong>Are your plan’s target-date funds (still) on target?</strong></p>
<p>Flows to target-date funds (TDF) have continued to be strong—and
little wonder, what with their positioning as the qualified default
investment alternative (QDIA) of choice for most 401(k)s. That said, the
vast majority of those assets are still under the purview of an
incredibly small number of firms—with glidepaths that are not as
dissimilar as their marketing materials might suggest.</p>
<p>A TDF is, of course, a plan investment, and like any plan investment,
if it fails to pass muster, a plan fiduciary would certainly want to
remedy that situation, including removing the fund if necessary (don’t
take my word for it—that’s coming straight from the Labor Department). </p>
<p>That said, TDFs are frequently, if not always, pitched (and likely
bought) as a package. While each fund in the family is reviewed
separately, and certainly should be, breaking up the set certainly
carries with it a series of complicated consequences, not the least of
which are participant communication issues and glide path compatibility.
Not that those can’t be overcome—and not that those complications would
be deemed sufficient to retain an inappropriate investment on the plan
menu—but it doesn’t take much imagination to think about the heartburn
that might cause.</p>
<p>The reasons cited behind TDF selection run a predictable gamut;
price/fees, performance (past, of course, despite those disclaimers),
platform (as in, it happens either to be their recordkeepers, or
compatible with their program)—and doubtless some are actually doing so
based on an objective evaluation of the TDF’s suitability for their plan
and employee demographics.</p>
<p>Whatever your rationale, it’s likely that things have changed—with
the TDF’s designs, the markets, your plan, your workforce, or all of the
above. It’s worth checking out.</p>
<p><strong>Is your plan committee capable?</strong></p>
<p>Today the process of putting together an investment or plan committee
runs the gamut—everything from simply extrapolating roles from an
organization chart to a random assortment of individuals to a thoughtful
consideration of individuals and their qualifications to act as a plan
fiduciary.</p>
<p>There is, or should be, a legitimate, articulatable reason why each
and every member of your plan/investment committee was selected. They,
and every other member of the committee, should know that reason. If you
can’t articulate that reason (or can’t with a straight face), they
shouldn’t be on the committee—for their own sake, and the sake of every
other committee member.</p>
<p>Note also that, over time, committees have a tendency to expand,
sometimes based more on factors like internal organizational politics
than on valuable perspectives or expertise. But human dynamics are such
that the larger the group, the more diffused (and sometimes deferred)
the decision-making. So, it’s worth revisiting that articulatable
reason—and making sure it’s still valid—on at least an annual basis.</p>
<p><strong>Do you need help?</strong></p>
<p>ERISA only requires that the named fiduciary (and there must be one
of those) make decisions regarding the plan that are in the best
interests of plan participants and beneficiaries, and that are the types
of decisions that a prudent expert would make about such matters. ERISA
does not require that you make those decisions by yourself—and, in
fact, requires that, if you lack the requisite expertise, you enlist the
support of those who do have it. </p>
<p>That’s where qualified retirement plan advisors and/or experienced
third-party administrators (TPAs) can make a big difference—both in
making sure you have good policies and procedures in place—and that they
are kept up to date! </p>
<p>Think of it as a smoke detector for your retirement plan. It might not save you any daylight—then again…</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-90383499784989045162023-10-28T06:30:00.002-04:002023-10-28T06:30:00.140-04:00Grading on a ‘Curve’<p></p><p>A recent analysis of world pension systems gave America a passing grade, but not a good one.</p>
<p>The latest—the Mercer CFA Institute Global Pension Index<a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>—gave the United States a C+ (though a B in adequacy!) ranking our retirement “system” well down (22<sup>nd</sup>) in the list of 47 retirement income systems around the world. </p>
<p>This particular index is comprised of three sub-indices: adequacy,
sustainability and integrity, which the authors say are used to measure
each of the retirement systems against some 50 “indicators.”<a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
Of course, people are entitled to establish whatever criteria they
think is reasonable in such matters, but those who would accept their
grading at face value would be well-advised to consider both the
assumptions and weighting applied to derive those outcomes. To the
sponsors’ credit, the 144-page document provides lots of opportunity to
do just that. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEji6KtKlVZd6cnM9xW2t0s0TWdnfQTfYZSzTj6WcKJkap8LS92oykm_8T1tkirWi8umbmx4wj6WDLhdulGLPEIVihVx5fmebWwZhRS8e32FEHb1z0ESWu4bbIDW3W6EGQrR2xAc5WzbdBeHUUf3o8BOJfUlqYTYRqqXKNgA6MCO_oj017L5o21ELg/s290/Story-Bell-Curve-_web.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="220" data-original-width="290" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEji6KtKlVZd6cnM9xW2t0s0TWdnfQTfYZSzTj6WcKJkap8LS92oykm_8T1tkirWi8umbmx4wj6WDLhdulGLPEIVihVx5fmebWwZhRS8e32FEHb1z0ESWu4bbIDW3W6EGQrR2xAc5WzbdBeHUUf3o8BOJfUlqYTYRqqXKNgA6MCO_oj017L5o21ELg/s1600/Story-Bell-Curve-_web.jpg" width="290" /></a><br /></p>
<p>Perhaps the biggest challenge of a system like ours matched up
against some of these other systems is the sheer diversity not only of
our population, but the system itself. The coverage gap<a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a>
we’re focused on closing presents a considerable disadvantage compared
to systems that employ nationwide mandates. And, let’s face it, the
funding issues of Social Security loom ever larger, and undermine the
“sustainability” measure of this index, if not the “integrity.” </p>
<p>If one were to take the recommendations of these authors to heart, in
order to boost our grade, we’d need to make people contribute more,
make them wait longer to get their benefits, pay them (particularly
lower-income workers) more benefits, increase vesting so that they earn
more benefits faster, and limit their ability to tap into those
retirement benefits before retirement—both by leakage, but also in
requiring that some part of those benefits be taken as an income stream.</p>
<p>Said another way, provide more government benefits and make people
put in more (and don’t let them take it out) so that they will have more
later. This, by the way, has been a consistent recommendation (though
perhaps worded more eloquently) of this <a class="ext" href="https://news.yahoo.com/news/5-ways-improve-u-retirement-070000855.html" target="_blank">index</a><span class="ext"></span>.</p>
<p>One thing that is NEVER mentioned, or even acknowledged in this
report is the cost of these measures, the taxes imposed to produce them.
Or the willingness of the population to undertake them to the exclusion
of other considerations. They aren’t, ironically enough, “means”
tested.</p>
<p>That’s not their responsibility, of course. Arguably presenting these
retirement system alternatives around the world provides policymakers
and the populace alike with a broader perspective—ideas and approaches
to consider, albeit those concocted in a pristine laboratory environment
where costs and personal choice are of no matter—only the largesse of
benefits. </p>
<p>But for those of us living in the real world, and those still working
on implementing the tools in the SECURE Acts—I’d give this assessment a
grade of “incomplete.”</p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>
In case you’re wondering, Netherlands, Iceland, Denmark & Israel
topped the list (again), all receiving an “A” grade, at least based on
the criteria and weighting adopted by the index. The index has been
published for a number of years now, and while Mercer’s role has been
consistent, different parties (now the CFA Institute) have partnered in
its production over the years.</i></p>
</div>
<div id="edn2">
<p><i><a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a>
The report explains that each system’s overall index value is
calculated by taking 40% of the adequacy sub-index, 35% of the
sustainability sub-index and 25% of the integrity sub-index—weightings
that they say “have remained constant since the first edition of the
Index in 2009.”</i></p>
</div>
<p><i><a href="https://www.napa-net.org/news-info/daily-news/grading-%E2%80%98curve%E2%80%99#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a>
Indeed, it would be naïve to gloss over the gaps in retirement security
that a largely voluntary system exposes. Not that anything (beyond
inertia and human nature) prevents every American worker from opening
their own retirement account. But we know, and the data supports, that
even modest income ($30,000-$50,000/year) workers are 12-15 times more
likely to do so when they have the opportunity to do so via a workplace
plan. In fact, there’s plenty of impetus in the provisions of the SECURE
and SECURE 2.0 Acts to encourage the formation of those plans.</i></p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-15218480120962316112023-10-21T06:30:00.001-04:002023-10-27T22:30:09.522-04:00A Day for TPAs<p></p><p>It might not have made it to your calendar, but last week (October 17) was National TPA Day.
</p><p>The
timing is no accident—yesterday would have been for many calendar-year
ERISA plans the (extended) deadline for filing the annual ERISA 5500
form.<a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_edn1" id="_ednref1" name="_ednref1" title="">[i]</a>
Like April 15 for CPAs, that date—and timing—are of enormous
consequence. And with that annual deadline in the rearview, third-party
administrators everywhere can, perhaps, heave a huge sigh of relief.
Maybe even throw a little “party.”</p>
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQyUogjI4KZbE0D6bvmdLFDKRWpQaSMtpT4ZbRJdkxp98jvapRBX4zueZgYSh96fJltwZqmQQc60Gi9hRMg8DIKPNHrNfUE2nMMoLGscJ2cntl_6Ug007IsV9ZM1_6RkAjLXL1MQNt96sokLBMekc4Y4uxhuUQQS6HdDWFVzR20G58jtR0z8L8iQ/s311/TPA%20day.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="162" data-original-width="311" height="162" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQyUogjI4KZbE0D6bvmdLFDKRWpQaSMtpT4ZbRJdkxp98jvapRBX4zueZgYSh96fJltwZqmQQc60Gi9hRMg8DIKPNHrNfUE2nMMoLGscJ2cntl_6Ug007IsV9ZM1_6RkAjLXL1MQNt96sokLBMekc4Y4uxhuUQQS6HdDWFVzR20G58jtR0z8L8iQ/s1600/TPA%20day.jpg" width="311" /></a></div>The relationship between advisors and TPAs is <a href="https://www.napa-net.org/news-info/daily-news/which-tpa-services-matter-most" target="_blank">complex</a>,
and one in which there seems to be little middle ground. For every
advisor that tells you how many times their TPA partner has gotten them
out of a real mess—and for every TPA that applauds the leadership
demonstrated by their advisor teammate—well, there seems to be one that
either dismisses the TPA’s propensity for a mistimed focus on minutiae
that is the essence of being a dutiful TPA, or one that frets that an
advisor’s focus on the “big picture” obscures significant operational
and administrative issues.<br /><p></p>
<p>There is, in fact, a certain yin and yang to the perspectives of the
two roles—and just like the concept that originated in Chinese
philosophy (describing opposite but interconnected, mutually
perpetuating forces)—successful (and legal) plan design and operation
require a balance. Where plans often fail is when one or the other
dominates. </p>
<p>Just as advisors are often (and inaccurately) seen as the sole
fiduciary in a plan once they’re hired, TPAs are generally assumed to be
attending to all of the particular details of accurately running the
plan; we’re talking about things like ensuring that the terms of the
plan document are adhered to, that non-discrimination tests are properly
applied, and that contributions are timely deposited. The lines are
often blurred between TPA and recordkeeper—the latter technically being a
TPA, though these days the level of services can differ dramatically. </p>
<p>Over time the role of TPA has been diminished in the eyes of many.
Sure, they deal with a lot of technical “minutiae”—we’re talking deep in
the “weeds” here. The classic reference is you ask what time it is, and
they (some, anyway) first want to explain to you how a watch is made.
That said, the role of plan administrator—perhaps a better label would
be compliance administrator—is essential—critical—to the smooth,
effective and efficient running of a plan—and on aspects that,<a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_edn2" id="_ednref2" name="_ednref2" title="">[ii]</a>
odds are, your recordkeeper (another critical role, but one often
focused on other things) isn’t always. They can even help you find—and
keep—clients!</p>
<p>That said, TPAs come in all shapes and sizes—and like advisors—have
different service models, areas of specialization and,
yes—personalities. If you’ve had a bad experience—you’re not alone. But
for my money, if you want to be able to focus on the plan issues that
truly require your expertise—rather than your attention—you’ll find that
all to be easier with the assistance, support, and guidance of a
qualified TPA.<a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_edn3" id="_ednref3" name="_ednref3" title="">[iii]</a></p>
<p>If you’ve found a good one (or two)—be sure to give them a hug—and maybe a cake. It’s National TPA Day, after all… </p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
<p>Additional TPA Resources: </p>
<p><a href="https://www.napa-net.org/news-info/daily-news/finding-right-tpa-partner" target="_blank">Finding the Right TPA Partner</a></p>
<p><a href="https://www.napa-net.org/news-info/daily-news/bundled-versus-unbundled-5-myths" target="_blank">Bundled Versus Unbundled: 5 Myths</a></p>
<p><a href="https://www.napa-net.org/news-info/daily-news/resource-%E2%80%98full%E2%80%99" target="_blank">Resource ‘Full’?</a></p>
<p><a href="https://www.napa-net.org/news-info/daily-news/whats-name-0" target="_blank">What’s in a Name?</a> </p>
<hr align="left" size="1" width="33%" />
<div id="edn1">
<p><a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_ednref1" id="_edn1" name="_edn1" title="">[i]</a>[i] Credit the folks at <a class="ext" href="https://retirement.johnhancock.com/us/en/b2b/celebrating-tpas#value" target="_blank">John Hancock</a><span class="ext"></span> for—to my eyes, anyway—making TPA Day a “thing.”</p>
</div>
<div id="edn2">
<p><a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_ednref2" id="_edn2" name="_edn2" title="">[ii]</a> Things like that: </p>
<ol><li><em>All eligible workers are included in the plan—as required by law—and ineligible workers are not unduly credited with benefits?</em></li><li><em>Compensation used as the basis for contributions and/or
eligibility is accurate, in accordance with ERISA and IRS limits, both
with regard to amount (how much) and individuals (who)?</em></li><li><em>The plan’s allocation of benefits meets legal requirements and
the correct individuals receive the correct amount(s), thus preventing
the need for corrective measures and penalties? </em></li><li><em>The amount(s) allocated to individual participant accounts match
the actual dollars deposited into the plan/trust. Additionally, to
ensure that contribution deposits are made to the plan/trust in
accordance with legal requirements, forestalling legal fines and
penalties?</em></li><li><em>The appropriate plan notices are timely delivered to the
applicable individuals in accordance with legal requirements, providing
them with important plan information and instructions (and preventing
the application of penalties for failing to do so)?</em></li><li><em>Employees are properly categorized as to their status as highly
compensated employees (HCEs), key employees (for top-heavy testing) and
spousal/familial relationships so that the allocation of benefits and
eligibility is appropriate and consistent with legal requirements?</em></li><li><em>The tax filings related to the plan (Form 5500, 8955, 5330,
etc.) are filed accurately and on time in order to comply with the legal
requirements regarding the plan, and thus avoid fines and penalties?</em></li><li><em>The amounts distributed as loans or distributions are consistent
with the vesting schedule of the plan, in accordance with plan
parameters and legal limits—and that the needed authorizations are
obtained?</em></li></ol>
</div>
<p><a href="https://www.napa-net.org/news-info/daily-news/day-tpas#_ednref3" id="_edn3" name="_edn3" title="">[iii]</a> And here’s a resource that can help you validate/align expectations of service; <a href="https://www.napa-net.org/sites/napa-net.org/files/TPA.ComAdminEval.pdf" target="_blank">HERE</a>.</p>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-48098480300083349592023-10-14T06:30:00.001-04:002023-10-27T22:41:25.487-04:00Mark Your Calendars!<p></p><div class="content clearfix">
<div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even"><p>Social
media routinely reminds me that I’m teetering on the brink of
overlooking key remembrances—days in the year to honor sons, daughters,
puppies, dogs, kittens, and…well, you name it. And we have whole months
set aside to acknowledge the contributions of women, black history, and
Hispanic heritage—but there’s another you might have missed…</p>
<p>As
it turns out, October is National Retirement Security Month—a “national
effort to raise public awareness about the importance of saving for
retirement.” More specifically, to provide an opportunity for employees
to reflect on their personal retirement goals and determine if they're
on target to reach those goals—and for those who work with those
employees to help them do so.</p>
<p>Now, while the need isn’t new, the calendar acknowledgement is, at
least relatively so. The notion was raised in 2006 by then-Sens. Gordon
Smith (R-OR) and Kent Conrad (D-ND)—though at that time it was “just” a
week. However, in 2020, the <a class="ext" href="https://www.nagdca.org/2021-nrsm/" target="_blank">National Association of Government Defined Contribution Administrators</a><span class="ext"></span> took
it even further and updated its legislative priority to advocate to
change it to National Retirement Security Month, instead of only the
week. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgr3ctVtHS33C15MexFss7dE1kDWvGkVLPbr286nCcaxmubI0Y6ze5QbYhQJAPRkaoQ3E4XnHbjSabct0V4P87JQo-Q0108sTSmDXATofQVSWJxYiwu3wxPtvGKznTWANsYjNEWrr74j1F05hOHFsjFliJRMCL4a7pW37s1_QkD9O6VSM0yuuHOw/s6016/calendar.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="4016" data-original-width="6016" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgr3ctVtHS33C15MexFss7dE1kDWvGkVLPbr286nCcaxmubI0Y6ze5QbYhQJAPRkaoQ3E4XnHbjSabct0V4P87JQo-Q0108sTSmDXATofQVSWJxYiwu3wxPtvGKznTWANsYjNEWrr74j1F05hOHFsjFliJRMCL4a7pW37s1_QkD9O6VSM0yuuHOw/s320/calendar.jpg" width="320" /></a></div><br /><p></p>
<p>That said—and despite the hard work, talented designs, and
sponsorship of a number of large and reputable financial services
organizations, I suspect many of you haven’t even heard of it. More’s
the pity.</p>
<h3>Key Objectives</h3>
<p>Traditionally, the week is focused on three key objectives:</p>
<ul><li>making employees more aware of how critical it is to save now for their financial future;</li><li>promoting the benefits of getting started saving for retirement today; and</li><li>encouraging employees to take full advantage of their employer-sponsored plans by increasing their contributions.</li></ul>
<p>Now, if you’re reading this (and you are, aren’t you?), odds are that
you’re all too aware of the challenges that confront our nation’s
retirement savings system. I’d go so far as to wager that just about
everybody taking the time to read this post thinks about those items
every working day, and doubtless spends a good part of their week trying
to advance those causes—so, what’s the point of a month devoted to that
emphasis?</p>
<h3>What If?</h3>
<p>The point, of course, is not for us—but for those who don’t have
these issues on their mind every day. Because, even if we should be
thinking about this every day of the year, special “events” like
National Retirement Security Month give those of us who do a chance to,
as a collective group of professionals, remind those who don’t of the
importance of thoughtful preparations for retirement.</p>
<p>Better still, with the plan design improvements available today, you
might only need one week—or one hour—of getting an individual—or group
of individuals—to think about those messages.</p>
<p>Consider, for example, what if that period of focus got an individual
(or, better still, a group of individuals) to enroll in their workplace
retirement plan? What if it led an employer to embrace automatic
enrollment, or, for those who are already enrolled, to increase the
default contribution rate, or to reenroll those who have opted out of
participation in the past? What if that focus prompted those who are
already participating to increase their deferral rate (on their own), or
to boost that rate so that they got the full benefit of the employer
match? And what if that period of focus—or the actions above—led workers
to stop and actually figure out how much they might need to save to
sustain their retirement?</p>
<p>What if, indeed? </p><p><b><i>- Nevin E. Adams, JD </i></b><br /></p>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-67448671135957165822023-10-07T06:30:00.001-04:002023-10-07T06:30:00.141-04:00Failure(s) to Communicate<p>There’s an oft-repeated line from that 1967 classic movie “Cool Hand Luke” about a “failure to communicate.” <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuJPRWYTa-6a-CMaqk-0zdB-64rdf7GgUBWXcDeQQmQuOZ0wy3ZL5iQjjj-KZiYIEbDWqcqYIrHMn_Vxdyu4Xj5cMzbBOWRxaumEOawwAAfvkevaWG9F65RD7grx-V2IQci4jNN4AIcZYkoef7BKwoljsmmjnR0rqEfp5pKaD5jxR_XqKHY4xlgw/s500/ALUA2uK.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="230" data-original-width="500" height="147" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuJPRWYTa-6a-CMaqk-0zdB-64rdf7GgUBWXcDeQQmQuOZ0wy3ZL5iQjjj-KZiYIEbDWqcqYIrHMn_Vxdyu4Xj5cMzbBOWRxaumEOawwAAfvkevaWG9F65RD7grx-V2IQci4jNN4AIcZYkoef7BKwoljsmmjnR0rqEfp5pKaD5jxR_XqKHY4xlgw/s320/ALUA2uK.gif" width="320" /></a><br /></p><div class="reader-article-content reader-article-content--content-blocks" dir="ltr">
<p class="ember-view reader-content-blocks__paragraph" id="ember3246">
Now, most of us aren’t trying to convey the consequences of
violating prison rules, but there are messages where mere words
sometimes fall short of their purpose. There are literal barriers in
terms of language, of course—but all too often also barriers built of
different life experiences, of cultural references, and certainly of
age. Indeed, we frequently use words, or employ metaphors to enhance, or
at least provide some flavor to our explanations/instructions—only to
have it fall on ears that may hear the words, but lack—or in some cases,
confuse—the necessary context (I’m routinely forced to reference the
Urban Dictionary to make sure certain words haven’t taken on an
unintended meaning). </p><p class="ember-view reader-content-blocks__paragraph" id="ember3246"><b>Mind ‘Set’
</b></p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3248"><b>
</b>In that spirit, several years back I stumbled across something
called the Beloit College Mindset List (a couple of years back it
“moved” and was rebranded as the Marist Mindset List). It was a list
developed to help college faculty be aware of dated references—to help
assure better communications with the incoming class of college
freshman. In fact, the focus of the list (and it dates back to 1998) was
to provide some perspective on the shifting generational
perspectives—the mindset, if you will—of individuals just entering
college.
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3249">
I remember fondly the “can you believe it?” water cooler chats
about some of the items on previous lists—kids entering college that had
never actually seen a floppy disk (which, ironically, lives on in that
“save” icon in Microsoft applications), who might have wondered what
“cc” actually stands for in their email (because they have never
actually had to deal with a “carbon copy”), who never had to dial a
rotary phone, who might never have seen (much less used) a payphone, who
never knew a world without the “world wide web” (much less a world in
which you could connect to it—wirelessly)—and perhaps most notably of
late, weren’t even alive on 9/11. Yes, we’re talking about a generation
who can’t fully appreciate just how weird it seems to see people having
video calls on their wristwatches—just like Dick Tracy did in comics of
old (talk about your dated references!). </p><p class="ember-view reader-content-blocks__paragraph" id="ember3249"><b>Class of 2027
</b></p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3251"><b>
</b>But, according to this year’s <a href="https://www.marist.edu/mindset-list/2027">Marist Mindset List</a>,<a href="https://www.napa-net.org/news-info/daily-news/failures-communicate#_ftn1">[1]</a> the Class of 2027:
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3252">
</p><ul><li>Are just as likely to be listening to Led Zeppelin as
Lana del Rey or Lil’ Baby on their phones (with access to music services
like Pandora launched in 2005, the year many of these future graduates
were born).</li><li>Will get their news primarily from social media
sites like YouTube, Instagram and TikTok (Dan Rather & Ted Koppel
both retired in 2005, “effectively ending the reign of network news
programs as the primary way younger Americans get their news”).</li><li>Have
always lived in a world visibly affected by climate change (harkening
back to Hurricane Katrina and Rita—though they wouldn’t be old enough to
remember either).</li><li>Will almost exclusively watch their video content on YouTube (which launched in 2005) and similar sites online.</li><li>Will
be the first to fully integrate ChatGPT or “Generative Pre-trained
Transformer” into their college learning experience (one can’t help but
see “fully integrate” as a disarming euphemism for more insidious
applications).</li><li>Often quote the TV show “The Office,” although
the program ended its run in 2013. The characters are omnipresent in
today's college culture and the show is now a cultural phenomenon thanks
to its rebirth via Netflix and short-form streaming services (OK—I
don’t get the fixation on The Office, either. But who am I to question
generational fixations?) <br /></li></ul><b>Retirement (Re)Set
</b>
<p class="ember-view reader-content-blocks__paragraph" id="ember3254">
That said, for those of us who will be working (or living) with
the Class of 2027 (once they graduate, if not sooner), well, for them
(and those working with them), it might be good to keep in mind:
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3255">
</p><ul><li>There have always been 401(k)s (even if everyone hasn’t had access to them at work).</li><li>They may never have to actually sign up for their 401(k) (thanks to automatic enrollment).</li><li>They may never have had to think about the investments in their 401(k) (due to QDIA/target-date fund defaults).</li><li>There
has always been a Roth option available to them, whether 401(k), 403(b)
or IRA (and, considering what future tax rates are likely to be, they
should take advantage).</li><li>They’ve always been able to view and transfer their balances online and on a daily basis (and so, of course, they mostly won’t).</li><li>They’ve
always worried that Social Security wouldn’t be available to pay
benefits. (In that, they’re much like their parents at their age…even
today).</li></ul>
<p></p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3256">
But perhaps most importantly, they’ll have the advantage of
time, a full career to save and build, to save at higher rates, and to
invest more efficiently and effectively—and, with luck, access to a
trusted advisor to answer their questions along the way...
</p>
<p class="ember-view reader-content-blocks__paragraph" id="ember3257"><b><i> - Nevin E. Adams, JD</i></b><br /></p>
<hr />
<p class="ember-view reader-content-blocks__paragraph" id="ember3258">
<em><a href="https://www.napa-net.org/news-info/daily-news/failures-communicate#_ftnref1">[1]</a></em><em>
Sadly, this year’s list isn’t quite as much “fun” as previous lists
have been (at least not to this Boomer)—and this year it comes with some
political “commentary” that seems unnecessary (at least to this
Boomer). The Marist crowd appears to take themselves more seriously than
the Beloit College founders did (or perhaps it’s just the times we’re
in).</em>
</p>
</div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-11360169708970040372023-09-30T06:30:00.001-04:002023-10-01T16:38:11.270-04:00ERISA Litigation: How Low Will 'They" Go?<p>The
ERISA litigation field in recent years has seen copycat filings,
plagiarism in pleadings, factual flaws, and misleading assertions—but to
my eyes, we’ve just hit a new low.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>I’m
speaking of what appears to be a new strategy, at least in this area of
the law. Specifically, a California law firm by the name of Lieff
Cabraser Heimann & Bernstein is in the midst of what appears to be a
pre-trial “shakedown.”</p>
<p>More specifically—brought to my attention by Daniel Aronowitz (writing for <a class="ext" href="https://www.euclidspecialty.com/lieff-cabrasers-shakedown-of-corporate-america-with-manufactured-claims-of-excess-recordkeeping-fees/" target="_blank">The Fid Guru Blog</a>)—Leiff
Cabraser is currently engaged in a letter writing campaign to plan
sponsors, alerting them to a series of assertions about ERISA
litigation, allegations about the fees paid by participants in their
plans (relative to a standard that has been repeatedly criticized in
that context at trial)—all alongside the fact that they’ve allegedly
found an as-yet-unnamed plaintiff-participant in the plan in question
that is said to be willing to represent a class action alleging the
plan’s fiduciary breach. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs_JglSMRvbVBhhqZV4feX57L7kETa0BA9pTvk4N8oePgUCKhRS5m_jmpjSULZDlas7eiKMQTjWuWdNWQOTKm3fVkjZlOTupuPC9y2v9UK1UbtxdEEDP_FH9Ti3J40wOQh1-PqSED5oC7qi-VdmUZlZ5gHhkHlbCMPuvMjfio-Q_YJHKy6w19TZA/s455/threat.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="307" data-original-width="455" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs_JglSMRvbVBhhqZV4feX57L7kETa0BA9pTvk4N8oePgUCKhRS5m_jmpjSULZDlas7eiKMQTjWuWdNWQOTKm3fVkjZlOTupuPC9y2v9UK1UbtxdEEDP_FH9Ti3J40wOQh1-PqSED5oC7qi-VdmUZlZ5gHhkHlbCMPuvMjfio-Q_YJHKy6w19TZA/s320/threat.png" width="320" /></a></p><p></p>
<p>Oh—and the purpose of this campaign? Why, according to the letter,
Lieff Cabraser Heimann & Bernstein is “open to discussing our
client’s ERISA claims in hopes of reaching an early resolution…before a
great deal of time and expense is incurred by any party in litigating
this matter.” </p>
<p>And if the threat of litigation was not sufficient to garner their
attention, the letter closes, “This may be the last time that the
parties have total control over the outcome of this matter without
leaving it up to the Court. A settlement now, before the parties have
incurred significant litigation expenses, will benefit both parties.”</p>
<p>Perhaps, but I’m guessing one party in particular.</p>
<p>Sadly, there’s nothing illegal in this approach—even though it smacks
of extortion. As for the recipients of these letters, they may well
know that the fees their plans/participants are actually paying are much
different than the letter suggests, but they may NOT know of the
shortcomings in the way the 401(k) Averages Book data is presented
(though already noted by more than one court) and applied to their plans
(Mr. Aronowitz does an <a class="ext" href="https://www.euclidspecialty.com/lieff-cabrasers-shakedown-of-corporate-america-with-manufactured-claims-of-excess-recordkeeping-fees/" target="_blank">artful job of explaining that</a><span class="ext"></span>,
however, and it’s worth a look!). However, they probably ARE aware of
the headlines that appear with distressing regularity tracking this type
of litigation and may well have a sense of the multi-million-dollar
settlements—whose pace and frequency seem to be quickening with each
passing month. </p>
<p>Looking at the arguments presented in most of these actions, it’s
hard to dismiss the feeling that most are, in fact, (just) playing for
that quick settlement; half of their filings (and most are pretty short)
are simply a cut and paste regarding ERISA’s obligations alongside an
inference (and sometimes more than an inference) that the plan
fiduciaries in question (and those who appointed them) have fallen short
of those obligations. They cite plans that are supposedly comparable
(at least in size and participant count), extract numbers from
government filings that don’t capture the full picture of costs (or
services), lay those down next to data from sources known to have
shortcomings for those purposes, toss in some “best practice” commentary
from a trade publication or two, and rely on the forbearance of the
judiciary to open the door to the more intrusive (and costly) process of
discovery, deposition, and at some point, trial. </p>
<p>That’s been the way of this type of litigation for awhile now, where
it is simply easier—and, sadly, cheaper—for plan fiduciaries (and their
insurers) to just settle and move on, though that process inevitably
serves to fund the plaintiffs’ bar’s next “foray.”</p>
<p>Consequently, it’s been refreshing of late to see some federal
district courts require more to establish a “plausible” argument to get
past that point—to call for not only an accounting of fees, but of the
services rendered for those fees. That surely complicates matters for
the plaintiffs’ bar—but then, why should they be able to drag firms
through the arduous process of discovery and depositions with no more
than regurgitated copy, sweeping generalizations, and a table or two
cobbled from unrelated sources? </p>
<p>But now it seems that this law firm at least doesn’t even want to go
through that exercise—and why should they if they can simply unleash a
correspondence campaign that stands to bring in a payoff from who knows
how many plans without even the bother of a court filing or appearance?</p>
<p>I know it’s easy to sit here and carry on as to why plan fiduciaries
need to stand up to this kind of practice—to applaud the actions of
federal judges who can see what’s going on here, and hope they continue
to demand more than mere allegations and flawed assumptions.
Unfortunately, this most recent undertaking is perhaps an obvious
progression of a sad, regrettable trend.</p>
<p>But I can promise you that if this “works”—it won’t be the last.</p><p>-<b><i> Nevin E. Adams, JD </i></b><br /></p>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0tag:blogger.com,1999:blog-33014325.post-3825260687554200912023-09-23T06:30:00.007-04:002023-10-01T16:42:12.784-04:00The Biggest Surprise About (My) Retirement<p>My
“retirement” isn’t even a year old—and for the most part, it’s played
out pretty much as planned. There was, however, an area that caught us a
bit flat-footed.</p><div class="content clearfix"><div class="field field--name-body field--type-text-with-summary field--label-hidden"><div class="field__items"><div class="field__item even">
<p>For us (and this has very much been a joint effort between me and my wife), that surprise was…Medicare. </p>
<p>Don’t get me wrong; to date the coverage has compared favorably with
what we had pre-retirement—mostly because we coupled “standard” Medicare
with a Medicare Advantage plan (which has actually provided some nice
enhancements over our pre-retirement coverage). </p>
<p>That said, here are some things we’ve learned along the way that we either didn’t know or hadn’t thought about “before”:</p>
<p><strong>Medicare isn’t free. </strong></p>
<p>Well, technically speaking, <em>some</em> of Medicare comes without additional premiums/cost, at least if you’ve worked at least 10 years and paid into that system. </p>
<p>There are two “core” parts to Medicare; what are affectionately referred to as <a class="ext" href="https://www.hhs.gov/answers/medicare-and-medicaid/what-is-medicare-part-a./index.html" target="_blank">Part A</a><span class="ext"></span> (hospital coverage)—which is “free” (in that your historical payroll deductions fund it) and <a class="ext" href="https://www.medicare.gov/what-medicare-covers/what-part-b-covers" target="_blank">Part B</a><span class="ext"></span>
(medical insurance, which covers outpatient care, services from doctors
and health care providers, some preventative services)—which, like your
current health insurance, has premiums that you have to pay. More on
that in a minute.</p>
<p>While certainly of benefit, those coverages won’t replace everything
covered by the health insurance you’ll have carried pre-retirement
(those are likely included in what are called Part C (vision, hearing,
dental, and Part D (prescription drug coverage). The bottom line here is
that your post-retirement spending plans need to include something for
health insurance (more precisely, your Social Security benefit will be
reduced by that amount). You can find out more at: <a class="ext" href="https://www.medicare.gov/basics/costs/medicare-costs" target="_blank">https://www.medicare.gov/basics/costs/medicare-costs</a><span class="ext"></span></p>
<p><strong>You (may) need to apply for Medicare before you “take” Medicare.</strong></p>
<p>Once you start receiving Social Security benefits, you are
automatically enrolled in Medicare A. But if you work past age 65 (as I
did) and don’t start taking Social Security (like me), then you have to
sign up for Medicare—even if you’re still working, have insurance, and
don’t plan to use Medicare (this will, of course, confuse your current
health care providers, at least momentarily. Everyone assumes when you
turn 65, you’re on Medicare). </p>
<p>There’s a seven-month initial enrollment period that begins three
months before the month you turn 65 and ends three months after your
birthday month. Now, there are some exceptions to that timing, but—the
bottom line is, you’ll likely find it to be less complicated to sign up
around your 65<sup>th</sup> birthday, and then you don’t have to worry that you’ll run afoul of deadlines that can cost you a lot later on.</p>
<p><strong>There are no Medicare “family” plans.</strong></p>
<p>You may be accustomed to choosing workplace health insurance based on
the needs of your family, or at least you and your spouse. For years I
have “delegated” that responsibility to my wife, who has always had a
better sense for the family doctors and our coverage needs. But we each
had to sign up for Medicare separately (though we did “coordinate”).</p>
<p>That said, there can be complications if you are retiring at a
different time than your spouse, particularly if you’ve shared coverage
under a family plan. We had planned to let my wife (who is the same age,
though she maintains that the five-month differential in our dates of
birth makes her younger) go on Medicare while I continued with my
workplace plan. Now, there is a process that allows for this, but it’s a
bit of an exception and—well, we got close to the deadline, and rather
than have coverage at risk, we just waited until we could both switch at
the same time.<br /><br /></p>
<p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjWlWb4wP82YzOmFY5NT_LIDD8YfaCHd2bRTf6TKoCFbCxwZoIJXuktL0rmT_HI1sNuDSM9Av_gzdUYFFbriM1oo5gPnFCrXAuAFIV3GYaNtXVtfzIzy3xVs0t40ANeg9ovL3xGC1M6NxAOZWRC6lkUDGdWHUnrpbuAdI_Mdy9Wu6ZrjHy-sniTcg/s612/surprise.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="408" data-original-width="612" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjWlWb4wP82YzOmFY5NT_LIDD8YfaCHd2bRTf6TKoCFbCxwZoIJXuktL0rmT_HI1sNuDSM9Av_gzdUYFFbriM1oo5gPnFCrXAuAFIV3GYaNtXVtfzIzy3xVs0t40ANeg9ovL3xGC1M6NxAOZWRC6lkUDGdWHUnrpbuAdI_Mdy9Wu6ZrjHy-sniTcg/s320/surprise.jpg" width="320" /></a><strong>Your Medicare premiums are based…on your income.</strong></p>
<p>One of the biggest surprises (to me, anyway) was to find my Medicare
health insurance premiums were based on income. And if you’ve filed
jointly, BOTH of your premiums are based on your adjusted gross income
(AGI). But that wasn’t the biggest surprise… </p>
<p><strong>Your Medicare premiums are based on your income…from two years ago.</strong></p>
<p>When it comes to figuring out your income for establishing your
Medicare premiums, you might expect that a government agency would turn
to an official government record of your income—and that turns out to be
your AGI, as noted above. The jaw-dropper (this was the biggest
surprise) was that it was our AGI from TWO YEARS AGO. </p>
<p>Now, mind you, we’ve planned our retirement income needs just
fine—but my AGI this year is going to be significantly less than it was
when I was employed full time. And that makes a BIG difference in those
monthly Medicare premiums. </p>
<p>Fortunately, there is an appeals process—and even more fortunately,
with my wife’s persistence we were able to rectify that situation BEFORE
the first premium came due. It’s something you’ll want to get a jump
on, as gathering the data/proof, getting it to Social Security—not to
mention getting it to the attention of someone at Social Security—can be
time consuming. For more information on that process, see <a class="ext" href="https://www.ssa.gov/medicare/lower-irmaa" target="_blank">https://www.ssa.gov/medicare/lower-irmaa</a><span class="ext"></span> or on the issue <a class="ext" href="https://www.wsj.com/personal-finance/taxes/irmaa-medicare-surcharge-refund-rebate-4ca564ea?st=8k393va2l270jfu&reflink=desktopwebshare_permalink" target="_blank">here</a><span class="ext"></span>.</p>
<p>The bottom line is that you want to start thinking about Medicare BEFORE you start filing for it. </p><p><b><i>- Nevin E. Adams, JD</i></b> <br /></p>
</div></div></div> </div>Nevin E. Adams, JDhttp://www.blogger.com/profile/07162580850277740193noreply@blogger.com0