RSS Feed for PLANADVISER
Note: Content for this RSS feed is provided as a text alternative to inline RSS feeds that may not display on all browsers.
The trusted information and solutions resource for America's retirement benefits decision makers | PLANADVISER
- Retirement Industry People Moves
published on Wed, 22 Nov 2017 17:22:51 +0000
New president for Ivy Distributors Inc. As Thomas Butch steps down as executive vice president and chief marketing officer of Waddell & Reed Financial Inc., and as president of Waddell & Reed Inc. (WRI) and Ivy Distributors Inc. (IDI), the company announced the appointment of Nikki Newton as the new president of IDI.IDI is a subsidiary that supports the distribution of the Ivy Funds. Newton, who has 25 years of industry experience and has been with the company since January 1998, currently serves as head of global relationship management for IDI, covering national accounts and consultant relationships, as well as institutional sales.In the new role, Newton will lead wholesale and institutional distribution, and sales and product development, as well as manage strategic relationships.Also effective immediately, Shawn Mihal will become president of WRI, a registered broker/dealer subsidiary that offers securities and insurance products and investment advisory services through financial advisers located throughout the U.S. Mihal currently serves as chief operating officer of WRI, after joining the company in March 2015 as chief regulatory officer and chief compliance officer. Mihal has 18 years of industry experience and will be responsible for all aspects of the company’s broker/dealer operations.In conjunction with these appointments, the company announced several additional changes to its executive team: Brent Bloss is promoted to the role of chief operating officer, and Benjamin Clouse will be appointed chief financial officer to succeed Bloss in 2018.John Hancock Retirement Plan Services creates large plan teamJohn Hancock Retirement Plan Services (JHRPS) announced the formation of a cross-functional leadership team charged with enhancing the delivery of customized retirement plans that meet the unique needs of clients in the large plan market.The team includes Thomas Shanley, divisional vice president, strategic relationship management and large market segment lead; Christopher Messina, vice president of institutional sales; and Willson Moore III “Chip,” national consultant relations.According to the firm, coordination among the team, which had occurred informally prior to the announcement, serves to provide a more seamless experience for advisers and consultants. The structure will deliver “on-point business strategy and service to clients that have a large participant base, multiple plan types, along with operational, risk mitigation, and fiduciary challenges.”Each member of the new team brings decades of experience. Shanley is responsible for formally establishing John Hancock RPS large plan segment’s strategic direction and overseeing execution of the comprehensive service model. Previously, he served as vice president, relationship manager both at JHRPS and New York Life Retirement Plan Services. Shanley has more than 22 years of experience in the financial services industry with an emphasis on corporate retirement plans. He holds a bachelor’s degree from Rhode Island College, holds a FINRA Accredited Retirement Plan Consultant (ARPC) designation and maintains his FINRA Series 7 and 63 registrations.With more than 20 years’ experience in the retirement services industry, including more than 17 years in implementation, new business, and sales, Messina is responsible for facilitating the development of strategic partnerships with intermediaries and new clients dedicated to the large plan market. He received a bachelor’s degree in economics from the University of Massachusetts at Lowell and a master’s in business administration from the F.W. Olin Graduate School of Business at Babson College. In addition, he maintains FINRA Series 6 and 63 registrations and a Massachusetts life insurance registration.Moore, who joined the organization in 2016 with more than 30 years of retirement plan industry experience, is focused on building and engaging relationships with the top-tier U.S. national and regionally oriented retirement plan consultants and investment advisers serving the large and mega plan market segment. He received a bachelor’s degree in political science from Ripon College, and maintains both FINRA Series 7 and 63 registrations. The post Retirement Industry People Moves appeared first on PLANADVISER.
- 401(k) Excessive Fee, Self-Dealing Suit Filed Against Wells Fargo
published on Wed, 22 Nov 2017 16:56:51 +0000
On the heels of a win for Wells Fargo in a lawsuit accusing it of self-dealing and imprudent investing of its own 401(k) plan’s assets by funneling billions of dollars of those assets into Wells Fargo’s proprietary target-date funds (TDFs), another participant has filed an excessive fee and self-dealing lawsuit.The new lawsuit claims the plan’s fiduciaries breached their duties of loyalty and prudence to the plan and its participants by failing to establish and use a systematic and unbiased review process to evaluate the performance and cost, regardless of their affiliation to Wells Fargo, of the investment options in the plan’s portfolio. Throughout the complaint, the plaintiff alleges that the plan’s fiduciaries’ lack of a systematic and unbiased review process caused plan participants to pay an unnecessarily high expense ratio for investments, not just for Wells Fargo proprietary funds, but for the nonproprietary funds which comprised the proprietary funds, as well as other nonproprietary funds.According to the complaint, as a result of plan fiduciaries’ breaches of duty under the Employee Retirement Income Security Act (ERISA), participants paid higher than necessary fees for both Wells Fargo-branded and managed investment options and certain non-proprietary investment options for years.The lawsuit says defendants’ lack of a systematic and unbiased review of the plan’s investment options resulted in: including higher cost and poorly performing proprietary investment options in the plan to the detriment of plan participants, failing to use the plan’s enormous size (between $22.8 billion and $39.4 billion in assets to negotiate lower fees for both proprietary and non-proprietary investment options included in the plan, maintaining a proprietary money market fund alongside a better performing and significantly cheaper stable value fund, and failing to switch higher cost and poorly performing investment options for cheaper and better performing options available in the market.“Even though the Plan is and has been one of the largest in the country, Defendants maintained investment options that charged Plan participants fees that were significantly higher than were available to a plan of its size. Moreover, Defendants engaged in self-dealing by selecting and maintaining proprietary investment options that both cost more than and underperformed other mutual funds available in the market, which cost Plan participants millions of dollars in excessive fees and poor performance,” the complaint says.The suit questions the use of actively managed versus passively managed funds. It also suggests that collective trusts and separate accounts are better vehicles than mutual funds for retirement plans.The complaint also says, “for both the proprietary and nonproprietary investment options, the expense ratios Plan participants paid did not meaningfully decline, if at all, even though the Plan’s assets substantially increased throughout the Class Period. Accordingly, the fees paid by Plan participants were excessive and unreasonable. Moreover, the high fees of the proprietary investment options and the sheer size of the assets Plan participants maintained in the proprietary funds guaranteed Wells Fargo and its affiliates tens of millions in profits from fees.”The post 401(k) Excessive Fee, Self-Dealing Suit Filed Against Wells Fargo appeared first on PLANADVISER.
- Morningstar to Unveil Office Cloud
published on Tue, 21 Nov 2017 17:16:42 +0000
Morningstar has announced that in the first quarter of 2018, it will introduce Morningstar Office Cloud, a cloud-based practice and portfolio management platform for advisers—designed to replace multiple legacy systems. Advisers can migrate client data from other portfolio accounting systems onto the new platform. Existing Morningstar Office users can migrate to Morningstar Office Could with no data conversion required. “Amid increased regulatory uncertainty and heightened investor expectations, advisers are being challenged to rethink existing business models and better demonstrate the value of their advice to clients,” says Tricia Rothschild, chief product officer at Morningstar. “With Morningstar Office Cloud’s fully-integrated data and research capabilities, advisers can focus on what really matters—helping their clients reach their financial goals.” The platform can be integrated with other third-party software packages and includes a client web portal that clients can log onto to access their information in real time, be it from a computer, laptop, iPad or mobile phone.Visit http://www.morningstar.com/company/morningstar-office for more information about Morningstar Office Cloud.The post Morningstar to Unveil Office Cloud appeared first on PLANADVISER.
- PBGC Wants to Keep Requiring Disclosures for Distressed DB Plan Terminations
published on Tue, 21 Nov 2017 16:56:43 +0000
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) approve a collection of information under its regulations on the disclosure of termination information for distress terminations, and for PBGC-initiated terminations of defined benefit (DB) plans.As background, Sections 4041 and 4042 of the Employee Retirement Income Security Act (ERISA) govern the termination of single-employer defined benefit pension plans that are subject to Title IV of ERISA. A plan administrator may initiate a distress termination undersection 4041(c), and the PBGC may itself initiate proceedings to terminate a pension plan under section 4042 if PBGC determines that certain conditions are present. Sections 4041 and 4042 of ERISA were amended by Section 506 of the Pension Protection Act (PPA) to require that, upon a request by an affected party, a plan administrator must disclose information it has submitted to the PBGC in connection with a distress termination filing, and a plan administrator or plan sponsor must disclose information it has submitted to the PBGC in connection with a PBGC-initiated termination. The PBGC is also required to disclose the administrative record relating to a PBGC-initiated termination upon request by an affected party.This collection of information was most recently approved by OMB, and the PBGC is requesting that OMB approve the collection of information for three years, without change.The agency is seeking public comments about its request. More information is here.The post PBGC Wants to Keep Requiring Disclosures for Distressed DB Plan Terminations appeared first on PLANADVISER.
- Scant Withdrawals From DC Plans in First Half of Year
published on Tue, 21 Nov 2017 16:28:59 +0000
Few defined contribution (DC) plan participants took withdrawals from their plans in the first half of the year, the Investment Company Institute reports. Just 2.2% of participants took withdrawals, a mere blip from the 2.1% that did so in the first half of 2016. Only 0.9% of participants took hardship withdrawals, on par with 2016.In the first half of the year, 16.7% of participants had an outstanding loan from their DC plan, up only slightly from the 16.6% of participants who could say the same at the end of the first half of 2016. However, this is up from 15.3% at the end of 2008 and down slightly from the 18.5% at the end of 2011. Participants also remained committed to investing in their DC plan, with a mere 1.6% ceasing contributions, down from 1.9% in the first half of last year.Participants also displayed contentment with their investment choices, with only 6.8% reallocating their account balances and 4.3% directing new investments for their contributions. Account balance changes were on par with 2016 and contribution reallocations were slightly lower than in the first half of 2016, ICI says.“The withdrawal and contribution data indicate that, essentially, all [defined contribution] DC plan participants continued to save in their retirement plans at work,” ICI says in its report, “Defined Contribution Plan Participants’ Activities, First Half 2017,” based on data from recordkeepers.The post Scant Withdrawals From DC Plans in First Half of Year appeared first on PLANADVISER.
- Responsible Investing Strategies Still a Challenge for Advisers
published on Tue, 21 Nov 2017 16:27:29 +0000
Responsible investing continues to gain traction with advisers and their clients, according to the Q4 2017 Eaton Vance Advisor Top-of-Mind Index (ATOMIX) survey of 1,000 financial advisers.Eighty-four percent of advisers reported their clients have at least some interest in responsible investing options. However, 82% also believe responsible Investing has a long way to go before it becomes mainstream.One-third (33%) of advisers said they are not adequately informed about responsible investing strategies and another 38% said while somewhat informed, they are looking for further education. Only 21% reported feeling very well informed.Accessing environmental, social and governance (ESG) data is a challenge for advisers. Sixty-nine percent said corporate sustainability data is hard for investors to obtain. Thirty-seven percent worry about achieving diversification with a responsibly invested fund.Overall, most advisers believe responsible investing strategies perform relatively well. Seventy-two percent said responsible investing solutions pose the same or less risk as traditional strategies, while 71% said responsible investments are equally as or less volatile than traditional strategies, and 61% believe responsible investment strategies perform the same or better than traditional strategies. Client priorities for responsible investing continue to be environmentally focused, with clean energy (53%), sustainability (45%) and climate change (41%) emerging as the dominant reasons for selecting responsible investments.“Clients are pursuing investment opportunities that align with their personal values,” says Anthony Eames, director of responsible investing strategy, Calvert Research and Management. “The demand for Responsible Investing strategies continues to rise, and advisors who deliver those strategies will emerge as sought-after experts in the field.”He adds: “The lack of understanding about ESG principals prompted us to create Calvert’s Responsible Investing framework. Our investment strategies follow the Four Pillars of Responsible Investing—performance, research, engagement and impact—which empower investors to seek competitive returns and access the full capital structure with portfolios that reflect their values.”More findings from the ATOMIX may be found here.The post Responsible Investing Strategies Still a Challenge for Advisers appeared first on PLANADVISER.
- Regulators Release Informational Copies of 2017 Form 5500
published on Tue, 21 Nov 2017 15:30:00 +0000
The U.S. Department of Labor’s (DOL)’s Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2017 Form 5500 annual return/report and related instructions.They are for informational purposes only and cannot be used to file a 2017 Form 5500 annual return/report.The “Changes to Note” section of the 2017 instructions highlight important modifications to the Form 5500 and Form 5500-SF and their schedules and instructions. Modifications include:IRS-Only Questions. IRS-only questions that filers were not required to complete on the 2016 Form 5500 have been removed from the Form 5500, Form 5500-SF and Schedules, including preparer information, trust information, Schedules H and I, lines 4o, and Schedule R, Part VII, regarding the IRS Compliance questions (Part IX of the 2016 Form 5500-SF).Authorized Service Provider Signatures. The instructions for authorized service provider signatures have been updated to reflect the ability for service providers to sign electronic filings on the plan sponsor and Direct Filing Entity (DFE) lines, where applicable, in addition to signing on behalf of plan administrators.Administrative Penalties. The instructions have been updated to reflect an increase in the maximum civil penalty amount assessable under the Employee Retirement Income Security Act section 502(c)(2) required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Department regulations published on January 18, 2017, increased the maximum penalty to $2,097 a day for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report. The increased penalty under section 502(c)(2) is applicable for civil penalties assessed after January 13, 2017, whose associated violation(s) occurred after November 2, 2015—the date of enactment of the 2015 Inflation Adjustment Act.Form 5500/5500-SF-Plan Name Change. Line 4 of the Form 5500 and Form 5500-SF have been changed to provide a field for filers to indicate the name of the plan has changed. The instructions for line 4 have been updated to reflect the change. The instructions for line 1a have also been updated to advise filers that if the plan changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.Schedule MB. The instructions for line 6c have been updated to add mortality codes for several variants of the RP-2014 mortality table and to add a description of the mortality projection technique and scale to the Schedule MB, line 6 – Statement of Actuarial Assumptions/Methods.Form 5500-SF-Line 6c. Line 6c has been modified to add a new question for defined benefit (DB) plans that answer “Yes” to the existing question about whether the plan is covered under the PBGC insurance program. The new question asks PBGC-covered plans to enter the confirmation number—generated in the “My Plan Administration Account system”—for the PBGC premium filing for the plan year to which the 5500-SF applies. For example, the confirmation number for the 2017 premium filing is reported on the 2017 Form 5500-SF.Filers should monitor the EFAST website for the availability of the official electronic versions for filing using EFAST-approved software or directly through the EFAST website.The post Regulators Release Informational Copies of 2017 Form 5500 appeared first on PLANADVISER.
- DOL Issues ERISA Guidance for Plans Impacted by Hurricane Maria, Wildfires
published on Tue, 21 Nov 2017 15:26:19 +0000
Following the Internal Revenue Service’s (IRS’s) relaxation of loans and hardship withdrawals from 401(k) plans for victims of Hurricane Maria and the October wildfires in California, the Department of Labor (DOL) has issued guidance on how these plans can still remain in compliance with the Employee Retirement Income Security Act (ERISA). If a plan sponsor and participant comply with IRS Announcement 2017-15 on the relaxed verification procedures for loans or hardship withdrawals, DOL says they will not treat them as having violated Title I of ERISA. When repaying the loan, the DOL says that those payments constitute plan assets and that employers must forward the money “to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld [from a participant’s wages] by the employer.”However, the DOL “recognizes that some employers and service providers, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed time frame.” Instead, the DOL will expect those employers and service providers to forward the repayments “as soon as practical.” If any of the retirement plans in the affected areas are unable to receive investments, issue loans or issue other distributions within three business days, they will have fallen into a blackout period, DOL says. ERISA normally requires plans to issue 30 days’ notice to participants prior to a blackout period, but given the fact that Hurricane Maria is a natural disaster, plans affected by the hurricane fall under the regulation’s exception to the advance notice requirement, DOL says. With respect to health care for participants, beneficiaries and sponsors of plans affected by Hurricane Maria, DOL and IRS will be extending the deadlines for them to “make critical coverage and other decisions affecting benefits.” The deadlines will be published in the Federal Register on November 21. DOL also says that health care plans should accommodate participants and beneficiaries impacted by both Hurricane Maria and the California wildfires by minimizing the “possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” Likewise, the DOL says it will take into consideration whether the physical disruption of a service provider’s place of business renders them unable to process a claim.Further details on how employers and advisers can handle retirement and health care plans in areas affected by these and other disasters is available on this section of the DOL’s website. Workers and families can find additional information here. IRS guidance on its relief for victims of these disasters is available here.The post DOL Issues ERISA Guidance for Plans Impacted by Hurricane Maria, Wildfires appeared first on PLANADVISER.
- New Complaint Alleges Excessive Fees in NYU Plans
published on Mon, 20 Nov 2017 18:27:04 +0000
Participants in the New York University and related plans are making a second attempt to sue fiduciaries for excessive fees.After a federal district court judge found most claims in an earlier complaint were not plausibly alleged by the plaintiffs, they filed a second complaint in the U.S. District Court for the Southern District of New York. This case was filed against NYU Langone Hospitals, NYU Langone Health Systems, the retirement plan committee, and several named defendants.As with the first case, which included the university’s Faculty Plan, the participants allege that instead of using the plans’ bargaining power to reduce expenses and exercising independent judgment to determine what investments to include in the plans, the defendants squandered that leverage by allowing the plans’ conflicted third-party service providers—TIAA-CREF and Vanguard—to dictate the plans’ investment lineup, to link its recordkeeping services to the placement of investment products in the plans, and to collect unlimited asset-based compensation from their own proprietary products.In the new complaint, the plaintiffs attempted to offer more evidence that their claims were plausible.For example, previously, U.S. District Judge Katherine B. Forrest dismissed all of the plaintiffs’ loyalty claims, finding that the plaintiffs failed to plead sufficient facts to support the loyalty-based claims. “A plaintiff does not adequately plead a claim simply by making a conclusory assertion that a defendant failed to act ‘or the exclusive purpose of’ providing benefits to participants and defraying reasonable administration expenses; instead, to implicate the concept of ‘loyalty,’ a plaintiff must allege plausible facts supporting an inference that the defendant acted for the purpose of providing benefits to itself or someone else,” she wrote in her opinion.She noted that plaintiffs’ allegations are principally based on NYU purportedly allowing TIAA-CREF and Vanguard to include their proprietary investments in the plans without considering potential conflicts, which favored TIAA-CREF’s and Vanguard’s own interests through the provision of allegedly bundled services. “As pled, these allegations do not include facts suggesting that defendant entered into the transaction for the purpose of (rather than merely having the effect of) benefitting TIAA-CREF,” Forrest wrote in her opinion.Funds offered for the benefit of recordkeepersAs noted in both complaints, TIAA-CREF offered its products and services strictly on a bundled basis. If a plan offers the TIAA Traditional Annuity, TIAA-CREF required that the plan also offer the CREF Stock and Money Market account, and to also use TIAA as recordkeeper for its proprietary products. The new complaint says TIAA’s financial interests were also served insofar as TIAA was able to use its position as recordkeeper to obtain access to the plans’ participants, acquiring information about their ages, length of employment, contact information, the size of their accounts, and choices of investments, and then used this information for its benefit in marketing lucrative investment products and wealth management products to participants as they neared retirement and before retirement. For this argument, they cite multiple recent reports in the New York Times.In addition, the complaint states, “By allowing the Plans to enter such a bundled arrangement with TIAA-CREF, Defendants agreed to lock the Plans’ participants into funds which Defendants did not analyze. It can never be prudent to lock funds in a plan for the future and to keep them in because of recordkeeping. Defendants thus failed to discharge their duty to independently evaluate whether each investment option was prudent for the Plans, and to determine whether the use of TIAA as a plan recordkeeper was prudent, reasonably priced, and in the exclusive interest of participants. Instead of acting solely in the interest of participants, Defendants allowed TIAA’s financial interest to dictate the Plans’ investment selections and recordkeeping arrangement.”The plaintiffs also say that because the defendants allowed the CREF Stock to be locked into the plans, they could not satisfy their duty to remove investments that are no longer prudent within a reasonable time. “As a result of Defendants’ breach in allowing CREF Stock to be retained in the Plans because TIAA-CREF demanded it and not based on an independent and ongoing assessment of the merits of the option, the Plans suffered massive losses compared to prudent alternatives,” the lawsuit says.Plaintiffs also note the TIAA Traditional Annuity has severe restrictions and penalties for withdrawal if participants wish to change their investments in the plans. For example, some participants who invest in the TIAA Traditional Annuity must pay a 2.5% surrender charge if they withdraw their investment in a single lump sum within 120 days of termination of employment. The only way for these participants to withdraw or change their investment in the TIAA Traditional Annuity is to spread the withdrawal over a ten-year period, unless this substantial penalty is paid. Thus, any of these participants who wish to withdraw their savings without penalty can only do so over ten years.Plaintiffs also allege that some expenses charged to participants were not related to services provided by the recordkeepers and are unnecessary, such as the administrative fee assessed on each variable annuity option. It is charged as a percentage of assets, rather than a flat fee per participant. As a result, as the growth in the plans’ assets outpaced the growth in participants, the fees paid to TIAA-CREF likewise increased even though the services provided did not increase at the same rate, resulting in further unreasonable compensation.As another example, the plaintiffs say distribution expenses are charged for services performed for marketing and advertising of the account to potential investors. These services provide no benefit to plan participants and are wholly unnecessary, and being charged for these expenses causes a loss of retirement assets with no benefit.The recordkeeping arrangementsForrest also previously ruled that merely having a contractual arrangement for recordkeeping services does not, as a matter of law, constitute a breach of the duty of prudence—to support a claim on this basis, plaintiff must make a plausible factual allegation that the arrangement is otherwise infirm. The plaintiffs attempt to support their claim by adding a series of assertions that alternative recordkeepers—with whom NYU was allegedly precluded from contracting—could have provided “superior services at a lower cost.” But, Forrest said if this fact alone supported imprudence, the mere entry into the market of a lower-cost and superior provider would lead to a breach of fiduciary duty. “This is not the law,” she wrote.Related to this the complaint says the retirement committee’s own publicly-available admissions unequivocally concede that the plans’ structure was imprudent and caused plan losses. Specifically, in 2009, the retirement committee recognized that in order to leverage the plans’ $3 billion in assets, improve the plans’ administrative efficiency and reduce costs, and offer a “best in class fund lineup,” it “need[ed] to streamline and reduce the fund lineup and select one vendor as sole recordkeeper.” Moreover, the retirement committee readily acknowledged that an unbundled platform was preferable to the plans’ “bundled” arrangement. It also admitted that plan consolidation would enable the plans to obtain “better share classes yielding higher returns,” which would “result in significantly lower fee structures for the participant.”Yet, according to the complaint, more than seven years later, the defendants still have not taken the action it recognized was “needed” as of 2009. In an October 13, 2016, meeting regarding the plans—after the filing of the previous lawsuit that challenged the plans’ use of multiple recordkeepers and duplicative options—the retirement committee admitted it had still not met the goal of “reducing duplication and fees.”The complaint adds that experts in the recordkeeping industry with vast experience in requests for proposals and information for similar plans have determined the market rate that the plans likely would have been able to obtain had the fiduciaries put the plans’ recordkeeping services out for competitive bidding would be no more than $840,000 in the aggregate for both plans combined (a rate of no more than approximately $35 for each participant in the plans per year.Using lower-cost fund share classesForrest also previously said the plaintiffs’ identification of funds for which NYU included a higher-cost share class in the plans instead of an identified available lower-cost share class of the “exact same mutual fund option” does not constitute evidence of imprudence.The complaint says that because the only difference between the various share classes is fees, prudent fiduciaries view higher-cost share classes as imprudent, because using a higher-cost share class results in the plan paying wholly unnecessary fees. “Because there is no prudent reason to pay a higher cost when the same fund is available at a lower cost, prudent fiduciaries of multi-billion dollar defined contribution plans obtain the lowest-cost share class available to the plan,” the complaint says. It also cites an article written for PLANSPONSOR by attorney Fred Reish of Drinker, Biddle and Reath, that says, “The failure to understand the concepts and to know about the alternatives could be a costly fiduciary breach.”The complaint points out that given that defined contribution plan fiduciaries are held to the standard of a knowledgeable financial expert, if a service provider or consultant recommends a particular share class, a fiduciary cannot blindly accept that recommendation at face value, but instead must review the fund’s prospectus to determine if a lower-cost version of the same fund is available, to avoid saddling the plan with unnecessary fees.In addition, it notes that even if a jumbo plan does not meet the minimum investment thresholds for an institutional share class, fund companies will routinely waive those minimums for billion dollar plans if merely requested, particularly if the plan’s total investment in the investment provider’s platform is significant. “Therefore, Defendants knew or should have known that investment providers would have made lower-cost share classes available to the Plans if Defendants had asked,” the complaint states.“This demonstrates a sustained failure of process on the part of the Retirement Committee to ensure that each option in the Plans was prudent.”The post New Complaint Alleges Excessive Fees in NYU Plans appeared first on PLANADVISER.
- Sizable Group of Investment Managers Pledge to Lower Fees
published on Mon, 20 Nov 2017 17:31:44 +0000
Twenty-one percent of investment managers plan to lower their fees in 2017, the Callan Institute found in its 2017 Investment Management Fee Survey.Today, only 69% of assets in retirement plans are in actively managed funds, down significantly from 84% in 1996. The most common objection active investment managers hear from sponsors is whether they are providing the value-added services to justify their fees, cited by 49% of these investment managers. The median fee that retirement plans pay for investments is 38 basis points (bps). By asset class it is 21 bps for fixed income, 34 bps for U.S. equities, 45 bps for non-U.S./global equities and 90 bps for alternatives. U.S. equities and non-U.S./global equities had the most dramatic movements between 2014 and 2016, with U.S. equity fees dropping 4 bps and non-U.S./global equity fees increasing 5 bps. Investment managers are allocating a lower percentage of their revenue to bonuses: 18%, down from 24% in 2014. However, the amount of revenue allocated to cover the cost of operations increased from 42% to 60%. This may be why profit margin expressed as a percentage of revenue decreased from 34% in 2014 to 22% in 2016. The percentage of investment management firms that offered performance-based fees dropped from 75% in 2014 to 64% in 2016. The types of funds that always use performance-based fees are all alternatives: hedge funds (60%), private equity (54%), infrastructure (38%), real estate (29%), hedge funds-of-funds (20%) and high yield fixed income (8%). It is a common practice for investment managers to negotiate their fees, with 83% undertaking this practice, although this is down from 91% in 2014. Callan’s report is based on responses from 59 asset managers representing $1.1 trillion in assets. Survey results also incorporated responses from 279 investment management organizations, supplemented by Callan’s Investment Manager Database of more than 1,600 firms. The full report can be downloaded here.The post Sizable Group of Investment Managers Pledge to Lower Fees appeared first on PLANADVISER.
- Six Ways to Up the Ante on DC Plans
published on Mon, 20 Nov 2017 16:23:43 +0000
While some plan sponsors may be waiting for Washington to settle on new tax regulations for defined contribution (DC) plans, there are steps that they can be taking to improve their plans now, AB says in a new blog, “Six Steps to Take DC Plans to the Next Level.” The first step, AB says, is to replace proprietary target-date funds (TDFs) from recordkeepers as the qualified default investment alternative (QDIA) with TDFs that use open architecture, and, in some cases, lower cost collective investment trusts, customized glide paths and in-plan guaranteed lifetime income. If the plan is not already automatically enrolling participants and escalating their deferrals each year, AB says, it should be. Thirdly, sponsors should consider offering a financial wellness program to prompt their participants to become more engaged. While using a QDIA and automatic enrollment are beneficial, AB says, sponsors should also revisit their investment lineup for those participants who want to select their own investments. Fifth, sponsors should make sure that their retirement committees receive fiduciary training, and sixth, hire an adviser or consultant, if they aren’t already working with one. “This is especially important for plans with less than $50 million in assets,” AB says. “Smaller-size plans that employ a financial adviser fare much better than those that don’t—showing higher participation rates, higher average savings among participants and more participants improving their retirement readiness.”The post Six Ways to Up the Ante on DC Plans appeared first on PLANADVISER.
- First Bankers Trust Settles Three ERISA Suits
published on Mon, 20 Nov 2017 16:06:02 +0000
The U.S. Department of Labor (DOL) has reached agreements to resolve three lawsuits with First Bankers Trust Services Inc. (FBTS), involving the approval of stock purchases for three ESOPs.According to DOL allegations, FBTS violated the Employee Retirement Income Security Act (ERISA) when it approved stock purchases by three employee stock ownership plans (ESOPs). As part of the agreements, FBTS will pay $15.75 million to the plans and reform its procedures for handling ESOP transactions.By way of background, the DOL initially filed suit against FBTS in 2012 in the U.S. District Courts for the Southern District of New York and the District of New Jersey. The lawsuits followed investigations by the New York office of the Department’s Employee Benefits Security Administration (EBSA) into the FBTS decisions to authorize ESOPs sponsored by Maran Inc., Rembar Co. Inc., and SJP Group, Inc., to purchase stock in their respective companies. FBTS will pay $8 million to the SJP ESOP; $6.6 million to the Maran ESOP; and $1.1 million to the Rembar ESOP.Jeffrey S. Rogoff, DOL regional solicitor of labor, says the settlements provide “not only for reimbursement to these ESOPs and their participants—they commit First Bankers Trust Services to clear procedures to enhance and ensure proper compliance in the future.”DOL reports FBTS served as a trustee and fiduciary of the ESOP in each of these three cases, charged under ERISA with ensuring that the ESOP paid no more than fair market value for the employer stock. The department alleged in all three cases that FBTS approved transactions without undertaking the due diligence required of an ERISA fiduciary, and ultimately caused the ESOPs to overpay by millions of dollars for the stock they purchased.The case involving the SJP ESOP resulted in a 17-day trial in district court in New Jersey, with the court reaching the determination that FBTS breached its duties of prudence and loyalty when it caused the ESOP to overpay for shares of SJP’s stock. The Maran case was the subject of a two-week trial before the New York district court in April 2017, but no judgment had been returned as the parties discussed settlement. The Rembar case was awaiting trial in New York.DOL explains that, as part of the settlement of the Maran case, FBTS also agreed to follow specific policies and procedures when it acts as a trustee or fiduciary to an ESOP that is purchasing, selling, or considering the purchase or sale of employer securities that are not publicly traded. These policies and procedures include “requirements for the selection and oversight of a valuation adviser, the analysis required as part of the fiduciary review process, and the documentation of the valuation analysis.”The post First Bankers Trust Settles Three ERISA Suits appeared first on PLANADVISER.
- Retirement Industry People Moves
published on Fri, 17 Nov 2017 17:19:01 +0000
Meeder Investment Management has announced that industry veteran Dan O’Toole has joined the firm as senior vice president and head of third-party distribution. O’Toole brings nearly 30 years of industry and investment management experience to Meeder, a tactical asset allocation strategist known for their suite of investment solutions and model-driven approach to investing.“We are very excited to have Dan join our leadership team. His experience working with sales and consulting teams who engage with institutions, advisers and clients provides the depth of leadership we need to ensure we can provide the right level of expertise, service and support today and in the future,” says Bob Meeder, president and CEO of Meeder Investment Management. “As we move forward in what has become a highly commoditized investment management world, financial intermediaries are trying to determine what types of investment strategies and solutions will help them address the challenges and opportunities of the current and future financial market environment. Dan’s leadership in these areas will position our firm well as we approach our 45th year in the industry.” O’Toole’s experience spans multiple organizations where he led national sales and consulting teams. Prior to joining Meeder, he served as senior managing director and head of national sales at Horizon Investments and was a senior vice president at AssetMark Investments.NEXT: PGIM Investments Appoints Chief Marketing Officer to Drive Global Expansion The post Retirement Industry People Moves appeared first on PLANADVISER.
- PBGC Deficit Report Shows Dire Situation for Multiemployer Plans
published on Fri, 17 Nov 2017 16:45:03 +0000
The Pension Benefit Guaranty Corporation’s (PBGC) Fiscal Year 2017 Annual Report shows that the deficit in its insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier. According to PBGC, the increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade.At the same time, PBGC’s single-employer insurance program continued to improve, as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities.PBGC Director Tom Reeder says his attention is focused on the “dire financial condition” of the multiemployer program. “We are engaged with trustees of troubled plans to help them protect benefits and extend plan solvency,” he explains. “We will continue to work with the Trump administration, Congress, and the multiemployer plan community to create solutions so that PBGC’s guarantee is one that workers and retirees can count on in the future. The longer the delay in making the changes needed to improve the solvency of the multiemployer program, the more disruptive and costly they will be for participants, plans and employers.”PBGC data shows the multiemployer program had liabilities of $67.3 billion and assets of $2.2 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $65.1 billion, up from $58.8 billion last year. “The increase of $6.3 billion results largely from 19 plans newly classified as probable claims because they either terminated or are expected to run out of money within the next decade, offset by the reclassification of one plan that is no longer a probable claim due to the implementation of benefit reductions under the Multiemployer Pension Reform Act of 2014,” Reeder explains. During FY 2017, PBGC reports, the agency provided $141 million in financial assistance to 72 insolvent multiemployer plans, up from the previous year’s payments of $113 million to 65 plans. In the coming years, the demand for financial assistance from PBGC will increase as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee level set by law. In the PBGC’s most recent projections, the agency estimated that, absent changes in law, its multiemployer program is likely to run out of money by the end of 2025, if not before. The outlook on the single employer side is much healthier. That program had liabilities of $117 billion and assets of $106 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $10.9 billion and reflects an improvement of $9.7 billion from $20.6 billion last year. For more information, visit www.PBGC.gov. The post PBGC Deficit Report Shows Dire Situation for Multiemployer Plans appeared first on PLANADVISER.
- Millennials Are Focused on Achieving Financial Goals
published on Fri, 17 Nov 2017 16:39:43 +0000
In a new report, “Breaking the Millennial Myth,” Natixis Global Asset Management examines the financial goals of Millennials, those born between 1980 and 2000. The oldest, Natixis says, are 37—raising families and buying homes. They are anything but the “slackers” other generations may think of when they hear the word Millennial. Natixis says that Millennials “are risk-conscious and have retirement in their sights, and when it comes to their finances, they are very much goals-focused.” Sixty-four percent say they have financial goals, and 59% have a financial plan in place to achieve them. However, some Millennials are too focused on the short term, with 64% saying the time horizon for their investments is five years or less and 87% saying it is less than 10. Natixis says “this likely reflects their current life stage in which anticipated events such as marriage or starting a new family, or significant purchases such as a new car or first home, may be only a few short years away.” Nonetheless, 66% of Millennials are saving for retirement. But they need help learning about how much they should save, as their average deferral rate is 10.9%, compared to 13.5% for Baby Boomers and 12.1% for Generation X. Fifty percent of Millennials say they need help understanding financial risk and 46% say they would like help with tax planning. Twenty-eight percent would like guidance on the financial basics of budgeting and managing debt. Surprisingly, the same percentage wants help with estate planning, even though they are only between the ages of 17 and 37.NEXT: Risk toleranceThe post Millennials Are Focused on Achieving Financial Goals appeared first on PLANADVISER.
- For Older Generations, Paying Off Debt Overrides Saving for Retirement
published on Thu, 16 Nov 2017 17:55:00 +0000
Just 10% of Baby Boomer and Generation X members give themselves an ‘A’ grade on retirement planning, while 63% give themselves a ‘C’ or lower, according to survey data from North American Company, a Sammons Financial Group member company. Nearly half (47%) of Baby Boomers confessed that spending money on things they didn’t need and getting into too much debt were their biggest financial mistakes they made when they were young, and another one-third (33%) say it was not saving for retirement. Yet, this is not the primary information or advice that they pass along to younger generations. With more Gen Xers saying they regret spending (44%) and accumulating debt (22%) than previous generations, it looks as though they may be on course to repeat the previous generation’s mistakes. As they approach retirement, most Baby Boomers cite issues related to paying off debt and having too many expenses (25%), as well as not making enough money (36%), as barriers to saving more for their retirement. Gen X has strikingly similar concerns—33% cited paying off debt and having too many expenses and 32% cited not making enough money—in addition to prioritizing college savings for children (28%). Half of both generations (51% of Boomers and 50% of Gen X) are prioritizing paying off debt before saving for retirement. Two-thirds (66%) of Baby Boomers admit they are concerned about outliving their retirement savings. Gen X is even more fearful—77% report the same concern. Nearly one-fifth of Gen X are supporting their parents, while most (71%) are also supporting their children. Given these financial obligations, it makes sense that a majority of Gen X (73%) wish they were saving more. The survey was fielded via Toluna’s online respondent panel and platform from March 29 to April 3, 2017, among 600 U.S. adults between the ages of 36 and 69. More findings are here.The post For Older Generations, Paying Off Debt Overrides Saving for Retirement appeared first on PLANADVISER.
- Schwab OpenView Adds Riskalyze and Autopilot Platforms
published on Thu, 16 Nov 2017 17:36:20 +0000
Riskalyze announced that both the Riskalyze and Autopilot platforms will be added to the Schwab OpenView Gateway, further expanding its integration with the custodian and allowing advisers to seamlessly sync and automate accounts. Schwab OpenView Gateway provides a flexible, open-architecture platform that enables integrations between the firm’s custody systems and participating technology providers, the firm explains. As part of the integration with Riskalyze and Autopilot, advisers will be able to connect their account to Schwab OpenView Gateway, allowing them to link clients between both platforms and also update client data daily, including client profiles, accounts, balances, positions and more. In addition, Riskalyze will be able to automate trade delivery for seamless execution with Autopilot’s “One-Click Fiduciary” technology.John Connor, vice president, Schwab Advisor Services Technology Solutions, suggests integrations with providers like Riskalyze “enhance our ability to provide flexible, efficient solutions, while also providing advisers choice to use the tools that suit them best to grow and scale their business.”The integration and features will be available to Schwab and Riskalyze advisers in the first quarter of 2018. To learn more about Riskalyze, visit www.riskalyze.com. The post Schwab OpenView Adds Riskalyze and Autopilot Platforms appeared first on PLANADVISER.
- Investment Products and Services Launches
published on Thu, 16 Nov 2017 16:45:00 +0000
American International Group, Inc. (AIG) and Clearwater Analytics will partner to execute technological enhancements to the global insurance organization’s investment data management.Clearwater, an automated SaaS solution, will provide AIG a cloud-based, highly scalable software platform that offers daily reconciled investment portfolio data, accounting entries, and reporting tools. The data management system will support AIG’s more than $250 billion in fixed income securities, equity investments, and residential mortgage loans. “Partnering with Clearwater will allow us to further shift focus from collecting data to analyzing it, so that we can support AIG’s objectives and investment strategies,” says Elias Habayeb, deputy chief financial officer at AIG. “With Clearwater’s expertise and their platform’s scalability, we are excited to take this decisive action in promoting technological excellence and operational efficiency.” “Establishing Clearwater as the core platform for its investment data management will provide AIG with greater freedom and flexibility, positioning the organization for future growth as it evolves investment strategies and asset classes,” says Dave Boren, CEO of Clearwater Analytics. “Clearwater’s automated solution can also support future integration efforts for mergers, acquisitions, and other growth strategies. AIG is a natural fit for Clearwater’s best-in-class platform and we look forward to a long and productive collaboration between our firms.”NEXT: Wilshire Launches Latest Indexes Tracking REITs The post Investment Products and Services Launches appeared first on PLANADVISER.
- Democrats Outline Their Vision for Protecting Union Pensions
published on Thu, 16 Nov 2017 16:28:00 +0000
Democratic members of both the U.S. House and Senate convened to promote their own plans for promoting broad-based economic acceleration, paying particular attention to the issue of troubled multiemployer pension plans. The left-leaning lawmakers are calling their economic vision “A Better Deal,” one that would “ensure the pensions American workers have earned over a lifetime of work are safeguarded and protected into the future.” While some of the lawmakers first started talking about this package of proposals back in July, the press conference was clearly called to show a unified opposition working to derail the GOP tax reform proposals under debate in the House and the Senate.Laying out the “Better Deal,” lawmakers repeatedly suggested pension plans, “including the massive Central States Teamsters Pension Plan, the United Mine Workers Pension Plan, and over 200 more plans impacting workers in every state in the country,” are on the brink of failure and are “threatened by massive cuts.” As laid out by House and Senate Democratic members, this new legislation “would put the pension plans back on solid footing, ensure they can meet their obligations to current retirees and workers for decades to come without cutting the benefits retirees earned, and safeguard them for the future.”When it comes to actually legislating the Better Deal, it seems the Democrats are coalescing around two bills, one previously put forward by Independent Vermont Senator Bernie Sanders and Representative Marcy Kaptur (D-Ohio), called the “Keep Our Pension Promises Act.” In short, the stand-alone bill would reverse a provision passed in 2014 that, as Democrats put it, “could result in deep pension cuts for millions of retirees and workers in multiemployer pension plans.” Another proposal to emerge is call the “Butch Lewis Act,” a similar proposal that would essentially be a bolt-on provision to the larger spending bills slated for votes very soon in Congress. Butch Lewis, the former President of Teamster Local 100 and “a leader of the fight to save Teamster pensions,” died in December 2015. His wife, Rita Lewis, spoke during the press conference and thanked the lawmakers for pressing this issue. For context, in December 2014, Congress approved and President Obama signed a spending bill that included provisions that allow for dramatic cuts to financially troubled multiemployer pensions. Under this provision, the pension benefits of retirees could be cut by 30% or more, and this has already occurred. Before the law was changed, it was illegal for an employer to cut the pension benefits retirees have earned.According to Democrats, their legislation “establishes a legacy fund within the Pension Benefit Guaranty Corporation to ensure that multiemployer pension plans can continue to provide pension benefits to every eligible American for decades to come.” This legislation is paid for by closing “two tax loopholes that allow the wealthiest Americans to avoid paying their fair share of taxes.”The post Democrats Outline Their Vision for Protecting Union Pensions appeared first on PLANADVISER.
- SIFMA Files Brief in Support of Fidelity in Stable Value Suit
published on Thu, 16 Nov 2017 16:15:23 +0000
The Securities Industry and Financial Markets Association (SIFMA) has weighed in on an appeal to a case against Fidelity Management Trust Company over the management and monitoring of a stable value fund offered to 401(k) plans. In an amicus brief filed with the 1st U.S. Circuit Court of Appeals, SIFMA says it has a strong interest, on behalf of its members, in clarifying the fiduciary obligations of investment managers in selecting and managing investment options in retirement plans governed by the Employee Retirement Income Security Act (ERISA). The lawsuit, which accused Fidelity of engaging in imprudent investment strategies for the Fidelity Group Employee Benefit Plan Managed Income Portfolio Commingled Pool (MIP), a stable value fund offered as an investment option in some 401(k) plans for which Fidelity was trustee, was dismissed by a district court in June. In its brief, SIFMA notes that a stable value fund is a conservative investment option that is designed primarily to provide stability, as opposed to growth. It points out that the plaintiffs do not claim that the portfolio failed to achieve its desired stability, nor that it lost value, but they claim that, in the immediate aftermath of the 2008 financial crisis, Fidelity was obligated by ERISA to invest the portfolio in riskier, longer-term assets in pursuit of greater yield. “Plaintiffs’ theories—if endorsed by a court—would prove deeply problematic to the financial services industry and to the ERISA plans that it serves,” SIFMA says. “With the benefit of hindsight, it will always be possible to observe that, during any given period, more risk in particular segments was either rewarded or punished. At the point of decision, however, asset managers lack the benefit of hindsight. Courts have rightly refused to credit claims, like this one, that rely, inextricably, on hindsight.” Rather than evaluating ERISA prudence claims on performance—which is inherently a hindsight assessment—courts should focus on whether the manager engaged in a prudent process, SIFMA argues. It notes that the Labor Department’s regulations obligate fiduciaries to engage in a deliberative process in which they probe key issues pertaining to their investment duties and make determinations based on their evidence-based assessments. SIFMA says Fidelity did just that—repeatedly assessing, for example, how best to maintain wrap coverage while wrap providers were exiting the market, and challenging, for example, whether another benchmark might prove more effective. It says plaintiffs’ argument that a lack of unanimity among Fidelity’s decisionmakers shows there is a real issue. “Internal debates and disagreements on tough issues are evidence of sound fiduciary processes—not evidence of fiduciary shortcomings,” the association wrote in its brief. NEXT: No need to follow the herd and aligning interests is good for allThe post SIFMA Files Brief in Support of Fidelity in Stable Value Suit appeared first on PLANADVISER.
- A New Look at Pension Plan Investing in 2018
published on Thu, 16 Nov 2017 15:54:53 +0000
In “Ten Investment Actions for DB Plans in 2018,” Willis Towers Watson updates 10 terms that have traditionally been used with respect to defined benefit (DB) plans—but says each needs to be revisited in light of regulatory and market developments. First off, pension plans have dealt with their fiduciary duties by ensuring that any decisions made with respect to the plan are reasonable and documented. In today’s world, Willis Towers Watson says, that won’t fly because DB plans are being held to a higher level of scrutiny than ever before and more parties are considered fiduciaries—and expected to be experts. Secondly, pension plans have been considered fully funded when their assets have been equal to or exceeded accounting liabilities. The consulting firm says pension plan sponsors need to be more diligent about ensuring that their assets will, indeed, support future benefits for employees. In the past, pension plans considered their time horizon to be a very long period of time until they would need to make their last benefit payment. In fact, Willis Towers Watson says, because people retire at different points, pension plan sponsors need to be aware that in some cases, their investment time horizon can be very short.Fourth, pension plans have traditionally decided on an asset allocation strategy and accompanying investment managers and let their decisions rest. Today, Willis Towers Watson says, pension plan sponsors need to continually monitor their investments in light of changing market conditions, saying that in today’s world, a pension plan needs to adopt “the dynamic process of achieving a series of risk allocations that vary with market conditions and reflect the plan’s progress toward its funding and settlement objectives.”NEXT: Interest rate riskThe post A New Look at Pension Plan Investing in 2018 appeared first on PLANADVISER.
- GOP Backs Away From Limits on Deferred Compensation
published on Wed, 15 Nov 2017 18:51:44 +0000
Both the preliminary versions of the House and Senate tax reform proposals would have made major changes to the treatment of deferred compensation for executives and highly-paid employees. However, following the earliest stages of debate, both the House and the Senate seem to have backed away from major changes to deferred compensation arrangements, as well as from other retirement-industry focused proposals. As the law currently stands, compensation is generally includible in an employee’s income when paid to the employee. However, in the case of a nonqualified deferred compensation plan, unless the arrangement either is exempt from or meets the requirements of Treasury Regulation 409A, the amount of deferred compensation is first includible in income for the taxable year “when not subject to a substantial risk of forfeiture,” even if payment will not occur until a later year. In general, to meet the requirements of section 409A, the time when nonqualified deferred compensation will be paid, as well as the amount, must be specified at the time of deferral, with limits placed on further deferral after the time for payment. Various other requirements apply, including that payment can only occur on specific defined events.This system would have be changed dramatically under the first drafts of tax reform proposals released on both houses of Congress. Under the preliminary Senate bill, for example, the rights of a service provider to compensation are treated as subject to a substantial risk of forfeiture “only if the rights are conditioned on the future performance of substantial services by any individual.” Under the proposal, a “condition related to a purpose of the compensation other than the future performance of substantial services (such as a condition based on achieving a specified performance goal or a condition intended in whole or in part to defer taxation) does not create a substantial risk of forfeiture, regardless of whether the possibility of forfeiture is substantial.” In addition, “a covenant not to compete does not create a substantial risk of forfeiture.”The House Ways and Means Committee had included similar language in its initial tax bill, but since then the language was already amended out of the tax bill prior to its clearing the committee. And news has emerged that the Senate has “stricken” its proposals regarding deferred compensation. It also seems to be the case that the House and Senate are backing away from the limitation of catch-up contributions for high-wage employees, and from the proposal to implement a 10% penalty tax for early withdrawals made prior to age 59½ from governmental section 457(b) plans.Of course, both the House and the Senate are still just getting started on tax reform. This tax reform effort will take some time to pan out, and preliminary details may change by the time actual legislation is voted on by the full House and Senate. The post GOP Backs Away From Limits on Deferred Compensation appeared first on PLANADVISER.
- Target-Date Funds See Net Outflows From Retirement Accounts in October
published on Wed, 15 Nov 2017 18:18:23 +0000
Trading among defined contribution plan investors was moderate in October, with three days of above normal trading activity, according to the Alight Solutions 401(k) Index. On average, 0.014% of balances traded each day. There was a 50/50 split of trading days favoring equities and those favoring fixed income. Most trading inflows went to international (46%), bond (22%), and large U.S. equity funds (14%), while outflows were primarily from company stock (40%), target-date (34%), and stable value funds (20%). At the end of October, 67.9% of balances were invested in equities, up from 67.6% at the end of September, and 67.2% of new contributions were invested in equities, up slightly from 67% in September. Target-date funds held the largest percentage of total balances in October (27%) and received the largest percentage of contributions (46%). More information is here.The post Target-Date Funds See Net Outflows From Retirement Accounts in October appeared first on PLANADVISER.
- Lack of Retirement Savings Causing Anxiety for Americans
published on Wed, 15 Nov 2017 16:48:20 +0000
Health care, retirement savings and student loans are the top causes of investor’s financial anxiety, according to a survey by Rubicoin, a digital investment platform provider. Among all investors, mounting health care expenses and bills (23.5%) and a lack of retirement savings (22.6%) are the two biggest contributors of financial anxiousness. For Millennials, student loan debt, credit cards and health care expenses all measured equally as causes for “extreme” amounts of financial stress. A lack of emergency savings and health care expenses are factors causing Millennial women to stress the most. Gen X women cite health care expenses and a lack of retirement savings to cause the most anxiety, followed closely by a lack of emergency savings. Women of both generations are primarily stressed about health care expenses and that only increases, alongside a lack of retirement savings, the older women get. Being ill-prepared for retirement is another, if not the top, factor causing stress among all Americans, not just women, according to Rubicoin. “Millennials are confident in the U.S. stock market to provide a substantial return, but are extremely anxious about their personal debts and expenses, ranging from health care to credit cards to student debt,” says Emmet Savage, CEO of Rubicoin. “It’s important for young investors to manage and pay-down those debts while simultaneously pursuing smart investment opportunities.” The survey was conducted online within the United States by Rubicoin using Google Survey technology in October 2017 among 620 people classified as American investors. Generations classified as Millennials, Gen X and Baby Boomers were equally represented in the survey.The post Lack of Retirement Savings Causing Anxiety for Americans appeared first on PLANADVISER.
- Retirement Plan Participants Need More Familiarity With Investment Fees
published on Wed, 15 Nov 2017 16:30:14 +0000
In its first report on retirement plan investment fees, The Pew Charitable Trust says it found nearly seven in 10 survey respondents in employer-sponsored retirement plans said they were at least somewhat familiar with their plan’s fees, while 31% were not at all familiar with the fees. Roughly two-thirds had not read any investment fee disclosure in the previous year. Even among those who said they were very familiar with their fees, 33% hadn’t read any fee disclosures in the past year. During a media briefing, John Scott, director, Retirement Savings Project at The Pew Charitable Trusts, said this was the most surprising finding of the research. “It raises the question of what the word ‘familiar’ means to respondents. Maybe they are just familiar with how fees over time affect retirement savings. I suppose they can be familiar without reading disclosures, but we believe people are overstating their knowledge,” he said. Of the one-third who had read a fee disclosure, nearly seven in 10 said they found the information understandable, but only 25% of all respondents said they had read and understood a disclosure about retirement account fees. Roughly four in five participants said it would be at least somewhat useful to have additional information about investment fees. Scott said this suggests that although many participants say they are familiar with retirement plan fees, they understand the limits of their knowledge and could use more information. Asked what plan sponsors and advisers can do to help retirement plan participants better understand plan fees, Scott suggested that just raising the issue of plan fees helps participants. “I hesitate to give advice based on our research, but plan sponsors are required by law to provide disclosures, and they can use this opportunity to discuss fees with participants and let participants ask questions,” he said. “There are a number of ways employer might help employees, but the key is to seek opportunities to motivate them to raise their awareness of fees and pay attention to disclosures.” NEXT: Characteristics of those unfamiliar and familiar with plan feesThe post Retirement Plan Participants Need More Familiarity With Investment Fees appeared first on PLANADVISER.
- Duty to Monitor at Heart of Fiduciary Solution from Cornerstone
published on Wed, 15 Nov 2017 15:48:54 +0000
Sitting down with PLANADVISER to discuss his firm’s new fiduciary support solution for advisers and their plan sponsors clients, John Riley, chief strategist at Cornerstone Plan Sponsor Consulting, stressed the solution is not meant to supersede any of the good work the plan adviser might already be doing. “With our solution we are not coming in and trying to take over a plan. Instead, the solution is purely focused on helping to establish fiduciary excellence. It is branded with the adviser’s own logos and marketing collateral, and simply represents a bolt-on service that we provide as an independent third-party,” Riley explains. “We have found advisers and sponsors really value this complementary, independent approach.”Riley explains the firm first got to work on an independent fiduciary support solution “way back after first hearing about the groundbreaking case of Tibble vs. Edison,” as the case first made its way through the district and appellate courts, eventually reaching the Supreme Court.“There are a lot of lessons for plan sponsors and advisers to take away from that litigation,” Riley says. “One of the main lessons is about the crucial importance not only of documenting the deliberation that went into your initial decisions with respect to a plan investment or a plan design change—but also the importance of continuing to monitor, deliberate and document on an ongoing basis.”To this end, the solution from Cornerstone offers template policies and procedures for guiding the fiduciary plan monitoring process. According to Riley, “all the parts of running the plan are covered in here.” The solution helps plan sponsors create a “fiduciary file” that proves their due diligence activities. “Plan advisers and sponsors can file key paperwork directly through the system,” Riley adds. “It also provides a yearly archive of all fiduciary documentation that can easily be recalled and utilized in the case of an audit or questions in the future. Overall, this solution adds a helpful framework around the whole compliance and documentation process.”Also as part of the solution, plan sponsors receive helpful education about all the moving parts of fiduciary liability and exactly what are the duties and responsibilities of all parties involved in plan management—the recordkeeper, the third-party administrator, the fund manager, the broker, the consultant, etc. “Plan Sponsors are always fiduciaries,” Riley concludes. “There is no getting around it. However, many of the fiduciary duties can be handled by others. This relieves the plan sponsor from some responsibility, but in the end, the sponsor is responsible to supervise those that take on delegated fiduciary duties.”More information is available here. The post Duty to Monitor at Heart of Fiduciary Solution from Cornerstone appeared first on PLANADVISER.
- Envestnet | Tamarac Launches Portfolio and Client Management Platform
published on Tue, 14 Nov 2017 17:58:49 +0000
Envestnet | Tamarac has launched the Tamarac platform, a completely redesigned version of its portfolio and client management software solution for independent registered investment advisers (RIAs), previously known as Advisor Xi. Tamarac will feature a complete overhaul of Advisor Rebalancing, a portfolio rebalancing and trading application, to be fully integrated with the Advisor View portfolio management and performance reporting application to create a seamless user experience. These applications, now known as Tamarac Trading and Tamarac Reporting, are combined in a single, intuitive software interface. With a single point of entry for all data and a simplified account opening and group management process, advisers will be able to better customize client reports and communications, reduce the time it takes complete transactions and tasks, and respond more quickly to client needs. Tamarac CRM, the client relationship management system designed specifically for independent advisers and built on the Microsoft Office 365 platform, will open up new options for advisers as they add and qualify leads and track business processes. The enhanced Tamarac CRM will provide advisers with greater field and entity customization, along with access to a broad range of third-party productivity integration partners in Microsoft’s app store. Optionally, RIAs already using Salesforce can use the new Tamarac App in the Salesforce AppExchange to enhance their CRM and benefit from the bidirectional data flow and workflow automation that Tamarac provides. Tamarac will also include:New client prospecting, proposal generation, account opening and onboarding capabilities built into its client portal (coming in 2018);New mobile apps that enable advisers to seamlessly share financial data and tasks with clients on their iOS and Android mobile devices;An upgraded document vault that makes document sharing easier and more secure, with the ability to track all parties who have viewed and changed documents;Data aggregation, including balance-only data for presenting client assets and liabilities in net-worth reporting and, coming in 2018, reconciled transactions and holdings information;Advanced business intelligence analytics and reporting to help advisers track the health of their business and benchmark their firm against other RIAs; andPersonal financial wellness tools within the Tamarac portal, enabling investor clients to group, track and act on all their transactional data—including proactive budget alerts and recommendations (coming in 2018). As a modular platform, Tamarac allows RIAs to license the specific software they need for reporting, trading and CRM, with the option to add components as their firms look to automate more of their business. Tamarac is also an open platform, with a large and growing list of supported integration partners—giving advisers the flexibility to build a technology network that supports their particular needs. “Never has it been more critical for advisers to stay connected with clients and anticipate their needs,” says Stuart DePina, president of Envestnet | Tamarac. “Tamarac helps advisers develop plans and recommendations driven by data and their own expertise, so clients feel more confident about their portfolios and advisers drive better outcomes for their businesses.”The post Envestnet | Tamarac Launches Portfolio and Client Management Platform appeared first on PLANADVISER.
- IRS Releases Covered Compensation Tables
published on Tue, 14 Nov 2017 17:28:56 +0000
The Internal Revenue Service has issued Revenue Ruling 2017-22 with the table of covered compensation for the 2018 plan year. The revenue ruling provides tables of covered compensation under Section 401(l)(5)(E) of the Internal Revenue Code to be used for determining contributions to defined benefit (DB) plans and permitted disparity in defined contribution (DC) plan contributions. To determine 2018 plan year covered compensation, the taxable wage base is $128,700. Permitted disparity allows for larger contributions or benefits with respect to compensation in excess of the Social Security wage base. In determining an employee’s covered compensation for a plan year, the taxable wage base for the plan year is the taxable wage base in effect as of the beginning of the period.The post IRS Releases Covered Compensation Tables appeared first on PLANADVISER.
- More Institutional Investors Seeking OCIOs
published on Tue, 14 Nov 2017 16:55:00 +0000
Cerulli Associates, a global research and consulting firm, expects that double-digit growth of worldwide outsourced chief investment officer (OCIO) assets managed on a partial or full discretionary basis will continue. Cerulli predicts a 1Q 2022 base case assets under management (AUM) projection of $2.3 trillion, but says the market could be as large as $2.7 trillion. Cerulli’s latest report, U.S. Outsourced CIO Function 2017: Identifying Emerging Opportunities Across Institutional Investors, says most of OCIOs’ new business is coming from investors that are using the OCIO model for the first time and previously used an investment consultant under an advice-only relationship (78%). However, providers expect increasing opportunities to come from replacement mandates. Together, defined benefit (DB) plans and nonprofits continue to represent the majority of the AUM of OCIOs polled by Cerulli (81.1%), with the greatest growth opportunities over the next two years expected to come from nonprofit (84%) and corporate DB (71%) clients for total portfolio services. OCIOs are gaining momentum with a broader range of investors—health and hospital systems, defined contribution (DC) plans, public DB plans, family offices, and sovereign wealth funds, as institutions face myriad investment-related, operational, and regulatory challenges, Cerulli says. More than one-third of OCIO providers view sleeve mandates from public DB (42%) and private DC (40%) plans as being very important to new business opportunities over the next two years. Nearly half of providers anticipate health/hospital systems to be very important to the growth of their business for both total portfolio (44%) and sleeve (46%) mandates. Use of an OCIO remains highest among smaller institutions with $250 million or less in AUM. During the next two years, providers polled expect the ”sweet spot” for total portfolio corporate DB (62%), nonprofit (59%), and health/hospital (70%) mandates to be in the $250 million to $1 billion range. Most (90%) asset managers polled by Cerulli have won a mandate through an OCIO provider and have had the most success working with OCIOs that are affiliated with an investment consultant (70%). Nearly two-thirds (63%) of asset managers surveyed anticipate the OCIO business will be very important to their overall institutional sales goals in three years, up from 37% that currently view it as very important. Information about ordering Cerulli’s report can be found here.The post More Institutional Investors Seeking OCIOs appeared first on PLANADVISER.
- Millennials Want Employers to Provide Help With Finances
published on Tue, 14 Nov 2017 16:34:34 +0000
Broadly, Millennials are positive about the future with 70% optimistic about their financial prospects; however, this optimism is tempered with concerns about their ability to meet all of their financial goals, according to a supplement report to Bank of America Merrill Lynch’s 2017 Workplace Benefits Report. The research finds that Millennials’ sense of realism about their situation leads to a generation of employees who are more engaged with their finances. Millennials want help that goes beyond retirement topics and empowers them to more effectively manage their finances today, while still saving for the future. They also tend to be more engaged and participate at higher levels in employer-sponsored savings plans and want to get help with financial matters in the workplace. Millennials expect that 65% of their retirement income will come from personal sources, compared to 55% for Generation Xers and 40% for Baby Boomers. Millennials also expect that 24% of their retirement income will come from continued work, compared to 19% for Generation Xers and 13% for Baby Boomers. Forty-three percent of Millennials say they need help managing their efforts to save for retirement, while 40% want help with good general savings habits. Thirty-eight percent want help with paying down or managing debt, and 31% want help with budgeting. Nearly half (48%) of Millennials want their employers to provide access to a financial professional to create a personalized financial strategy; 46% want employers to bring in financial experts to provide general training and education about financial matters; and 45% want education and training tailored to age or current financial issues they’re facing. Millennials also say they want help via multiple channels: online, in-person, on a mobile device, in a seminar at work and online webinars. More findings can be found in “A Closer Look at Millennials.”The post Millennials Want Employers to Provide Help With Finances appeared first on PLANADVISER.