Technical Competence

This station houses posts and commentary about the challenges facing state and municipal DB pension plans — funding, municipal bankruptcies, litigation, etc.

Technical Competence

Technical Competence

By Fred Barstein9/16/2013 • 0 Comments

Speaking on a wide range of issues at last week’s Plan Sponsor Council of America conference, EBSA head Phyllis Borzi commented on a number of pending issues near and dear to the hearts of DC advisors and providers, including fee disclosure, lifetime income illustrations in participant statements and the much-anticipated redefinition of fiduciary rule. READ MORE

By Ray Harmon9/12/2013 • 0 Comments

As Phyllis Borzi was informing the attendees of the Financial Services Institute’s annual conference this week that the Department of Labor’s forthcoming fiduciary standard proposal will be delayed, AARP released a study of the attitudes of 401(k) and 403(b) participants regarding fiduciary duties and investment advice. READ MORE

By Fred Barstein9/11/2013 • 0 Comments

At this week’s Financial Services Institute meeting in Washington, EBSA chief Phyllis Borzi stated that the redefinition rule will not be forthcoming in October as originally planned and that the delay could be several months. Given the heightened attention on the rule, Borzi wants to make sure that all the details have been worked out. Once the proposed rule is finished, it will be submitted to the White House’s Office of Management and Budget for review — which could take up to 90 days — and then published in the Federal Register for public comment. READ MORE

By Fred Barstein9/10/2013 • 4 Comments

During a recent conference call at an industry meeting, Jeffrey Turner, EBSA’s deputy director charged with enforcing the rules affecting DC plans, took credit for lower fees, quality and greater transparency in 401(k) plans. There’s no doubt that DOL’s 2012 rules requiring greater disclosure of fees helped focus attention on those issues — perhaps giving the PBS Frontline crew and Yale’s Prof. Ian Ayres the inspiration for their recent actions — but much of the research has shown that plan sponsors, and especially participants, have not taken dramatic action as a result. READ MORE

By Fred Barstein9/5/2013 • 5 Comments

Is online advice about to catch on with 401(k) participants and investors, especially those about to retire? As waves of Baby Boomers begin to retire and roll assets out of DC plans, some online providers are betting that they will need and want advice and will be willing to pay for it. Do these services pose a threat to advisors? READ MORE

By Fred Barstein9/5/2013 • 0 Comments

Though there’s consensus that the DOL’s proposal to express DC participants' account balance as a stream of income on their statements is a good idea, there’s widespread disparity on how to make the calculations. There’s also concern that participants will think the projections are guarantees, giving rise to fiduciary liability or unrealistic expectations. READ MORE

By Fred Barstein8/30/2013 • 0 Comments

Does the higher education, 403(b) market offer insights that 401(k) plans should follow, as well opportunities for 401(k) advisors? According to a study by Transamerica, higher ed deferral rates are 13.4% — compared with an average of just over 6% for 401(k) plans. Transamerica attributes the results to more face-to-face meetings at these institutions of higher learning. READ MORE

By Fred Barstein8/30/2013 • 0 Comments

A federal bankruptcy court ruled this week that the city of San Bernardino’s bankruptcy filing may proceed amid arguments by CalPERS, the state pension fund. San Bernardino was the first entity to stop paying CalPERS, although it recently resumed doing so. READ MORE

By Fred Barstein8/28/2013 • 1 Comments

Among those advisors lucky enough to have been through a DOL audit, most wish that their clients had been better prepared, with all requested documents and materials gathered ahead of time. In the wake of the 408(b)(2) rules, the DOL’s Philadelphia region recently updated the list of documents that they typically request during an audit. The list is lengthy and although the DOL will typically work with the plan sponsor if additional time is needed to produce the documentation, it’s certainly better to have it ready, which is good practice anyway. READ MORE

By Fred Barstein8/27/2013 • 0 Comments

As public pensions are unraveling, with cities like Stockton, San Bernardino and now Detroit burdened by huge retirement obligations owed to workers and now unable to pay their bills, news of private lobbyists entitled to receive benefits is causing concern, the Wall Street Journal reports. Hundreds of lobbying groups in 20 states are entitled to receive retirement and, in some cases, health care benefits because they represent associations of cities, counties and school boards. READ MORE

By Andrew Remo8/22/2013 • 15 Comments

The Center for American Progress, a liberal think tank with close ties to the Obama administration, issued a deeply critical report Aug. 20 on the voluntary employer-based private retirement system. The report concludes that the current situation is so bad for individuals that the entire system needs to be dismantled and replaced with a new “collective defined contribution” arrangement. READ MORE

By John Ortman8/15/2013 • 1 Comments

For retirement plan advisors, there’s a silver lining in the dark cloud hanging over public sector DB pension plans: new opportunities in the 403(b) defined contribution market. The pressure being put on public employees’ DB plans has led to “a need to increase both participation rates and contribution rates” in 403(b) plans, Chris DeGrassi, executive director of the National Tax Sheltered Accounts Association (NTSAA), told BenefitsPro in a recent story on the topic. “The demand for investment professionals to engage in and assist in this market has never been higher,” says DeGrassi. READ MORE

By Warren Cormier8/14/2013 • 0 Comments

Despite plan sponsors’ apparent sense of responsibility, there is a steady and increasing stream of studies concluding that employees are not prepared to retire. So what can be done? And just as importantly, what role can advisors, who are a major force in the industry, play in the retirement readiness solution? READ MORE

By Brian Graff, Esq.8/12/2013 • 0 Comments

Responding to the recent effort by Prof. Ian Ayres of the Yale Law School to threaten plan sponsors with negative publicity for voluntarily offering their employees “high cost” 401(k) plans, ASPPA sent a letter Aug. 9 — co-signed by plan sponsors who personally received the professor’s letter — to the dean of Yale Law School, Robert C. Post. The letter addresses the flaws of the professor’s research and requests a meeting regarding steps the school should take to address the damage that the professor has done by irresponsibly contacting more than 6,000 plan sponsors based on a faulty premise. READ MORE

By John Ortman8/7/2013 • 3 Comments

One overlooked factor in the sale of the Washington Post, announced on Monday: a massively overfunded pension plan. With $2.07 billion in assets and facing $1.47 billion in pension liabilities, the plan is overfunded to the tune of $604 million. The Post’s next owner, Amazon founder Jeff Bezos, agreed to pay $250 million for the Post and other publishing businesses owned by the Washington Post Co. You do the math. READ MORE

By Fred Barstein8/1/2013 • 7 Comments

The once-prominent retirement plan advisor and trustee who touted fiduciary standards was sentenced to 17 years in prison by a federal judge in Boise, Idaho. In April, Hutcheson was convicted of 17 counts of a wire fraud scheme to steal $5 million of pension funds he oversaw to enrich himself and his family as well as buy a cash-strapped resort. Rejecting Hutcheson’s plea to turn himself in later, the judge stated: "You're too smart, you're too devious. You're going to have to serve your time; you might as well start now." READ MORE

By John Ortman8/1/2013 • 0 Comments

As we reported last week, the DOL has delayed enforcement of the 2013 round of 404a-5 participant fee disclosures for six months. The analysts at Relius have released two helpful follow-on resources — a technical update taking a deeper dive into the implications of the 404a-5 enforcement delay and a brief FAQ on the status of the 408b-2 service provider disclosures. READ MORE

By Fred Barstein8/1/2013 • 0 Comments

Mike Sweeney, a five-time major league baseball all-star, recently filed a suit against his former advisor accusing him of making risky investments without his knowledge and consent. Before Sweeney signed a big contract with the Kansas City Royals in 2002, he was making close to the major league minimum and had told his advisor to invest conservatively, with 73% of assets in muni bonds and other money in large cap stocks when the advisor took over. Over the next five years, Sweeney lost $4.9 million of the $7.6 million invested in private equity investments that Sweeney claims the advisor said was safe. READ MORE

By Fred Barstein7/31/2013 • 0 Comments

Though it’s important, the SEC’s initiative to create a uniform fiduciary rule under Dodd-Frank is not a front burner issue at the Commission. For example, the issue of crowd funding is more important, SEC Chair Mary Jo White stated at a recent Senate Banking Committee hearing. READ MORE

By Ray Harmon7/29/2013 • 2 Comments

I was excited to hear that President Obama would be addressing the issue of retirement security in a series of speeches last week focusing on his policy agenda. That is, until I actually heard him do it. Speaking at Knox College in Galesburg, IL, on July 24, the president took the stage and made an irresponsibly misleading assertion about our so-called “upside down” retirement system. READ MORE

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