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 John Ortman6/7/2013 • 0 Comments

More and more 401(k) advisors are eyeing the 403(b) market as a good place to expand their practices. If that describes you, there’s a once-a-year opportunity coming up at the end of this month: The NTSAA 403(b) Summit. The Summit is the big annual event of the National Tax Sheltered Accounts Association, NAPA’s sister organization within ASPPA that represents 403(b) and 457 advisors. This year’s NTSAA Summit will be held June 23-25 in Chicago. READ MORE

By Fred Barstein5/24/2013 • 2 Comments

It’s not surprising that DB plans — mostly run by professional managers who are not emotionally attached — perform better than DC plans, but the gap in 2011 was the greatest since the mid-90s, according to a recent TowersWatson study. The real questions are why and how DC plans can catch up — the subject of a blog post by Reuter’s Linda Stern. READ MORE

By Fred Barstein5/17/2013 • 1 Comments

With so many observers pining about the good old days when everyone had a pension plan, and the anti-401(k) faction looking to turn the DC system into a government-sponsored DB plan, perhaps it’s time for a healthy dose of reality. Before we try to mirror the past, we should look at it in a sobering light. READ MORE

By Jennifer McKibben5/16/2013 • 0 Comments

Interactive retirement calculators are growing in popularity as they become increasingly sophisticated and easy to access. These online-based calculators, often available on DC companies’ home pages, are embracing a broader view of income sources and potential expenses to help participants plan their retirement on a monthly basis, according to Pensions & Investments. The new calculators account for outside investments, DB plans, IRAs, Social Security and health care costs. READ MORE

By Fred Barstein5/9/2013 • 0 Comments

A recently released LIMRA study on ERISA 403(b) plans highlights that this $485 billion market is one that advisors and providers focused on 401(k) plans should consider. While 403(b)s — about two-thirds of which are sponsored by health care and higher educational institutions — are becoming more like 401(k) plans, there are subtle differences that providers or advisors thinking of entering this market should be aware of. READ MORE

By Fred Barstein5/2/2013 • 0 Comments

Using 401(k)s as the bellwether for a new world driven by increased connectivity, noted author and New York Times columnist Thomas Friedman writes that the DC system embodies a world in which each individual must take charge of his or her life. Gone are the institutional protections from big government, employers and unions, leaving individuals to fend for themselves. For some this can be very exciting, but for others it can be frightful. Sound like your participant base? READ MORE

By Fred Barstein4/26/2013 • 0 Comments

In reaction to this week’s “Frontline” program on 401(k)s, EBSA’s Phyllis Borzi reiterated that participants should pay close attention to the fees they’re paying and the type of advisor they’re employing. And in an interesting move, the PSCA offered producer/correspondent Martin Smith free membership in their association. READ MORE

By Fred Barstein4/25/2013 • 6 Comments

Noted thought leader Michael Kitces makes a very interesting point: Advisors who focus on or lead with the fact that they are fiduciaries can actually destroy trust. Advisors who focus too much on their fiduciary status are making the implied statement that clients can trust them — but trust is earned, not demanded. And bashing other advisors who are not fiduciaries — implying that by definition they are not trustworthy, as Martin Smith did on this week’s “Frontline” program — can create distrust for all advisors and the entire system, argues Kitces. READ MORE

By Fred Barstein4/25/2013 • 1 Comments

In the aftermath of the attack by the PBS “Frontline” program on the 401(k) system, which focused on fees and charged that plan participants are being taken advantage of by Wall Street and advisors, ICI has released the results of a study showing that participants in 401(k)s tend to pay less for their mutual funds than the industry investor. READ MORE

By Fred Barstein4/23/2013 • 0 Comments

New research by ASPPA shows that middle- and lower-income Americans benefit more from retirement tax incentives, mostly due to the non-discrimination rules in DC plans. Putting aside the fact that unlike other tax incentives, savings that taxpayers get by taking advantage of the retirement tax rules are deferrals, not permanent exclusions, the research shows that 71% of the tax benefit from DC plans goes to people with an AGI of less than $150,000. READ MORE

By Jennifer McKibben4/17/2013 • 0 Comments

As the retirement plan environment continues to shift from a defined benefit to a defined contribution system, there is great concern about whether participants will outlive their retirement savings and be unable to maintain a certain standard of living during retirement. A 2012 report by the DOL's ERISA Advisory Council examined income replacement issues in DC plans. READ MORE

By NAPA Net Staff4/8/2013 • 0 Comments

Advisor Matthew Hutcheson’s trial — he’s charged with 17 counts of wire fraud — began last week and is expected to run through the middle of April. Hutcheson, once a spokesperson for fiduciaries in the retirement world who testified before Congress and regulators, is accused of using funds from retirement accounts he oversaw to attempt to purchase a failing luxury ski and golf resort in Idaho, as well as to buy luxury cars and remodel his house. READ MORE

By NAPA Net Staff4/5/2013 • 1 Comments

While most people thought that the battle over the definition of fiduciary under ERISA would be confined to the qualified plan market, it seems that the real battle may be fought over IRAs. Moving to a levelized compensation, fee based model for advising a plan as a fiduciary seems acceptable to an industry that was moving in that direction anyway. But the question is whether that makes sense for IRAs, especially smaller accounts, and whether the DOL rather than the SEC should be taking the lead. READ MORE

By NAPA Net Staff4/3/2013 • 0 Comments

The number of claims against fiduciaries has increased threefold since the 1990’s, according to the North American Professional Liability Insurance Agency — with plan sponsors now surpassing the medical profession as targets for litigation. Last year, for example, the ABB, Inc. fiduciary lawsuit resulted in a $37 million judgment against plan fiduciaries, highlighting the importance to plan sponsors of following a prudent process when changing plan funds. READ MORE

By NAPA Net Staff4/3/2013 • 0 Comments

The retirement industry in general and 401(k) plans specifically have been the subject of tough questions and much scrutiny, with many calling 401(k)s “a failed experiment.” Robert Richter, past president of ASPPA, defends 401(k)s in a column published in the Wall Street Journal. READ MORE

By NAPA Net Staff4/3/2013 • 0 Comments

Since the introduction of electronic filing in 2009, the IRS and DOL have been more aggressive in using the Form 5500 and schedules to identify plans for audits and investigations. Last year, for example, within a few months of the Form 5500 filing, the DOL sent thousands of letters or emails to plan sponsors requesting amendments or explanations of responses on the form or schedules. But what responses are likely to trigger an audit or investigation? READ MORE

By NAPA Net Staff4/2/2013 • 1 Comments

It's not surprising that using an adviser can improve a person's odds of having enough money for retirement. What might be surprising is that using an online calculator can help even more. According to EBRI’s latest Retirement Confidence Survey, families in the highest income quartile increased their chances of being retirement ready by 14.7% when using a calculator, compared with 11% who consulted an advisor. Families in the lowest income quartile increased their chances of being retirement ready by 14.6% when using a calculator versus 9.1% of those who used an advisor. READ MORE

By NAPA Net Staff4/2/2013 • 0 Comments

In what could be a landmark case, a federal bankruptcy court in California has ruled that the City of Stockton should be allowed to move forward with its Chapter 9 proceeding over the objections of the bond holders. The court didn’t opine on the really critical issue of whether federal bankruptcy law trumps state law — there is little if any legal precedent in this area, since municipal bankruptcies are rare. READ MORE

By NAPA Net Staff4/1/2013 • 1 Comments

Add the Congressional Black Caucus to the growing list of groups that oppose the DOL’s expansion of the definition of fiduciary. In a letter to the acting Labor Secretary signed by eight members of the House Financial Services Committee, the Black Caucus expressed concern that the DOL’s expanded definition would drive commissioned brokers from the IRA market, leading to a “disparately” negative impact on African Americans. READ MORE

By NAPA Net Staff3/29/2013 • 0 Comments

Highly compensated participants in a plan that fails coverage or nondiscrimination requirements for a plan year face more serious tax consequences than if the plan is disqualified for another issue. Furthermore, such qualification failures are demographic failures, and are not eligible for self-correction under EPCRS, the IRS correction program. A new Technical Update from SunGard Relius explains how to make a retroactive corrective amendment under Treas. Reg. §1.401(a)(4)-11(g) — a.k.a. an “11(g) correction.” READ MORE

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