How Safe is my Retirement Savings?

February 23, 2012 by Raymond Eddings, CFP®, Retirement Consultant in Individuals

In November of 2011, American Airlines filed for bankruptcy protection.  One of the goals of management was to reduce the cost of running the company’s pension plan.  Pilots, flight attendants, and baggage handlers who retired from the company had been promised a retirement income for the rest of their lives based on their average wages and how long they worked for the company.  Now their retirement lifestyle is in jeopardy.  Could the same thing happen to you?

To answer this question, we first need to understand the different kinds of pension plans.  Historically, when an employer wanted to attract and retain the best talent as employees, they created a pension plan. Throughout most of the 20th Century that pension plan was most likely a “defined benefit” pension plan.  That means that a formula based on how long someone worked for the company and theiraverage income, was used to calculate a stream of monthly income for the rest of the employee’s life.

The employer had all the responsibility for setting money aside, investing it, and making sure it lasted a lifetime.  In the 1980’s, after the passing of the Employee Retirement Income Security Act (ERISA) of 1974, “defined contribution” pension plans began to become the retirement vehicle of choice for employers and employees.  All the responsibility of setting money aside, investing it, and making it last, was left up to the employee.

Differences between Defined Benefit & Defined Contribution Plans

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DOL Issues Final Fee Disclosure Rule: What plan sponsors should do now to prepare for compliance.

February 15, 2012 by Chase Tweel, J.D., LL.M, ERISA Analyst in ERISA Updates, Vendor Updates

In this follow-up of our recent blog post, “ERISA Update: Department of Labor Issues Final Fee Disclosure Rule: Important Information for Plan Sponsors,” we’ll help plan sponsors determine what they should be doing now to prepare for compliance.

The plan sponsor’s role in complying with the Department of Labor’s Final Rule for service provider fee disclosures may be passive compared to its service provider’s who will actually be providing the required disclosures.  However, plan sponsors are responsible for ensuring that the disclosures made by its service providers are sufficient under the regulations; therefore, monitoring and determining whether ongoing disclosures are needed and reporting non-compliant service providers are necessary.

To prepare for this obligation, plan sponsors should consider establishing procedures for evaluating their service providers’ disclosure obligations under the final rule with a particular emphasis on identifying instances where either:

(1) its service providers’ initial disclosures are insufficient; or Read full article »

Retirement Readiness Q&A

February 6, 2012 by Pension Consultants in Retirement News

After our recent Educational Series webinar on Retirement Readiness: Is your plan getting employees to a better retirement?, Cody Mendenhall, CFP®, Manager of RetireAdvisers® Services, responded to the questions the audience asked. Here’s what he had to say.

Question: In this economy and with the markets fluctuating so much over the last year, do you see a trend in employer confidence in individuals’ ability to save? And if so, how are they responding to this economy?

Cody: Individuals’ lack of confidence in their retirement readiness is well documented in studies, but a recent study from Aon Hewitt showed a significant decline in employer confidence in their employees’ retirement readiness as well. The study showed a decline of employer confidence from 30% last year to just Read full article »

ERISA Update: Department Of Labor Issues Final Fee Disclosure Rule: Important Information For Plan Sponsors

February 3, 2012 by Chase Tweel, J.D., LL.M, ERISA Analyst in ERISA Updates, Vendor Updates

The U.S. Department of Labor’s Employee Benefits Security Administration issued a final rule that will provide employers sponsoring both defined benefit and defined contribution plans with information about the administrative and investment costs associated with providing such plans to their workers. The department also announced a 3-month extension in the effective date of this rule, meaning service providers must be in compliance by July 1, 2012, for new and existing contracts or arrangements between Employee Retirement Income Security Act-covered plans and service providers.

The Labor Department’s rule requires service providers to furnish information that will enable pension plan fiduciaries to determine both the reasonableness of compensation paid to the service providers and any conflicts of interest that may impact a service provider’s performance under a service contract or arrangement. It requires disclosures of direct and indirect compensation certain service providers receive in connection with the services they provide. The rule applies to those service providers that expect to receive $1,000 or more in compensation and provide certain fiduciary or registered investment advisory services, make available plan investment options in connection with brokerage or record-keeping services or otherwise receive indirect compensation for providing certain services to a plan. 

The key provisions of the interim final rule were covered in the presentation Fee Disclosure Regulations: A Practical Guide for Plan Sponsors, which is now available to watch on-demand.  In the response to the comments submitted to the Department, the final rule differs from the interim final rule in the following ways: Read full article »

Regulations bring transparency – and that’s a good thing in the retirement industry

February 1, 2012 by Brian Allen, CFP®, President in Retirement News

To be opaque is to be in opposition to free enterprise.  Why is it then that transparency is so often abandoned by the marketplace?

Consumers of all sorts need transparency to make good decisions; however, even with perfect transparency, not all will.  Without it though, consumers are deprived of the resources needed to decide which products and services serve their best interest.

The retirement plan community is not immune from these natural forces.  In fact, our industry, our chosen profession, is awash with examples of blurring meaningful information from those who are our consumers.  Plan sponsors and fiduciaries have often had trouble understanding Read full article »

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2012 Pension Focus Conference Announces Two Speakers

January 4, 2012 by Pension Consultants in Company News

We are excited to announce two of this year’s Pension Focus Conference speakers: Jeffrey S. Jones, Ph.D., CFA of Drury University and John L. Utz of Utz, Miller & Eickman, LLC.  Jeffrey Jones will be speaking on the state of the economy and capital markets, and John Utz will be speaking on two topics including how reviewing recent court cases can safeguard your plan as well as the role of the plan committee.

This year’s Pension Focus Conference will be held May 17th & 18th at Chateau on the Lake in Branson, Missouri.  The two day conference provides plan sponsors and fiduciaries with information from the industry’s leading experts in the areas of 401(k), Profit Sharing and Defined Benefit plans.

Mark your calendar and stay tuned—more information to come soon!

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Our Retirement Plan Commitment in 2012 is to All Stakeholders

December 19, 2011 by Brian Allen, CFP®, President in Company News, Retirement News

Merry Christmas!  Another year is about to close and it is a good time to remind ourselves of what is truly important in life, reflect on the past and begin making our plans for the new year.

Those of us in the retirement planning industry have spent the year working diligently to make the employer-sponsored, private retirement system work -  in totality for all stakeholders.  Each stakeholder rightfully demands attention, and must receive information and expert guidance for the system to work as intended.

The employers who sponsor the plans (plan sponsors) are one group of stakeholders.  They have a unique set of needs as do another group of stakeholders, the fiduciaries of the plans who are charged with making decisions and overseeing the plan’s operation.  Finally, we can’t forget the stakeholders that the private retirement system is intended to benefit – the employees and their families.

In the history of the employer-sponsored, private retirement system, it was the employers themselves that the marketplace first rushed to accommodate—after all, this was where Read full article »

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How you invest your retirement plan money is a hot button issue…as it should be

November 28, 2011 by Cody Mendenhall, CFP®, Manager, RetireAdvisers® Services in Individuals, Retirement News

On October 25, 2011, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) issued final regulations that further clarify the rules or exemptions of how fiduciary advisers provide investment advice to plan participants.

Regulations.  Changes in regulations.  Exemptions.  What’s the fuss all about?  “Given the rise in participation in 401(k) type plans and IRAs, the retirement security of millions of America’s workers increasingly depends on their investment decisions,” as stated by EBSA Assistant Secretary Phyllis C. Borzi.  Through all the regulations, transactions and details, the sole purpose of a retirement plan is to allow individuals to prepare for and enjoy a successful retirement. 

While the industry shift from defined benefit to defined contribution plans has provided many benefits, it has also forced individuals to become professional money managers, and although education efforts help, they are not enough.  The passing of the Pension Protection Act of 2006 (PPA) opens the door for fiduciary advisers to fill the void and pick up where education leaves off.  The fear in the industry is that while these regulations and rules are aimed at helping individuals become retirement ready, they may inadvertently allow for advice that is not truly in the client’s best interest.  To help protect consumers and ensure the advice they receive is un-conflicted, EBSA has issued the final regulations discussed below.

Under the regulations, an eligible investment advice arrangement can only be provided on a Read full article »

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Pension Consultants: 2011 SBJ Choice Employers Finalist

November 16, 2011 by Pension Consultants in Company News

Pension Consultants is honored to have recently been recognized as the second place recipient, in the 5-24 employees category, of the 2011 Springfield Business Journal’s Choice Employers Award. The Choice Employers Award recognizes companies in the Springfield area and is based on five factors including incentives, family friendly policies, employee development, corporate culture and civic activities. For more information about the award and the annual awards ceremony held on November 10, visit the Springfield Business Journal’s website.

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An ERISA Foundation Q&A Part 2

November 14, 2011 by Pension Consultants in ERISA Updates, Retirement News

After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 2” of what he had to say.

Question: Can you give me some examples of what a settlor function is?

Chase:  A settlor function is one that is distinct from a fiduciary function. In other words, it’s a decision or a function that’s performed “above the plan,” and is not subject to fiduciary scrutiny because it’s a decision or an act that’s being made while the employer and the individuals who represent the employer are wearing their corporate hats. Some settler function examples include the decision to execute a merger, sell the company or acquire another company. Even though that decision is going to profoundly impact the retirement plan, the decision is still insulated from a business fiduciary standard.

So if a merger or acquisition has an incidental adverse impact to plan participants, plan participants would not be able to bring a cause of action against the employer or the plan sponsor for that merger or business transaction because the act was performed as a settlor, not as a fiduciary.

Other examples of settlor functions would be tweaking the design of the plan, removing certain benefits and features, adding a Roth feature and eliminating a match. As long as certain requirements are met because of their settlor functions, there’s not going to be fiduciary exposure for those actions.

Question:   How do I know if my trustee is directed or discretionary?

Chase:  This should be a relatively easy issue to determine. The first place to look is in the Read full article »

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