Newsletters

John Oliver Riffs On Retirement Plans and Makes Some Excellent Points!

By: David I Gensler, MSPA, MAAA, EA

In a recent airing of Last Week Tonight, John Oliver devoted an entire episode to money in general and 401(k) retirement plans in particular.  The piece can be seen in its entirety at https://www.youtube.com/watch?v=gvZSpET11ZY. It runs for 20 minutes but the actual discussion regarding retirement plans begins at about 11 minutes into the piece (if you have time, watch the whole thing – it is really, really funny). Note – There are more than a few four letter words thrown around.

In his general discussion about money, Oliver makes a statement that “money is the thing everyone likes to think they’re good with despite the evidence provided in every episode of the Suze Orman Show.” Oliver highlights Orman shooting down one woman’s request to spend money on a trip to Iceland to become a “certified elf spotter.” Oliver generously offers to provide the woman with her very own elf spotter certificate, thus saving her the expense of the trip.

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How Could Two Little Retirement Plans Have Such Big Problems?

By: David I Gensler, MSPA, MAAA, EA

An advisor who I have known for many years called me for help. His client has a problem with their retirement plans and the IRS. The company that sponsors the plans consists of four employees: a father (the business owner), his spouse, his son and his daughter in law. They maintain two plans: a defined benefit pension plan and a profit-sharing plan.

The retirement plan consulting firm that set up the plans had the father covered by the defined benefit plan with the other employees waiving out of that plan. The profit-sharing plan covers the other three employees. The father waived out of profit-sharing plan. Their goal was to give the father a large benefit in the defined benefit pension plan and have the other employees receive smaller benefits from the profit-sharing plan. I have not seen the waivers but I was assured that the signed waivers exist.

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401(k) Lawsuits move…Down Market?

By: David I Gensler, MSPA, MAAA, EA

Businesses rarely adopt a strategy of moving down market. They either stay or move up market. That certainly has been true in the world of 401(k) litigation. Almost universally, the plans being sued have had participants in the tens of thousands and assets in the billions of dollars. And why wouldn’t they? The attorneys that pursue these actions take them on a contingency basis. Years pass as they wind their way through the courts. So the only way that the potential result justifies the investment of time, energy and money by the litigating law firm is to “follow the money.”

Now, for the first time, in two separate actions, 401(k) lawsuits seem to be moving down market.

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An Annual Physical For Your Retirement Plan? – Yes, It’s Called An Annual Compliance Review

By: David I Gensler, MSPA, MAAA, EA

No one would argue that an annual physical is a good idea (we may not actually do it, but no one would argue that it is a good idea). Just like an annual physical can detect a small problem and keep it from morphing into a more serious problem, so too can an annual compliance review identify smaller legal, operational and/or fiduciary issues before they become bigger and more difficult to deal with.

I would assert that once a year, your retirement plan should be reviewed by any (and perhaps all) of the following: your plan’s legal counsel, your third party administrative (TPA) firm and your investment advisor.

Potential Legal Issue – The most frequent error that most retirement plans make is a failure to sign and date all of the plan’s required documents. All of these documents have a “drop dead” execution date. Failure to timely sign and date the plan or certain amendments to the plan can invalidate the plan. A really important execution date occurred only last month. Every defined contribution plan (401(k) plans, profit-sharing plans, etc.) needed to be completely restated and signed no later than April 30, 2016. If you don’t remember doing it or you know that you did not do it there is no need to panic. The IRS has a program (the Voluntary Corrections Program or VCP) which will allow you to correct just about any defect in your document.

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This and That…

By: David I Gensler, MSPA, MAAA, EA

I thought that this week’s blog would focus on a couple of different topics. They are related to prior blogs that I have written.

Colorado State-Run Retirement Plan Is Postponed Indefinitely

In my last posting, I wrote how the state of Connecticut recently approved a bill to offer workplace employees an automatic payroll contribution Roth retirement plan, if they did not have access to an employer sponsored plan (The State of Connecticut Is Ready To Enter The Retirement Plan Business – And This Is A Good Thing Because…). I thought that while the state of Connecticut was well intentioned, that the government (any government: municipalities, states, the federal government) has no idea how complex these retirement programs are to run. For this and other reasons, I did not think that this was a good idea.

The state of Colorado, which had previously approved a piece of legislation that was almost identical to the Connecticut bill, has put it on hold. The bill, at the request of its sponsors, was postponed indefinitely. Supporters of the measure plan to re-introduce legislation in the 2017 session. Hopefully, the plan’s sponsors came to their senses and were just looking for a way to save face so that this piece of legislation could die a quiet death.  I sincerely hope so.

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The State of Connecticut Is Ready To Enter The Retirement Plan Business – And This Is A Good Thing Because…

By: David I Gensler, MSPA, MAAA, EA

By the slimmest of margins, the state of Connecticut recently approved a bill establishing a state-run retirement plan for private sector workers.

Here is how it would work. Employers with at least five employees that do not currently offer a workplace retirement plan would be required to set up an automatic payroll contribution plan for their employees. All employees who are at least 19 and who earn at least $19,000 per annum would be automatically enrolled, once they have been employed for 120 days.

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The Wild Card Post-Retirement Cost That Most Folks Fail To Account For Is…

David I Gensler, MSPA, MAAA, EA

…The golden years. Travel, more time with the grandkids, volunteering, finally having the time to pursue an old passion (gardening, teaching, writing, etc.). All of those things sound great. And all of those things assume something that none of us can really count on. As we age, our continued good health. Assuming that we will be healthy into our 80’s and (yes) 90’s can lull us into a false sense of security. That is because one of the most significant expenses facing us in our post-retirement years is the cost of either professional in-home care or an assisted living facility.

The statistics are both daunting and sobering. The U.S. Department of Health & Human Services estimates that more than half (52%) of Americans will need some form of long-term services in their lifetime. As the baby boomer population ages, those percentages will only go up. The national average for a home health aide is approximately $22 per hour. That could add up to $46,000 per year.  If a registered nurse is needed, the cost could grow to $172,000 per year.

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Tibble vs. Edison Round II: A Game Changer Ends Not With A Bang But With A Whimper

By: David I Gensler, MSPA, MAAA, EA

No one would argue that when the Supreme Court ruled in Tibble v Edison that plan fiduciaries had “an ongoing duty to monitor plan investments” it was a game changer. Now, for the first time, there was direction (from the highest Court in the land) that a “set it and forget it” mentality when it came to a 401(k) plan’s fund lineup was not sufficient.

But, many of you will recall, that was not the end of the story. After making its ground breaking ruling the Supreme Court remanded the case back to the 9th Circuit.  The 9th Circuit had previously ruled that mutual funds added to Edison’s lineup back in 1999, were beyond the reach of the 6-year statute of limitations. This is the ruling that caused the plaintiffs to take this to the Supreme Court in the first place. So now, in light of the Supreme Court’s ruling, did the 9th Circuit see the case differently?  Spoiler alert – they did not!

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Retirement Plan Risks: What Could Cause You To Outlive Your Retirement Plan Nest Egg?

By: David I Gensler, MSPA, MAAA, EA

10,000 baby boomers turn 65 every day. This is expected to continue for the next 17 years. Their retirement years will not resemble that of the generation that preceded them, the greatest generation.  Most of the information disseminated by the media about retirement has focused on saving for retirement and the inherent risks of not saving enough.  Those risks are easy to see. But what about when you actually retire and start to draw down your nest egg? There are risks that we face after we retire which are unique and for which many of us are unprepared.

Some of those risks are:

Longevity – A husband and wife are both 65. There is a 50% probability that one of them will still be alive at age 90. There is a 33% probability that one of them will still be alive at 95. So your retirement nest egg may need to last another 30 or 35 years. Few retirees contemplate living that long or structuring their portfolio to take this contingency into account. Read More

Murder’s Retirement Accounts Cannot Be Shielded: Is This Ruling Contrary to ERISA?

By: David I Gensler, MSPA, MAAA, EA

We all know that crime does not pay. But I always thought that no matter what crime you committed, that an individual’s retirement plan accounts were pretty much bullet proof. That the assets would be judgement proof as long as they remained within the retirement plan or had been rolled over into an IRA. On the face of it, after reading about this recent civil judgement, it seems that might no longer be true. But there are some important facts that are specific to this case which need to be taken into account.

A Montgomery County Court of Common Pleas judge recently ruled that the estate of Ellen Gregory, who was killed by Rafael Robb in 2006, will be able to recover funds from his retirement accounts. Mr. Robb’s position was that these accounts (which consist of state pension funds and IRAs which total almost $3 million dollars) were exempt from judgements.

Mr. Robb, an ex-University of Pennsylvania professor, bludgeoned his wife, Ms. Gregory, to death in 2006. He was arrested in January 2007 and charged with first- and third-degree murder. He ultimately pleaded guilty to voluntary manslaughter and was sentenced to five to ten years in jail.

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