What traits in their plan’s advisor do plan sponsors value? Which ones should they value?

What traits in their plan’s advisor do plan sponsors value? Which ones should they value?

BY: David I Gensler, MSPA, MAAA, EA 

Which Qualities Plan Sponsors Do Value

A recent poll of plan sponsors wanted to know which services plan sponsors most value from their advisors. Asked to name their top three, two stood out: Read More

Tibble v Edison – Five Lessons Learned

By: David I Gensler, MSPA, MAAA, EA

Tibble v Edison broke new ground in terms of clarifying that plan stewards have “an ongoing duty to monitor plan investments.” In the Tibble case, the Supreme Court rejected the argument that an initial fund review was sufficient when facts and circumstances may have changed to preclude the need for an ongoing assessment of a retirement plan’s fund lineup.

However, the defendants in Tibble actually did a lot of things right that many retirement plans fail to do. Here are the top five:

1. They had a formal investment committee 

Two heads are better than one, three heads are better than two, etc. ERISA does not require that the plan’s fiduciary form an investment committee. However, it does require that if you lack the requisite expertise to make the sorts of investment decisions unique to 401(k) plans (establishing the metrics that funds will be benchmarked against, evaluating the fund lineup, etc.), you should reach out to someone or an organization that has that expertise. Forming an investment committee to review the plan’s investment performance is just a wise thing to do.

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When Is A Sure Thing Not A Sure Thing? You Need To Question These Four Retirement Plan “Givens”

By: David I Gensler, MSPA, MAAA, EA

What if I had come up to you in January and said that I would give you 5,000 to 1 odds on these two things happening in 2016: the Cubs will win the World Series and Donald Trump will be the next president of the United States. Would you have taken my bet or checked to see if I had forgotten to take my meds?  We have been trained to make decisions based upon events that have happened in the past.  Or, if we are told something often enough by people who we perceive to be experts, we believe them.  Maybe we even make some pretty important decisions based upon their recommendations (Lehman Brothers go out of business?  Ridiculous!  Buy their stock and then buy some more!).  Here are four retirement “sure things” that you need to question:

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The Best Laid Plans of Mice and Men

David I Gensler, MSPA, MAAA, EA

Some of us do a really good job of planning for the future. Many of us do not.  In trying to gauge how much we need to save for retirement, we assume that our life in retirement will be pretty similar to the life we led before we retired. We forget that our paycheck serves as our ultimate “goalie.” If the refrigerator breaks and we need to buy a new one or if we get into a car accident and need to go out of pocket on our deductible, we always have the money we earn from working to back us up. Of course, we don’t really plan for these painful financial events; they happen and we swallow hard and just deal with them.

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Why Should A Plan Sponsor Care About Automatic Enrollment?

By: David I Gensler, MSPA, MAAA, EA

No one could argue the fact that automatic enrollment, when properly implemented is a positive benefit for employees. Automatic enrollment, when coupled with automatic escalation (the automatic increase in deferrals rates) will help participants who might not otherwise be inclined to participate in your 401(k) plan save for their retirement.

We can easily identify the following benefits to the plan participants: Read More

The Empire Strikes Back – John Hancock Responds to John Oliver

By: David I Gensler, MSPA, MAAA, EA

OK, so I am being a bit overly dramatic here. John Hancock is not an empire and they are not exactly striking back.  However Manulife, the Canadian insurance company that owns John Hancock is ranked number 212 in Fortune magazine’s 2015 list of the Fortune Global 500.  So they are a pretty big company.  And on its own, insurance company John Hancock is not exactly chopped liver either.

Manulife and John Hancock published an open letter in response to John Oliver’s segment on Last Week Tonight https://www.youtube.com/watch?v=gvZSpET11ZY about its experience with John Hancock when it attempted to set up a 401(k) plan (you can get a copy of the letter here) for the show’s staff.

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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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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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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