Financial News

Mercer Expects Retirement Plans to Fare Well in Tax Reform - Thu, 12/14/2017 - 19:10

Speaking during a Washington Update webcast event, Mercer’s Geoff Manville, principal, government relations, observed that the effort in the House and Senate to pass tax cuts is coming to its dramatic conclusion.

According to his sources inside the Beltway, the current plan is for the Senate and House to both vote on final tax cut legislation early next week. The Senate likely will move first, based on what the Mercer team is hearing, with the House moving perhaps one or even two days later.

“Heading into the weekend, the attention of Republican leaders has turned away from crafting a compromise towards winning support for that compromise and getting the votes that are needed, particularly in the Senate,” Manville says. “We hear that Republican Senators Susan Collins, from Maine, Ron Johnson, from Wisconsin, and also potentially Marco Rubio, from Florida, are holding off at this point from actively voicing support or opposition, and for different reasons. Senator Bob Corker, from Tennessee, is already a professed ‘No,’ but the betting is still that they can get the votes to pass both the House and Senate.”

While the full, final text of the combined bill is not yet circulating publicly, the Mercer team is “fairly confident” that few, if any, direct retirement plan taxation reform provisions will make the final proposal.

“The benefits and retirement industries seem to be coming out of this process is good shape,” Manville notes. “We’re not there yet, but it is shaping up this way, based on what is visible to us at this point. Of course, it’s not all good news—the benefits and compensation provisions are always going to be a mixed bag when major tax changes are proposed.”  

Manville further warns retirement plan professionals to “prepare for a pretty tricky period in the months ahead,” should this tax cut package ultimately be successful: “Employers will likely have some difficulty in knowing how to handle the January 1, 2018, effective date that has been assigned for many of the bills’ provisions. I know our friends in the payroll department are still scratching their heads about how they should be planning to do withholdings in the early part of next year.”

On the health care side of things, Manville expects the final tax cut bill will likely keep the Senate’s proposed repeal of the Affordable Care Act’s (ACA) individual mandate penalty. This move does not necessarily impact employers directly, but it does represent a potentially disruptive force that could alter the direction of the wider health care marketplace within which employer-sponsored health care plans operate.

“There is a separate push going on outside the tax bill to restore funding for the ACA cost-sharing subsidies the Trump administration stopped paying earlier this year,” Manville notes. “There is also interest in giving states more flexibly here and more help to set up re-insurance program for high-cost patients. However, there are real political barriers standing in the way here, so the prospects aren’t necessarily great on these issues getting stand-alone consideration in 2018.”

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Categories: Financial News

Congressmen Introduce SAVE Act - Thu, 12/14/2017 - 18:50

U.S. House Representatives Ron Kind, D-Wisconsin, and Dave Reichert, R-Washington, introduced The Small Businesses Add Value for Employees (SAVE) Act of 2017, H.R. 4637.

According to a statement from Kind, the bill would encourage more small businesses to offer retirement savings plans to their employees. The bill removes the “common bond” requirement for multiple employer plans (MEPs), enabling small businesses to pool together, regardless of industry, to offer retirement plans to their employees.

A statement from the American Council of Life Insurers (ACLI) President and CEO Dirk Kempthorne, says, “The Small Businesses Add Value for Employees (SAVE) Act of 2017 provides practical solutions for Americans’ retirement security challenges. As ACLI’s Assessing Americans’ Financial and Retirement Security study shows, employees with access to employer-sponsored workplace retirement savings accounts are more likely to save for retirement. Every day between now and the year 2030, 10,000 people will reach age 65. They need education about their savings and access to lifetime income solutions.”

ACLI also noted that the bill would:

  • Facilitate Lifetime Income Disclosure. This provision will help participants better understand how their retirement savings could translate into monthly income at retirement.
  • Clarify the Current Annuity Selection Safe Harbor. Under this provision, a key employer concern will be addressed with respect to adding an annuity option to a retirement plan. When evaluating insurance companies to provide an annuity to a plan, employers will be able to rely on specific representations from the insurer regarding state insurance regulator oversight and review.
  • Expand MEPs. The provision encourages and helps employers not yet prepared to sponsor their own retirement plans to join together to achieve economies of scale and receive advantages with respect to plan administration, which will increase retirement plan access.

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Categories: Financial News

Investment Products and Services Launches - Thu, 12/14/2017 - 18:22

Hartford Funds has announced the listing of its fourth actively managed fixed income and 11th overall exchange-traded fund (ETF), Hartford Municipal Opportunities ETF.

Sub-advised by Wellington Management Company LLP (Wellington Management), this actively managed ETF is designed to provide financial advisers and their clients with an investing strategy that seeks tax-exempt income by investing in opportunities in investment grade and high-yield municipal bonds.


“Investors are very tax-aware and, as interest rates go up, advisers are seeking fixed income strategies with the potential for greater after-tax returns and income,” says Vernon Meyer, chief investment officer of Hartford Funds. “HMOP offers a diversified option for this challenge in a more tax-efficient ETF, while tapping into Wellington’s deep knowledge of managing municipal funds backed by credit research expertise.”


HMOP offers an actively managed municipal bond strategy that invests in investment grade and non-investment grade municipal securities across states, sectors, and different parts of the yield curve. The strategy seeks to deliver current income generally exempt from federal income taxes and long-term total return. HMOP has an expense ratio of 0.35%.


Wellington Management’s Brad W. Libby, managing director and fixed income portfolio manager/credit analyst, and Timothy D. Haney, CFA, senior managing director and fixed income portfolio manager, will serve as the portfolio managers of the Hartford Municipal Opportunities ETF.

Wilmington Trust Releases Margin Management Solution with AcadiaSoft Services

Wilmington Trust has recently engaged AcadiaSoft to launch a new “Margin Management” service for clients.


Wilmington Trust’s Margin Management is designed to assist clients in satisfying their margin and collateral obligations arising from derivatives, repurchase agreements, TBAs (forward mortgage-backed securities), and other bilateral agreements. Margin Management enables Wilmington Trust to support all aspects of the margin and collateral process with limited client involvement, as a fully outsourced solution.


“We approached AcadiaSoft because their suite of products provided an integrated solution for our new Margin Management service,” says Scott Linden, Wilmington Trust’s managing director for Collateral Management. “AcadiaSoft’s ProtoColl and MarginSphere services enable our team of custody administration specialists to manage the growing client demand for margin and collateral solutions.”


According to Wilmington Trust, the key benefits of Wilmington Trust’s Margin Management service are that it:

  • Uses a trusted service provider and custodian to manage all aspects of the margin and collateral process;
  • Greatly reduces the need for the client’s operational and technology resources in the collateral process; and
  • Provides the client with volume insensitivity as their trading demands and/or market volatility increase.


Wilmington Trust’s Margin Management service will be available to its clients in early 2018. The Wilmington Trust appointment is part of AcadiaSoft’s wider success with ProtoColl and marks the eighth such appointment in the last 12 months.


AcadiaSoft acquired ProtoColl in November 2016 and has since integrated the end-to-end collateral and margin management service into the AcadiaSoft Hub. ProtoColl automatically calculates excess and deficient margin requirements for each active agreement, in addition to generating all necessary margin calls and associated notifications.

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Categories: Financial News

Multiemployer Plan Fund Manager Sentenced for Fund Theft - Thu, 12/14/2017 - 17:51

The U.S. District Court for the Northern District of Alabama has sentenced a former multiemployer plan fund manager to make restitution in the amount of $45,896 and serve five years of probation, including six months of home confinement, for violating the Employee Retirement Income Security Act (ERISA).

The action follows a U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) investigation that determined Brandi Box Stephens, as fund manager for the Iron Workers Local Union No. 92 Welfare Plan and the Iron Workers Local Union No. 92 Pension Plan, altered her own paychecks by increasing the amount she was due, as well as issuing additional payroll checks to herself by securing signatures of plan trustees and changing the name of the payee on the check to match her name.

In addition, Stephens entered false information on the paper stubs attached to the physical checks, and made fraudulent entries into the plans’ accounting records.

She has been barred from acting as a fiduciary for five years.

“Theft from retirement plans and pensions has significant adverse effects on the livelihood and peace of mind of workers,” says EBSA Regional Director Isabel Colon. “Our Department takes these actions seriously and will continue to investigate any action that threatens retirement benefits workers have earned.”

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Categories: Financial News

Vanguard Launches Retirement Plan Comparison Tool - Thu, 12/14/2017 - 16:49

Vanguard just launched a new interactive Retirement Plan Comparison Tool, powered by Vanguard’s How America Saves data.

It allows users to instantly benchmark their own plan metrics against Vanguard’s nearly 2,000 recordkept plans—and identify opportunities for changes and improvements.

According to Vanguard, the tool allows plan sponsors to:

  • Make more effective plan decisions as they interact and manipulate industry and plan data to create insightful comparisons;
  • View the retirement savings behavior of more than four million Vanguard-recordkept plan participants to track historical trends and benchmark their employee benefits; and
  • Build and analyze customized reports that they can share or present to others in their organization.
The tool is available publicly to any plan sponsor or consultant here.

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Categories: Financial News

Kroger Withdraws From Troubled Central States Multiemployer Plan - Thu, 12/14/2017 - 16:41

The Kroger Co. and International Brotherhood of Teamsters (IBT) announced the ratification of a new labor agreement that provides for Kroger’s withdrawal from the Central States Pension Fund.

Kroger and IBT have been working together for several years on a plan to protect the pensions of Kroger associates at these facilities, who are participants in the Central States Pension Fund. In 2015, the company and the IBT negotiated, and members ratified, an agreement that would have transferred Kroger associates and retirees from Central States to the new IBT fund. This transfer required the approval of Central States, but the Central States Trustees have not agreed to the transfer. This led Kroger and the IBT to negotiate an agreement providing for Kroger’s withdrawal from Central States, while preserving the possibility of a transfer. The Central States Pension Fund projects it will go insolvent in 2025. 

Under the Multiemployer Pension Reform Act (MPRA), multiemployer plans in critical and declining status may apply to the Treasury Department for a suspension or reduction in benefits. Unfortunately, the process is proving more stringent than applicants and industry experts had anticipated. The Treasury Department rejected Central States’ application for a suspension of benefits.

Kroger and IBT have established a new fund, called the International Brotherhood of Teamsters Consolidated Pension Fund that is designed to provide Kroger associates with a secure pension. Central States Trustees do not have to approve the new agreement.

The withdrawal is effective December 10, 2017. Kroger will make payments to Central States to fulfill its withdrawal liability obligation.

Under the ratified agreement, the benefits current associates have earned as participants of Central States will be protected. The new IBT pension fund will make up benefits that are reduced by Central States as a result of Kroger’s withdrawal. Should Central States become insolvent and benefits are reduced, the IBT Consolidated Pension Fund will restore benefit reductions above the level guaranteed by the Pension Benefit Guaranty Corporation (PBGC).

Moving forward, current associates also will begin earning a new pension benefit through a formula negotiated by Kroger and the IBT and ratified by members.

“Given the uncertain future of Central States and the potential adverse impact on our members, the National Committee felt the move to the IBT Consolidated Plan will ensure they have a stable and reliable retirement benefit in the future,” says Steve Vairma, IBT vice president.

“This is a good agreement for our current associates and our company. It provides our current associates security for their future retirement and the company financial certainty regarding this important investment in our associates,” says Mike Schlotman, Kroger’s executive vice president and chief financial officer.

Congressional Democrats working on labor and retirement issues convened Wednesday morning to call on their Republican majority colleagues to consider immediate stand-alone passage of legislation, known as the Butch Lewis Act, which would, Democrats argued, “ensure the pensions that American union workers have earned over a lifetime of work are protected into the future.”

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Categories: Financial News

Bill Would Require Employers To Automatically Enroll Workers - Thu, 12/14/2017 - 16:41

Representative Richard Neal, D-Massachusetts, recently introduced the Automatic Retirement Plan Act of 2017, which would require employers to have a retirement plan, either a 401(k) or 403(b) plan, and automatically enroll participants into the plan.

In addition, the bill would enhance employers’ ability to participate in open multiple employer plans, limit the formation of state-sponsored automatic enrollment individual retirement account (IRA) plans and permit workers to have 50% or more of their distributions invested in a “form that guarantees them lifetime income.”

Starting in 2020, the bill would be applied to all employers, except those with fewer than 10 employees, those in business for less than three years and those qualifying as governmental or church organizations. For employers with 100 or fewer employers earning at least $5,000 in 2021, the bill would apply in 2022. Should an employer fail to comply with the law, they would be fined $10 per employee each day.

However, on the date the new bill would be signed into law, employers with existing qualified plans, whether 401(k)s, 403(b) plans, simplified employee pension (SEP) plans, savings incentive match plans for employees of small employers (SIMPLE), or individual retirement account (IRA) plans, would be considered to be “grandfathered” and could continue their offerings uninterrupted for six years. For organizations with such plans that have 100 or fewer employees and that earned at least $5,000 in the year prior to the bill being signed, they would be “grandfathered” for eight years after the bill would be signed. After this time has elapsed, they would be subject to the new law.

The law would require organizations to defer at least 6% of employees’ salaries and include automatic escalation, although the amount of the escalation is not specified in the bill. It would also permit workers to ask for 50% or more of distributions from their balances to be in the form of an investment that guarantees lifetime income, i.e. an annuity.

With regard to multiple employer plans, the bill would lift the current restriction that an employer pairs only with companies with common ownership or common business purposes. In addition, one employer’s compliance failure would not jeopardize the entire plan, and the bill would require the Internal Revenue Service (IRS) to provide guidance on the common plan administrator’s duties. Furthermore, small employers in these types of plans would be exempt from certain fiduciary responsibilities.

The bill would permit state-sponsored automatic IRAs in existence before its enactment to continue, but not permit new ones to be created.

The full text of the bill can be viewed here.

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Categories: Financial News

EBSA Nominee Rutledge Advances Through Senate Help Committee - Thu, 12/14/2017 - 16:18

The Senate Committee on Health, Education, Labor, and Pensions voted during an executive session on Wednesday evening to advance Preston Rutledge’s nomination to serve as the Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA).

Rutledge currently serves as senior tax and benefits counsel on the Majority Tax Staff of the Senate Finance Committee, and as top aide to Senator Orin Hatch, R-Utah. These ties to the government, and particularly to a legislator known for being active on retirement and labor issues, suggests a change in strategy from the president’s first effort to name the top official at the Department of Labor (DOL)—in effect Rutledge’s future boss. Readers may recall how the president’s first nominee for DOL Secretary, CKE Restaurants CEO Andrew Puzder, failed to gain the support of other government and industry stakeholders, leading eventually to his withdrawal from consideration for the top cop position at DOL.

In comparison, President Trump’s replacement nominee, R. Alexander Acosta, sailed through the Labor Secretary nomination process with relative ease. The former member of the National Labor Relations Board was seen as having a deeper connection to and understanding of the issues he would be facing as leader of the DOL. Acosta was then serving as Dean of the Florida International University Law School, and the Trump administration was careful to highlight his long and distinguished career in public service.

If and when the Republican majority in the Senate approves Rutledge’s nomination to head EBSA, the industry will begin eagerly watching how Acosta and Rutledge will work together on a variety of issues—chief among them the fiduciary rule reforms. Until Rutledge takes the position it remains difficult to forecast what the ultimate fate of the twice-delayed rulemaking might be; however, his time working closely with Senator Hatch offers some indication of what his broad philosophy is likely to be with respect to the labor issues of the day. With Hatch helping to lead the way, the Senate has recently voted to overturn Department of Labor (DOL) rules that helped state and local governments set up retirement savings plans for private-sector workers who have no access to such plans.

This move came despite strong opposition from retirement investor advocacy organizations—those representing individual investment product customers, rather than providers, it should be stated. AARP, for example, said its leaders were deeply disappointed with the Senate vote discouraging local flexibility to offer workplace savings for the 55 million Americans who currently lack access to retirement savings plans at work.

Such criticism notwithstanding, Rutledge seems to be enjoying relatively little opposition as he moves closer to becoming EBSA head, and a number of provider groups have today already applauded the Senate committee’s evening vote to advance his nomination. Lee Covington, senior vice president and general counsel for the Insured Retirement Institute (IRI), says his organization, which is actively lobbying for the reversal of the ongoing fiduciary rule reforms, is “looking forward to working with Preston to develop and put in place policies which will help to expand access to workplace retirement plans, increase retirement savings, and boost the utilization of lifetime income products.”

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Categories: Financial News

IRI Warns Conflict of Interest Reforms Could Discourage Annuity Use - Wed, 12/13/2017 - 20:02

In an open comment letter submitted to the Securities and Exchange Commission (SEC), the Insured Retirement Institute (IRI) stresses the need for any investment industry conflict of interest reforms to be well-coordinated among regulators—and to keep in mind the crucial differences that exist between annuities and equity investments.

For context, in June of this year the SEC published a request for public comment on standards of conduct applicable to investment advisers and broker/dealers when they provide investment advice to retail and retirement investors. The request was among the first actions taken by the SEC under the new leadership of Chair Jay Clayton, and was interpreted by many to represent the SEC jumping in to play a direct role in the ongoing work at the Department of Labor to revamp the fiduciary definition under the Employee Retirement Income Security Act (ERISA).

At a high level, IRI argues the work completed so far by the Department of Labor (DOL) on the Obama-era fiduciary rule reforms must be skeptically reviewed by the new administration. According to IRI, major adjustments are needed to the DOL rulemaking in order for it to be considered workable by the advocacy group’s members. Furthermore, IRI argues the DOL has over-stepped the bounds of its authority and is currently engaged in work that would be best left to the SEC.

“The new standards should not require financial professionals to completely disregard their own interests or recommend only the ‘best’ or ‘cheapest’ product,” IRI argues. “The standard should only apply to recommendations that would reasonably be viewed as a call to take action and are sufficiently individualized.”

Beyond these arguments, IRI says DOL and SEC should work together to create advisory industry standards that do not impair the ability of firms and financial professionals to market, advertise and sell their products. In multiple sections of its letter, IRI goes so far as to argue the whole DOL rulemaking process that has unfolded so far should be tossed: “The DOL rule is causing consumers to lose access to valuable retirement products and services, and therefore should not serve as the starting point for rulemaking by the commission.…The Commission should collaborate with the DOL, FINRA, and the state insurance and securities regulators to develop a clear and consistent best interest standard.”

Investors are generally capable of looking out for their own interests and should have freedom of access to shop the financial services marketplace for retirement income guarantees, IRI continues. “The SEC should preserve access to annuities and other valuable financial products and services by rejecting the DOL’s paternalistic view of individuals. A competitive product marketplace is clearly in the best interests of retirement investors,” IRI says.

IRI goes on to state that investors should “always have the right to choose” their own financial professional: “Regulations should not favor or disfavor financial professionals based on the nature of their compensation (commission or fee) or the scope of their product offerings (proprietary products or limited product shelf).”

In terms of what it would like to see SEC accomplish, IRI shares the following list: “Conflicts should be eliminated when reasonably possibly (without requiring levelized compensation); unavoidable conflicts should be managed through mitigation and disclosure; disclosures should help investors understand what they are paying and what they are getting for their money; SEC should only propose new disclosure requirements if it identifies a gap in existing disclosure requirements; and the commission should adopt a rule to allow use of a summary prospectus for variable annuities to help investors better understand these products.”

Beyond this, IRI argues the SEC, if it does implement any new rules, should provide true grandfathering: “Any new standard of conduct should not retroactively apply to pre-existing accounts or transactions. The commission should provide a flexible regulatory environment to facilitate and encourage innovation, but should not pick winners and losers. The best interest standard should not be interpreted or enforced through private litigation; regulators should control interpretation of the standard, and enforcement should be handled through regulatory actions or arbitration.”

IRI’s full comment letter can be downloaded here.

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Categories: Financial News

Only 10% of Multiemployer Plans Are in Critical and Declining Status - Wed, 12/13/2017 - 18:32

The latest survey from Segal Consulting shows only 10% of multiemployer retirement plans are in critical and declining status, with most plans in the green zone.

Data based on 2017 certifications filed through September 30 shows nearly two-thirds (64%) of multiemployer plans are in the green zone as defined by the Pension Protection Act (PPA), meaning they are at least 80% funded. However, the Multiemployer Pension Reform Act (MPRA) provides that plans that would otherwise be in the yellow zone can remain in the green zone if projected to move back into the green zone without the benefit of a remedial funding improvement plan, Segal notes. Twelve percent of plans are in the yellow zone, and 14% of plans are in the red zone, considered critical status.

Segal also found nearly one-quarter of plans are more than 100% funded, and more than more than half of plans in the survey have a funded percentage between 73% and 99%. Fewer than 7% of plans have a funded percentage of less than 50%.

Segal notes that in the construction industry, a greater percentage of plans with fewer than 1,000 participants are in the red zone than larger plans based on a distribution of the zone status for more than 200 Segal clients by number of participants. However, only six plans in this industry are in critical and declining status in 2017.

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Categories: Financial News

Small-Employer DC Plan Coverage Gap Varies by Region - Wed, 12/13/2017 - 17:44

A new report from Finhabits, “Latino Small Business Workers Lack Retirement Savings,” shows that the smaller the employer, the less likely is the organization to offer any type of tax-qualified retirement plan, such as a 401(k).

On average, the research shows, only 10% of U.S. small-sized businesses—defined here as those with fewer than 100 employees—offer a retirement plan to employees. Even more troubling, when ranking select metropolitan areas by percentage of Hispanic population, the report portrays “a troubling correlation between access to retirement plans and the Hispanic population of a city.”

“Minorities—Hispanics in particular—are significantly less prepared than their white counterparts when it comes to retirement readiness,” researchers note. “In the five most-Hispanic metro areas analyzed, including Laredo, Texas; McAllen-Edinburg-Mission, Texas; Brownsville-Harlingen, Texas; El Paso, Texas; and Las Cruces, New Mexico, on average only 4% of small businesses offered retirement plans to their employees. This figure is in contrast to an 11% participation by firms in the five least-Hispanic metro areas we analyzed. Both numbers are a cause for concern, but it’s clear that Hispanics metro areas are worse off.”

As laid out by Finhabits’ report, very few workers save for retirement unless their employer offers them a retirement plan. As a result, overall, only 30% of small business workers are saving for retirement in the U.S.

“The previously mentioned correlation between retirement savings and the Hispanic population of a metro area is more noticeable here,” researchers explain. “Only 11% of workers in the five most Hispanic metro areas are saving for retirement compared to 35% of workers in the five least Hispanic areas. When looking at the state-level numbers, the same argument holds true. At a glance, every state is failing with the average being below 30%, but the Southern and Midwestern States are worse off than the Northern States.”

The data shows Arizona, New Mexico, Florida, and Texas all have Hispanic population levels above 20% and are among the states where employees are least likely to be saving for retirement. Important to note, California sits as an outlier in the research: Despite being among the states with a high Hispanic population (38.4%), their retirement health is above the average.

The analysis concludes the U.S. “stands at point in time when access to employer-sponsored retirement accounts is decreasing and participation when plans are available is worryingly low. The data we analyzed and presented highlights the problem for individuals working in small businesses in predominantly Hispanic metro areas. We believe the only solution is to provide these individuals with an alternative to the status quo approach to retirement savings.”

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Categories: Financial News

Democratic Lawmakers Urge Quick Passage of Butch Lewis Act - Wed, 12/13/2017 - 16:39

Congressional Democrats working on labor and retirement issues convened Wednesday morning to call on their Republican majority colleagues to consider immediate stand-alone passage of legislation, known as the Butch Lewis Act, which would, Democrats argued, “ensure the pensions that American union workers have earned over a lifetime of work are protected into the future.”

Democratic Senators and Representatives laid out the Butch Lewis Act as a key tenant of their so-called “Better Deal” platform. The legislation is named for Butch Lewis, the former President of Teamster Local 100 and “a leader of the fight to save Teamster pensions.” Lewis died in December 2015 and is survived by his wife, Rita Lewis, who has continued to work directly with Congressional Democrats on this issue.

For context, in December 2014, Congress approved and then-President Barack Obama signed a spending bill that included provisions that allow for potentially significant cuts to financially troubled multiemployer pensions. Under new provisions in the law, the pension benefits of certain retirees could be cut by 30% or more, and this has already occurred. Before the law was changed, it was illegal for an employer to cut the pension benefits collectively bargained retirees have earned.

Beside a long list of Democrats, speakers endorsing the bill’s passage Wednesday morning included current Teamsters President Jim Hoffa, as well as rank and file retired union members. The speakers sounded dire warnings that numerous multiemployer pension plans—including the massive Central States Teamsters Pension Plan, the United Mine Workers Pension Plan, and over 200 more plans impacting workers in every state in the country—are on the brink of failure. The longer action is delayed on this challenge, the more severe will be the consequences for the retirees and employers involved, and for tax payers.

Speakers agreed that, if nothing is done, many of these multiemployer plans are projected to fail within just the next 10 years. The result of significant cuts to these pensions would be economically devastating, Democratic lawmakers and union leaders argued. For context, in 2015, multiemployer participants were paid $241 billion in wages and pension benefits and those participants contributed over $35 billion in federal taxes and an additional $8.4 billion in state and local taxes.

Democrats argued that, if pension plans are allowed to fail, not only will employers no longer be able to pay promised benefits, but taxpayers would be at risk of having to pay billions. Already the Pension Benefit Guarantee Corporation (PBGC), the government sponsored insurance company for multiemployer pensions, has an exposure of $59 billion and is projected to become insolvent by 2025. The Congressional Budget Office estimates that the cost of backstopping the PBGC, should it fail, would be $101 billion dollars over 20 years.

Conventional political wisdom suggests the bill is unlikely to earn immediate consideration by House and Senate Republicans, who are busy pushing through a major tax cut prior to the start of the 2018 midterm election cycle. However, during a long list of recent interviews, retirement industry analysts and lobbyists have frequently pointed out that more and more lawmakers on both sides of the political aisle are coming to understand the time is ripe to follow up on the highly successful Pension Protection Act (PPA) of 2006. And so, there could be some political surprises brewing for 2018, whether involving the Butch Lewis Act or another piece of timely retirement-focused legislation, known as the “Automatic Retirement Plan Act of 2017.”

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Categories: Financial News

Work in Retirement Could Be an Elusive Goal for Many - Wed, 12/13/2017 - 16:09

Workers in a new survey expect to live to a median of age 90, which could be why 53% expect to retire after age 65 or not at all, and 56% plan to continue working at least part-time in retirement, according to “Wishful Thinking or Within Reach: Three Generations Prepare for Retirement,” issued by the Transamerica Center for Retirement Studies.

Among those who say they expect to “work in retirement,” 83% say it is because of financial need, and another 75% say it is to remain active. Whether they will be able to continue to work is in question, the Center notes, citing 2016 data from the Bureau of Labor Statistics that indicated only 20% of Americans age 65 or older were employed.

“Today’s workers are expecting to live long lives and, in doing so, they are disrupting retirement as we once knew it,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Many are envisioning retirement as a new chapter in life that involves continued work but with more free time to pursue personal interests. The big question is whether their vision is wishful thinking or within their reach.”

As to what their greatest retirement fears are, 57% of Generation X and 55% of Baby Boomers say it is outliving their savings. Among Millennials, their greatest fear, cited by 47%, is not being able to meet their family’s basic financial needs.

Seventy-six percent of workers of all ages are concerned that Social Security may not exist by the time they retire, and 79% believe they will have a harder time achieving financial security in retirement than their parents. While the latter is somewhat less true for Boomers (75%), it is more so for Millennials (83%) and Gen X (80%).

Challenges keeping people from saving

The survey explored various factors keeping people from saving for retirement and found that 66% have made paying off debt a financial priority. While this is less true of Boomers (59%), it is more often the case for Gen X (72%) and Millennials (67%). Paying off debt is more important to workers than is saving for retirement, with 57% saying this is a financial priority. This is even more prevalent among Baby Boomers (72%) as opposed to Gen X (61%) and Millennials (45%).

The Center also learned that 29% of workers have taken a loan, early withdrawal or hardship withdrawal from their workplace retirement plan or individual retirement account (IRA). While this is slightly less often the case for Boomers (26%) and Millennials (28%), it is more likely among Gen X (34%). Furthermore, workers have a median of $5,000 in emergency savings.

Taking into consideration all household retirement accounts, Boomers have a median savings of $164,000, Gen X has $72,000 and Millennials, $37,000.

The Center outlines four ways workers can improve their retirement outlook. First, they should resist procrastination; 40% of workers say they do not want to concern themselves with retirement investing until they approach their retirement date. Second, they should calculate their retirement needs; 47% of workers who provided an estimate for their retirement needs guessed at the number.

Third, they would have a formal, written retirement strategy, as only 16% of workers have one. Lastly, they should take steps to continue working past 65; only 46% of workers say they are keeping their skills up to date.

Harris Poll conducted the online survey for the Center among 6,372 workers in August and October.

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Categories: Financial News

Legislators Reintroduce RETIRE Act to Congress - Wed, 12/13/2017 - 15:58

U.S. House Representative Jared Polis, D-Colorado, and Representative Phil Roe, R-Tennessee, introduced legislation to help Americans plan for retirement.   

The Receiving Electronic Statements to Improve Retiree Earnings (RETIRE) Act was previously introduced in 2015.

The RETIRE Act would ensure employers make retirement information easily accessible online, while providing protections for employees who prefer to receive paper documents. Under current law, employers are required to mail paper documents such as notices, disclosures and statements to plan participants.

“We need to make it easier for Americans to think about and plan for retirement,” Polis said in a statement. “Nowadays, most Americans prefer their inbox to their mailbox.  The RETIRE Act makes planning one-click away by giving employees online access to their retirement information.  Not only does it make retirement information more accessible, but it helps the environment and reduces costs by cutting back on wasted paper.”

“Today, more and more Americans are choosing to manage their finances online,” said Roe. “By encouraging savers to receive their retirement plan information online, this commonsense bill will lower administrative costs, provide more timely access to plan information and allow greater interaction with and personalization of retirement savings. At the same time, this legislation provides important consumer protections, allowing participants to opt out and receive paper statements at any time with no additional cost.”

Tim Rouse, executive director of the SPARK Institute, commended legislators for reintroducing the bill. “The RETIRE Act ensures retirement savers will have greater access to needed information and online tools to assist them as they save and plan to retire,” he said in a statement.

The SPARK Institute previously released a white paper from Quantria Strategies, LLC entitled “Improving Outcomes with Electronic Delivery of Retirement Plan Documents,” which examines the rationales for allowing plan sponsors to make electronic delivery the default method for communicating with retirement plan participants. The white paper calculates that switching to an electronic delivery default would produce $200 to $500 million in aggregate savings annually that would accrue directly to individual retirement plan participants.

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Categories: Financial News

Segal Group Offers Reporting and Disclosure Calendars - Wed, 12/13/2017 - 15:46

The Segal Group has published 2018 Reporting & Disclosure Calendars for multiemployer and single-employer benefit plans.


The calendars summarize the annual compliance requirements and disclosure obligations that retirement and health plan sponsors need to know. The content in these calendars may cause plan sponsors to consider their current approaches, Segal says.


For example, sponsors of private-sector defined benefit (DB) and defined contribution (DC) retirement plans must satisfy rules requiring that coverage, benefit amounts and the availability of benefits, rights and features do not discriminate in favor of highly compensated employees. “This testing is generally required each year, but can be every third year in certain circumstances,” says Serena Simons, National Retirement Compliance leader. “Plan sponsors should check the last time they performed this testing.”


Also, Congress and the federal agencies that regulate plans covered by the Employee Retirement Income Security Act (ERISA) have taken action to help plan sponsors, plans and participants affected by the 2017 hurricanes and wildfires. “Both retirement and health plan sponsors may want to consider offering relief of different types to affected individuals in specified disaster areas,” notes Simons. “They should check the agency websites for more information.”


For health plan sponsors, the Affordable Care Act (ACA) 40% excise tax on high-cost health plans above a certain threshold is still scheduled to take effect in 2020. “Plan sponsors should take action now to evaluate when and under what circumstances their plans could be expected to reach the excise tax thresholds and by how much,” says Kathy Bakich, National Health Compliance practice leader. “With those estimates in hand, plan sponsors can begin the process of deciding whether to consider plan design changes that would help them lower total plan costs.”

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Categories: Financial News

Facing Regret, Employees Value Retirement Savings Help From Employers - Tue, 12/12/2017 - 19:19

Regret continues to be the prevailing sentiment that employees express about their retirement savings habits, according to a national survey conducted by American Century Investments.

Respondents point to the first five years of their working lives as the period of time for which they have the most regret. Common barriers to saving remained consistent with previous surveys and included not earning enough, having to pay off debts and incurring unexpected expenses. More than 90% said it would be “at least somewhat important to tell their younger selves to save more.” About 75% said their early-career self would be “somewhat or very likely” to listen to that advice.

Four out of 10 respondents credit their employer with playing a critical role in getting them to save for retirement. When offered the option of receiving either a 100% match on 3% of their retirement plan contributions or a 3% higher salary, 77% of pre-retirees chose the match over the higher salary; 75% of participants ages 25 to 54 would take the match. When asked the same question substituting 6% for 3%, 78% of pre-retirees and 69% of younger participants chose the match.

“The idea that employees would accept a higher match over higher salary may have implications for plan sponsors and their consultants in structuring compensation and benefit programs,” American Century Investments Vice President, Client Marketing, Diane Gallagher says. “It is certainly a perspective that is worth examining within a particular organization.”

Perhaps because the first five years of their working lives is the time period respondents have the most regret about saving for retirement, they find automatic retirement plan features important. Eight out of 10 employees want at least a “slight nudge” from their employers in helping to save and invest optimally for retirement. One out of 10 want “a kick in the pants” to encourage them to save more.

When asked if the company they worked for should offer automatic features, the vast majority agree. Seventy-five percent believe automatic enrollment at 6% is something their company should do. More than 60% feel automatic enrollment should be implemented retroactively. Eight in 10 show at least some interest in a regular, incremental automatic increase. The same number support plan investment re-enrollment into target-date solutions.

The fifth annual study includes responses from 1,500 full-time workers (grouped by ages 55 to 65 and 25 to 54) who currently participate in their employer’s retirement plan.

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Categories: Financial News

MetLife Finds Move Away From Money Market Funds in DC Plans - Tue, 12/12/2017 - 18:46

One year after the U.S. Securities and Exchange Commission’s (SEC)’s money market fund (MMF) reform rules went into effect, there has been meaningful movement away from money market funds as a capital preservation option in defined contribution (DC) plans, with just over half of plan sponsors now offering money market as a capital preservation option (52%), down from 62% in 2015, according to MetLife’s 2017 Stable Value Study.

Money market fund reform required providers to establish a floating net asset value (NAV) for institutional prime money market funds, which will allow the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. The rule updates also provide non-government retail money market funds with new tools, known as liquidity fees and redemption gates, to address potential runs on fund assets.

MetLife found there has been growth in stable value funds, with 9% of sponsors adding stable value funds to their plans in the past two years. Among plan sponsors who are reasonably familiar with MMF reform, a clear majority (83%) feel that stable value is a more attractive capital preservation option for plan participants than money market funds, as do nearly all DC plan advisers surveyed.  Even among plan sponsors familiar with the rules whose plans offer only a money market option, a majority (55%) think stable value is a better option.

Despite recognizing the attractiveness of stable value, the study found that just three in ten plan sponsors overall (31%) evaluated their use of money market funds as their plan’s capital preservation option in light of MMF reform.  MetLife says this indicates a continuing need for education about the rule changes and the role stable value funds can play as the capital preservation option within DC plans.

Advisers yield a great deal of influence in plan sponsors’ selection of capital preservation options, with 73% of sponsors who offer stable value and 67% who offer money market saying their advisers recommended these options to them.  However, there is a disconnect between the capital preservation recommendations advisers say they are providing and the actions plan sponsors are taking.  According to the findings, 90% of advisers report recommending stable value very often, but 86% say they seldom or never recommend money market funds.

Another factor impacting the adoption of stable value may be plan sponsors’ perceptions of its performance.  Historically, stable value options have outperformed money market funds, with both higher yields and lower volatility, and have also outperformed inflation. However, just over half of plan sponsors (56%) are aware that stable value returns have outperformed money market returns over the past 15 years, while 84% did not know that stable value returns have exceeded inflation over that same period.

There is some good news regarding the perception of stable value’s performance. Seven in ten plan sponsors (70%) believe that stable value will preserve its rate advantage over money market returns even if interest rates go up, and one-third who would consider eliminating money market in favor of stable value (33%) say they are motivated by stable value’s better rates. For those who include stable value in their DC plans, the leading reason for doing so is because it offers better returns than money market or other capital preservation options (43%).

MetLife commissioned Greenwald & Associates and Strategic Insight to conduct the research of plan sponsors, advisers and stable value fund providers between June and August 2017. A total of 241 plan sponsor interviews were completed among plan sponsors who offer a 401(k) 457, or 403(b) plan. Telephone interviews were conducted with 10 DC plan advisers and 19 stable value fund providers.

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Categories: Financial News

T. Rowe Price Introduces Tool to Help With Financial Wellness - Tue, 12/12/2017 - 17:28

T. Rowe Price announced the integration of an online cash flow management tool, DoubleNet Pay, into the company’s full-service defined contribution (DC) plan participant program.

The firm says the tool allows individuals to take control of their competing financial priorities by automating their spending and saving for short- and long-term goals.

Participants who enroll in the service can manage their income by establishing deductions from their bank account to apply toward emergency savings, bill payments, and debt management. Each month the identified dollar amounts will be automatically deducted from an individual’s paycheck so they can clearly see and understand their disposable income. The tool will be available on T. Rowe Price’s Workplace Retirement website.

“We’ve heard from many employers that day-to-day financial management and budgeting is a concern of their employees. When individuals are reviewing their retirement savings, they are also naturally thinking about the here and now in terms of spending and saving,” says Diana Awed, head of product and marketing for T. Rowe Price Retirement Plan Services. “We’ve seen the impact automatic services can have on financial behavior, particularly with retirement savings, and believe the addition of DoubleNet Pay to our financial wellness program will encourage employees to get on the right path with their finances, including paying down debt, starting an emergency fund, and saving for retirement.”

For more information about T. Rowe Price’s financial wellness program, visit For more information about DoubleNet Pay, visit

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Categories: Financial News

Fewer People Rely on Employer as a Source of Investment Advice - Tue, 12/12/2017 - 17:17

“Employer” is the eighth most important source of investment advice and information in 2017, cited as a primary, usual or occasional source by 46% of households nationally, according to a report from Hearts & Wallets. Employer is the primary source for only 27% of households.

Employer is the 10th source for frequency of sources, trailing the leaders of myself, partner/spouse, media (newspapers/radio/TV/radio), family, online, friends, financial professionals and other sources, the survey found.

Instead, the leading source of investment advice and information is “myself,” at 91%, increasing from 86% in 2013. “Spouse/partner” comes in second at 85%, up from 75% in 2013. Financial professionals come in third at 71%, up from 64% in 2013.

All types of financial professionals as a group grew as a source of information and advice overall, increasing seven percentage points from in 2013. Although use of paid investment professionals declined by one percentage point at the national level since 2013, other types of financial professionals, mostly unpaid, grew by more than nine percentage points.

Investors are increasing use of all sources of information and advice in 2017, and at the same time, are more likely to blend live and digital sources of advice. Using this emerging definition of “hybrid” investors, 41% of households use both digital advice as well as live financial professionals.

The biggest blenders of digital and live advice are the more affluent and younger consumers. Blenders of digital and live advice include more than two-thirds (68%) of investors ages 35 to 44 with investable assets between $100,000 and $250,000 and 85% of investors younger than 35 who have more than $1 million in assets. In all, more than 75% of consumers younger than 45 with assets of more than $250,000 meet this “hybrid” definition.

According to the survey, more than half of U.S. households now uses online sources of investment information and advice. Computer and mobile growth as a source continues among younger investors (ages 21 to 39) and pre-retirees. Mobile use as a source of information and advice has tripled over the last six years at the national level. Nearly two thirds (60%) of investors ages 21 to 27 now use mobile, and investors ages 40 to 52 are warming to mobile, at 31%.

The top three online activities nationally for investors are checking their accounts, using planning calculators and tools, and visiting finance portals. For mobile, the top two activities are the same, but “using social media” and “watching videos and podcasts” tie for No. 3. The biggest generational difference is that younger investors tend to be more interested in social media, watching videos and downloading podcasts. Almost half of investors ages 21 to 39 now use social media for investing information.

Information about how to purchase the report, Advice & Technology: Rise of Mobile and New Thinking on the “Hybrid Investor,” is available here.

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Categories: Financial News

Investors Agree Guaranteed Income in Retirement Is Important - Tue, 12/12/2017 - 16:52

According to the Wells Fargo/Gallup Investor and Retirement Optimism Index, asset owners are feeling about as optimistic today as they did back in September 2000, when the index set its as-yet-unbroken record high of +147.

The strong optimism for the third quarter stands despite real concern, only recently abated, that Congressional tax reform efforts might reduce or even eliminate tax incentives and favorable deferral rules for employer-sponsored retirement plans. According to the index results, three-quarters of non-retired investors in the survey have a 401(k) plan, and more than half (57%) say the most valued feature of their plan is the “match contribution from their employer.” The next most valued feature is the tax deferral on the money they contribute, which was noted by 33% of respondents.

“The 401(k) plan has evolved into the greatest savings and investment vehicle that Americans have today to steadily build a retirement nest egg,” says Fredrik Axsater, executive vice president and head of strategic business segments at Wells Fargo Asset Management. “Pre-tax savings has a direct impact on the level of savings that people achieve, and we have to recognize this as the country contemplates changes in tax policy.”

Forty-six percent say they would “save less” or “stop saving” in their 401(k) if the tax deferred status of their plan was taken away.

Confusion abounds over retirement income

One key finding from the index shows nearly all non-retired investors (98%) “strongly agree” or “somewhat agree” that “it is important to have a guaranteed income stream in retirement, in addition to Social Security,” and yet, according to Axsater, there is confusion about how to get this additional income stream.

“Six in 10 either strongly agree or somewhat agree that they want a guaranteed monthly income stream that lasts as long as they need it, even if that means giving up access to some of their money,” he says. “But at the same time, 75% of non-retired investors either strongly agree or somewhat agree that they want the freedom to spend their money as they want in retirement, even if that means they may run out of money too soon.”

Investors also are unsure about what products are available to provide them with a guaranteed income throughout retirement. In addition, they are unsure how much money they would need to structure various levels of income for various amounts of time.

“Setting a retirement savings goal—even if it’s an estimate—is a critical step in the process of managing one’s retirement outcome, but it’s hard to do,” Axsater notes. “Further, it becomes even harder to try to estimate what one will harvest from savings each year of living in retirement. This is where our industry must come up with solutions that allow people to envision their savings needs and what that translates to in terms of annual draw down in retirement.”

Interest grows in social impact investing

Wells Fargo and Gallup researchers asked investors about their views on “social impact investing,” which was defined for respondents as “choosing investments based on the effect they have on things like the environment, human rights, diversity and other social values, in addition to investment returns.”

Women express more interest in investing in social impact investments, with 39% saying they are “very interested” or “somewhat interested,” as compared with 26% of male investors. The data shows younger investors appear more interested in this type of investing, with 39% of investors aged 18 to 49, “very interested” or “somewhat interested,” compared with 29% of investors age 50 and older.

Overall, 44% of non-retired investors with a 401(k) say they would “definitely” or “probably” put money in social impact investments if they had the option in their plan. Moreover, 34% of non-retired investors with a 401(k) say that including social impact investments as an option in a work-place retirement plan would make them feel “more positively” toward their employer. Of those non-retired investors who would feel more favorably about their employer, 53% are women and 47% are men.

In the Wells Fargo/Gallup survey, investors were asked to rate their interest in each of three specific social impact themes. Seventy-eight percent of investors say they are “very interested” or “somewhat interested” in protecting the environment, 76% are “very interested” or “somewhat interested” in doing social good—such as promoting diversity and improving education—and 74% are “very interested” or “somewhat interested” in focusing on responsible corporate governance, including “ethics” and “behaviors.”

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