Tag: 401(k)

Should a Federally Sponsored ‘Pension Dashboard’ Be Established?

Mary Pat Campbell

Link:https://www.napa-net.org/news-info/daily-news/should-federally-sponsored-%E2%80%98pension-dashboard%E2%80%99-be-established

Excerpt:

A “pension dashboard” could be useful in the United States to help participants track their retirement savings when they change jobs, but Congress would need to authorize a federal agency to establish and oversee such a dashboard. It also would have to give the agency the authority to consolidate retirement account information, the GAO stated in its report—“401(k) Plans: Additional Federal Actions Would Help Participants Track and Consolidate Their Retirement Savings.”

GAO was asked to review, among other things, the challenges that 401(k) plan participants have in keeping track of their retirement savings, as well as the challenges they have in rolling over their savings from one plan to another and federal actions that can improve the process.

In fact, this issue is not new, as the dashboard concept was raised in late 2020 in a white paper (A Retirement Dashboard for the United States) by authors David John of the AARP Public Policy Institute, Grace Enda of the Urban-Brookings Tax Policy Center, and William Gale and J. Mark Iwry of the Brookings Institution who called for the creation of a retirement dashboard to help savers better manage and keep track of their savings.  

….

Consequently, GAO recommends that Congress grant authority to a federal agency to develop and oversee a comprehensive pension dashboard that can provide participants’ information to them in one location. GAO notes this “would reduce the burden on plan sponsors and providers, who must otherwise track or manage lost accounts or missing participants.” 

The report also suggests that DOL and IRS establish a system to facilitate automatic plan-to-plan rollovers to help participants maintain consolidated savings as they change jobs. GAO also recommended that the government (PBGC, Labor and Treasury) help 401(k) participants by improving the information they receive about options for their plan savings and the process they must undergo to consolidate their savings after changing jobs.

In its written response, DOL stated that it would consider actions related to GAO’s disclosure recommendation to ensure participants “receive easily understandable, timely, and comprehensive information.” DOL also noted that it is engaged in joint agency efforts and that it would be appropriate for them to consider the recommendation as part of such efforts with Treasury, IRS, and PBGC, as required under the SECURE 2.0 Act. Under the act, the agencies are to study, analyze, and report to Congress on the effectiveness of their reporting and disclosure requirements before the end of 2025.

Author(s): Ted Godbout

Publication Date: 20 Feb 2024

Publication Site: NAPA – National Association of Plan Advisors

Editorial: No Crypto in 401(k)s

Mary Pat Campbell

Link: https://www.toledoblade.com/opinion/editorials/2022/10/08/no-crypto-in-401-k-s/stories/20221004017

Excerpt:

Meanwhile, in Congress the Retirement Savings Modernization Act was just introduced to allow cryptocurrency and just about anything short of lottery tickets into America’s 401(k) accounts. The alternative asset industry — private equity, hedge funds, venture capital, real estate, and more — has been trying for years to offer their speculative products — and reap huge fees in the process — through personal retirement accounts as they are already able to do in some public pensions, such as Ohio’s.

There has been no legal barrier to these investments, and the Trump administration’s Department of Labor went so far as to specify that alternative investments could be part of 401(k)s, a decision affirmed by the Biden Administration. But companies administering 401(k) accounts are fiduciaries, and they’ve avoided alternative investments in fear of getting sued for breach of fiduciary duty for offering them to workers. For decades, prudence has prevailed and 401(k) retirement accounts have not allowed high-fee, illiquid funds as a 401(k) option.

The proposed bill simply states that alternative investments, despite the higher fees associated with them, are “covered” investments that do not establish fiduciary breach by their presence in a 401(k) plan. The cloak of congressionally created cover for alternative investments is needed because the current commonsense assumption is that the mere presence of these investments is strong evidence fiduciary duty has been breached.

Author(s): Blade Editorial Board

Publication Date: 8 Oct 2022

Publication Site: Toledo Blade

Your New Woke 401(k)

Mary Pat Campbell

Link:https://www.wsj.com/articles/your-new-woke-401-k-retirement-savings-esg-erisa-biden-administration-department-of-labor-proposal-11634753095

Excerpt:

While Democrats in Congress negotiate over trillions of dollars in new spending, the Biden Administration is quietly advancing its agenda through regulation. Witness a little-noticed proposed rule last week by the Labor Department that will add new political directives to your retirement savings.

The Administration says the rule will make it easier for retirement plans to offer 401(k) funds focused on ESG (environmental, social and governance) objectives. In fact, the rule will coerce workers and businesses into supporting progressive policies.

An important Trump Labor rule last fall reinforced that the Employee Retirement Income Security Act (Erisa) requires retirement plan fiduciaries to act “solely in the interest” of participants. The rule prevented pension plans and asset managers from considering ESG factors like climate, workforce diversity and political donations unless they had a “material effect on the return and risk of an investment.”

The Biden DOL plans to scrap the Trump rule while putting retirement sponsors and asset managers on notice that they have a fiduciary duty to include ESG in investment decisions. The proposed rule “makes clear that climate change and other ESG factors are often material” and thus in many instances should be considered “in the assessment of investment risks and returns.”

Author(s): WSJ editorial board

Publication Date: 20 Oct 2021

Publication Site: WSJ

ASPPA 2021 Conference: Day 1

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/10/17/asppa-2021-conference-day-1/

Excerpt:

General Session 1: Washington Update

per Brian Graff who has spent 25 years at ASPPA and got some recognition for it at the end of this session.

….

Hispanic and Black coverage in 401(k) plans is low and if this situation it does not improve private sector plans could be eliminated in favor of a government option as in Australia. States (first Oregon, then CA, and 8 others) are setting up their own plans and forcing companies to be in it if they don’t have their own plans. This is good for us in that companies do not want to give their money to states (especially in CA and NJ) so they set up their own plans that need to administered by us.

Proposal that may be effective in 2023 is requiring all companies with at least six employees in the last two years to set up a 401(k) plan with auto-enrollment at 6% going up to 10%. Pie would increase by 62 million participants (from 95 million now) and 600,000 plans (on top of 800,000 now).

Author(s): John Bury

Publication Date: 17 Oct 2021

Publication Site: burypensions

U.S. Retirees’ Experience Differs From Nonretirees’ Outlook

Mary Pat Campbell

Link: https://news.gallup.com/poll/350048/retirees-experience-differs-nonretirees-outlook.aspx

Graphic:

Excerpt:

The differences in reliance on income sources between those who are already retired and those who are not yet retired are likely attributable, at least in part, to apprehension about the Social Security system, as well as the rise of 401(k)s accompanied by a decline in work-sponsored pension plans.

57% of retired U.S. adults say they rely on Social Security as a major income source, and 38% of nonretirees expect it to be a major source for them.

Likewise, 36% of retirees and 19% of nonretirees say a work-sponsored pension plan is or will be a major income source.

Nonretirees are most likely to say a 401(k) or other retirement savings account will fund their retirement (49%). Meanwhile, 35% of retirees mention 401(k)s as a major funding source of their retirement.

Author(s): Megan Brenan

Publication Date: 18 May 2021

Publication Site: Gallup

Wall Street wants to end Trump-era ESG fund rule for 401(k) plans

Mary Pat Campbell

Link: https://www.cnbc.com/2021/03/04/wall-street-wants-to-end-trump-era-esg-fund-rule-for-401k-plans.html

Excerpt:

The Labor Department issued a rule in October, during the Trump administration, that experts say would curb use of ESG funds in 401(k) plans.

Money managers and other stakeholders are pushing the Biden administration to scrap the rule or agree not to enforce it, according to a report in The Wall Street Journal.

Investor demand for ESG funds has grown significantly. 401(k) plans represent a big untapped growth source.

Author(s): Greg Iacurci

Publication Date: 4 March 2021

Publication Site: CNBC

Wall Street Lobbies to Bring More ESG Funds Into 401(k)s

Mary Pat Campbell

Link: https://www.wsj.com/articles/wall-street-lobbies-to-bring-more-esg-funds-into-401-k-s-11614767400?mod=djemwhatsnews

Excerpt:

Money managers are lobbying to scrap a Trump-era rule that makes it difficult for 401(k) plans to invest in socially focused funds.

The Labor Department rule, announced in October, imposed restrictions on what can and can’t be offered as company 401(k) funds. One result is that plans can’t use funds with nonfinancial goals as default investments for employees.

That means 401(k) overseers and managers need to show that environmental, social and governance strategies can boost financial returns—a challenge for the nascent industry. ESG-focused funds are a growing profit center for asset managers.

Lobbyists representing managers, pensions and retirees began making calls to the Biden transition team in the weeks after the rule was announced. Some lobbyists urged the incoming administration to agree not to enforce the rule and place it under review, said people familiar with the matter.

Author(s): Dawn Lim

Publication Date: 2 March 2021

Publication Site: Wall Street Journal

Saving Social Security Is a Bipartisan Issue: Survey

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2021/02/22/saving-social-security-is-a-bipartisan-issue-survey/

Excerpt:

Most Americans of both political parties agree there Is a retirement crisis ahead.

A majority of those surveyed say COVID-19 has delayed their retirement plans.

Many stated that pension plans are better than 401(k) plans.

Author(s):  Ginger Szala

Publication Date: 22 February 2021

Publication Site: Think Advisor

Why Early 401(k) Withdrawals Are a Bad Idea

Mary Pat Campbell

Link: https://knowledge.wharton.upenn.edu/article/why-early-401k-withdrawals-are-a-bad-idea/

Excerpt:

Wharton Business Daily: What are your thoughts on the move by Congress to allow people to be able to dip into their 401(k) accounts? You are not a fan of that idea in general.

Olivia Mitchell: That’s true. This got started in March 2020, when the CARES Act was passed by Congress, allowing people who had 401(k) accounts and who were younger than age 59.5 to access up to $100,000 from their retirement accounts without paying the 10% penalty. Congress permitted this in the throes of COVID and then they allowed the income taxes on those withdrawals to be spread over three years unless the money was repaid to the account. That option ended in December 2020.

Congress passed a new bill in December that did not extend penalty-free access to everyone, but it did permit people who experienced federally declared disasters, aside from COVID, to withdraw some of their 401(k) money. So, there are still eligible people who, in 2021, can withdraw up to $100,000 from their retirement accounts without penalties. Again, they can spread it over three years for tax purposes. In general, this is not a good idea.

Author(s): Olivia S. Mitchell

Publication Date: 23 February 2021

Publication Site: Knowledge @ Wharton