First of, a big thank you to Joan McDonagh from Empower for taking time to join me on the podcast! As an ERISA attorney and co-author of The 401(k) Answer Book she brought a lot of fire power to the table! Click here to listen to this episode!
DOL Proposed Fiduciary Rule
Our conversation was timely with the current intense focus on when and what the DOL will announce with the new “fiduciary rule”. Key things employers should keep an eye on are, what actions or conversations will make service providers considered a fiduciary. The specific focus is likely to be on how service providers will interact with 401(k) participants when they are considering their distribution options. The DOL is has been very concerned about the “conflicted” information participants get from service providers about their options. The DOL is trying to curtail service providers from steering participants to products or investments where they make more money based by selecting a product they are recommending or promoting. Stay tuned as Joan is expecting the new rule to be announced soon!
While there has been a lot if interest and focus on the fiduciary rule, personally I found our conversation around state-run retirement plans and initiatives to help participants generate income in retirement to be just as interesting.
State Run Retirement Plans
All employers should keep an eye on what states are doing in their quest to launch a retirement plan, especially those where you have employees. Hopefully, employers who already sponsor a 401(k) or other employer sponsored retirement plan will likely not be significantly impacted. However, those employers who do not offer a 401(k), other employer based retirement plan, are excluding employees from participating in their retirement plan or have long waiting periods employees must satisfy prior to being eligible to join their plan, should keep a close eye on developments in the states where they have employees. Also, not to be forgotten is the federal government’s myRA which could further muddy the waters!
Generating Lifetime Income
In my humble opinion, the next big conversation in the retirement industry will be around the “decummulation” of assets in qualified retirement plans. After all, who doesn’t want to have lifetime income! This is likely going to take a combination of several factors to successfully improve participant outcomes in the long run. Specifically education of plan sponsors about the challenges participants face in generating lifetime income, new rules to provide fiduciary safe harbors to employers who offer in-plan options and finally and most importantly education for participants about what is available to them both inside and outside of their retirement plan. In my conversation with Joan, we hit on a few government initiatives such as Qualified Longevity Annuity Contracts (QLACs), Guaranteed Lifetime Withdrawal Benefits (GLWBs) and the inclusion of expected monthly income in retirement on participant quarterly statements. These, unlike the fiduciary rule, are moving along at a slower more deliberate pace.
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