At the end of a long process that could have many in the retirement world seriously considering their futures in the business — or how they go about getting expert input to make those plan decisions — the Department of Labor is apparently close to finishing its controversial work on establishing a fiduciary standard.
Phyllis Borzi, assistant secretary of labor with the Department of Labor’s Employee Benefits Security Administration, told attendees at Tuesday’s annual American Society of Pension Professionals and Actuaries conference in National Harbor, Md. that the last stages of finalizing DOL’s conflict of interest rulings are indeed underway, with the long-awaited regulations potentially possible by year’s end.
“It’s entirely possible, though I’m a poor prognosticator on dates,” Borzi told Brian Graff, ASPPA’s executive director and CEO, during a question-and-answer session. Borzi said the regulations have been through a complex and uniquely public set of comments and re-examinations, perhaps not so hard to understand considering the strong feelings on the issue in the greater retirement planning and benefits administration field.
In the meantime, Borzi said she continues to reinforce the theme that clearer fiduciary guidelines would create a more even playing field for employees and consumers hoping to make important financial decisions or better utilize their existing, company-sponsored 401(k) benefits. And none of that advice is ever really free, she suggested.
“There’s some sort of implicit assumption that consumers don’t want to pay for unbiased advice, and I think there’s also a completely false assumption that advice that comes as part of a sales and marketing approach is free,” she said. “The people who give financial advice are not providing that advice for free — they have higher-fee products with lower returns. It’s false to think that they’re not getting compensated, even if they do give advice that’s in the best interest of their clients.”
Borzi and Mark Iwry, deputy assistant secretary to the Department of Treasury, both said they are also working to continue to improve and clarify the importance of annuitized “lifetime income solutions” as part of America’s greater, largely 401(k)-focused defined contribution plans, especially as more older workers find themselves facing major choices in allocating their hard-earned retirement savings.
“Our shared concern is that far too many people are getting the largest chunk of money in their lives, besides selling a home, and we’re trying to figure out how to encourage [plan sponsors and administrators] to provide more options,” she said. “Even I’m not smart enough to figure out how to make that kind of money last for the rest of my life.”
“There have got to be ways to make lifetime income more attractive to DBs, DCs and even IRAs,” Iwry added. “A default annuity exists already and partial annuitization is another option, but we have to get away from the ‘all or nothing’ lump sum situation — which has a very, very high takeup rate.”
Iwry said Treasury also continues its support for more extensive use of auto-enrollment and auto-escalation features in 401(k) plans, as they’ve been proven to be one of the most important factors in helping plans prosper and recover from their post-economic meltdown malaise. To that end, he’s also encouraging the development of 401(k)s which provide a higher company match to lower-paid employees in order to “supercharge” their smaller contributions, but still keep them vested and involved in retirement planning.
Borzi said HR professionals will also soon see the results of work on new benefit statements for employees which will provide clearer illustrations of what the balance of their retirement savings would mean for an actual lifetime income stream. “We’re taking kind of a training wheels approach – figuring out what you might you tell employees that would be useful to them – though we’re perfectly open to changes,” Borzi added.
And the Department of Labor also continues to work with the Department of Justice, Treasury and the IRS to provide real-world interpretation and guidance in light of the post-DOMA/Windsor ruling, figuring out the specifics of pensions and retirement benefits for same-sex couples and clarifying the new definitions of spouse.
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