Great Scott! It’s Back to the Future Day! ERISA Edition

Back to the Future II turned out to be about as accurate as Nostradamus in its predictions about October 21, 2015. Yes, today is the day!

We have Flat Screen TVs, biometric door locks, Google and the NSA know everything about us, and yes, Lexus even recently unveiled a fully functional HOVERBOARD:

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Heck, the Cubs, who win the World Series this year in the film, are playing still alive and playing the Mets in the NLCS. Do you believe in miracles?!?

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In the movie, Biff travels back in time with 50 years of sports history in a Sports Almanac and becomes the richest man in America with the information. If you were able to go back in time 10 years with a 2000-2010 Retirement Plan Almanac, this is what you would have done:

2000: Don’t put that tech and telecom fund in your plan menu like everyone is demanding…right before the Dot Com bubble bursts.

2002: Fire your commissioned based broker and hire a fee-based fiduciary advisor.

2004: Negotiate for revenue-sharing credits and an ERISA budget from your recordkeeper. “How much are they really making?” If your provider doesn’t offer that yet, run a search and hire one who will.

2006: Change your default fund to a QDIA, adopt auto-enrollment and auto-increases to massively increase participation.

2008: Make sure you know how risky your 2010 fund is… before the crash. Some of the most popular lost 30%!

2010: After seeing all the disclosures on the revised 2009 Form 5500, run an RFP to renegotiate your service provider’s fees or find a new, more cost-effective one.

So here we are on October 21, 2015, Back to the Future Day. Don’t you wish you had known all of those things in the year 2000? Think how much better off your plan and your participants would have been.ball

Well, here are our NORTH PIERdictions for the next 10 years Into The Retirement Future:

  • Financial Wellness programs will be a commonplace benefit at most companies.
  • With the 2015 Supreme Court finding that Edison was liable for not monitoring plan fees at the individual fund level, plaintiffs’ attorneys will launch a slew of lawsuits against any mid to large sized company that has high plan fees and can’t justify them.
  • Normal Auto-enrollment levels will start at 6-8% and auto increases will top out at 10%-15%, as companies realize that’s the only way to truly improve participant outcomes. Matching formulas will stretch to those levels as well.
  • Now that companies like Nationwide, ING (now Voya), MassMutual, and The Hartford have settled landmark revenue sharing cases, many large advisors/brokers will be mired in lawsuits for similar conflicts of interest.

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What to do today:

  • Initiate some form of financial wellness program. Perhaps run an RFP for a financial wellness provider. Many are less expensive than you think due to effective technology solutions.
  • Run an RFP for all of your retirement plan service providers to make sure you are paying the right amount and getting the best services available. A good search can result in no change of vendor but an increase in services at a more competitive price. This includes your advisor. Our typical advisor search yields 20%-40% in annual savings.
  • Revisit your match and profit sharing formulas. With a good auto-enrollment program, many testing issues improve. Model out lower match percentages and higher maximum contributions. (Instead of 50 cents on-the-dollar for the first 6%, consider matching a third up to 10%. Your limit is an implied endorsement to your participants.
  • Adopt a fee policy. How do you allocate fees amongst your participants? Is it still straight asset based? If so, your more seasoned employees might be paying 100 times more for their administration than your newer ones. This is the new place to discuss, decide and then document, document, document.

As a reminder, North Pier can help you with all of these items. As an ERISA search and specialty engagement firm, we are not in competition with your existing providers. We are here to help you optimize your plans, whether your best bet is to stay with your incumbents, or move on to greener pastures. The time to act is now. Don’t put it off… INTO THE FUTURE…