On February 28, 2013, DOL published its long-awaited target date fund (TDF) ‘tips.’ In this article we review the DOL ‘tip sheet’ and TDF fiduciary issues generally. Background The late-2008 financial crisis had a particularly significant impact on some 401(k) plans that offered TDFs. In 2007 the Department of Labor had finalized its qualified default… Read More
There’s a superficial answer to this question — just multiply your marginal tax rate times the amount of this year’s benefit. So, if you are getting a benefit that is worth, say, $10,000, and your tax rate is 39.6%, then your tax saving $3,960. That is the wrong answer – in what follows we are… Read More
In a series of recent articles we have reviewed the tax value of saving in a 401(k) plan (relative to saving outside a plan) and considered the effect on the 401(k) tax benefit of different changes in the tax law. Those articles have focused primarily on the tax value to higher paid plan participants, because… Read More
In this article we briefly review the key 2012 retirement policy developments and then discuss what we expect to be the key retirement policy issues ‘on the table’ in 2013. 2012 review Like 2011 and, we suspect, 2013, the issues of the budget and the deficit dominated legislative policy in 2012. Thus, the major piece… Read More
The Social Security Administration just announced benefit increases effective in 2013. Current retirees will receive a cost-of-living increase, beginning in January 2013, of 1.7%, reflecting the increase in CPI-W between the third quarter of 2011 and the third quarter of 2012. In addition, the maximum amount of earnings subject to Social Security tax will increase… Read More
A key element of the debate over comprehensive tax reform and retirement savings tax incentives will be the fairness of the current 401(k) system. In this article we review current fairness arguments and the data that opponents and proponents put forward in support of their views. Upside-down incentives The following is from a 2005 paper… Read More
Closely linked to the criticism that the 401(k) system is unfair is a criticism that it is inefficient: that it does not do as good a job accumulating retirement savings as could be done. While the “inefficiency” argument is complicated and involves a variety of issues, the elements of the system that have gotten the… Read More
On May 7, 2012, the Department of Labor released Field Assistance Bulletin 2012-02, providing additional guidance with respect to DOL’s participant-level fee disclosure regulation. We have provided a detailed outline of the fee disclosure regulations (provider-to-sponsor and participant-level) and a detailed discussion of the participant-level regulation. The FAB, which is in Q&A form, addresses a… Read More
In Tussey v. ABB, the United States District Court for the Western District Of Missouri held that employer fiduciaries violated their fiduciary duty with respect to company 401(k) plans (the two plans are very similar and are hereafter simply called the “Plan”) in connection with a revenue sharing-based fee arrangement with Fidelity Trust. This is… Read More
Part 1 — — Provider-sponsor disclosure rules The regulation adds an elaborate set of fee disclosure requirements for the availability of the ERISA exemption for service providers. Violations are subject to ERISA sanctions (including an excise tax on the provider) for prohibited transaction violations. Summary — · The rules for single provider arrangements are… Read More
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