Feb 11, 2011
--- Laying it all out on the table, PLANSPONSOR and PLANADVISER’s Editor-in-Chief, Nevin E. Adams, opened the first Virtual PLANADVISER National Conference (VPANC) by outlining the top 10 trends most likely to impact the retirement industry this year. ---
The first trend to watch for in 2011 was dubbed “’Share Alikes?” referring to the expected proliferation of revenue-sharing lawsuits. Adams said it’s not only large plans that need to worry about this anymore. The first wave of lawsuits came about in 2006, and so far, most plaintiffs have not been successful. However, as more law firms are becoming “experts” in the Employee Retirement Income Security Act (ERISA), Adams predicted we can expect to see more lawsuits this year.
The biggest concern for plan sponsors, however, may not be fee-related litigation. Rather, lawsuits about employer stock and stock-drop cases will be more troubling, Adams said.
The second topic under the microscope was taxes, and the question was posed: “What if your taxes won’t be lower in the future?” Adams said there has been a long standing presumption that deferring taxes on retirement savings is the smart move, so you pay taxes at a lower level when you’re ready for the distribution; it is supposed to be a win/win situation. But what if taxes are higher in the future? In a “virtual” show of hands, Nevin questioned those listening to the webcast who thinks taxes will go down in the future. This is not likely–younger workers might be at the lowest tax rates of their lives today, Adams suggested. Yet the number of plans offering a Roth solution has been sluggish–18.8% of plans offered Roth in 2009, with a median usage rate of 5%. The “accepted” understanding of the role tax savings may have to be reevaluated this year.
The avalanche of disclosures was the third trend Adams discussed. He expects it will indeed feel like information will be “dumped” on plan sponsors, and in the beginning, it will lead to more questions than answers. Some of the disclosures sponsors will have to sort through are the 5500 Schedule C, 401(k) fair disclosure, and the Pension Security Act, the pending 408(b)(2) regulations, and then, they’ll have to figure out what participant disclosures they’ll have to provide. As Adams said, “disclosure is not (necessarily) clarity, and more disclosure is not (necessartly) more clarity. However, it beats the alternative.”