Compliance January 30, 2014

Senator Harkin Proposes ‘USA’ Retirement

Proposed legislation from Senator Tom Harkin (D-Iowa) would expand access to privately run, portable retirement plans for all workers.
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Harkin, chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, began scouting the idea of an auto-enrolled plan for all workers in 2012 to address the country’s growing retirement crisis.

Pointing to the retirement income deficit, Harkin said in a press conference discussing the Act that the difference between what people have saved for retirement and what they should have at this point is at least $6.6 trillion. Only one in five people has a defined benefit (DB) plan, and half of workers have no plan at all. Half of Americans have less than $10,0000 in savings, and 85% of Americans report they are worried about their prospects for retirement.  

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There is strong public support for reforming the retirement system.  A recent study by the National Institute for Retirement Security found a majority of Americans agree there is a need for a strong, universal pension system, and 90% favor a plan for all Americans, that is portable and that provides a monthly check throughout retirement.

The USA Retirement Funds Act tackles the retirement crisis head-on by ensuring people currently without access to a workplace retirement plan would finally have the opportunity to earn a safe and secure pension benefit for life. 

“The plan would be shaped as a lifetime stream of income,” Harkin said in a press conference. Unlike 401(k) plans, there would be no lump sums and no borrowing. The assets would be annuitized at retirement age.

Key features of the USA Retirement Funds are:

  • Universal coverage: USA Retirement Funds would be available to everyone, including the more than 61 million people without access to a workplace retirement plan and the 14.5 million people who are self-employed.
  • Automatic enrollment:  Employees would be automatically enrolled at a rate of 6% per year, but could choose to raise, lower, or stop their contributions.
  • Secure lifetime income: Benefits would be paid monthly for life, and participants would be shielded from market volatility and other risks.
  • Lower costs: Pooled, professional management and risk sharing will reduce the cost of retirement by up to 50%.
  • Portability: People would be able to take their benefit with them as they change employers.
  • Simple for businesses: Small businesses can easily participate and would not have to take on risk or administrative burden.

As well as establishing USA Retirement Funds, the Act would make it easier for small employers to offer pooled retirement plans, encourage plan sponsors to incorporate  lifetime income solutions into their defined contribution plans, provide increased fiduciary and other protections for plan participants, simplify the administration of defined benefit pension plans, and improve the pension insurance system.

Products January 30, 2014

TD Ameritrade Unveils Plan Solution

A new program from TD Ameritrade offers registered investment advisers (RIAs) a turnkey solution for simplified development and management of qualified defined contribution retirement plans.
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The streamlined program makes it easier for RIAs to bundle essential plan services while preserving an open-architecture arrangement for investment flexibility, the firm says in a statement. The new solution is also designed to reduce the time it takes to ensure compliance with applicable regulations.  

The RIA program is run in conjunction with TD Ameritrade Institutional and provides advisers with support during the launch and ongoing administration of retirement plans. The service can also help advisers turn new and existing clients into growth opportunities, the firm says.

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The solution offers RIAs a single point of contact for all their 401(k) plan-servicing needs, combining recordkeeping, asset custody and third-party administration from TD Ameritrade Trust Company. Participants in the plans gain access to thousands of non-proprietary ETFs and mutual funds.  

“We listened to advisers and they wanted a simplified, branded retirement plan solution to help them gather assets they’re not capturing today,” says Skip Schweiss, managing director, TD Ameritrade Institutional and president of TD Ameritrade Trust Company. “Our new approach gives advisers a streamlined solution with the TD Ameritrade name, which can be a key selling point with plan sponsors.”

TD Ameritrade says just 5% of RIAs service a meaningful number of 401(k) plans, but recent regulatory changes designed to enhance investor protections have tilted the playing field in the favor of RIAs.

The U.S. Labor Department now requires retirement plan providers to fully disclose their services, compensation and fiduciary status. TD Ameritrade says that more employers, as they gain better access to fee and service disclosures, will shift retirement plans to RIAs, where advisers are held to a rigorous fiduciary standard of care.

“Regulators have changed the ground rules in a way that I believe truly favors fiduciary advisers,” Schweiss says. “Opportunity is knocking and we want to help advisers open that door.”

RIAs will get the TD Ameritrade Retirement Plan Playbook, which offers step-by-step guidance on how to set up a retirement plan business, approach prospects and service clients. The program offers account management tools and materials for advisers, enrollment and education support for employers, as well as planning tools and IRA rollover assistance for plan participants.

Advisers still control their clients’ investment options through TD Ameritrade Trust Company’s open-architecture platform, with unbundled access to more than 13,000 mutual funds and over 1,000 ETFs, as well as access to TD Ameritrade’s self-directed brokerage platform.

More information is available here.

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