HealthView Service’s tools give
consumers a better way to understand what their health care costs might be in
retirement, as well as long-term care costs and future retirement savings. Users
receive a report that details average costs for people in similar circumstances
after they supply basic information, such as age, gender, health status and
location. New calculators were designed to spark conversations between
investors and advisers to discuss how these expenses can be built into existing
plans for retirement.
The tools draw on the firm’s actuarial
and medical professional-reviewed approach to calculate expected retirement
health care costs for broker/dealers and financial advisers, according to Ron
Mastrogiovanni, founder and chief executive of HealthView Services. “The health
care costs calculator draws upon more than 50 million health care cases and a
broad range of data points to provide a comprehensive perspective on the
expected health care costs retirees will have to pay for out of their own
pockets,” he said in a statement.
Despite the concerns about
health care costs in retirement expressed so commonly by consumers and
advisers, many people still haven’t built these costs into their retirement
planning, the firm says. HealthView’s white paper, “Closing the Retirement Health Care
Costs Planning Gap: The Next Retirement Planning Challenge,” highlights a number of reasons for the gap
and outlines several simple retirement planning steps and questions that need
to be asked. Case studies help underscore the benefits of incorporating health
care costs into retirement planning.
“The takeaway from this work is
that while total lifetime health care costs will be higher than many expect, if
planned for early enough, these costs are manageable,” Mastrogiovanni believes.
“By incorporating them in planning during working years, we believe retirees
will be better positioned to make informed planning decisions and realize the
retirement security they seek.”
HealthView Services provides
retirement health care planning applications, including Medicare, long-term
care and Social Security optimization. More information is on its website.
By using this site you agree to our network wide Privacy Policy.
Changes Plan Sponsors Would See with New Fiduciary Rule
With so much industry attention fixed on the DOL’s proposed fiduciary rule language, plan sponsor clients will undoubtedly be asking, “What does it mean for us and our employees?”
The Department of Labor’s (DOL) new fiduciary investment
advice proposal replaces or updates past guidance about advice to plan sponsors
and participants in ways that would provide additional protections and make fees and
who is acting as a fiduciary clearer.
However, the proposal also changes the distinction between
education and advice in such a way that some expect plan sponsors and participants
to have access to less help and guidance.
The DOL started out its rule proposal by explaining why
it thought past guidance needed to be updated. Current regulations include a
five-part test for determining if a person or entity is providing fiduciary
investment advice. The five-part test includes conditions that (1) the advice
regarding plan investments be rendered “on a regular basis;” (2) the advice
would serve as a primary basis for investment decisions with respect to plan
assets; (3) the recommendations are individualized for the plan; (4) the party
making the recommendations receives a fee for such advice; and (5) the advice
is made pursuant to a mutual understanding of the parties.
The DOL is proposing to replace that regulation (established
in 1975) with a new definition: a person renders fiduciary investment advice by (1)
providing investment or investment management recommendations or appraisals to
an employee benefit plan, a plan fiduciary, participant or beneficiary, or an
individual retirement account (IRA) owner or fiduciary, and (2) either (a)
acknowledging the fiduciary nature of the advice, or (b) acting pursuant to an
agreement, arrangement, or understanding with the advice recipient that the
advice is individualized to, or specifically directed to, the recipient for
consideration in making investment or management decisions regarding plan
assets.
The DOL contends that the lines drawn by the five-part test
frequently permit evasion of fiduciary status and responsibility in ways that
undermine the statutory text and purposes of the Employee Retirement Income
Security Act (ERISA) and subsequent guidance. As a specific example, the agency
mentions an adviser’s assistance with a one-time purchase of a group annuity to
cover promised benefits when a defined benefit (DB) plan terminates. The agency
says that due to the “regular basis” requirement of the five-part test, the
adviser would not be a fiduciary. Under the new rule, the adviser would be a
fiduciary, and in that way, the rule would provide more protection for plan
sponsors.
In addition, the DOL noted that the “regular basis”
requirement also deprives individual participants and IRA owners of statutory
protection when they seek specialized advice on a one-time basis, such as for
help with the decision to make an annuity purchase or to roll over their
accounts. The new proposal would make the person or entity giving this advice a
fiduciary and provide statutory protection in these cases.
Plan sponsors may think provisions of the new rule related
to IRA owners do not affect them, but it is important to note that the rule
inclusively defines an “IRA” as any account described in Internal Revenue Code
section 4975(e)(1)(B) through (F), such as a true individual retirement account
described under Code section 408(a) or a health savings account (HSA) described
in section 223(d) of the Code.
The new definition of fiduciary investment advice generally
covers the following categories of advice: (1) investment
recommendations, (2) investment management recommendations, (3) appraisals of
investments, or (4) recommendations of persons to provide investment advice for
a fee or to manage plan assets.
The new proposal includes several carve-outs for persons who
do not represent that they are acting as ERISA fiduciaries. Subject to
specified conditions, these carve-outs generally cover:
statements
or recommendations made to a “large plan investor with financial
expertise” by a counterparty acting in an arm’s length transaction;
offers
or recommendations to plan fiduciaries of ERISA plans to enter into a swap
or security-based swap that is regulated under the Securities Exchange Act
or the Commodity Exchange Act;
statements
or recommendations provided to a plan fiduciary of an ERISA plan by an
employee of the plan sponsor if the employee receives no fee beyond
his or her normal compensation;
marketing
or making available a platform of investment alternatives to be selected
by a plan fiduciary for an ERISA participant-directed individual account
plan;
the
identification of investment alternatives that meet objective criteria
specified by a plan fiduciary of an ERISA plan or the provision of
objective financial data to such fiduciary;
the
provision of an appraisal, fairness opinion or a statement of value to an
employee stock ownership plan (ESOP) regarding employer securities, to a
collective investment vehicle holding plan assets, or to a plan for
meeting reporting and disclosure requirements; and
information
and materials that constitute “investment education” or “retirement
education.”
The DOL say this clarity about advisers’ fiduciary status
would strengthen its enforcement activities resulting in fuller and faster
correction, and stronger deterrence, of ERISA violations.
Regarding what constitutes “investment education” or
“retirement education,” the new proposal incorporates much of the guidance
found in the DOL’s Interpretive Bulletin 96-1, released in
1996, but there are exceptions. As a departure from IB 96-1, paragraph (b)(6)
of the proposed regulation says investment education information and materials
may not include advice or recommendations as to specific investment products,
specific investment managers, or the value of particular securities or other
property.
This concerns attorney Jason Roberts, chief executive
officer of Pension Resource Institute, who says someone providing a valuable
service to plan sponsors and participants as a non-fiduciary will now have to
do something different to remain a non-fiduciary due to this departure from IB
96-1.
He explains that participants are reluctant to pore through
fund fact sheets and investigate investments on their own. Under 96-1,
educators could use a combination of interactive investment materials, such as
risk tolerance questionnaires, and could suggest hypothetical allocations,
specifying a percentage to each asset class. Educators could even show which
funds in their particular plan fulfill those asset classes, if they used a
disclaimer that said the material showed only hypothetical examples and
participants were free to make their own choices, according to Roberts, who
added, “This would be gone, and participants couldn’t take the hypothetical
example and easily pick plan investments.”
“That scenario, in which participants could use that
information to select investments, was a win-win,” Roberts says. “We’ve seen it
work. It is refreshing to participants, and plan sponsors could do this
education in a group setting and know, at a minimum, participants would have
diversified investments.”
Roberts adds that the majority of retirement plan sponsors
are small, and may be working with non-fiduciary advisers that only provide
education for participants. He contends the small plan sponsors working with
fiduciary advisers are outliers. Firms that cannot or may not provide fiduciary
services to plan sponsors and were able due to provisions of IB 96-1 to provide
help, can’t now, and working with fiduciary advisers will cost plan sponsors
and participants more, Roberts says.
The DOL says in its regulation that it “believes that
effective and useful asset allocation education materials can be prepared and
delivered to participants and IRA owners without including specific investment
products and alternatives available under the plan.” However, it invited
comments whether this change to previous guidance would be appropriate.
On a more positive note, with lifetime income a growing
focus in the retirement industry, the DOL said commenters persuaded it that
additional guidance may help improve retirement security by facilitating the
provision of information and education relating to retirement needs that extend
beyond a participant’s or beneficiary’s date of retirement. Accordingly,
paragraph (b)(6) of the proposal includes specific language to make clear that
the provision of certain general information that helps an individual assess
and understand retirement income needs past retirement and associated risks
(e.g., longevity and inflation risk), or explains general methods for the
individual to manage those risks both within and outside the plan, would not
result in fiduciary status under the proposal.