Compliance January 8, 2018

Bill Would Provide New Safe Harbor for Annuity Provider Selection

U.S. Representatives introduced the Increasing Access to a Secure Retirement Act.

Reported by

U.S. Representatives Tim Walberg, R-Michigan, and Lisa Blunt Rochester, D-Delaware, introduced H.R. 4604, the Increasing Access to a Secure Retirement Act.

The bipartisan bill clarifies and strengthens existing rules to make it easier for retirement plan sponsors to provide guaranteed lifetime income products as part of their employee benefits. It intends to amend the Employee Retirement Income Security Act (ERISA) and lays out specific criteria for selecting an annuity benefit provider.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“To encourage and make saving easier, we should create more opportunities for employers to offer reliable investment options to the men and women they employ. Our bipartisan bill removes the regulatory uncertainty that hinder most employers from offering guaranteed lifetime income products, like annuities, to their workers. By establishing a clear set of rules, we can help more Americans retire with the certainty that they will have income to last throughout their retirement,” said Walberg in a statement.

“This bipartisan bill will allow a greater number of employees the option of annuities as a part of their benefits packages. By clarifying rules surrounding annuity plans, we’re broadening savings options available to employees across the country. I look forward to working with my colleagues on the Education and Workforce Committee to expand access, participation, and the variety of tools in saving for retirement,” Blunt Rochester added.

According to a Plan Sponsor Council of America survey, the top concern 401(k) plan sponsors expressed about adding a retirement income guaranteed product to their plan was fiduciary exposure (38.3%). Even the Treasury Department has suggested more than the DOL guidance is needed to encourage in-plan guaranteed income use.

The Insured Retirement Institute (IRI) said it “enthusiastically” supports the bill. “The bill provides a clear path for employers to meet their fiduciary obligations and will allow more retirement savers the opportunity to convert their retirement savings into guaranteed lifetime income,” it said in a statement.
Uncategorized January 8, 2018

Resolutions for E&F Investment Committees to Consider in 2018

Mercer introduces their top 10 key tips for endowment and foundation (E&F) committees to understand and implement throughout the year. 

Reported by

As the new year settles in, Mercer has released 10 key tips for endowment and foundation (E&F) investment committees, from how to revisit economic, social and governance (ESG) investing to reframing the tone behind active and passive investing.

“E&F portfolios continue to benefit from strong equity markets, with overseas investments contributing at a greater rate than in most periods since the 2008 financial crisis. Record high equity markets, however, may lull investors into a false sense of comfort. Market dynamics make the persistence of this bull run more fragile,” says Ken Shimberg, U.S. Endowment & Foundations chief investment officer, Mercer. “Concurrently, greater reliance on endowments makes institutions more vulnerable to adverse events. Staff and committees should apply a strategic perspective to governance processes and implementation considerations to ensure they provide the checks and balances necessary to support successful investment execution.”

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Other areas of focus suggested for E&F investment committees, included in the Top Ideas for Endowment and Foundation Investment Committees whitepaper, are implementing a “do nothing” strategy, where committees embrace smaller benefits and maintain assets at current weights for future opportunities; evaluating litigation vulnerability at a time when lawsuits against higher education 403(b) plan sponsors are higher than ever—having skyrocketed in the past two years—; and increasing awareness of tax changes, including the latest modifications in tax reform.

Mercer also suggests that to take full advantage of market dislocations, E&F investment committees should review ways that portfolio structure and policy can promote agility in investing to accommodate attractive investment opportunities as they arise. In addition, investment committee and staff processes for reacting to an extraordinary event could be rusty, as the credit crisis was nearly a decade ago, Mercer says. Processes should be reviewed to ensure that they are best suited to current committee dynamics and preferred means of communication. Specific and rules-based protocols should help inform timely decision-making during an adverse event and lessen the behavioral impact that inevitably influence decisions in stressed conditions. Guidelines should reflect the most accurate snapshot of the institution’s risk tolerance.

Mercer says that according to NACUBO data, in the year ending June 2016, endowments with $500 million or less reduced both equities and fixed income in favor of less-liquid strategies. The firm says committees should identify likely demand for capital in the event of a market correction. Institutions may want to establish lines of credit or similar on-demand borrowing, relying on existing banking relationships to negotiate preferential fees and ensure that contracts will be stable through an adverse event.

The full list of Mercer’s tips can be downloaded from here.

«