“We’re in a fairly fast-changing area. If you go back 10, 20 years, most of the articles would be outdated,” Reish told PLANADVISER.
“Things do change,” he said. “Over the last year, we’ve written about 408(b)2 and 404(a) 5 disclosures [by plan sponsors to participants] , which have both had deadlines for compliance last year. Those articles are still relevant for people who have questions about how to comply or what they should be doing. They’re not as quite as relevant as they were, but most of the developments in the last 10 years continue to be relevant,” Reish said. They can be helpful to deepen someone’s background or understanding of current regulation.
Reish follows new regulations closely. One upcoming issue, the Department of Labor’s (DOL’s) redefinition of fiduciary advice regulation, slated to take place in July, would be a game changer, Reish feels, and would affect a number of transactions and providers.
If the definition is expanded, it could encompass more people within the definition of fiduciary, and brokers and insurance brokers would likely feel the greatest impact, Reish said.
A closely related development is that the regulation could include some provisions that affect how rollovers are captured, and many IRA-related transactions—both significant for how people do business as well as for IRA account-holders.
Reish details how a regulation will impact broker/dealers, or registered independent advisers, or recordkeepers or providers. “Because of the different ways these providers do business,” he explained, “the rules impact them differently. I tend to focus on people within the industry and how it affects them, rather than on the regulation itself.”
401(k)s are like onions, Reish said, with a lot of layers. “Just when you think every 401(k) issue has been solved, you find another,” he said. One concern that has recently begun cropping up is participants’ own view of their account balances, and how small the monthly payout might seem, in the withdrawal phase, compared with the entire balance.
A monthly $1,600 check might seem pretty measly when the account holds about $400,000, Reish said, based on the 4% withdrawal formula that accounts for inflation, as well as good and bad stock markets over a 30-year period. “But it’s not a slam dunk,” Reish said.
As people become more interested in annuities and other guaranteed income solutions, income in retirement is of great concern to the DOL and the Treasury Department. Both agencies are trying to make it easier for plan sponsors to give different solutions to participants. One possibility would be requiring quarterly statements to participants that include a projection of retirement income, helping to recast 401(k)s as income generators instead of wealth vehicles. If the amount was too low to generate sufficient income in retirement, Reish pointed out, it could motivate participants to save more.
Reish has been writing for some time on these issues, reaching out through LinkedIn with articles that address compliance issues of interest to advisers and broker/dealers, on subjects ranging from participant disclosure regulations and their impact on recordkeepers, to what the 408(b) changes mean to registered investment advisers. These articles are available on the blog.
Reish’s areas of specialty include issues concerning the employee retirement income security act (ERISA), employee benefits and executive compensation, government and regulatory affairs. He is a member of the firm’s retirement income team. His blog is www.FredReish.com.