Deals & People January 25, 2024

Northwestern Mutual CEO John Schlifske to Retire at End of ‘24

Executive Vice President Tim Gerend will take over the role next year.

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John Schlifske

John Schlifske on Thursday announced his intention to retire, effective December 31, 2024, after serving as Northwestern Mutual’s CEO for 14 years and being at the firm for 37 years. His decision to retire follows the company’s longstanding mandatory retirement age policy.

During Schlifske’s tenure as CEO, New York-based Northwestern Mutual’s exclusive distribution network expanded to nearly 8,000 advisers from about 6,000. The company also achieved record revenue in 2022 (with 2023 figures yet to be reported) of nearly $35 billion, more than 50% growth since 2010, according to the announcement.

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Northwestern Mutual also announced that its board of trustees has elected Tim Gerend, 52, to serve as the next CEO, effective January 1, 2025. Gerend will move from his current position as executive vice president and chief distribution officer to become the president of Northwestern Mutual. Schlifske will continue as chairman of the board of trustees until January 2025, when Gerend will assume this role.

“It’s been a pleasure to serve Northwestern Mutual for nearly four decades. I have a deep sense of pride and gratitude for Northwestern Mutual, our dedicated employees and field force of advisers,” Schlifske said in a statement. “With our strategic vision, commitment to mutual values, leading financial strength and unique culture, I’ve never had more confidence in the future of this company.”

Northwestern Mutual, which offers investment services, financial planning and life insurance, reported a record $2.2 billion in permanent life insurance sales in its 2022 annual report. It also noted a 7% decrease in overall client investment assets to $227 billion, due in part to market declines.

Gerend joined Northwestern Mutual as an attorney in 2002 and, over the past 22 years, has held various positions, including roles in law, field compensation and planning, enterprise compliance, and campus planning. In 2018, he took on the role of executive vice president and chief distribution officer, overseeing career distribution, marketing and strategic communications.

“I am humbled and honored to accept the role of CEO,” Gerend said in a statement. “John’s leadership and guidance over the years has been invaluable to me and other company leaders. I’m confident that with our talented employees and financial advisors, we will continue the momentum that John has created during his tenure.”

Compliance January 25, 2024

PLESAs Are Important Coverage Expanders, SECURE 2.0 Co-Author Argues

A former senior Senate staffer spoke at the EBRI-Milken Retirement Symposium about how pension-linked emergency savings accounts can greatly encourage enrollment among lower-income employees.

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Kendra Isaacson, a principal at public policy consultancy Mindset and a former tax counsel for the Senate Committee on Health, Education, Labor and Pensions, explained that pension-linked emergency savings accounts are an important “coverage expander,” while also highlighting some of the shortcomings of the SECURE 2.0 Act of 2022.

Her remarks were delivered Tuesday at the EBRI-Milken Institute 2024 Retirement Symposium, hosted at Washington, D.C.’s Kennedy Center by the Employee Benefit Research Institute and the Milken Institute.

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Emergency Savings

SECURE 2.0 permits sponsors to create an emergency savings account connected to their retirement account, known as a PLESA. The balance of the PLESA can reach up to $2,500, and participants can draw from it without an early withdrawal penalty. Both the IRS and the Department of Labor have recently issued guidance on PLESAs, clarifying how plan fiduciaries can administer and manage the new benefit.

Isaacson, a longtime advocate for PLESAs and their inclusion in SECURE 2.0, explained that many lower-income savers are often more hesitant to keep their money “locked up” than other workers, and as a consequence, many do not save as much as they could.

The idea of a PLESA, sometimes called a sidecar account (Isaacson’s preferred name), is that it provides the liquidity that lower-income savers need to cover emergency expenses, therefore encouraging them to save in their tax-deferred retirement plan and potentially further benefit from an employer match.

SECURE 2.0 limits access to PLESAs to non-highly-compensated employees, those making less than $155,000 per year. This provision was added to help the bill’s passage and is something Isaacson hopes will be removed later. The limit, according to Isaacson, creates unnecessary compliance issues and uncertainty, especially for employees who start a PLESA while making less than $155,000 and get a raise later on that puts them over that limit.

She also said the limit of $2,500 could and probably should be increased; some proposals that were considered put the limit as high as $10,000, she noted.

Lifetime Income

Isaacson also advocated at the symposium for greater availability in defined contribution plans of lifetime income options such as annuities. She explained that there is demand for these products in plans, but there are certain practical issues with doing so.

She believes that “DC plans should have a distribution option that is a full or partial lifetime income option,” but because of higher fees and difficulties selecting a provider, “plans are skittish.” Annuities can also bring liquidity issues for employees who do not stay in a plan for long or only contribute a small amount of money.

Lifetime income “should not be a default, but it should be an option,” Isaacson said, and “could be right for some people” in DC plans. The Lifetime Income for Employees Act, introduced in the House of Representatives in June, would permit DC plans to offer prudent annuity products as a default investment. SECURE 2.0 already provides more flexibility and availability for offering annuities in DC plans.

Lastly, Isaacson noted that the DOL’s required report on Interpretative Bulletin 95-1, which was due on December 29, should be completed soon. IB 95-1 describes the criteria that fiduciaries should consider when selecting a provider for a pension risk transfer. A report on possible changes to these criteria was mandated by SECURE 2.0.

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