Compliance September 10, 2012

PANC 2012: The Politics of Retirement

The government tries to lend its hand to the retirement readiness goal, but other agendas may get in the way.
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The middle class has taken a hit from the recession, and the least-understood repercussion of this has been the hit to retirement savings, according to Marcia S. Wagner, principal at The Wagner Law Group. “Each leg of the three-legged stool is wobbly,” she told attendees of the 2012 PLANADVISER National Conference, referring to the three sources of retirement income for Americans – Social Security, employer-sponsored retirement plans and personal savings.  

While lawmakers have gotten involved in efforts to solve the retirement crisis, with legislation and proposals to increase savings, promote better returns in retirement plans and facilitate decumulation planning, their efforts on tax reform to solve the nation’s budget crisis threatens to undo it all, Wagner contended.  

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She noted that the Pension Protection Act of 2006 helped to increase savings by giving statutory cover to plan sponsors that adopt automatic enrollment and automatic escalation. This led to plan sponsor and plan adviser initiatives to re-enroll and/or re-allocate all employees, which Wagner said do not have statutory cover, but sponsors and advisers should nevertheless move forward – because she thinks these initiatives will soon. Automatic IRAs have also gained bi-partisan support from lawmakers, which would increase savings for employees of the smallest employers.

Regulations concerning fee disclosure and participant advice, as well as the impending re-definition of fiduciary coming from the Department of Labor, are designed to put downward pressure on fees and to create an interest in more levelized fee arrangements, which will help retirement plan participants receive better returns on their investments, Wagner said.  

The recent Internal Revenue Service exemption for longevity annuities in defined contribution plans from onerous death benefit rules, as well as efforts to relax required minimum distribution (RMD) rules are government efforts that would facilitate decumulation planning, she said.  

However, when Congress considers tax reform to help lower the nation’s debt, retirement plans also enter the discussion, and not in a good way. According to Wagner, in the government’s view, favorable tax treatment for retirement plans will result in $361 billion in foregone revenue from 2011 to 2015. “Plan limitations can, have and will change, depending on what society needs,” Wagner warned. “And they can be lowered to reduce the national debt.” Not only are lawmakers talking about lowering amounts that receive favorable tax treatment, but they have also considered making contributions to retirement plans immediately taxable.   

These discussions have sparked lobbying from industry groups that represent plan service providers, plan sponsors and investment providers, who all say reducing tax incentives to save for retirement will reduce plan offerings and contributions by employees at all wage levels, Wagner said. “It will reduce the role of employers in the retirement industry,” she concluded.
Deals & People September 10, 2012

Forward Management Creates Distribution, Sales Roles

Clay Smudsky has been appointed managing director, head of distribution, a new position at Forward Management.
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The firm has brought John Harty on board as vice president of Institutional Sales. It has also expanded its intermediary sales team, adding James Pagliaroli as VP, regional sales director, Aaron Kravitz as key accounts manager and James Lumley as sales associate.  

Smudsky will be in charge of Forward’s business development and client service activities. He previously held the position of president, Institutional at Forward. In another newly created position, Harty will focus on continuing to build Forward’s institutional business by establishing and maintaining client relationships with pensions, endowments, foundations and family offices in the western region.  

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With more than 17 years experience in the asset management industry, Harty most recently was director of national accounts for Pyxis Funds. He earned a B.S. in Business and Finance from Mount St. Mary’s University.  

In the newly created position of key accounts manager, Kravitz will focus on developing and maintaining relationships with partner firm contacts such as home office relationship managers, product and platform specialists, manager research analysts and sales and marketing professionals.  

Pagliaroli will work directly with clients and prospects in the Southeast region, and Lumley will also focus on serving financial advisers in this region.  

Pagliaroli was previously senior director of Guggenheim Investments. He is a graduate of Iona College, and holds the CAIA, CIMA, CPWA and CMFC designations. Kravitz was most recently employed by AllianceBernstein Investments, where he was assistant vice president of Global Business Development. He received a B.S. in Business Administration from Georgetown University. Lumley joined Forward from Transamerica Capital, where he was an internal wholesaler.

 

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