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Opportunity Knocks 

Adviser opportunity abounds in 403(b) market 

Regarding the 403(b) market, Aaron Friedman, National Practice Leader for Nonprofit Consulting at The Principal, says “there is still a huge opportunity for advisers to step in and help.”

Friedman drew this conclusion based on the latest 403(b) plan sponsor survey results from The Principal and the Profit Sharing/401k Council of America (PSCA). He pointed out that 11.1% of all 403(b) sponsors are planning on issuing a request for proposals (RFP) in the next 12 months. This jumps to 14.9% for sponsors of plans with 200 to 999 participants, and 13.2% of large plans (1,000+ participants).

Specific areas where an adviser can add value

Friedman says many sponsors still don’t know their Employee Retirement Income Security Act (ERISA) status and an adviser can help determine this so sponsors can avoid compliance issues and implement best practices. In addition, the survey found 48.6% of 403(b) plan sponsors have an investment policy statement (IPS), meaning more than half either don’t have one or don’t know if they have one. An adviser can help sponsors develop an IPS, as well as governance and due diligence processes.

The need for adviser help also can be seen in the number of investment options the survey found sponsors are offering in their plans. For example, in the higher education market segment, sponsors offer an average of 55 investment options, and in this segment, 62% of participants were contributing to their plans, compared to 74% for all 403(b)s. Friedman says this is consistent with studies that show more options actually discourage participation.

Friedman adds that sponsors still need help in developing education programs and measuring the effectiveness of their plans to determine if they are helping employees prepare for retirement.

One avenue for seeking out 403(b) business is within an adviser’s own community. Advisers can reach out to charitable organizations and talk to them about their retirement plans and whether they are working effectively. Friedman suggests that, if the communication uncovers low participation or complicated administration, or no governance, due diligence, or education procedures in place, advisers should tell the organization how they can assist.

Over and Out

Judge dismisses case regarding 12(b)-1 fees

A district judge dismissed a case alleging that, because brokers are being paid for investment advice by 12(b)-1 fees, they also should be registered as investment advisers.

Judge Leonard B. Sand in the U.S. District Court in the Southern District of New York presided over the case, Bradley C. Smith v. OppenheimerFunds Distributor Inc., and ultimately dismissed it on grounds that the plaintiff was not protected by the Investment Adviser Act of 1940 as he argued he was.

According to the court memorandum, the plaintiff, a resident of North Carolina, owns Class C shares of Oppenheimer Gold & Special Minerals Fund and Class C shares of the Oppenheimer Small & Mid-Cap Fund, a series of Oppenheimer Quest for Value Funds. The plaintiff has held shares in both funds since June 9, 2006.

The Board of Trustees for each fund decides how to compensate broker/dealers (B/Ds) for selling shares. Here, the funds pay distribution fees pursuant to Rule 12b-1 to OppenheimerFunds, the funds’ distributor, which, in turn, forwards these payments to retail B/Ds such as Merrill Lynch, which distribute shares in the funds. The plaintiff alleged that, since October 1, 2007, OppenheimerFunds have made these payments in the form of asset-based compensation, and that such compensation violates the Investment Advisers Act (IAA) of 1940.

“Special compensation”

The court memorandum explained that B/Ds are regulated by the Securities Exchange Act of 1934, whereas the IAA applies to investment advisers. The IAA also applies to full-service B/D firms that provide investment advice to their customers. A B/D firm providing investment advice must comply with the IAA by registering as an investment adviser, maintaining recordkeeping and reporting procedures, adopting policies to prevent violations of the securities laws, and maintaining compensation arrangements in accordance with the IAA. Firms registered as both B/Ds and investment advisers are called “dual registrants.” The plaintiff alleged that his mutual fund shares are held in a brokerage account at B/D Merrill Lynch.

The IAA contains a “Broker/Dealer Exclusion” for a B/D that gives advice that is only “incidental” to its conduct as a B/D “and that receives no special compensation therefore.” Such B/Ds are exempted from the IAA’s registration and reporting requirements. According to the plaintiff, “special compensation” includes anything other than transactional commissions. Therefore, the plaintiff contended that B/D dual registrants who receive any form of compensation other than transactional commissions cannot offer investment advice under the IAA to holders of brokerage accounts.

Judge Sand wrote in the memorandum that the plaintiff has “failed to assert a viable predicate violation of the ICA necessary to make out a claim under ICA section 47(b). Plaintiff is not left without a remedy for the broker/dealers’ alleged underlying violations of the IAA. Those violations involved the broker/dealers’ receipt of asset-based compensation for brokerage accounts, or their failure to register as investment advisers while receiving such compensation. Under this theory of liability, the ultimate fault would lie with the broker/dealers themselves, and Plaintiff may sue them for violating the IAA…. Moreover, Plaintiff’s claims—including his federal claims—rely on alleged breaches of fiduciary duty. Plaintiff is, of course, free to raise such fiduciary duty claims in state courts. Accordingly, Defendants’ motion to dismiss Plaintiff’s First Cause of Action is granted.”  —Nicole Bliman

Prudent Standard

In an amicus brief filed on behalf of plaintiffs in Taylor v. KeyCorp, Secretary of Labor Hilda L. Solis explains her opinion.

The brief, filed in the 6th U.S. Circuit Court of Appeals, says that the presumption of prudence does not apply or is rebutted whenever a fiduciary knowingly pays an inflated price for employer stock. Solis agreed with the district court’s decision that a plaintiff rebuts the presumption of prudence by showing that a prudent fiduciary would not invest in the stock under the prevailing circumstances, and plaintiffs are not required to plead additional allegations that the sponsoring employer was on the verge of a “drastic, extreme, or impending collapse.”

In addition, Solis wrote that the presumption is an evidentiary presumption and, as such, the district court also correctly concluded that the presumption did not provide grounds for dismissal at the pleading stage.

Solis also agreed with the district court’s holding that, because “ERISA fiduciaries are liable for making misrepresentations in plan documents, they also should be prohibited from incorporating into plan documents other documents [including SEC filings] that make material misrepresentations about the company and then disseminating those misrepresentations to plan participants.”

The district court, however, dismissed the case last year, ruling that neither of the plaintiffs who brought the suit had suffered injury from their holding of KeyCorp stock in their plan accounts and, therefore, lacked standing to sue. The Secretary filed a separate amicus brief on January 12, 2011, in support of the plaintiff-appellant with respect to those issues. —Rebecca Moore

Stuck at a Crossroads

J.P. Morgan finds participants in a quandary

In a recent white paper, J.P. Morgan explains that participants want income replacement projections, but don’t know how to translate their 401(k) savings into retirement income.

J.P. Morgan survey data found that 86% of respondents said they want to know how much of their pre-retirement salary they can replace, yet almost one quarter (22%) aren’t sure what they are on track to receive after they stop working. Overall, only 40% of respondents feel comfortable that they will be able to reach their financial goals in retirement.

Americans also are underestimating how much money they will need in retirement, according to the data. Among respondents who had a target retirement income replacement level in mind, nearly half (45%) thought they would need less than 75% of their pre-retirement salary level. However, J.P. Morgan research shows that a minimum guideline for successful retirement income is a replacement ratio of at least 70% or more.

“On the positive side, some 91% of participants agreed that they were personally responsible for their own financial futures,” says Diane Gallagher, Vice President, Product Development, J.P. Morgan Retirement Plan Services. “However, there’s still a significant gap between acknowledging responsibility and acting upon it.”

The paper, titled “Searching for Certainty,” also discusses how two-thirds of respondents admitted that they don’t know how much they should be saving for retirement and that nearly half of respondents are afraid that they will outlive their retirement savings. Of the participants who said they would need 75% to 100% of their pre-retirement salary after they stop working, less than a third had enough savings to provide this income.

Largely due to the lasting effects of the recession, most Americans have pushed aside retirement savings priorities, which came in a distant second to paying monthly bills in the survey. This is despite the fact that 401(k)s are the only, or the primary source of, retirement savings for two-thirds of Americans.

Interestingly, higher-income employees are facing the most challenging shortfalls in closing the retirement income gap, which highlights the significant need for supplemental savings channels for this demographic.

Employees earning $165,000 annually cannot replace their salary on their 401(k) contributions alone, even with making catch-up contributions. As a result, the availability of a nonqualified plan is increasingly important with the full complement of savings plans working together. According to J.P. Morgan’s research, however, 46% of nonqualified plan participants currently do not contribute to their primary defined contribution plan.

Home Office Help

Advisers want more fiduciary guidance from B/Ds

Advisers are looking for an increased level of support from their broker/dealers, says a survey from John Hancock Financial Network (JHFN).

Eighty-five percent of retirement plan advisers currently are performing services traditionally performed by plan fiduciaries, JHFN found in its survey. However, most of these advisers are not declared plan fiduciaries; only 34% of respondents said they held the AIF designation.

Of the survey’s 220 retirement plan adviser respondents, 44% were affiliated with wirehouses, 21% were independent, 20% were with regional broker/dealers, and 15% with insurance broker/dealers. When asked to characterize their approach to the retirement plan business, 18% said they were plan design/ERISA experts, 31% considered themselves investment experts, and a slight majority (51%) felt they had a general sales approach to the business.

Eighty-six percent of the plan design/ERISA experts regard fee disclosure regulations as an opportunity for growth. Greater fee disclosure and increased demands by plan sponsors, including accountability, as well as tying fees to services provided, are driving advisers to shift to more fee-based business in the future.

Further, while advisers reported that 31% of their current business is fee-based, in the future, they expect that number to double to 60%.

When asked what they most wanted from their broker/dealers, the advisers cited the following as their top three needs: fiduciary guidance (82%), competitive information (76%), regulatory updates (75%).

“Not surprisingly, what advisers want most is help with the changing landscape,” said Bruce Harrington, Head of Retirement Sales and Strategy for JHFN. “We think that those who understand the changes and train to become specialists will find quite a bit of opportunity.” —Nicole Bliman

Saving for Retirement Ranks

Ninth on List of Concerns

When asked to categorize a list of personal and financial concerns, 64% of benefits-eligible employees responding to Prudential’s Fifth Annual Study of Employee Benefits said “needing to save for retirement” is “highly important,” though eight other choices ranked higher. Prudential found that saving for retirement has become much less of a concern since the recession; immediate financial needs must be taken care of first. Workers’ top five concerns in 2010 are having job security (86% rate as “highly important”), making ends meet (82%), having appropriate health insurance (78%), having retirement savings last as long as you need it to (72%), and maintaining a healthy lifestyle (69%). Needing to save for retirement came in ninth on the list of 15 concerns. Prudential found that those farthest from retirement place the least amount of importance on planning for it, even saying that, for employees under age 35, it is virtually “off the radar.” Those five to 10 years from retirement place the most importance on it, with 93% ranking “having your retirement savings last as long as needed” as highly important, and 77% ranking needing to save for retirement as highly important—these are higher percentages than for any of the other segments. —Nicole Bliman

Put it in Writing

Written retirement income plans help drive business

A Fidelity survey found that advisers who provide comprehensive retirement income planning—specifically, written, detailed plans—generally receive higher satisfaction, referrals and, ultimately, higher concentrations of client assets.

The survey, “Fidelity Retirement Redefined,” included more than 500 financial advisers and 500 pre-retirees and retirees who work with financial advisers.

Despite the correlation between the benefits of offering clients a written retirement income plan, only 18% of pre-retirees who work with advisers have retirement income plans and, of those, only half (53%) have written, detailed plans. What also makes these low numbers odd is that eight in 10 pre-retirees (81%) think a detailed plan is important,

“Our survey found that advisers face a range of challenges that can make ‘writing a retirement income plan’ feel extremely complex—and, for that reason, many are opting for more informal planning processes,” said Larry Sinsimer, Senior Vice President, Practice Management for Fidelity Investments Institutional Services Company. “Yet, investors are telling us that those advisers who can help them address the complexities of retirement planning—in writing—will secure their loyalty, referrals, and business.”

Advisers reported reasons why they may not provide written, detailed plans include a difficulty in getting clients to focus on the future versus the present, and the fact that, in today’s economic environment, plans may become obsolete too quickly. Yet, the survey also finds that written, detailed plans may help to:

• Drive satisfaction. Those investors who had written, detailed retirement income plans reported the highest levels of satisfaction with their advisers. Sixty-three percent of pre-retirees who reported having written, detailed retirement income plans said they were “very satisfied” with their advisers; that percentage grew to 69% for retirees.

• Result in clients concentrating assets. Investors who reported being “very satisfied” with how their adviser is handling their retirement income plans consolidated more assets with them. “Very satisfied” pre-retirees consolidated 72% of their savings and investments with their primary adviser and “very satisfied” retirees consolidated 81% of their assets.

• Generate referrals. Seventy-nine percent of pre-retirees and 83% of retirees who reported being “very satisfied” with how their adviser is handling the development of their retirement income plans have referred business.

Once retirees develop income plans, Fidelity found they have the best intentions to follow them; 80% of retirees say they would follow at least some of their plan.

The study found that retirees may be identical by age but totally different when it comes to their individual retirement planning needs. For that reason, retirement income planning has evolved from an age- or asset-based process to one that has many nuances, requiring highly personal discussions about spousal alignment, lifestyle, and familial commitments.

Most advisers continue to rely on traditional financial models to aid them in their retirement income planning discussions. According to the survey, 88% use probability models and 76% use graphs/charts with historical trends.

EBRI: Capping Contributions Helps No One

The Employee Benefit Research Institute (EBRI) found that the proposed tax reform regarding 401(k)-type retirement plans from the National Commission on Fiscal Responsibility and Reform would hurt both the highest- and lowest-income workers.

EBRI’s research finds the Commission’s recommendation to cap annual tax-preferred contributions to either $20,000 or 20% of income (whichever is lower) for 401(k)-type plans—referred to as the “20/20” cap—would most affect the highest-income workers—not surprising, since those with high income tend to save the most in these kinds of retirement plans. However, the cap would reduce retirement savings by the lowest-income workers as well.

The analysis finds that, for each age group (except for the oldest), the lowest-income group has the second-highest average percentage reductions in 401(k) contributions. Primarily, this is because their current or expected future contributions would exceed 20% of compensation when combined with employer contributions.

“Phrased another way, the 20/20 cap would, as expected, most affect the highest-income workers, but it also would cause a very big reduction in retirement accumulations for the lowest-income workers,” said Jack VanDerhei, EBRI Research Director.

Currently, the combination of both worker and employer 401(k) contributions is the lesser of a dollar limit of at least $49,000 per year, or 100% of an employee’s compensation. —PA

Who Is the New Fiduciary?

Department of Labor comments about proposed regulation

The Department of Labor’s (DoL’s) proposal for a new definition of fiduciary was discussed at the PLANSPONSOR­ National Conference—and a representative from the DoL was present to add his viewpoint.

Michael Davis, Deputy Assistant Secretary at the DoL, began by saying how the concept of fiduciary is the core component of the Employee Retirement Income Security Act (ERISA). ERISA was created to protect participants and their assets, he said, and the fiduciary serves as the umbrella for these protections. The original five-part test to determine if one is acting as a fiduciary (the advice is individualized, provided for a fee, provided on a regular basis, pursuant to a mutual understanding between the plan sponsor and adviser, and the advice will form the primary basis for the plan’s decisionmaking), is being overhauled, Davis said, to protect plan sponsors better —particularly sponsors of smaller plans.

Small-plan sponsors too often fall victim to an “asymmetrical” system, said Davis. They have so much on their plates and, therefore, rely heavily on the advice they are given regarding their retirement plan, they shouldn’t have to worry if the advice was given in good faith or not.

The proposed changes to the five-part test will remove the requirements that the advice is given on a regular basis and that it will serve as the primary resource for decisionmaking in the plan. Davis noted that, currently, an adviser can claim to be a fiduciary but, if one of the five parts is missing, the adviser could back out of this obligation if things go wrong. For instance, if the advice was not given regularly, legally, the adviser does not qualify as a fiduciary, no matter what was said beforehand.

Davis said the DoL recognized that these proposed changes to the definition of fiduciary would bring about passionate responses, and they have. Because of this, the exemptions to the question of who is a fiduciary are critical to point out, he said. There will be the seller’s exemption; if someone is clearly selling a product, they will not be held to fiduciary liability.

Davis also addressed the pushback the DoL has received regarding the inclusion of IRAs in its proposal. He said there has been a lot of concern over the topic, but the DoL felt that addressing regulations surrounding IRAs was imperative.

“From 1998 to 2004, 80% of assets in IRAs were from DC plan rollovers. As Boomers are retiring, this is becoming front and center; it’s the biggest move of assets in the history of the country. We can’t have different sets of provisions on the two sides. In an IRA environment, you don’t have the mediator, the plan sponsor; the participant is alone, so we need these protections in place,” he said.

Lastly, Davis mentioned how some people have suggested that the DoL redo the proposal altogether. This is unlikely, he said, because the comments that were received regarding the proposal can all be addressed using the original proposal as a basis—the DoL believes starting the proposal anew is unnecessary.

The final rule is expected to come out by the end of the year, he said, adding that it is a significant undertaking and the DoL is committed to seeing it through. —Nicole Bliman

Average 401(k) Expense Ratio Declines

According to an annual report by the Investment Company Institute (ICI), 401(k) plan participants invested in stock mutual funds on average paid lower expense ratios in 2010. The report, The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2010, shows at year-end 2010, $1.8 trillion, or more than half, of the $3.1 trillion in 401(k) assets was invested in mutual funds, primarily in stock funds. The asset-weighted average expense ratio paid by 401(k) investors on their stock funds dropped three basis points to 0.71% in 2010, slightly lower than the 2009 average. According to the ICI, the 401(k) average expense ratio is measured as a 401(k) asset-weighted average; the total expense ratio, which is reported as a percentage of fund assets, includes fund operating expenses and the 12b-1 fee. —Sara Kelly

Most Participants Would Not Be Saving If Not for 401(k)

Survey results from Fidelity Investments reveal more than half (55%) of current workplace savings plan participants say they would not be saving for retirement if they didn’t have a 401(k) plan. The research also found nearly one in five respondents (19%) currently enrolled in workplace plans report they have no retirement savings at all outside this key retirement benefit. Fidelity surveyed 1,000 current and retired workplace plan participants on their attitudes and behaviors toward retirement savings and found 92% of current workplace participants indicated they chose to participate in their 401(k) because it is important or very important not to lose out on company match dollars, and 90% said the plans are a good tax-deferred way to save. —Rebecca Moore

Tight Squeeze

FRC predicts regulations will cut profits

Pressure is growing on plan providers as regulators and legislators continue to scrutinize fees and outcomes of defined contribution (DC) plans, according to a Financial Research Corporation (FRC) study.

“Overall, we believe that plan-level profits are likely to be squeezed across most stakeholders,” said Leslie Prescott, author of the FRC study, “Trends in Retirement/401(k) Plans and Administration.” “Prospects for growth exist for firms that understand the current market dynamics and position their organization to take advantage of these developments.”

The study findings are based on FRC’s assessment of the five major trends and four strategic issues affecting the DC industry. The report provides outlooks and key takeaways regarding these trends for asset managers, advisers, and recordkeepers. The report focuses primarily on 401(k) plans, but also includes selective coverage of 403(b) plans.

According to FRC’s analysis, DC plans comprised approximately $4.5 trillion in assets at the end of 2010. Industry sources estimate that there were 49 million participants in 401(k) plans at the end of 2009.

As part of the report, FRC analyzed information from BrightScope’s retirement plan database. This analysis revealed that total plan participant costs as a percentage of assets vary significantly with plan size, and the average participant-paid costs as a percentage of assets for the smallest plan groups was more than three times those of the very largest plans. “This shows the impact of scale on the business,” said Prescott. “In our analysis, we also saw cost disparities where comparably sized plans within an industry often had substantial differences in the actual dollar amount of annual fees that a participant would pay, amounting to hundreds and even thousands of dollars a year. The spotlight on plan costs is causing plan sponsors to seek out and use benchmark data more frequently to uncover opportunities to reduce plan costs, often through plan redesign or change in plan providers.”

The FRC report also finds that impending requirements for improved fee disclosure are driving plan sponsors to investigate different investment vehicles as their understanding of total fees being paid for the management of DC plan assets increases, creating the likelihood of demands for cost reductions. As Prescott points out: “Both the total amount of plan fees as well as the clarity of the fees are expected to create openings for a wider variety of investment structures beyond basic noninstitutional-class mutual funds. We’re seeing innovation and competition among investment vehicles providing an unprecedented number of low-cost in-plan options. For example, ETF’s are moving into plans, and fully indexed target-date funds have captured 27% of target-date mutual fund assets.”

FRC sees regulatory forces, along with economic factors, heightening competition among recordkeepers of all types and sizes, and across all plan sponsor segments. “We’re witnessing a variety of strategic approaches being made by competitors in efforts to gain scale, which is critical to profitability in this business,” commented Prescott. “According to FRC’s analysis, the independent recordkeepers who hold 15% of defined contribution plan assets likely will face the greatest pressure.”

Missing Out?

GAO report suggests ways to maximize retirement income

In a recent report, the Government Accountability Office (GAO) found most retirees rely primarily on Social Security and pass up opportunities for additional lifetime retirement income.

The GAO report reviewed retirement income strategies, policies, and choices made by retirees. Many retirees born in 1943 who started taking Social Security benefits when they turned 62, for example, passed up increases of at least 33% in their monthly inflation-adjusted Social Security benefit levels available at full retirement age of 66. Most retirees who left jobs with a defined benefit pension received or deferred lifetime benefits, but only 6% of those with a defined contribution plan chose or purchased an annuity at retirement.

The report said financial experts GAO interviewed typically recommended that retirees systematically draw down their savings and convert a portion of their savings into an income annuity to cover necessary expenses, or opt for the annuity provided by an employer-sponsored DB pension instead of a lump-sum withdrawal. Experts also recommended that individuals delay receipt of Social Security benefits until reaching at least full retirement age and, in some cases, continue to work and save, if possible.

For example, for the two middle net-wealth households GAO profiled with about $350,000 to $375,000 in net wealth, experts recommended purchase of annuities with a portion of savings, drawdown of savings at an annual rate, such as 4% of the initial balance, use of lifetime income from the DB plan, if applicable, and delay of Social Security. To navigate the difficult choices on income throughout retirement, the experts noted strategies depend on an individual’s circumstances, such as anticipated expenses, income level, health, and each household’s tolerance for risks, such as investment and longevity risk.

The GAO made no recommendations in its report, but said policy options proposed by various groups concerning income throughout retirement include encouraging the availability of annuities in DC plans and promoting financial literacy. Certain proposed policies seek to increase access to annuities in DC plans, which may be able to provide them at lower cost for some individuals. However, some plan sponsors are reluctant to offer annuities for fear that their choice of annuity provider could make them vulnerable to litigation should problems occur.

Other proposed options aim to improve individuals’ financial literacy, especially to better understand risks and available choices for managing income throughout retirement in addition to the current emphasis on saving for retirement. Proposed options include additional federal publications and interactive tools, sponsor notices to plan participants on financial risks and choices they face during retirement, and estimates on lifetime annuity income on participants’ benefit statements. —Rebecca Moore

DoL Extends Applicability Dates for Fee Disclosure Rules

The Department of Labor’s (DoL’s) Employee Benefits Security Administration (EBSA) has issued a final rule that extends the applicability date for fee disclosure regulation under Section 408(b)(2) of the Employee Retirement Income Security Act (ERISA) three months later than the proposed deadline extension, to April 1, 2012. The newly issued rule adopts amendments to previously announced compliance dates, effective July 15, 2011. The final rule also amended the applicability date of a proposed transition rule for participant-level fee disclosure under Section 404(c) by adopting a 60-day transition period following the applicability of the Section 408(b)(2) regulation. This will ensure that compliance with the Section 408(b)(2) regulation is in force before plans are required to disclose service provider fees to participants. —Sara Kelly

Employers To Spend More Time on Retirement Plan Governance

Four out of 10 U.S. employers expect to spend more time governing their employer-sponsored retirement plans over the next two years, according to a survey by Towers Watson. Faced with rising benefit costs and increased regulatory complexity, only 2% anticipate spending less time managing their plans. Among those respondents that expect to spend more time on plan governance, a vast majority (86%) cited regulatory complexity as a major reason, while two-thirds (67%) plan do to so as part of a greater emphasis on corporate governance. The survey also asked respondents to identify the greatest retirement plan governance challenges they expect to face in the next two years, a little more than three-fourths (77%) placed retirement benefit costs among their top challenges, while slightly fewer (73%) cited regulatory complexity. —Rebecca Moore

Keeping a (Virtual) Eye on Your Bag

Delta introduces program to track luggage

The mysterious disappearance of checked baggage may soon be a thing of the past. Delta unveiled a program earlier this year to allow passengers to track the movement of checked luggage. 

Delta is the first major airline to introduce a checked-baggage tracking service, which starts from when the luggage is scanned at check-in, to when it is loaded on a plane, to when it arrives at baggage claim.

Delta passengers will receive a tracking number when they check their baggage online or at the customer-service counter, which then can be followed on Delta’s Web site using smartphone apps or laptops. 

If, while tracking your bag’s progress, you notice it being loaded onto the wrong flight, Paul Skrbec, a Delta spokesman, tells PLANADVISER you can notify any of the baggage services offices at the airport, adding that Delta “probably knows about it before the customer and will be attempting to fix it.” 

Delta rolled out the tracking technology around the same time as the Obama administration unveiled new rules requiring airlines to refund baggage fees for lost luggage (Delta charges $25 for one checked bag). Airlines already are required by law to compensate passengers for lost or damaged baggage, but the new laws take late-to-arrive bags into consideration as well. 

On its blog, Delta recently posted four additional baggage-handling upgrades, including:

• Proactive notifications if your bag is on a different flight by signing up for “Last Minute Updates” on delta.com. 

• Self-service baggage kiosks in 18 of Delta’s busiest airports by year’s end—similar to the more common check-in kiosks, but they are located near airport baggage service offices and bag carousels. The kiosks can be used to view a bag’s status, check which carousel bags will arrive on, and file a delayed bag claim, if necessary.

• An online delayed-bag claim process (it used to be necessary to fax or mail in a lost bag claim form). 

• Rebates for bags lost beyond 12 hours; apply on delta.com for a transportation credit voucher rebate for $25 for one bag or $50 for two bags.