New Year’s Resolutions for Your 401k That You Can Keep!

NYResoultionBeing a retirement plan consultant I read a lot of retirement related new flashes.  One recent news flash said that 83% of Americans are not including financial planning in their New Year’s resolutions.   I also read another study that sixty-nine percent of respondents say it is “extremely” or “very important” that the government find ways to financially encourage every company to offer its employees a 401(k) retirement savings option and to financially encourage every American to participate in their employer’s 401(k) retirement savings option.   This was according to the Wells Fargo-Gallup Investor and Retirement Index which tells me that it is important to them.  So where is the disconnect? 

Perhaps ING has the answer for us.  In a survey released last year 56% of respondents said that running a marathon was easier than saving for retirement.  Now I’m not a runner at all but I try from time to time.  The last time I ran a 5k, however, I couldn’t sit down for a week.  That said I have to believe that saving for retirement is a little easier than running a marathon.

I can understand if people think that planning for retirement is confusing.   However, it doesn’t have to be.  IMHO too much time is spent on the investments that people own in their retirement plans and not enough on what goes in and what comes out.  The simplest resolutions are the ones best kept.  I’ve got a plan that anyone can follow and it only takes about 30 minutes a year.

Step 1 – Find out how much you need to save.  There are a lot of good website calculators out there that will tell you how much you’ll need in retirement but some are better than others.  It doesn’t matter which one you use but it doesn’t need to be complicated.   FINRA has a good calculator online here.  By going through this simple calculator and putting your info in you will come out with a number that you need to save until retirement to live comfortably.   When entering in your information remember that the difference between your annual yield and the inflation rate is your Real Return and the larger the difference the more impact your yield will have on the amount you need to save.  For reference, the S&P 500 index from Jan. 1, 1930 to Dec. 31, 2012 gained 9.42% annualized and the inflation rate for the same time period was 3.36%.1

Step 2 – Save what you can today and increase each year.  Once you know how much you need to save each year you should put as much as you can afford into the plan starting in year one.  It’s ok if it’s not the amount from step one the important thing is to start with what you can and then increase it by 1% per year.  The goal here is to get up to as close to the amount in step 1 as you can over time.  A lot of 401(k) plans have step-up provisions that will do this automatically for you each year.

Step 3 – Know what type of investor you are and open your statements.  Not everyone is a professional investor and most people shouldn’t think that they are.  Most Plans have “do it for me” type investments such as asset allocation or target date funds that will pick your fund mix if you aren’t sure where to invest.  These funds make it easy to select where to invest and frankly more people should take advantage of them.  Choosing a target date fund is relatively easy and should be done according to your age.  If you need more help try this website.  Regardless of what you select for investments you should open the statements that you get each quarter.  Markets go up and down and how much that will affect you is relative to your risk tolerance.  If you open the statements each quarter you will get a better sense of how much risk you are taking by how much each statement balance moves.  If you aren’t comfortable with the quarterly fluctuation then you can increase or decrease your allocations accordingly.

If you follow these three steps you’ll find that saving for retirement is much easier than running a marathon.  However, just like running a marathon you can’t simply show up at the starting line and decide to race.  Running marathons takes years of conditioning and dedication to the sport.  Saving for retirement though can be a little easier.

1. Source: (January, 2013)

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401k Investing 101 is now in Session

For those of you who haven’t heard about Khan Academy yet I highly recommend that you check their site out.  Khan Academy’s goal is to provide a world class education to anyone with a computer free of charge.  Their lessons are taught via short video’s, usually under 10 minutes, on a variety of topics.   They started with Math and Science and have been doing it now for a myriad of other subjects, including personal finance.

At Capitol 401k one of our goals is to provide every one of our participants the tools to understand how their accounts work so that they can make better informed investing and saving decisions.   To this end, I will be posting videos regularly that explain in layman’s terms what a 401k is and the important concepts that you should be aware of when investing in your 401k.  The first video that I have uploaded to the class is below:

Additionally, I have also signed up on Khan Academy to be a coach of sorts and walk willing participants down a path that I believe will teach them the tools to become better savers and investors.  Please sign up for my class at   Once you log in you can add a coach on your dashboard.  To add my 401k Investing 101 class to your dashboard you can enter code HXTHFV to get access.

I hope that you are able to sign up and get a world class education on personal finance through Khan Academy and Capitol 401k.

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Should your plan have Fiduciary Insurance Coverage?

This interview was conducted with Gary Sutherland of North American Professional Liability Insurance Agency, LLC on July 26, 2013.  Gary is a nationally recognized speaker on Fiduciary Liability Insurance.  Gary is the “ask the expert” for the Center for Fiduciary Due Diligence and a founding member of the National Association of Plan Advisors (NAPA).  In addition, Gary is charged with reviewing the insurance policies of all advisors wishing to work with TIAA/CREF. 

Eric:  Gary, thank you for taking the time to speak with us today about the differences between Fiduciary Insurance and ERISA Bonds.  To start off, can you please explain what an ERISA Bond is and how it works and what the requirements are? 

Gary:  Sure, the ERISA bond is found under § 412 of ERISA.  A Bond is not insurance in that there is no defense coverage.  It is not defending you for a claim.  An ERISA Bond only covers theft of 401(k) money there is no insurance component whatsoever.   When there is a theft of money the bond makes the person whole and the insurance company then can go after whoever committed the fraud.  It is designed to protect the Plan’s assets.   But it’s really somewhat small in that the bond amount is 10% of plan assets up to $500,000 and then due to a new change in the Pension Protection Act of 2006 if you have company stock in the 401(k) plan you need $1M.   These are for qualified assets.  Unqualified plans have different requirements but for this purpose we’re just talking about Qualified.  That means if you have a $10M plan the maximum bond is $500k unless there is company stock in which case it would be $1M.

Eric:  Is that the same requirement for Defined Benefit as well as Defined Contribution Plans?

Gary:  It is.  Both defined benefit and defined contribution are the same.

Eric:  Who at the company does it cover and what are some of the acts that it typically covers. 

Gary:  The bond is typically owned by the plan so the bond is going to cover anyone that handles plan funds.  That could be the person who submits the money to the custodian.  It could be someone who commits fraud on the payroll.  So it can be an employee; it could be an owner of the plan; it can be a functional fiduciary – someone who is not named in the plan but acts in the human resources component for the company.  What it doesn’t cover is outside people.  So it doesn’t cover third party vendors unless specifically named on the bond.  So your advisor and others should have their own bond to cover for them.

Eric:  Some people have brought up the fact that employee dishonesty policies can cover this. 

Gary: Employee dishonesty is a crime policy and you can add an ERISA bond to your crime policy.  It has to be an approved company, so the Dept. of Labor has to be able to approve the company.  And it has two nuances to a regular bond. The first one is that it can have no deductible.  So, if you have an Employee Dishonesty policy with a $5000 deductible it has to be waived for the ERSIA bond.   In addition to that, there has to be a feature that allows the amount of limits required to meet the 10% threshold.  So if you have a $100,000 employee bond and the plan grows beyond that $100,000 it has to have an automatic increase to increase to $150,000 if the plan requires it even though on the face value it says $100,000.

Eric:  Can you get a bond for more than $500,000

Gary:  You can

Eric:  Is it recommended?

Gary:  Well, it’s unusual, I wouldn’t say it’s recommended but often times when you’re dealing with unions specifically where there’s been years and years of abuse a union will require a much higher bond.  We’ve written bonds up to $20M.  If you’re looking at a $25M plan $500,000 doesn’t seem like a lot.  But that is what’s required and you can certainly buy more.

Eric:  Let’s just say that there was a fraud and the bond has to pay out but the fraud was over the amount of the bond, who pays that other money?

Gary:  Good question, it would depend on what the DOL sees whether there was no supervision of employees?  Was there a fiduciary breach because of no checks and balances?  They may come after anybody.  It would really be from the DOL who would say to the business “it’s your fault that $1m was stolen, we understand that you’re bonded for $500,000 you’re responsible to make up the $500,000.”

Eric:  So, if it was at the action of a fiduciary then that fiduciary under ERISA could be personally liable?

Gary:  Correct.

Eric:  That brings us up to the next topic of conversation, can you explain what a Fiduciary Liability Policy is and how they differ from an ERISA Bond?

Gary:  A Fiduciary Insurance Policy is your typical insurance policy.  It provides a defense if you’re named in a suit for breach of fiduciary duty.  The thing to understand about Fiduciary Insurance it not only covers  the 401k plan it covers every health and welfare benefit that you offer your employees.  It covers your dental, your health and life insurance, whatever benefit that you offer, if there is a mistake made, it covers you.  It covers the fiduciaries of the plan, usually the owners of the business, who have a personal liability under ERISA.  It also, by definition, covers anyone in the company who acts as a functional fiduciary.  Someone who is not named in the plan but because of the duties of their job is a fiduciary.  Someone who hires an employee and talks to them about benefits;  Human resource people; payroll people; people who calculate benefits; all of those people would be covered under that policy.  Fiduciary insurance is relatively inexpensive given insurances today.  Just as an example a plan with $5m in assets a policy may only cost them $1500 per year.   It is important to note that because in the event that a claim is made against you for a breach of fiduciary duty, instead of going to your corporate counsel or attorney, you are now speaking directly to an expert in ERISA law.  Often times even on potential claims you can get the insurance company to come in and help you on the legal aspects and it is coming out of the premium you are paying.

Eric:  Is there a limit on the amount of work that you get for that premium amount?

Gary:  Some policies will limit it, but generally the idea of the insurance company is win-win, if they can get in and avoid a claim then they are going to do it.  That is generally the attitude.

Eric:  Without the policy you are going to have to go it alone?

Gary:  Basically, you’re going through the yellow pages to find an attorney or calling friends and people you know to help you.

Eric:  Right, not all ERISA attorneys are the same.

Gary:  That’s correct, within ERISA there are your backroom attorneys that deal with plan documents and then there are attorneys who regularly defend people on claims, and we’re looking for the ones that are doing 25 claims a year.

Eric:  What are the typical claims that you see under both the ERISA Bond and also Fiduciary Insurance.

Gary:  On the ERISA bond, of course, it’s only theft so it has to be theft.  Generally what we see is that someone in the company’s employment borrows from the money that should have been sent up to the custodian.  So they take employee’s assets thinking that they can pay it back in two weeks.  And then they use the next pay period to make up for the previous one and they’re always two weeks behind and  it never gets made up.   Fortunately, those cases tend to be pretty small.  At some point in time the employer gets a letter that they are consistently late in deposits and that’s how it gets discovered.   We see that quite a bit.  We also see people who have done fraudulent loans.   They borrow from someone else’s plan and forge their documents with the idea that it’s temporary and they’re going to pay it back.  They recognize that people don’t look at their 401k statements so they won’t notice that suddenly there is a $50,000 loan.   In one particular case there were multiple loans taken, the human resources person who was behind it said that it was a mistake and she would get it corrected.   Then she would pay it off and borrow from someone else.   In that case she stole about $300,000.

Eric:  Wow, and under the fiduciary insurance? 

Gary:  Fiduciary claims break pretty evenly about 50% of the claims are 401k related and 50% are other benefit plans.  That probably the thing that is a little eye-opening.  Most people assume that it is all 401k, but the reality is that as many mistakes are made in the health and dental.   People aren’t added in time, or they are put on the wrong plan.  That is something that we see quite frequently, where they have three or four plans and the person chooses plan A, the higher plan, but they are put on C, the cheaper one, and then get denied coverage.   These are typical claims that we see quite a bit.

Eric:  Can plan assets be used to pay for the Fiduciary Policy and or the ERISA Bond? 

Gary:  The answer to that question is yes, they can pay both for the bond and the insurance policy.  However, we don’t recommend it.   On the bond it’s not generally a big issue because the premium is typically only several hundred dollars so at the end of the day it usually has no impact.  On the Fiduciary Insurance if the plan assets pay the policy and then they pay out on the policy.  The insurance company that writes the policy can subrogate against the owners.   So the owners think that they are buying coverage for themselves but if the plan pays for the policy then the insurance company can turn around and go after the plan fiduciary say that they have to pay this.  We never recommend it.

Eric:  A lot of times when we bring on a new client we are told that the Fiduciary coverage is packaged in with other insurances.  Often it will be tacked on to the D&O policy or BOP policy.  Is that coverage similar to what you can buy in a stand-alone policy?

Gary:  We hear that a lot too.  The insurance companies have not done a great job explaining what the coverage’s are.  They tend to throw these limited coverage’s on things like general liability or business owners policy.  So they give the illusion of coverage.  On many general liability policies there is what is called employee benefits liability.  It is usually sub-limited and it only covers mistakes made in the health and welfare plans not the 401k, so that is a big gap.  But often times it’s limited to $5000 or $25,000 and it is defense only, there is no damages coverage.   You can add fiduciary coverage to the D&O policy and it is pretty common.  For a small business where they have a $1M D&O and they have the fiduciary coverage generally that is fine.   For a larger company where there is real D&O exposure we never recommend combining them because you are sharing limits.  One D&O claim blows the limits and then there’s nothing left for fiduciary coverage.  In addition to that, often times the problem with the D&O and fiduciary insurance is “which hat are you wearing when the claim was made?“   As a director you have a fiduciary responsibility to your shareholders or employees or owners but as a fiduciary for a 401k plan it is a different liability and you’re fiduciary responsibility to the 401k is at a higher level than your D&O.  Which means that if it’s something that would actually hurt the company but it is right for the 401k, you have to do what is right for the 401k which puts you in a significant conflict.  That is why you may not want to have those in one policy.

Eric:  Is there a size of plan that dictates how much coverage you should have?

Gary:  There is, as a general rule of thumb what we recommend, if a plan is under $100M in assets, generally speaking $1m in coverage is fine.  The reason for that is the average claim for a plan of that size is about $774,000.  So we’re covering the great majority of potential claims made against those plans.  $100 to $500M in assets you’re generally looking for $2M and above.  Once we get into the $1B in assets we are looking at about a $5M policy.  You’re never going to be able to buy limits to match your assets, nor do we think the exposure is there.  The good news is that we have been tracking fiduciary claims since the early 80’s and pretty much have a good sense of how many claims there are and what the litigation costs are.   Currently, there are about 10,000 active fiduciary claims in the court systems today.   This is interesting because it almost matches what is happening with sexual harassment in the courts and we all sort of feel like we need that coverage.  Yet they are almost the same in terms of numbers.

Eric:  And there isn’t the same uptake on the fiduciary liability policies, right?

Gary:  No, and the issue is we typically only hear about the big claims, you know, the $42M claims.  We don’t hear about the everyday $300,000 or $800,000 claims.

Eric:  Are most of these claims the result of an audit or employee complaint?  How do they typically arise? 

Gary:  Generally, they are employees that bring the claims.  Often times it is when they go to retire and they meet with their financial planner and they find that there are significant problems with their 401k.  For defined benefit we know that there are actuarial issues and they may find out that they have nowhere near enough to retire on.  On the defined contribution plans we may find that the investment of their assets was not suitable to their age.  We all read the newspaper stories of the grandmother who finds that 50% of her assets were invested in risky alternative assets.   Generally, we don’t see claims from audits on a regular basis.

Eric:  Is there a difference between fiduciary liability policies?  How often should they be reviewed?

Gary:  Yes, there is.  Not every policy is written the same.  They all have the same core components but they are significant nuances to each policy.  You are looking for a policy that can be as broad as possible for functional fiduciaries.   You want a policy that will cover anybody at the company that did any role that could have led up to a potential claim.  You don’t want to have anybody excluded so you want it to be as broad as possible.   In addition to that you want some language that covers any benefit plan even if it wasn’t named in the application.  You don’t want to realize that you just added Long Term Care for the employees and find out that it was excluded.

Eric:  Is there anything else that you want to add? 

Gary:  I think that the biggest thing to add is that as a fiduciary to the plan you know that you are required to be bonded.  But what you may not know is that you are also required to have anyone that is a third party vendor be bonded.  Anyone that handles plan assets is required to be bonded and if they are not bonded and you didn’t know it that could be a breach of fiduciary duty right there.   So let’s say for example that you are working with an investment advisor that specifically handles plan assets and has the ability to steal and there is a theft by that person that could come back on you as a breach of fiduciary duty and you could be personally liable.   In addition to that you want to work with vendors who have Errors and Omissions Insurance, more importantly than just them having it you need to make sure that they are covered as a fiduciary to the plan.  Many policies out there exclude their activities as a fiduciary so you may think that they have coverage and it turns out that they do not.  Again, that could be potentially a breach of fiduciary duties.   What we tell plan sponsors is don’t rely on certificates of insurance to evaluate whether someone is covered.  Rather get the policy itself and have an agent or ERSIA attorney review it to make sure that there is appropriate coverage.

Eric:  Gary, thanks for taking the time to sit down with us today.   I think that you have successfully explained the differences between ERISA Bonds and Fiduciary Insurance.  If our readers have any questions can they get in touch with you? 

Gary:  Absolutely, I will be happy to speak with them directly.   I can be reached at (508) 656-1350 or at  Also, for more information they can visit our website at  Just make sure to let me know that they are working with you so that I know that there is no cost to that.

Eric:  Thank you very much Gary.  I really appreciate your time today. 

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DOL Says Ok to Extend Delivery Date of Participant Fee Disclosure Notices

Reset-Button-300x300On July 22nd, the DOL released Field Assistance Bulletin 2013-02 allowing a one time “Re-Set” of the distribution date for participant fee disclosure notices.  Under regulation 404a-5 the DOL required that plan administrators disclose detailed investment-related information to plan participants and beneficiaries about the plans’ designated investment alternatives.  For most covered plans operating on a calendar year basis the initial disclosure was due before August 30, 2012 and at least annually thereafter.  Many plans considered “at least annually thereafter” to mean at least once in a calendar year.  In other words if the initial disclosure was distributed to participants on August 15, 2012 the 2013 notice would be due by August 15, 2013 and each year thereafter.  A plan could “re-set” its notification date if they were to send out a second notice in a single year.  For instance if a plan wanted to align their disclosures with annual notices that are already being sent at year end, they could include a second notice with their additional year end disclosures and that would change the date that the annual 404a-5 notices must be sent going forward.

With this bulletin the DOL is allowing plans to “re-set” their notification date without having to distribute a second notice within a 12 month period so long as the plan administrator deems that distributing that notice would create additional cost to participants and beneficiaries.  It is important to note though that this bulleting applies only to the distribution of the annual notices and does not suspend enforcement on any of the other provisions of 404a-5 like website access to fees and quarterly statement disclosures.  Additionally the DOL will allow plans who have already satisfied their 2013 disclosure obligations to extend the timing of their 2014 mailing to coincide with other participant disclosures if they deem that doing so will decrease costs to participants and beneficiaries.

In our opinion most plans incur some cost to distribute the annual 404a-5 notices and an annual fee disclosure notice is most likely to be acknowledged when accompanied in the context of other plan related disclosures at a more appropriate time.  There has been a lot of research and studies done on the effectiveness of 404a-5 from a participant level as to whether the information provided is understood and is affecting investing effectiveness.  I believe that any simplification of plan related disclosures is in the best interests of plan participants.  Of course, as a Plan Sponsor you should carefully consider the facts and circumstances of your Plan and act accordingly in the best interests of your plan participants.

The full text of FAB 2013-02 can be found here:

The above represents the opinion of Eric Lazzari and is not necessarily indicative of the views of Capitol Securities Management, Inc.

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EBSA offers guidance on selecting Target-Date Funds.

Target-Date Funds have become increasingly popular in defined contribution plans.  However, the use of Target-Date Funds comes with certain fiduciary responsibilities that must be addressed.  Often times plan sponsors use Target-Date Funds because participants find them very useful and easy to understand.  Additionally, many 401(k) vendors automatically include them as standard options on 401(k) investment menus.  Not all Target-Date Funds are created equal however and it is important to create a prudent review process to document the decision on which target date fund to use in your plan.

In an effort to help plan sponsors identify the fiduciary pitfalls associated with selecting Target-Date Funds the Department of Labor has prepared general guidance to assist plan fiduciaries in selecting and monitoring Target-Date Funds.  For more information please visit

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Are 401k Fund Lineups Opening Participants up to Unnecessary Risk?

Many investors in retirement plans could be at risk for losses resulting from increasing interest rates.  Traditionally bonds have been a good place to invest in times of market volatility, however, with interest rates at all-time lows they may not be that safe at all.  Compounding the problem for investors in their 401k Plan there may not be anywhere to turn.  The problem lies with how a lot of plan lineups are created and could open up plan participants to increased risk of loss.

In general, a 401k plan that intends to comply with ERISA 404(c) must offer at least 3 distinct investment alternatives.  In practice these three categories were best represented by an equity fund, a bond fund, and a cash fund.  The theory being that with these three funds an investor can achieve a portfolio with an appropriate risk/return characteristic for his or her situation.  Over the years plan menus have grown.  It is now common for a plan to provide at least one fund for each of the nine domestic allocation categories as well as international and other specialty categories such as real estate and even commodities.  However, many plans don’t offer a similar number of bond options.  Often times we’ll only see an intermediate term corporate bond fund on plans that we take over.

This poses a big problem for retirement investors looking for safety.  According to a Wall Street Journal report “Money has flowed into bonds at an extraordinary pace in recent years.  In the past two years alone, investors put just over $1 trillion into global mutual and exchange-traded bond funds, while pulling a net $9 billion from equity funds, J.P. Morgan  says.”  If interest rates increase sharply the value of the bonds held will decrease proportionally according to their duration.  With nowhere else to turn plan participants could continue to add to their interest sensitive options without any knowledge of the excess interest rate risk they are taking on.

However, by managing the lineup to include a few more investment options Plan Sponsors can give participants the tools that they need to be more flexible in any investment environment.  On plans that we manage we like to add in at least two other categories of bond investments in addition to their core intermediate bond fund.  “Strategic income” funds and “Inflation protected” bond funds offer additional diversification options for plan participants concerned about rising interest rates.  A “strategic income” fund allows the portfolio manager to invest across a wider opportunity set and enables them to adapt to volatile markets and changes in credit and interest rate risks.  An investment in “inflation protected” bonds helps fixed income investors diversify and protect against the loss of purchasing power from an unexpected rise in inflation.  By adjusting the crediting interest rate along with inflation these types of bonds have a better chance of maintaining value in an inflationary environment.

Financial markets have never been more tumultuous and as a result plan sponsors need to be proactive with their fiduciary responsibilities.  Now is a great time to evaluate the fund lineup that you have in order to ensure that you are giving participants the tools that they need to reach retirement securely.

For more info from the WSJ article on ticking time bombs click here.

The above represents the opinion of Eric Lazzari and is not necessarily indicative of the views of Capitol Securities Management, Inc.

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Financial Resolutions are Being Overlooked by Participants

Americans are more concerned about losing weight than financial fitness according to the “New Year’s Resolutions Survey” conducted by Allianz Life Insurance Company.  The survey showed that 88% of Americans list eating better or exercising more as their resolution while only 16% of Americans surveyed list financial planning as a concern.

“It’s alarming that Americans’ willingness to ignore financial planning in their New Year’s Resolutions continues to go up year after year,” said Katie Libbe, vice president of Consumer Insights for Allianz Life. “With the responsibility for retirement security shifting from employers to individuals, people need to become more—not less—active with financial planning to ensure they have enough money to fund a retirement that could last up to 30 years.”

Last week, featured a number of articles and videos from their analysts, editors, and industry experts dedicated to helping retirees and pre-retirees get their New Year’s investing resolutions on track. They posted a focused group of articles and video reports on saving more, spending less, allocating wisely, picking stronger investments, maximizing Social Security, and much more to help individuals plug into their portfolios and get going.

There is some great information there to help get those resolutions started on the right track.  I encourage you to visit the site here and read an article or two and get started on those financial resolutions.  Being financially fit is just as important as being physically fit.

The above represents the opinion of Eric Lazzari and is not necessarily indicative of the views of Capitol Securities Management, Inc.

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Employers Making Retirement Readiness a Top Priority

A recent survey shows that more employers are looking beyond participation rates and savings rates for 2013.  The survey conducted by Aon Hewitt suggested that 86% of employers surveyed are planning to focus on “retirement readiness” for the upcoming year.

The companies plan to focus communications on “how much” it will take for an employee to save for retirement.  Offering initiatives to assist employees to create an accurate picture of future needs and whether they are on track to meet their needs.

Employers are also making changes to their Defined Contribution Plans that offer more options for their workers to manage their investments during retirement.  In preparation for the distribution phase (retirement) companies are adding drawdown features, managed pay-out funds, insurance or annuity products that are now included in the fund line-up.  These Income solutions allow retirees a way to receive regular, scheduled payments from their DC plans.

For more details on the survey please visit: 

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Millennials at Risk For Low Savings in Retirement

When they were not automatically enrolled, just 13.4% of Millennials participated in employers’ plans—a drop of 22% in the past year, according to data from Wells Fargo Retirement.   Among those who do contribute, Millennials’ savings rates are dangerously low, with almost half (47.3%) putting away 3% of salary or less.  This is comparable to the members of Generation X (32.8%) and Baby Boomers (24.9%) who contribute at the same rate.  The percentage of Millennials doing all three key things to save for retirement—participating, contributing at an adequate rate and being appropriately diversified—is just 5.2%.

However, Millennials are highly motivated to save for retirement and would plan ahead if they knew more about retirement benefit options from their employers, according to a new study by Prudential Retirement.  Millennials especially react well to group meetings and customized coaching sessions and interactive electronic delivery of education.

For more on the Prudential study:



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Season’s Change!

As the weather in New England changes and we move into fall we’re reminded of a different change but a change none-the-less.  The retirement industry has undergone some changes this Summer as well.  Fee disclosure is finally upon us and we’re just now picking our heads up from all of the extra leg work that we did for our clients in July and August.  We’re proponents of the new 401k fee disclosure regulations in spirit.  Transparency is always a good thing in our opinion and it’s something that is a core value in our business model.  However, the new laws as written require much effort on the Plan Sponsor’s part for a message that only a few participants will ever heed.  Regardless, fee disclosure is here to stay and you as a plan fiduciary must adapt and comply. 

This brings us to the question of the day.  Did your advisor help you through this transition period, or were you left to do it alone?  If you were like most of our clients these new rules were complicated and confusing.  Relying on the recordkeeper in most instances was of no use at all either.  In one case a well-known local recordkeeper was sending out participant notices that required substantial changes in order to be compliant.  This very popular insurance based recordkeeper didn’t even mention the recordkeeping fees that they charge nor was there a place in the notice to insert them.   We received several drafts of the notices that were prepared by Third Party Administrators that were completely inaccurate.   All I can say is that it was a good thing we took an active role in these disclosures and ensured our clients’ compliance. 

So what is next?  With the change in weather come wardrobe changes.  With the change in the retirement plan industry come new service models.  It is wise to look back on your experiences over the Summer and reflect on what your advisor is getting paid for.  If you were left hanging in the wind like the last few leaves of Autumn I suggest that you need to begin looking for a new advisor.  There are a lot of advisors who specialize in retirement plans now, and you should be with one of them.   These new fee disclosure regulations are here to stay and if everyone gets on board it could be a good thing for plan participants and sponsors alike.   The winds of change are here for the retirement industry and I sense a lot more to come.

The above represents the opinion of Eric Lazzari and is not necessarily indicative of the views of Capitol Securities Management, Inc.

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