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Retirement Savings Policy: Past, Present and Future Tense: The Alexandra Lajoux Corporate Governance Series

Autor Barry, Michael P.
en Limba Engleză Paperback – 11 iun 2018 – vârsta de la 22 ani
Mike brings to this work his comprehensive experience and consummate technical talent in a beautifully readable book. A treasure. --Frank Cummings, Former Adjunct Lecturer in Law at UVA Law School, Columbia Law School, NYU Law School, and ALI-ABA Retirement Savings Policy reviews the basic policies that govern retirement savings plans, and their real world application, focusing on the key issues of finance, taxation, fiduciary conduct, and employee choice. The discussion is framed around the three fundamental challenges confronting employers and employees today ¿ the pension legacy, the 401(k) revolution, and the pressure, from policymakers, regulators, opinion leaders, and individuals, for changes that will put retirement security within reach of all Americans. With more than 40 years¿ experience in the field, Michael P. Barry provides both a wealth of practical detail ¿ best practices and concrete solutions ¿ and a broad framework for understanding the issues surrounding retirement plans and strategies. The result is a comprehensive introduction to the forces that drive sponsor, participant, and policymaker decision-making. This is the perfect book for benefits and financial professionals who want a better understanding of the basic rules that govern retirement plan administration but also serves those interested in truly understanding the nuances and issues surrounding retirement plans and policies. The approach is practical, focusing on how US retirement plans actually work, how they are taxed (and not taxed), how they are regulated. But it is also conceptual, devoting considerable attention to an understanding of why these plans work the way they do. Why regulators and policymakers are so focused on a handful of issues ¿ expanding coverage, reducing fees, fairness. And, at the highest level, what are the problems that we are trying to solve. As such, much of what we discuss will be of interest to a more general reader, who wants a realistic understanding of what is really at stake in current retirement policy debates.
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Specificații

ISBN-13: 9781547416455
ISBN-10: 1547416459
Pagini: 240
Dimensiuni: 155 x 230 mm
Greutate: 0.39 kg
Editura: de-G Press
Seria The Alexandra Lajoux Corporate Governance Series


Notă biografică

Michael P. Barry is President of O3 Plan Advisory Services LLC, which provides retirement plan regulatory analysis targeted at plan sponsors and those who provide services to them. Before founding Plan Advisory Services in 1998, Mike was Managing Director at Bankers Trust and, before that, practiced law in Washington D.C. and New York. Mike writes a regular column for PLANSPONSOR Online - "Barry's Pickings."


Cuprins

Part I: The Defined Benefit Plan Legacy ¿ 1

Chapter 1: An Overview of Existing Plans ¿ 3

Chapter 2: DB Plan Basics ¿ 7

A Formula Benefit ¿ 7

Where All the Risk Is Borne by the Sponsor ¿ 9

The Three Risks of Retirement Savings ¿ 9

Chapter 3: The DB Valuation Challenge ¿ 13

The Challenge ¿ 13

The "Time Value of Money" ¿ 14

Going Concern-The Portfolio Rate of Return Option ¿ 17

Chapter 4: The Regulatory Framework-Benefit Insurance, Minimum Funding

Rules and Accounting Standards Affecting DB Plan Finance ¿ 21

The Pension Benefit Guaranty Corporation ¿ 22

The Pension Protection Act of 2006 ¿ 22

Plan A: Tighten the Minimum Funding Rules ¿ 23

Plan B: Relax Minimum Funding Standards and Increase PBGC Premiums ¿ 24

The Current Minimum Funding Regime ¿ 25

The Current PBGC Premium Regime ¿ 26

The Accounting Regime, Very Briefly ¿ 27

How DB Liabilities Are Valued for Financial Statement Purposes ¿ 28

Chapter 5: The Regulatory Framework-Minimum Standards for Retirement Plan

Design and Tax Code Nondiscrimination Rules ¿ 31

Minimum Standards ¿ 31

Spousal Rights-the Retirement Equity Act of 1984 ¿ 33

Tax Code Nondiscrimination Rules ¿ 34

Tax Code Limits on Benefits, Contributions, and Compensation ¿ 34

Chapter 6: Problems with the DB Design ¿ 37

Issues with DB Design ¿ 37

The Inadequacy of Pre-Retirement Income as an Index of Post-Retirement

Needs ¿ 37

The Inadequacy of a Flat Retirement Income Target ¿ 39

DOI 10.1515/9781547400294-206

The Significance of Post-Retirement Risk ¿ 39

The Inadequacy of a Benefit Design Based on a Full Career ¿ 40

The DB Benefit Is Significantly Backloaded ¿ 40

Significance for Corporate Culture ¿ 41

Chapter 7: The Cash Balance Plan Conversion Crisis ¿ 43

What Is a Cash Balance Plan? ¿ 43

Why a Cash Balance Plan? ¿ 45

Why Did These Plans Have a Surplus? ¿ 45

Why Does a Funding Surplus Matter? ¿ 46

Why Cash Balance Plans Solved This Problem ¿ 46

Cash Balance Plan Conversion = A Decrease in Benefits for Older

Employees ¿ 48

Massive Employee Pushback ¿ 49

Chapter 8: The Secular Decline in Interest Rates and the Viability of DB

Plans ¿ 53

What About the Other Two Sponsor Risks-Investment and Mortality? ¿ 54

A Fundamental Lack of Transparency ¿ 55

Chapter 9: Getting Out, Slowly ¿ 57

The Increased Cost of Plan Termination ¿ 57

Getting Out Without Getting Out-The Plan Freeze ¿ 58

Taming Liabilities-Liability Driven Investments ¿ 58

The LDI Overlay ¿ 59

Chapter 10: Managing the DB Legacy-Reducing PBGC Premiums ¿ 63

Plan Funding, Briefly ¿ 63

PBGC Premiums, At Length ¿ 63

Pursuing a Contribution Policy That Reduces Variable-Rate Premiums ¿ 67

Variable-Rate Premium Fundamentals ¿ 67

Two Broad Strategies ¿ 68

Strategies for Maximizing the Value of the Headcount Cap ¿ 69

PBGC Premiums and Basic Retirement Policy ¿ 71

Chapter 11: The Cash Balance Alternative ¿ 73

The PPA Legitimizes the Cash Balance Design ¿ 73

Market Cash Balance Plans ¿ 74

Chapter 12: Intermezzo-Basic Policy Considerations Part I ¿ 75

Two Kinds of Office ¿ 75

What Are the Retirement Benefits? ¿ 76

The Status of Subsidized Benefits ¿ 77

A Legitimate Expectation That the Employer Would Continue the Plan ¿ 78

DB Plans, a Verdict ¿ 79

Who Pays for Retirement Benefits? ¿ 80

Retirement Savings Tax Policy-Two Views ¿ 81

Part II: Defined Contribution Plans and the 401(k)

Revolution ¿ 83

Chapter 13: The Rise of the 401(k) ¿ 85

Chapter 14: DC/401(k) Plan Basics ¿ 89

How Contributions Are Determined ¿ 89

How Assets Are Invested ¿ 89

How Benefits Are Paid ¿ 90

A Retirement Savings Design that Functions Like Compensation ¿ 90

What Happened to the Three Risks? ¿ 90

The Structure and Administration of 401(k) Plans ¿ 92

Chapter 15: The DC Adequacy Challenge ¿ 95

What Is Adequacy? ¿ 95

A Subjective Answer to the Adequacy Question ¿ 96

Towards an "Adequate" Policy Framework ¿ 96

Ambiguities ¿ 96

Three Sorts of Answers to the Adequacy Question ¿ 97

Adequacy of Investment ¿ 101

Payout ¿ 104

Chapter 16: Adequate Savings and the Regulatory Framework-Retirement

Savings Tax Incentives ¿ 105

The Current System ¿ 105

Retirement Savings Tax Benefits ¿ 106

How Much Are These Tax Benefits Worth? ¿ 106

Methodology ¿ 107

"Roth" versus Regular Contributions ¿ 110

Retirement Savings Tax Incentives, Rothification, and the Budget ¿ 111

A Middle-Class Tax Benefit? ¿ 112

Does This System Work? ¿ 113

Chapter 17: 401(k) Tax Code Nondiscrimination Rules ¿ 115

The ADP Test ¿ 115

The Dollar Limit on 401(k) Contributions ¿ 116

Passing the ADP Test ¿ 117

Participant Education ¿ 117

Matching Contributions ¿ 117

Safe Harbors ¿ 118

Defaults ¿ 118

Chapter 18: Adequate Investment-The Asset Allocation Challenge ¿ 121

Participant Education ¿ 122

Default Investments ¿ 122

2007 QDIA Rules ¿ 123

DOL's QDIA Regulation ¿ 123

QDIA/Target Date Funds as the Preferred Asset Allocation ¿ 125

Chapter 19: ERISA Fiduciary Rules ¿ 127

Who Is a Fiduciary under ERISA? ¿ 128

What Are a Fiduciary's "Duties"? ¿ 128

ERISA Section 404(c) ¿ 129

Residual Obligations of Plan Fiduciaries Under 404(c) ¿ 129

General Fiduciary Standards ¿ 130

Prohibited Transactions ¿ 130

Prohibited Transaction Exemptions ¿ 131

Chapter 20: The Structure and Administration of 401(k) Plans, Revisited ¿ 133

Basic Organization ¿ 133

Fiduciary Selection and Monitoring of Plan Service Providers ¿ 133

The Structure of 401(k) Plan Fee Arrangements ¿ 134

Current Practice ¿ 137

Chapter 21: Why Fees? ¿ 139

First: Unlike in DB Plans, in 401(k) Plans Fiduciary and Participant Interests

Are Not Aligned ¿ 139

Second: Fees Have a Significant Effect on Retirement Outcomes ¿ 139

Third: Plan Fiduciaries Limit Participant Investment Choices and Negotiate

the Deal with Plan Service Providers ¿ 140

Academic Work on Fees ¿ 140

Chapter 22: 401(k) Plan Fees and Fiduciary Regulation ¿ 143

Fee Disclosure ¿ 144

Provider-to-Sponsor Disclosure Rules ¿ 145

Sponsor-to-Participant Disclosure Rules ¿ 146

The Fiduciary Rule, Round 1 ¿ 146

Round 2 ¿ 147

The Fiduciary Rule in Brief ¿ 148

A New Set of "Impartial Conduct" Standards ¿ 150

Regulation of Compensation Policy ¿ 150

Disclosures ¿ 151

Contract Requirement for Non-ERISA Plans and IRAs ¿ 151

Implementation, Criticism, Challenges ¿ 151

Fifth Circuit Vacates the Fiduciary Rule ¿ 152

Assessing Fee Regulation Efforts ¿ 152

Chapter 23: Fiduciary litigation ¿ 155

The Problem of Proof ¿ 155

"Generic Services"-Recordkeeping ¿ 156

Chapter 24: Fiduciary Best Practices and Managing Fiduciary Risk ¿ 161

Key Process Elements ¿ 161

A Broad Range of Alternatives ¿ 163

Chapter 25: An Adequate Payout ¿ 169

The 401(k) Payout Challenge ¿ 169

Individual Choice vs. the "Right Choice" ¿ 176

Chapter 26: Intermezzo-Plan B ¿ 183

Continued Work-the Good News ¿ 183

The Other Plan B: Moving In with the Kids ¿ 185

The Worst Case ¿ 186

For the Most Part, a First World Problem ¿ 188

Part III: The Future ¿ 189

Chapter 27: The Demographic Background ¿ 191

The Age-Old Problem of Old Age ¿ 191

The Wealth Transfer Paradigm ¿ 194

The Socialization of the Paradigm ¿ 195

Money versus Time ¿ 199

Turning Savings into Investment ¿ 199

Chapter 28: The Great Transition ¿ 201

The Ratio of Workers to Retirees Is Going to Go Down, Significantly ¿ 201

In the Transition from PAYGO to Funding, Someone Will Have to Pay

Twice ¿ 202

The Transition to the 401(k) System Caught Baby Boomers Mid-Career ¿ 204

Chapter 29: Covering the Uncovered ¿ 207

How Big Is This Problem? ¿ 207

What Sorts of Employers Don't Provide Plans? ¿ 208

What Is Preventing Smaller Employers from Implementing Workplace

Retirement Plans? ¿ 208

Reducing Administrative Burden and Cost ¿ 210

Increasing Incentives ¿ 213

And the Gig Economy ¿ 215

Chapter 30: The Implications of the Software Revolution for Retirement

Savings ¿ 219

The Current System ¿ 219

The Distributed Ledger Technology Revolution ¿ 221

Are There Situations in Which Friction Is a Feature, Not a Bug? ¿ 223

Are There Situations in Which Transparency Is a Bug, Not a Feature? ¿ 223

Chapter 31: The Role of the Employer ¿ 225

What Is in All This for the Employer? ¿ 227

Chapter 32: The Bureaucratization of Capital ¿ 231

Chapter 33: Coda ¿ 233

What is Retirement? ¿ 233

The Way Forward ¿ 234

Index ¿ 237