Part of Invesco’s Legislative Insights series
As noted in my last post, House divided: Republicans and Democrats square off in fiduciary rule fray, most Democrats didn’t support the House bill to block implementation of the DOL rule until after the Securities and Exchange Commission (SEC) weighs in with its regulation defining investment advice. But that lack of support doesn’t reflect a lack of concern among Democrats about some DOL rule provisions.
In an Oct. 30 letter to the DOL, a group of nearly 50 Democratic members of Congress asked for a 15-to-30 day comment period after the final rule is issued, likely early next year. Otherwise, they stated, “It will be harder to discern if the rule can be implemented without unintended consequences, particularly regarding the provision of high-quality financial advice to low- and middle-income American families.”1Read More
Many participants are combining target date and target risk funds with other investment options
A recent Aon Hewitt report indicating that DC plan participants are misusing target date and target risk funds is generating quite a bit of discussion in the industry. According to the report, 68% of plan participants surveyed have money invested in target date or target risk funds, but the average allocation is only 69%.1
What’s wrong with this picture? Those findings indicate that many participants are combining target date and target risk funds — intended, of course, to be “one-stop” diversified portfolios — with other investment options. Which begs the questions:
- Are participants misunderstanding the purpose of these options?
- Are they attempting to adjust the funds’ allocations because they’re uncomfortable with them?
Both of these are likely true to some extent. However, our research at Invesco suggests other factors are at work here as well.Read More
Part of Invesco’s Legislative Insights series
On Nov. 16, the Department of Labor (DOL) unveiled its proposed rule to clarify the application of Employee Retirement Income Security Act of 1974 (ERISA) to state-run IRA programs, which includes modification of the existing payroll deduction safe harbor. The proposal allows for an ERISA exemption for IRAs that feature auto enrollment and payroll deduction and are offered by states as a default program where an employer is required to sponsor a plan.
Meeting safe harbor criteria
To meet the DOL’s proposed new safe harbor, states would have to adhere to several basic requirements, including these:Read More
Part of Invesco’s Retirement Strategies series for IRAs
The Department of Labor (DOL) is aiming to finalize the tweaked version of its revised proposed fiduciary, or conflict-of-interest, rule during the first half of 2016. Amid the uproar surrounding this controversial regulation, these two dominant — and divergent— advisor views seemed to have emerged:
- Overreaching regulators are trying to destroy our business by adding a compliance burden that is too complicated and will be far too expensive to implement. Ultimately, it will drive fees higher and limit investor access to advice.
- This is basically how I operate my business already, and I believe my clients are willing to pay for the service and value I provide. Our industry used to strive for fiduciary status — now it will become the basis for our business model. The DOL rule may add broader compliance oversight, but based on the opportunity, I understand that.
So what’s the opportunity that offsets increased oversight and expense?Read More
Part of The Business of Retirement series
The Pension Protection Act of 2006 has spurred sweeping adoption of target date funds (TDFs) as qualified default investment alternatives (QDIAs), and TDFs continue to grow within DC plans. For plan fiduciaries, the Department of Labor (DOL) mandates that achieving the best possible outcomes for your participants includes taking appropriate steps to align your TDF strategy to the needs of your participants.
So in theory, having more TDF options because of advancements in technology and other competitive factors is good news for plan sponsors. But in practice, this proliferation of new options is creating challenges for plan sponsors seeking to understand the various TDF models and compare them to the needs of their plans in accordance with DOL guidance.Read More
Part of Invesco’s Retirement Strategies series
Last week, “things that go bump in the night” included two Social Security claiming strategies that got bumped from most retirement planning when the Senate passed a last-minute budget deal in the predawn hours on Friday. There were none of the usual preliminaries — no hearings, no legislation, no grandstanding by proponents and opponents, no discussion in the financial media. It was simply a done deal, sealed and delivered, when President Barack Obama signed the bill into law on Monday to keep the government afloat. Now, however, there’s plenty of discussion, along with plenty of shell-shocked seniors and financial advisors. Here’s why.Read More