401(k) Real Talk Transcript for March 27, 2024
Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA omnichannel and CEO at TRAU, TPSU & 401kTV - I review all of last week’s stories and select the most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
Empower made a series of announcements about retirement income solutions available to their almost 19 million DC participants with several partners.
Income America will provide guaranteed income within Empower’s managed accounts powered by Morningstar while a collaboration between American Funds, Great Gray, flexPATH and TIIA have partnered on a TD CIT with an imbedded an annuitization option.
Empower itself will offer managed spend down solutions as well as the option for participants to shop outside the plan through MassMutual’s Blueprint Income marketplace. (MM sold its record keeping division to Empower in 2021.)
Positioning itself as a platform rather than a builder of products, the Empower announcement should help with the adoption of retirement income as competitors will need to follow if successful. Let’s hope it is as DC plans need to address the decumulation phase of retirement.
In what Fortune magazine is calling a “retirement megatrend,” more people are taking a phased retirement rather than going cold turkey. As detailed by TR Price’s Stuart Ritter at a recent TPSU program, there are two ways people can fail at retirement: 1. Not enough money; and 2. Not preparing for their new life which can be helped through a phased retirement.
Led by the pandemic when remote working became the norm and technology, it’s easier for workers to continue to contribute while organizations can retain their knowledge and relationships at a reduced cost mentoring, not blocking, younger workers who may also want more flexible work options.
Principal’s Chris Littlefield noted that the shift is towards people fitting work into their life, not life into work with more companies learning how to “offboard” workers.
All of which could accelerate the adoption of retirement income.
As discussed in my recent column about the need to manage not eliminate conflict, which is nearly impossible, Groom Law Group’s David Kaleda details the potential conflicts as wealth and retirement converge at the workplace.
With more firms integrating wealth and retirement plan advisory practices, conflicts are sure to arise as wealth managers must abide by ERISA and the IRC when managing DC assets in plans which will be exacerbated by the DOL’s fiduciary rule now at OMB due out in June.
So wealth advisors recommending rollovers and those managing client’s DC assets, if they are paid out of plan assets, may come under the jurisdiction of ERISA and the DOL, not just the SEC, creating conflict that firms will have to manage.
As 401k plans explode led by state mandates and tax credits facilitated by PEPs with Cerulli projecting 1m plans by 2029, wealth managers are taking note.
Not only are clients asking for help, but traditional advisors see opportunities to win new clients within the plan.
A leading provider details in a WM.com column how previous fears and concerns about DC plans by wealth managers are being overcome through outsourcing and partnerships opening a world of opportunities as wealth advisors struggle to source new clients.
The defined contribution industry is all abuzz about the potential for PEPs, CITs and retirement income. And while important concepts, someone forgot to tell plan sponsors.
After hundreds of plan sponsor training programs, there are few if any that have proactively asked for any of these services.
Which is not to say that they are unimportant – they are helping plans to lower fees, outsource work and liability, while enabling participants fortunate enough to have enough assets to retire without worry about running out of money.
Read my recent WealthManagement.com column about how the problem is not just the language we use, which is riddled with acronyms and code sections, it’s about framing the issues in terms that normal people can understand.
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
- Republicans propose raising Social Security age
- Pension risk transfers may be next litigation target
- Another ERISA case hits the U.S. Supreme Court
- Intellicents partners with Candidly on student loan debt repayment program
- Candidly named 3rd most innovative company by FastCompany
Please let me know if I missed anything or if you would like to comment. Otherwise I look forward to speaking to you next week on 401k Real Talk.
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Originally posted on: https://www.wealthmanagement.com/rpa/401k-real-talk-transcript-march-27-2024