The DOL’s guidance on missing plan participants appears just as effective as its week 2012 Mutual Fund Fee Disclosure Rule. Yes, it’s there, but it has no viability. Still, that doesn’t mean 401k plan sponsors can ignore the issue, even if they have not lost participants.
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The twist is this: The bad news is only a fraction of the people will be able to save $4.3 million for retirement because the average salary is too low. The good news is most people won’t need to save $4.3 million because, thanks to living on a low average salary, they are accustomed to spending far less.
The challenge is plan sponsors often can’t determine if an account is forgotten until some triggering event. And by that time, it’s too late.
The antiseptic compliance regime spelled out by the DOL and ERISA has to date defined fiduciary services. Perhaps, if we’re going to consider what is “beyond” that sterile definition, we might want to go back to the future. In a sense, rediscovering where “fiduciary” initially came from might suggest where it is headed.
“They can benefit from something more tailored to their unique circumstances, particularly as they are approaching certain key inflection points in their working lives or key financial decisions they have to make or key life events. Therefore, what we’ve been seeing in the retirement plan industry is this emphasis on retirement plan services.”
The key intent of this strategy is to allow freedom to and reward long-term employees who have accumulated the skills the company needs to compete.
Still, it seems most financial professionals feel anything that brings people closer to the road towards financial independence should be encouraged.
Overall, nearly 1 in 5 companies still have not adopted auto-enrollment. There are common reasons why companies would not include auto-enrollment in their plans.
So what if a few very high net savers end up with bigger retirement plans? Good for them. The point is to make it easier for more people to save more.
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Old vs. new thinking, the obvious answer, and quit complaining and start remembering.