The story arc of the 401k mimics that of software. Each release adds to and builds on features and benefits over and above those of previous releases.
Tag "DOL"
Unlike previous definitions, this version takes a definitive step towards allowing plan sponsors to forgo traditional financial measures. Rather than relying on extensive academic studies, this new Rule represents a certain leap of faith.
There is an out, of course, but that might eliminate the so-called “institutional pricing” advantage former employees have for staying in the plan in the first place.
“I was [once] a major skeptic of the use of annuities, I have subsequently changed my mind regarding the efficacy of low-cost fixed and variable annuities in both personal and retirement accounts.”
Today, in reading some of the headlines, you’d think they’re greater than sliced bread. They may be. They may not be. Still, there are differences, and 401k plans sponsors would benefit from practicing the utmost in due diligence when determining if CITs are the right fit for their plan.
Should the platform offer ESG doesn’t necessarily mean good news for the 401k plan sponsor. Including ESG funds might introduce other risks.
If you’re a fiduciary of the acquiring plan, you want to make sure you’re not burdened with any unknown liabilities. If you’re a fiduciary of the acquired plan, you want to make sure the merger process doesn’t introduce new liabilities.
In theory, 401k plans were always intended to be highly portable, but that’s not what happened. “Portability” only evolved to the extent that the most-attractive balances were picked off and rolled over to IRAs, and everyone else was left holding the bag.
“Perhaps the continued confusion can be expected given that the term ‘best interest’ is not defined in Reg BI and the word ‘fiduciary’ is not used in defining the new standard. It makes it harder to understand.”
In a nutshell, what was initially considered a “pick me because you like me” decision on the part of the prospect has been reframed as a “pick me because I sold you investments” decision. It’s a subtle distinction, but it drives the difference between a fiduciary act and a non-fiduciary act.
