October 10, 2002 (PLANSPONSOR.com) - Plan sponsors
eager to implement online advice sooner rather than later,
may want to consider a new product from mPower.
mPower, an online advice and education provider,
unveiled a new version of its advice service called Dynamic
Plan Advisor that the company claims can go live in a plan
in as little as two days rather than the customary 45 to 60
days.
The company said the service is aimed at plan providers
serving the small- and mid-sized plan market to offer a
single master Web site and to avoid plan-level
implementation.
In addition to providing the advice product, mPower said
it also offers a marketing partnership with sponsors of a
provider’s plans to convince more employees to save for
retirement.
NAGDCA Experts Say Pension Reform Prospects Still
Good
September 10, 2002 (PLANSPONSOR.com) - While time is
running out for the 2002 legislative session in Congress,
plan sponsors may yet get some new pension reform
proposals.
That was the opinion of two industry experts speaking at
the National Association of Government Defined Contribution
Administrators (NAGDCA) in Scottsdale, Arizona.
Susan White, president and founder of Washington-based
Susan J. White & Associates, legislative counsel
to NAGDCA, noted that “Enron-related” legislation is still
likely before year end.
White acknowledged some elements of the pension
proposals on the table might be problematic for government
plan administrators, such as a requirement for quarterly
benefit statements.
However, rather than oppose such provisions
directly, she noted that NAGDCA had opted to work with
legislators to make the final provisions as practical as
possible.
Limited Life?
An ongoing concern for 457 plan sponsors is that the
provisions in the Economic Growth Tax Relief and Recovery
Act (EGTRRA) that did so much to resolve the historical
barriers between 457 plans and other retirement programs
are not permanent.
White noted that the return of federal budget deficits
introduced an element of uncertainty to the discussions
that might require separating those provisions from the tax
bill.
At the same time, she cited a sentiment among some on
the Hill that there was no reason to maintain separate sets
of rules for programs such as 457 and 401(k) – particularly
with EGTRRA’s progress in resolving many of the traditional
disparities in benefits limits.
However, the lack of a 10% excise tax imposition on 457
plan distributions, and the ability of beneficiaries to
retire earlier under such programs seem likely to engender
a desire to maintain a separation, both by government
workers and plan sponsors alike.
White noted one unexpected – and unpleasant – result of
EGTRRA’s reconciliations – the imposition of 20%
withholding on distributions from these programs.
401(k) plan sponsors, who have had a decade to acclimate
participants to that impact, can surely sympathize.
Advice Price
Sharing White’s assessment for the prospects of pension
reform was John Barry, an Assistant Attorney General for
the State of Maryland, and NAGDCA vice president.
Barry noted that the key difference in the pension reform
bills currently circulating on the Hill was the treatment
of investment advice.
He noted that, as currently drafted, a requirement of a
“statement of investment principles” contained in the bill
passed by the House in April (HR 3672) and the Senate
Finance Committee (S. 1971) would both apply to 457
plans.
However, Senator Kennedy’s version (S. 1992), as
currently drafted, would not apply to those programs.
Barry noted that since state government plans operate
under a different regulatory framework than federal
programs, the current advice debate has an indirect
application to government plans.
He noted that in government plans trustees and
administrators are allowed to give advice, and that private
entities are required to comply with securities law with
respect to advice – noting that giving advice may be a
fiduciary act under state law.
However, 457 programs, which operate without the
oversight of the Department of Labor on the advice issue,
enjoy more latitude – and potentially more risk – for plan
sponsors.
Barry noted that state laws generally have no explicit
restrictions on advice, nor will it typically have
definitions of advice practices. Still, state
securities laws are likely to require that such advice and
security recommendations be made only through licensed
representatives.
But while 457plans have different issues, Barry noted
that state plans do tend to follow the ERISA model,
including participant education, adoption of independent
computer advisory modules and a demand for independence of
the advice provider.