Compliance June 9, 2001

DOL Opposes Easing Advice Restrictions

September 18, 2000 (PLANSPONSOR.com) - Acting Assistant Secretary of Labor Leslie Kramerich says recent attempts to lower restrictions on offering investment advice to plan participants are not needed, and could be harmful.
Reported by

However, she did say the Labor Department was open to looking at ways to overcome those barriers, while protecting participants.

In a speech at the 2000 Los Angeles Benefits Conference, Kramerich, who heads the department’s Pension and Welfare Benefits Administration, also said that simply telling participants the source of the investment advice would not overcome the conflicts of interest inherent in that structure.

Get more!  Sign up for PLANSPONSOR newsletters.

She did acknowledge that concerns about fiduciary liability might be keeping some employers from offering advice, but said that the department believes that current law affords employers “considerable flexibility” in responding to participant advice needs.

Kramerich noted that the Labor Department’s Interpretive Bulletin 96-1 made it clear that designating a person to provide investment advice to pension plan participants would not, in itself, give rise to liability for losses resulting from an individual participant’s investment decision.

She also described as “phenomenally troubling” any attempt to constrain PWBA’s oversight responsibilities with regard to employee pension plans, according to BNA Pension & Benefits Daily.

Kramerich acknowledged that many workers need investment advice, since they have little/no background in complex investment concepts.

She also said:

  • designating a person to provide investment advice does not, in and of itself, give rise to liability for losses resulting from the participant’s investment decisions.
  • employers are not liable for acts of investment advisors. However, they are responsible for the prudent selection and monitoring of the advisor(s), as they are with any service provider.

She also made clear that the department expects that fiduciaries will be prudent in their selection of advisors – and will periodically review those choices.

– Nevin Adams           editors@plansponsor.com

Benefits June 8, 2001

Health Spending Increases Led Benefits Trends

June 8, 2001 (PLANSPONSOR.com) - Employers spent $5.3 trillion on total compensation in 1999, with wages and salaries accounting for 84% and benefits making up the remainder, according to the Employee Benefits Research Institute (EBRI)
Reported by

In comparison with employer benefits spending in 1960, in 1999 the proportion of total benefits spending on:

  • retirement benefits declined from 59.6% to 47.8%
  • health benefits increased from 14.3% to 48.1%
  • other benefits declined from 25.7% to 10.4%

In the 1980s, employer spending on all benefits increased at an average annual rate of 8.1%, falling to 3.7% in the following decade.

Get more!  Sign up for PLANSPONSOR newsletters.

The rate drop was largely due to the slowdown in spending on group health insurance, which fell from an average growth rate of 11.9% to 4.5% in the 1990s.

The rate of employer spending on group health insurance has fallen steadily from 1981, when it increased by 17.5%, to a negative growth rate in 1997 of minus 4.9%. Since then, the growth rate of employer spending on this benefit has been increasing, reaching 7.4% in 1999.

Private Sector Benefit Spending $60 billion by 2000

Research by EBRI also shows that spending on retirement income benefits, excluding Social Security, increased at a rate of 4%, in comparison to a much slower average annual growth rate of 1.2% in the 1990s.

Spending on retirement benefit, excluding social security, is divided as follows:

  • Private-sector employers spent $55.3 billion in 1980, increasing to $62.6 billion in 1990 and falling to $60.4 billion at the end of the decade
  • State and local government spent $19.1 billion in 1980, rising to $33 billion ten years later, and increasing to $42.5 billion in 1999
  • The federal government spent $30.1 billion on retirement income benefits, less Social Security and railroad retirement in 1980. This increased to $58.8 billion in 1990, and to $69.6 billion in 1999.
  • In the 1980s, the 5.6% growth rate in employer spending for retirement income benefits, less Social Security, by state and local governments outpaced that of the private sector, which increased at an annual rate of 1.2%.

 In the 1990s, private spending on retirement income benefits decreased at an average annual rate of minus 0.4%, in comparison to the 2.9% rate among state and local governments.


 

«