Benefits June 28, 2013

For Gen Z, 28 Is the Magic Number

June 28, 2013 (PLANSPONSOR.com) - On average, members of Gen Z expect to be living on their own by age 21, according to the 2nd Annual Generation Z Survey, released by TD Ameritrade Holding Corporation.
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However, 63% say they feel welcome to move back in with their parents in the future if they cannot afford to swing it on their own. This young generation appears to have no qualms about moving back home, either. In fact, many see some benefits to living with their parents. Eighty-one percent of those currently living at home after college or planning to do so say it allows them to save money, while nearly half (48%) say it allows them to be selective about employment opportunities. 

But parents, fear not. Gen Z does not plan to live at home forever. When asked at what age they would be embarrassed to still be living at home, Gen Z, on average, said age 28. Nearly nine out of 10 (88%) would be embarrassed to still be living at home at 30, and half (49%) would be embarrassed to still be living at home at age 25.   

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Not only do they hope to be independent and living on their own by age 28, but it is also the age members of Gen Z, on average, plan to start saving for retirement. Thirty-nine percent of those in Gen Z worry they will not be able to count on Social Security or other government retirement programs when they get older (31% in 2012), and 31% of those in Gen Z are concerned about not being able to put money away for retirement.  

When it comes to the life path they plan to take, those in Gen Z expect major milestones will occur in this order:   

1. Start a job.

2. Buy a car.

3. Pay off student debt.

4. Get married.

5. Buy a home.

6. Start saving for retirement.

7. Have children.

 

“It’s interesting to see that this young generation plans to take a fairly traditional path to their futures, however; the one piece that looks out of place is saving for retirement,” says Carrie Braxdale, managing director, investor services TD Ameritrade, Inc. “Time and time again we hear Baby Boomers say they wish they would have started saving earlier, and the hope is that we can spread the word to Gen Z to start saving as soon as they start working, rather than waiting until they reach other milestones. Even a little bit can go a long way, and the power of compounding interest is an opportunity they do not want to miss out on.”
Compliance June 27, 2013

Tips for Document Requests in Service Provider Investigations

June 27, 2013 (PLANSPONSOR.com) - It’s a situation dreaded by every service provider to a retirement plan: an investigation by the Department of Labor (DOL).
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It’s not the greatest news, and according to law firm Drinker, Biddle & Reath, the DOL has been turning up the heat on service provider investigations. For a number of years it’s been targeting registered investment advisers, and has also begun to target broker/dealers and recordkeepers, the law firm said in a webinar presentation, “Surviving DOL Service Provider Investigations.” 

According to Drinker Biddle, the investigations seem to be part of the DOL’s ongoing Fiduciary Service Provider Compensation Project, which focuses on “the receipt of improper or undisclosed compensation by employee benefit plan consultants and investment advisers.” The main point is to make sure that plan fiduciaries and plan participants receive comprehensive disclosure about service provider compensation and conflicts of interest. The Employee Benefits Security Administration (EBSA) will also conduct criminal investigations of potential fraud, kickback and embezzlement involving advisers to plans and participants.  

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One way investigations of service providers arise is when the DOL is looking into a retirement plan and finds an issue, and then moves over to the service provider, noted Fred Reish, chair of the Financial Services ERISA team, at Drinker, Biddle & Reath. “They found problems in conflicts of interest, self-serving or self-dealing areas,” Reish said.  

But there are ways to survive, which Drinker Biddle, detailed in its webinar.

Get set for the documentation request: lots and lots of it. 

Part of the investigation is the request for documentation, typically a large quantity. For each client, they’ll want the name, employer identification number and address of the plan sponsor; the name of the plan; the plan number; the dates of services for the plan; the name or names of the plan trustee, investment manager and custodian. (Note that for trustee, investment manager and custodian there can be more than one name.) 

The DOL will ask for agreements executed by the provider or an affiliate that detail services provided to employee benefit plan clients.   

The DOL will ask for information about how the plan’s assets were invested. These documents may also describe how advice about the value of securities or other properties was rendered to the plan, as well as how recommendations about investing in, purchasing or selling securities or other property were made.  

Experience in handling these investigations is important, Drinker Biddle advised. First, negotiate with the DOL the timing of responding to the requests. Next, negotiate the volume of materials to be provided. Then, “pre-audit” the materials to see what they are likely to show.

Provide a Sample of Information   

Bruce Ashton, an attorney with Drinker, Biddle & Reath, suggested service providers ask the DOL to issue an administration subpoena to contain the volume of information. He pointed out that the DOL is looking for extremely detailed information on the plan. “In our experience, we try to typically have the client put together information as best it can, and then ask the DOL to select a sample from the list,” Ashton said. “Then the client can put together more details about that selected list, as opposed to every single client.”  

For a recordkeeper that could be tens of thousands of clients, Ashton said, and it is unrealistic to expect the provider to provide this, or for the DOL to review it. “Instead of two moving trucks of documents, try to get DOL to select a sample and provide information on a reasonably small sample,” Ashton advised.

 

The firm made the following observations about the DOL’s request for documents:

•Time allowed for producing documents may be short;

•Much of the information may not be readily available;

•Some types of documents may not exist;

•DOL requests tend to be over-inclusive; and

•Providers need to understand the implications of the questions and the responses.   

 

—Jill Cornfield

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