Pensions & Investments East Coast Defined Contribution Conference

Event: Pensions & Investments East Coast Defined Contribution Conference

When: March 3-4, 2008

Where: PGA National Resort & Spa, Palm Beach, Florida

What: Defined-contribution plan sponsors, providers and consultants come together to discuss compliance, best practices and the changing regulations in retirement benefits.

Conference information: For information about Pensions & Investments, go to www.pionline.com.

Day 2—March 4, 2008

Compliance complaints: Day 2 kicked off with Deanna Garen, senior vice president, relationship management, at Prudential Retirement, lamenting all the new rules and regulations confronting 401(k) plan providers.

“If only we could spend as much money on innovation as we do on compliance,” she said as several people in the audience nodded their heads.

Preaching to the choir: Keynote speaker Raymond Martin spent the first half of his keynote speech discussing the retirement savings crisis in America—a concern that wasn’t new to attendees.

However, benefits managers’ ears pricked up when Martin, president and CEO of CitiStreet Advisors, chastised them for only automatically enrolling new hires into their 401(k) plans and not current employees.

The three biggest reasons companies say they do not automatically enroll current employees is they are afraid of increased liability, more costs associated with offering an employer match to more participants, and a fear of increased complaints from employees, Martin said.

But if companies comply with the Pension Protection Act on default funds for employees, liability shouldn’t be an issue, he said. And proper communications and education should address complaints from employees, he said. And what about increased cost?

“My sense is that the savings companies are seeing from changes in their pensions and health care plans are more than the increase cost associated with the employer match,” he said.

Martin also gave an earful to 401(k) plan providers for making it so difficult for employees to roll over their assets from a 401(k) plan to an Individual Retirement Account. This is a particular issue as young people are switching jobs more often, he said.

“It is just absurd how difficult financial institutions make it to roll over money,” he said. As a result, employees often just cash out of their plans.

Even legislators—none of whom were in attendance—got a talking-to from Martin in his speech. As people are living longer, these individuals are going to need to figure out how to pay for their health care in retirement, he said. Martin called on Congress to allow for tax-free withdrawals from 401(k)s to pay for health care.

“This could be yet another incentive to get employees participating in their 401(k) plans.”

Day 1—Monday, March 3, 2008

More news on the horizon: Plan sponsors and providers who thought they could relax now that the Pension Protection Act has been enacted were in for a rude awakening from the opening speaker of the conference.

James Delaplane, a partner at the Washington law firm Davis & Harman, is a regular speaker at the P&I events and is known for waking up attendees by listing a number of important issues being batted around Capitol Hill. This conference was no different.

A pressing concern for both plan sponsors and plan providers is the Department of Labor’s pending regulations on fee transparency.

First, the DOL is planning to establish regulations on how plan providers should disclose fees to plan sponsors. This, however, may not be limited to just defined-contribution providers, Delaplane noted. As it currently stands, health and welfare providers and defined-benefit providers would also have to disclose this information—which came as news to several attendees.

“Many people are saying that they should break this out into different buckets,” Delaplane said in an interview after his presentation. It remains unclear what the Labor Department will do.

Even more pressing for employers, however, is what will happen with the current discussions both at the DOL and on Capitol Hill on how employers should disclose fees to plan participants.

Right now, the DOL, the House of Representatives and the Senate are all looking at this issue. The potential good news for employers, according to Delaplane, is that while the House is likely to pass a bill, the Senate is not. This means the Labor Department will likely be the source of the rules on how companies should disclose fees to plan participants.

Without predicting who our next president might be (at the last conference, he predicted that Mitt Romney would be running against Hillary Rodham Clinton), Delaplane also discussed the various implications for employers if Clinton, Obama or McCain became president.

Regardless of who becomes president, there will be much discussion in coming years about how to take care of the baby boomers as they retire, Delaplane said.

The national concern about reaching people who are not covered in retirement plans is only growing.

And the question that all companies are going to be wrestling with is what happens to those retired employees and their management of money after they leave the company, he said. “Are you ready to take that on?”

Effective marketing for 401(k)s: Sitting outside over breakfast, Ross Servick, head of consultant and research relations at Schroders Capital Management, discussed one of the most effective strategies of increasing 401(k) plan participation that he had ever witnessed.

Twenty years ago, when he was just starting to work at MFS Investment Management, the HR person gave him and the other new employees two forms.

They were told that one was to fill out now and if they didn’t want to do that, they could fill out the second one when they turned 65. The first form was a 401(k) application. The second? An application to work for McDonald’s.

Needless to say, everyone signed up.

—Jessica Marquez