Catching Up on PSNC 2011 Coverage

August 7, 2011 ( - In June we held the sixth annual PLANSPONSOR National Conference.   


We had a great turnout, marvelous panels, and a great location, all helping to facilitate a great exchange of information!  For those of you who weren’t able to participate (and those of you who were), here’s a summary, with links to expanded coverage.  

Mark your calendars NOW for next year’s event – June 4-6, Chicago, Illinois.  You won’t want to miss out!  

You can check out a photo gallery from the event HERE.

You can access recordings of the event HERE.


10 (More) Things You’re Probably (Still) Doing Wrong  

A panel at the PLANSPONSOR National Conference discussed 10 things retirement plan sponsors are probably doing wrong as fiduciaries.  Fred Reish, Chair, Financial Services ERISA Practice, Drinker, Biddle & Reath LLP, says sponsors should focus on themselves instead of on what all mutual funds and investment experts are telling them. There are two steps to deciding what target-date fund is right for their plan. First, sponsors should understand their employees; if they are in an industry where if there is a recession older employees could get laid off or retired, then they need to have a conservative glidepath, if they are with a high tech industry where employees make a lot of money and are always going to be employable, that suggests they could have a more aggressive glidepath.   


Fixing 403(b) Plan Mistakes 


Michael J. DiCenso, National Practice Leader, Gallagher Retirement Services, told attendees at the PLANSPONSOR National Conference that 403(b) plan committees, whether governed by the Employee Retirement Income Security Act (ERISA) or not, are fiduciaries under federal, state and common laws, and should act in the best interest of participants and beneficiaries and should be free of conflicts of interest.  Speaking on common errors with 403(b) plan compliance the Internal Revenue Service is seeing, Colleen Shull, Revenue Agent, IRS, said self correction is not available for having no written plan document as of December 31, 2009. Sponsors need to use either the Voluntary Compliance Program or an Audit Closing Agreement.  Sponsors also seem to be having problems with implementing plan features unique to 403(b) plans, according to Shull. 


Misbehavioral Finance 


There’s always a lot of talk about how to improve participant behavior in a retirement plan, but sometimes it’s the plan sponsor that “misbehaves.”  At the PLANSPONSOR National Conference in Chicago last month, panelists discussed ways in which plan sponsors might struggle in fulfilling their fiduciary duties.  Tim Black, Senior Vice President at Mosse & Mosse Associates cited problems such as a “herd mentality,” “analysis paralysis,” or “recent-cy bias” influencing committee decisions, while Diane Gallagher, Vice President at J.P. Morgan Asset Management, said that plan sponsors need to leverage the power of communications as much as possible “to make it hard for people to fail.” Jennifer Flodin, COO and Co-Founder of Plan Sponsor Advisors, told the audience “You need to take a step back and think about what this plan is intended to do; are you getting any [return on investment] on it?”  Kristi Mitchem, Head of Global Defined Contribution at State Street Global Advisors, said there is a consistent fear among investment committees of receiving a negative reaction from the participant base, and that we tend to “over-extrapolate” the power of the small percentage of participants that would care to vocalize their concerns.  


Small Plans, Big Challenges 


At the PLANSPONSOR National Conference, a panel discussed the challenges facing smaller (less than $10 million in assets) employer-sponsored retirement plans.  Perry Wolkowitz, Director, Finance & Administration, EIMC LLC, said he wants to give his employees enough choices - but every few months, he’ll get a notice saying some fund is on a watch-list – then soon after that, he’ll get another notice saying he needs to remove that fund.  He fears that this makes him look bad.  Don Jones of Fiduciary Doctors advised Perry that he shouldn’t be worried that he’s moving assets around too often.  The way Jones see it, the plan fiduciary is the parent of the plan – and sometimes, the parent has to take action, even if the “children” (participants) aren’t sure of the reasons why the action was done.  Michele Suriano of Castle Rock Investments noted that in small plans, it’s critical to determine who is a fiduciary, and advocated establishing a charter delineating the duties of each person.  Bill Elmslie of ING said above all, you still need an adviser to walk you through the process.  Another challenge Wolkowitz discussed is that of compliance.  He explained how he’s never sure what will be thrown at him next. 


Is Your Plan Ready for a Retirement Income Option? 


Phil Senderowitz, Senior Plan Consultant, 401(k) Advisors, told attendees of the PLANSPONSOR National Conference that to know whether their retirement plan is ready for a retirement income option, sponsors should consider the long-term implications of using a retirement income product and the unknowns.  John A. Pickett, SVP, Financial Advisor, CAPTRUST Financial Advisors, said sponsors need to recognize there is a need for retirement income products. Plan communications previously only focused on how participants can accumulate savings, but now communications should help participants see their retirement plan as a source of retirement income.  Panel moderator Nevin Adams, Editor-in-Chief, PLANSPONSOR, said some studies have shown that the number one reason sponsors said they don’t have a retirement income product in their plans is. 


Setting the Right Benchmarks 


At the PLANSPONSOR National Conference in Chicago last month, panelists discussed what benchmarking means to them and what plan sponsors should consider when analyzing their plans.  Doug Prince, Managing Director, The Prince Group of Stifel Nicolaus, said there are five areas that can be benchmarked individually: plan design, fees, participant benchmarking, investments, education, and service provider/vendor.  Barbara Delaney, Principal, StoneStreet Equity, said something as broad as “participant readiness” may seem hard to benchmark at first, but there are specific items to consider, such as the average deferral rate.  Mary K. Hollingsworth, Director - Client Communications, Product and Business Support, Wells Fargo Institutional Retirement and Trust, challenged the audience with a question; “Is your plan successful and how do you know?” 

Best Practices for 403(b) Plans 


Laurie Clemens, Director of Human Resources for Heritage Valley Health System, PLANSPONSOR’s 2011 Non-profit/403(b) Plan Sponsor of the Year told PLANSPONSOR National Conference delegates about the massive education campaign that moved the System’s plan from a 53% participation rate to 82% in just four years, while Chris Cannova, Director of Compensation & Benefits, Archdiocese of Chicago, adds that plan sponsors should make sure their providers and adviser know their business, not just the 403(b) market, but the particular market segment the sponsor is in.  Jim Phillips, President of advisory firm Retirement Resources, suggests starting with the basics, not only a mission statement for the plan, but identifying who are fiduciaries to the plan and what are their duties. 


Creating Better Savers 


A panel of experts at the PLANSPONSOR National Conference discussed practical ways to engage and involve the unengaged participant.  Mary Martinis, Director-Retirement Plan Services, The Heestand Company, says the industry has been guessing what participants need and sending them messages in a variety of ways. She contends that one-on-one meetings work better because a sponsor or adviser can listen to why a participant isn’t saving and what he or she is afraid of.  Erica Stebe, Assistant VP, Client Communication Consulting, MassMutual Retirement Services, agrees, noting that participants get some 3,000 messages of some sort each day and they only effectively remember four.  Scott West, Head of Consulting, Invesco Van Kampen Consulting, noted that investors want a positive message. They don’t want to be spoken to in a fear-based way.  According to Janet L. Ganong, Retirement Plan Consultant, The Kieckhefer Group, RBC Wealth Management, messages should be impactful – don’t just tell participants to save, but give them real numbers on how much to save. 


Five Things You Need to Know About Retirement Income 


When defined benefit plans were the prominent employer-sponsored savings vehicle, employees didn’t worry about accumulating savings; they knew they were going to get a monthly income. The switch to 401(k)s changed that focus, according to Steve Smith, VP, Sales & Corporate Plans Market Leader, Diversified Investment Advisors, a member of a panel at the PLANSPONSOR National Conference discussing five things sponsors need to know about retirement income.  On that list were to know why you need a retirement income solution, develop an income policy statement, realize that you may need to influence your recordkeeper, and know that the hurdles to adoption are not as high as you may think. 

Building a Better Retirement Plan Menu 


A panel at the PLANSPONSOR National Conference discussed best practices for building a better retirement plan investment menu.  “Investment decisions for your retirement plan start and stop with the investment policy statement,” says Michael Maresh, Financial Advisor, The Maresh Yoshida 401k Group.  The IPS should dictate the type and number of funds as well as when funds should be terminated.  Brett Howell, Wealth Management Advisor, The Howell & Sharp Group at Merrill Lynch, suggests sponsors first understand who their employees are and put forth a mission statement for their plan. 


Is My Plan Design Effective? 


Another way for sponsors to ask “Is my plan design effective,” is to ask “Are participant behaviors effectively improving their retirement security,” according to Joseph Ready, EVP, Director of Institutional Retirement and Trust, Wells Fargo, speaking to attendees of the PLANSPONSOR National Conference.  Ready notes that the traditional measures of plan success are participation rate, deferral rate, and investment diversification. While these are good, he contends sponsors need to go deeper, looking at participant demographics and personas. 


Picking the Best Provider 


Panelists at the recent PLANSPONSOR National Conference all agreed that before doing a search for a new retirement plan provider sponsors need to be clear on their goals.  Tom Johndrow, Director Retirement & Relocation, Monsanto, said to first decide who is part of the team that will handle the search.  For medium sized plans, Jania Stout, VP, Retirement Plan Consulting, PSA Fiduciary Consulting Group, said it is usually the retirement plan committee that handles the search, while William S. Van Ess, Financial Advisor/Employee Benefits Specialist, Spectrum Insurance Group, who advises small plans under $10 million, said for small plans the team may only consist of the owner and HR manager. 

Five Things You Need to Know About Being a Fiduciary 


A panel at the PLANSPONSOR National Conference in Chicago discussed five things retirement plan sponsors need to know about being a fiduciary, including a reminder that plan committees can’t eliminate their fiduciary liability (although they may be able to hand some of it off), that there are some questions you always want to be able to say “yes” to, that fiduciary governance is more than just the investments, and due diligence on service providers is a big deal.   


Alpha Bets 


John Keefe, Contributing Editor, PLANSPONSOR, told attendees at the PLANSPONSOR National Conference that while there has always been a theoretical need for liability-driven investing (LDI) - what else would pension plan sponsors invest against but their liabilities - but sponsors are reluctant to take on that approach.  Steven W. Glasgow, SVP, Avondale Partners LLC, says the response he almost always gets from clients when asked if they have considered LDI is that they are waiting for interest rates to go up, while John Dixon, Manager, Employee Benefits, Joy Global Inc., whose firm is in the process of moving to LDI, said that a key barrier in deciding to take that approach is making the leap that asset return is a distant second to benchmarking liabilities.  To start the process of managing funded status volatility, Francis A. Salem, Sr. Portfolio Manager, Columbia Management, says sponsors should look for a return that compares with the change in the value of liabilities every year, with lowest risk. Begin with duration matched fixed income, bonds put together to match the annual liability discount rate, Salem suggests.  The next part in the process is to look at. 


Committeed Relationships 


Deciding what investments should be included in a retirement plan’s menu and monitoring those investments is a huge amount of risk and liability for just one person; plan sponsors need an investment committee.  Michael W. Kozemchak, Managing Director, Institutional Investment Consulting, told attendees at the PLANSPONSOR National Conference that as sponsors think about who should be on the committee, who might be a fiduciary to the plan already and move from there. Attila T. Toth, Principal, Portfolio Evaluations, Inc., adds that for his clients, the committee usually includes representation from the finance and HR departments.  Doug Halman, Director of Finance, for the Indianapolis Art Center, which is a nonprofit still in the process of starting up its investment committee, says it struggles with the skill set of its current board, so it is trying to recruit outside folks with investment skills to serve on the board. 

The “To” Versus “Through” Debate 


“THROUGH” WAYS?  Since the market downturn of 2008 there has been increasing debate on whether target-date funds should take retirement plan participants “to” retirement or “through” retirement.  Scott Brooks, Head of U.S. Retail Client Relations and Business Development, RREEF, told attendees at the PLANSPONSOR National Conference there is no right or wrong answer; sponsors must figure out what is right for their particular plan and circumstances.  Glenn Dial, SVP, Head of Retirement Product Business Development, Allianz Global Investors Distributors LLC, says there is no clear definition of which funds are “to” and which are “through,” but that as a general rule, a “to” fund would be one with the least risk and least equities at the retirement date, and a “through” fund has more risk and equities at the target-date.  Steve Bleiberg, President and Chief Investment Officer, Legg Mason Global Asset Allocation, argues that a 65-year-old may still live another 20 years, so why be conservative. 


Five Things You Need to Know About QDIAs 


Qualified Default Investment Alternatives (QDIAs) are not a “get out of jail free” card for fiduciary liability.  Panelists at the PLANSPONSOR National Conference said that according to the Department of Labor, sponsors still have to do their due diligence in the selection and monitoring of QDIAs, have to understand what they’re buying, how they work, and how much it costs.  Bradford Campbell, of Counsel, Schiff Hardin LLP, said documentation of the reasons for selection is more important than what the fund does (how it performs), while Philip J. Callahan, Managing Director, National Sales Manager, Retirement Services Group, Goldman Sachs, said the QDIA choice is often directed by the retirement plan provider, and the sponsor may not be aware of other options – balanced funds and managed accounts. According to Callahan, target-date funds may not meet all the needs of the plan or participants. 


Glide Paths 


With 12% of retirement plan assets in target-date funds and 40% of new assets going into TDFs, panelists at the PLANSPONSOR National Conference said it is critical that everyone understand their composition.  Dan Oldroyd, Executive Director, J.P. Morgan Asset Management, discussed one growing trend among TDFS – deciding to use a “custom” TDF in the plan, outlining four considerations when deciding to go that direction.  Josh Cohen, Defined Contribution Practice Leader for Russell Investments, honed in on diversification, noting that diversification is not a “magic bullet for higher returns” nor will it make up for not saving enough or not being in a TDF.  He cited three elements of diversification: manager diversification, asset class diversification, and how to address inflation risk.  Craig Lazzara, Senior Director, U.S. Equity Products for S&P Indices, said that the problem with benchmarking these funds is that there are a lot of moving parts, but explained three main ways in which sponsors can benchmark TDFS. 

So, Sue Me 


Don’t put anything in writing that you wouldn’t want printed in the Wall Street Journal.  That was one message to plan sponsors from attorneys on a panel at the PLANSPONSOR National Conference. Nancy G. Ross, Partner, McDermott, Will & Emery told attendees that if they find themselves in litigation, discovery is a long, tedious process, and the plaintiffs will ask for documentation of everything.  Another message from H. Douglas Hinson, Partner, Alston & Bird LLP, is to keep good records and minutes. Hinson reminded sponsors not to leave loose ends in meeting minutes or investment policies statements; sponsors should do what they say they're going to do.  Hinson said this message was clear from the recent decision in George v. Kraft where, James Fleckner, Partner, Goodwin Procter LLP, said, the 7th U.S. Circuit Court of Appeals decided the case would have to go to trial because Kraft hadn’t done an RFP in 15 years. 


The New Fiduciary  


The Department of Labor’s (DoL) proposal for a new definition of fiduciary was discussed at the PLANSPONSOR National Conference—and a representative from the DoL was present to add his viewpoint.  Michael Davis, Deputy Assistant Secretary at the DoL, began by saying how the concept of fiduciary is the core component of the Employee Retirement Income Security Act (ERISA), and that the original five-part test to determine if one is acting as a fiduciary (the advice is individualized, provided for a fee, provided on a regular basis, pursuant to a mutual understanding between the plan sponsor and adviser, and the advice will form the primary basis for the plan’s decision-making), is being overhauled, Davis said, to better protect plan sponsors—particularly sponsors of smaller plans.