The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a final rule giving the 72 million participants covered by 401(k)-type retirement plans in the U.S. more information about the fees and expenses of their plans.

“Current law does not require that all workers be given the information they need to make informed investment decisions or, when information is given, that it is furnished in a user-friendly format,” said an EBSA announcement.

“This rule will ensure that all workers who direct their plan investments have access to the information they need to make informed decisions regarding the investment of their retirement savings, including fee and expense information.”

The final regulation requires plan fiduciaries to:

• Give workers quarterly statements of plan fees and expenses deducted from their accounts.
• Give workers core information about investments available under their plan including the cost of these investments.
• Use standard methodologies when calculating and disclosing expense and return information to achieve uniformity across the plan investment options.
• Present the information in a format that makes it easy to compare the plan’s investment options.
• Give workers access to supplemental investment information in addition to the basic information required under the final rule.

© 2010 RIJ Publishing LLC. All rights reserved.

The October 2010 edition of the Melbourne Mercer Global Pension Index, produced by Mercer and the Australian Centre for Financial Studies, ranks the U.S. retirement income system, including Social Security and private pensions, tenth among the retirement systems of major countries

The index gave the U.S. system a score of 57.3 on a scale of 100, with 61 being the average among 14 countries. It described the U.S. system as having “a progressive benefit formula based on lifetime earnings, adjusted to a current dollar basis, together with a means-tested top-up benefit; and voluntary private pensions, which may be occupational or personal.”

No country’ system got an ‘A’ in the survey, which would have required a score of over 80. Five countries scored a ‘B,’ including the Netherlands (the highest, with a 78.3), Switzerland, Sweden, Australia and Canada.

The ‘C’ group included the U.K., Brazil, Chile, Singapore, the U.S., France and Germany.

The following table shows the position of the United States when compared to the thirteen other countries and some of the indicators that either scored relatively well or poorly.

According to Mercer, the overall index value for the American system could be increased by:

• Raising the minimum pension for low-income pensioners.

• Adjusting the level of mandatory contributions to increase the net replacement for median-income earners.

• Improving the vesting of benefits for all plan members and maintaining the real value of retained benefits through to retirement.

• Reducing pre-retirement leakage by further limiting the access to funds before retirement.

• Introducing a requirement that part of the retirement benefit must be taken as an income stream.

© 2010 RIJ Publishing. All rights reserved.

The British government apparently intends to proceed with the foundation of the National Employment Savings Trust (NEST), as well as plans to increase the retirement age to 66 ahead of schedule, IPE.com reported.

The new proposals mean the state pension age will increase from to 66 from 65 between 2018 and 2020, six years earlier than at first proposed. NEST is a national defined contribution plan that resembles the U.S. Department of Labor’s proposed “auto-IRA” for employees of U.S. firms that don’t offer retirement plans.  is intended to increase savings among lower-income workers not served by other plans, will begin in 2011. Auto-enrollment in NEST will begin in 2012.

In December 2006, The U.K. government first proposed NEST—then called Personal Accounts—as a simple, low-cost way to increase individual workers’ savings for retirement.  The expenses would be two percent of the value of each contribution to NEST, and an annual management charge equal to 0.3% of the total amount in the plan.

Starting in 2012, British workers participating in NEST will be automatically enrolled into a default investment fund. They will also have a choice of investments, including options such as social, environmental and ethical investments. The initial contribution limit is £3,600 ($5,700).

Employers must automatically enroll their eligible workers into a qualifying pension scheme and make contributions to it.  Workers will be able to opt-out of their employer’s scheme if they choose not to participate.

NEST is portable. Anyone who joins it can continue to save in it even after they stop working or if they move to an employer that does not use NEST. The self-employed and sole proprietors are not subject to auto-enrolment can join NEST.

© 2010 RIJ Publishing LLC. All rights reserved.

American Funds, iShares, and Prudential Financial lead other providers in “creating strong connections with individual advisors,” according to Advisor Touchpoints 2010, a report issued by Cogent Research this week.

“Prudential has strengthened its grip on advisors in the variable annuity space over the past year, [but]American Funds and iShares face increasing challenges from other mutual fund and ETF providers,” said the report, which is based on a survey of 1,500 registered advisors.   

The proportion of advisors who named Prudential as the variable annuity provider doing the best job keeping them feeling “personally connected to the company, its products, and services,” increased since 2009 to 18% from 14%.

Twelve percent of advisors, the same number as in 2009, said Jackson National was the VA issuer they felt most connected to, while 9% of advisors chose Sun Life Financial, up from only two percent in 2009.

Among mutual fund producers, 19% of advisors this year indicated that “American Funds does the best job making them feeling connected,” compared to 23% of advisors who felt this way one year ago. Franklin Templeton Funds was chosen by 14% of advisors, up from seven percent. BlackRock and Fidelity Advisor funds experienced similar substantial proportional increases.

While iShares was the most popular ETF provider (32% of advisors felt a strong connection), PowerShares, ProShares, and Vanguard are gaining.

©  2010 RIJ Publishing LLC. All rights reserved.

James and Ann West, your average hypothetical American couple on the cusp of retirement, face a dilemma. They hoped to retire in 2014 on $451,000, most of it in qualified plan savings. But Jim, 66, recently suffered a mild infarction and has decided to retire now. Ann, 62 and still earning $30,000, is baffled about what to do next.

What’s the best retirement income plan for the Wests? That was the challenge laid down for individual and plan sponsor advisors in the “Retirement Income Smackdown,” a contest sponsored by the Center for Due Diligence and judged at the CFDD’s 2010 Advisor Conference last week in Chicago.

The winning strategy, determined by a paper-ballot vote among about 150 people, came from John Mulligan, a 53-year-old Oregon CFP and CIMA. He “advised” the Wests to live on earned income and savings for four years, then maximize Social Security, and invest their excess capital in a globally diversified portfolio of stocks, bonds, real estate, commodities and cash.   

In a phone interview, Mulligan described his influences as Moshe Milevsky, the RIIA’s “build a floor and create upside” philosophy, fellow advisors Ed Slott and Craig Israelsen, and Horsesmouth’s “Savvy Social Security Planning for Boomers” product—though not necessarily in that order.

There were two other Smackdown finalists at the CFDD conference, the best of about 25 entries. Burlington, Iowa, advisor Curtis Cloke recommended that the Wests top up their monthly income in retirement by purchasing two installment-refund income annuities, one immediate and one deferred until Ann’s retirement in 2014, with $290,000 of their savings.

A third contestant, William Heestand, a plan sponsor advisor in Portland, Oregon, approached the Wests as plan participants rather than as individual clients. (The CFDD is primarily an organization of plan sponsor advisors and ERISA specialists.) Heestand advised the Wests, who both had qualified plans, to put an in-plan, stand-alone guaranteed lifetime withdrawal benefit rider on their $451,000 in retirement accounts. 

The people behind the Smackdown—Phil Chiricotti, the CEO of CFDD, Keith Diffenderfer, the advisor who hatched the idea, and Garth Bernard, the consultant who MC’d the Smackdown—kept the elements of the West hypothetical as uncomplicated as possible. The Wests, for instance, were renters, not homeowners. It wasn’t said whether they had heirs or beneficiaries.

The takeaway from their comments: the problem of designing an income plan was both difficult to solve and, perhaps paradoxically, amenable to a wide variety of solutions.  Chiricotti wants to reprise the contest at the 2011 CFDD Advisor Conference.

Maximize Social Security

In examining the Wests’ situation, John Mulligan noticed that the couple was four years apart in age. He also noticed that their stated monthly income needs were about $4,000, and that they could eventually meet their fixed costs simply by maximizing their Social Security benefits.

So Mulligan’s plan called for Jim to retire now but delay Social Security until age 70, when he’d qualify for the maximum benefit: $2,990 a month. He advised Ann to work for four more years, then take spousal Social Security benefits of $1,450 for four years before switching to her personal benefits of $1,943 at age 70. (The Social Security estimates include cost of living adjustments, or COLAs.)

During the four-year gap, when Ann was still bringing home $2,250 each month but Jim was foregoing Social Security, Mulligan prescribed a simultaneous Roth IRA conversion of Jim’s $250,000 401(k) assets (in five annual steps) and a $1,775-a-month drawdown of his Roth account to cover living expenses. He paid part of the Roth tax bill with the Wests’ $25,000 money market savings.

As for the Wests’ invested assets, Mulligan advised them to allocate their savings to twelve categories, a la Craig Israelsen (small, medium and large cap domestic stocks, non-U.S. stocks, emerging market socks, real estate, resources, commodities, domestic and non-U.S. bonds, TIPS, and cash), and to rebalance monthly. Such a portfolio would have averaged 9.51% a year from 2000 to 2009, Mulligan said.

Buy income annuities

At the heart of Curtis Cloke’s strategy were two income annuities. Cloke, the creator of the THRIVE Income Distribution System, advised Jim West to take $2,265 a month in Social Security benefits immediately. He recommended that Ann retire in four years and claim lifetime benefits of $1,472. 

To supplement Jim’s Social Security benefits and Ann’s salary until 2014, Cloke had the Wests put about $250,000 in an inflation-adjusted (5%), installment-refund, joint life income annuity that paid $754 a month starting in April 2011. In addition, Ann used $39,000 of her qualified savings to buy a deferred installment-refund joint life income annuity that paid a level $341 a month, starting in January 2018. At that time, Ann would begin taking $624 a month in RMDs from her 403(b) plan. 

After purchasing their annuities, the Wests would have about $160,000 for emergencies and splurges. If they needed more liquidity for any reason, they could tap the commuted value of their $250,000 annuity. Cloke’s plan also included a conversion of Ann’s 403(b) to a Roth IRA. He rejected other scenarios—such as Jim delaying Social Security or Ann retiring in 2010—because they consumed so much capital over the next four years. 

Get a living benefit rider

Then there was the GLWB solution. William Heestand, president of The Heestand Company, a Portland, Oregon plan sponsor advisor, assumed that Jim’s 401(k) and Ann’s 403(b) plans each offered a stand-alone lifetime withdrawal benefit rider like Prudential’s IncomeFlex or Great-West’s SecureFoundation in-plan annuity programs.

Heestand’s advice: Jim should retire now and claim Social Security, while Ann should work until 2014 and then claim. They should cover their entire $410,000 in qualified savings with a GLWB and activate the 5% annual withdrawal ($20,500). He assumed that their expenses started at about $56,000 per year, including Medicare supplements and long-term care insurance premiums.

Spreadsheeting the variable annuity’s investment performance under benign and adverse market conditions, Heestand observed—as others have—that the GLWB was superfluous under a benign scenario.  But under adverse conditions, it provided about $300,000 more in income over a lifetime and left a larger estate than an uninsured, investment-only strategy. In particular, it protected the Wests from sequence of return risk, which Heestand described as “the real deal—the biggest financial risk in retirement.”

© 2010 RIJ Publishing LLC. All rights reserved.

Income from annuity sales at bank holding companies (BHCs) reached $640.9 million in the second quarter of 2010, up 10% from $582.6 million in the first quarter, according to the Michael White-ABIA (American Bankers Insurance Association) Bank Annuity Fee Income Report.

Year over year, bank annuity fee income was up 8.0% from the $593.1 million in the second quarter of 2009. First-half 2010 annuity commissions of $1.22 billion, however, were down 7.8% from $1.33 billion in the first half of 2009.

The report is based on data from all 7,077 commercial and FDIC-supervised banks and 930 large top-tier bank holding companies operating on June 30, 2010. Of those 930, 387 or 41.6% participated in annuity sales activities during first half 2010.

Their $1.22 billion in annuity commissions and fees constituted 10.8% of their total mutual fund and annuity income of $11.33 billion and 15.1% of total BHC insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $8.10 billion.

Of the 7,077 banks, 894 or 12.6% participated in first-half annuity sales activities. Those participating banks earned $375.0 million in annuity commissions or 30.6% of the banking industry’s total annuity fee income. However, bank annuity production was down 22.6% from $484.3 million in first half 2009.

Nearly seventy-three percent (72.7%) of BHCs with over $10 billion in assets earned first-half annuity commissions of $1.15 billion, constituting 94.0% of total annuity commissions reported. This revenue represented a decrease of 8.4% from $1.26 billion in annuity fee income in first half 2009.

Among this asset class of largest BHCs in the first half, annuity commissions made up 10.3% of their total mutual fund and annuity income of $11.16 billion and 15.0% of their total insurance sales volume of $7.65 billion.

BHCs with assets between $1 billion and $10 billion recorded an increase of 4.9% in annuity fee income, rising from $59.6 million in first half 2009 to $62.5 million in first half 2010 and accounting for 37.4% of their mutual fund and annuity income of $167.1 million.

BHCs with $500 million to $1 billion in assets generated $11.0 million in annuity commissions in first half 2010, down 8.2% from $12.0 million in first half 2009. Only 32.3% of BHCs this size engaged in annuity sales activities, which was the lowest participation rate among all BHC asset classes. Among these BHCs, annuity commissions constituted the smallest proportion (12.9%) of total insurance sales volume of $84.9 million.

Wells Fargo & Company (CA), Morgan Stanley (NY) and JPMorgan Chase & Co. (NY) led all bank holding companies in annuity commission income in first half 2010. Among BHCs with assets between $1 billion and $10 billion, leaders included Stifel Financial Corp. (MO), Hancock Holding Company (MS), and National Penn Bancshares, Inc. (PA).

Among BHCs with assets between $500 million and $1 billion, leaders were First American International Corp. (NY), Ironhorse Financial Group, Inc. (OK), and First Citizens Bancshares, Inc. (TN).

© 2010 RIJ Publishing LLC. All rights reserved.

The exodus of assets from domestic equity funds has been a big story this year. But TrimTabs Research notes that a lot of that outflow is finding its way into global equities, thus refuting the conventional wisdom that aging Boomers aren’t losing their risk appetite.

“Global equity mutual funds have posted an inflow of $72.2 billion since the end of March 2009, roughly matching U.S. equity fund redemptions of $65.2 billion,” according to TrimTabs September 22 fund flow report.

“In other words, there seems to be a specific disdain for U.S. stocks. We believe this is mostly because U.S. equities have been a terrible investment in the past decade.”

But TrimTabs confirmed another piece of conventional wisdom: that retail investors tend to buy high and sell low. Mis-timing the market apparently made the past decade even worse for many people than the S&P’s point-to-point net-zero performance in the Naughts Decade implies.

During the past decade, the S&P 500 ranged from a high of 1,565 in October 2007 to a low of 676 in March 2007. But the “flow-weighted purchasing price” was 1,434. That’s worse timing than a chimpanzee could achieve by throwing rubber darts at a Bloomberg screen. “If investors had bought randomly, their flow-weighted purchasing price should be 1,171—the average closing price of the S&P 500 in the past decade,” TrimTabs reported.

As a result, “about half of U.S. equity mutual fund investors are sitting on paper losses of more than 25% even though the S&P 500 stands exactly at its 10-year average,” the weekly bulletin said. “This helps to explain persistent equity fund outflows despite the recent rally. Some mutual fund investors are so deep underwater that rallies are essentially meaningless to them. Also, many investors might be selling simply to harvest losses on their underwater positions.”

© 2010 RIJ Publishing LLC. All rights reserved.

Jackson National Life has introduced a “customizable guaranteed minimum withdrawal benefit (GMWB) called Freedom Flex as an option on its Perspective series variable annuity contracts.

“We took our Lifeguard Freedom Six, which had a six percent annual bonus and an annual step-up for a fee of 95 basis points, renamed it Freedom Flex, and added a 5%, 7% or 8% bonus with either an annual or quarterly step-up,” said Alison Reed, vice president of product management. “The rider price now ranges from 90 bps for a 5% bonus with an annual step-up to 130 basis points a year for the 8% bonus with an annual step-up.” Quarterly step-ups aren’t available on the 8% bonus.

“We’ve always focused on the cafeteria-style VA product, with various withdrawal and bonus options, and we decided to extend that to the GMWB option. It’s an extension of our ‘give the rep a choice’ philosophy,” Reed told RIJ.

Perspective contract holders can choose from the following options:

• 5-8% annual bonus or “roll up.” Investors can grow their guaranteed withdrawal balance (GWB) by selecting an annual bonus ranging from 5% to 8% in years with no withdrawals.
• Quarterly or annual step-ups. Contract holders can capture investment gains with annual or quarterly step-ups. Annual step-ups lock in the contract anniversary value, while quarterly step-ups lock in gains annually based on the highest adjusted quarterly contract value.
• Single or joint option. Clients can provide guaranteed lifetime income for themselves with the single option, or for themselves and their spouse with the joint option. The joint option isn’t available on the 7% rollup with the quarterly step-up or the 8% rollup.
• 99 investment options. Contract holders can choose from among 99 investment portfolios, without asset allocation restrictions.

Contract holders who wait 10 years (or until age 70, if later) to take withdrawals are eligible for a 200% GWB adjustment, which increases their guaranteed withdrawal balance to double what they invested in the first year.

When investors are ready to start taking retirement income, they may withdraw between 4% and 7% of their guaranteed withdrawal balance every year for life, depending on their age at the time of the first withdrawal. Contract holders can also start and stop withdrawals as desired, giving them the flexibility to decide when to take income.

In conjunction with the Freedom Flex launch, Jackson has added BlackRock, the world’s largest asset manager with $3 trillion under management, to its investment manager lineup. The firm will manage the new JNL/BlackRock Global Allocation portfolio, and will also subadvise the JNL/BlackRock Commodity Securities portfolio. In May, the company expanded its investment offerings with the addition of six American Funds Insurance Series portfolios.

© 2010 RIJ Publishing LLC. All rights reserved.

Vanguard’s ultra-low cost “Admiral” class of mutual fund shares, until now available only to investors able to put at least $100,000 in an individual fund, are now within the reach of ordinary middle-class investors.

Investors now have to put only $10,000, not at least $100,000, in Vanguard’s broad stock and bond market index funds to buy ultra-low cost Admiral Shares, and only $50,000, not $100,000, to qualify for Admiral Shares on most Vanguard actively-managed funds.

Someone investing $50,000 in Vanguard’s 500 Index Fund, for instance, would pay $35 a year in management fees instead of $90. He or she would pay seven basis points (.07%) per year in fund management fees, the Admiral Shares price, instead of 18 basis points, the Investor Shares price. 

The move affects an estimated two million Vanguard shareholders and 52 Vanguard funds, including the huge Total Stock Market Index Fund (Admiral Shares, 7 basis points/Investor Shares 18 bps), the Total Bond Market Index Fund (Admiral Shares, 12 bps/Investor Shares, 22 bps) and Total International Stock Market Index Fund (Admiral Shares 20 bps/Investor Shares, 32 bps). 

© 2010 RIJ Publishing LLC. All rights reserved.

Google to Map Inflation Using Web Data

Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics. But the GPI is still a work in progress, the Financial Times reported.  

At the National Association of Business Economists conference in Denver, Google chief economist Hal Varian said economic data can be gathered far more rapidly using online sources. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks.

Since last Christmas, Varian said that the GPI shows a “very clear deflationary trend” for web-traded goods in the U.S. Though not seasonally adjusted, the data show that prices rose during the same period a year ago. The ‘core’ CPI in the US, which excludes food and energy, rose 0.9 per cent on a year ago in August.

Comic Fred Willard Stars in Symetra’s ‘Don’t Fear 65’ Campaign   

Known for his film work in Waiting for Guffman and Best in Show, as well as TV roles in Modern Family and Everybody Loves Raymond, Fred Willard appears in three new video shorts hosted on Symetra Life’s DontFear65.com website. Willard also is featured in online ads directing consumers to the site.

The campaign is designed to fight post-crisis paralysis and dispel obsolete ideas about retirement. “‘Don’t Fear 65’ is more than an awareness campaign; it’s a call to action,” said Jim Pirak, Symetra vice president of Corporate Marketing. “With the confidence of many retirees shaken by the economic downturn, Don’t Fear 65 encourages people to take charge of their financial future and approach retirement with optimism.”  

In the web videos, Willard is seen on a Sunday drive with an actor playing his grandson. “Grandpa” gives the boy dubious financial advice in vintage Fred Willard style. He regales his grandson with a series of observations about staying healthy, planning for retirement and achieving important milestones in retirement.

A series of title cards are interspersed throughout the videos, countering the questionable advice from Grandpa with sound information about how Symetra’s income annuity products can help build guaranteed income for life. Now in its third year, the campaign website is a resource for Symetra distribution partners to use with their clients as they build financial plans.

The campaign will run nationally through banner ad placements on websites frequented by retirees and pre-retirees, including MSN, Yahoo, WSJ.com, MarketWatch.com, Barrons.com, SmartMoney.com, Kiplinger.com, and online media outlets on the Tribal Fusion ad network. Symetra worked on the updated campaign with Seattle-based Copacino+Fujikado.

TIAA-CREF CEO Calls for New Thinking on Retirement Security

In San Antonio, Texas, TIAA-CREF CEO Roger W. Ferguson, Jr. told members of the National Council on Teacher Retirement at their annual conference that it’s time “to rethink, repair, and restart America’s retirement system.”  

He called for a system that would “combine the best practices of defined benefit plans and defined contribution plans, be affordable for employers, and give employees access to guaranteed income that will last a lifetime.” Such a system would:

• Ensure workers have access to retirement savings opportunities. By enrolling workers automatically, private-sector workplace plans can approach the public sector, where nearly all full-time workers have access to a retirement plan, he said.
• Help workers amass sufficient savings, via 15-20 investment options, as well as objective advice and guidance to help workers understand them.
• Provide opportunities to save for long-term retirement health care expenses, which can be anywhere from $200,000 to $800,000 for a retired couple.   
• Offer all workers a guaranteed lifetime income option. The average monthly Social Security payment for retired workers is about $1,600, he said, while average monthly spending for individuals over age 65 exceeds $3,000.

Eighty percent of higher education employees, who use TIAA-CREF, describe themselves as “somewhat confident” or “very confident” that they will have enough money to live comfortably in retirement, compared with just 54% of all U.S. workers, according to the TIAA-CREF Institute.

As an example of a new approach to public sector retirement plans, Ferguson cited TIAA-CREF’s agreement with the government of Orange County, California to provide an optional defined contribution retirement account that would supplement a new tier in the county’s defined benefit program.

The plan offers new county employees the option of taking a reduced defined benefit, and the county will match a percentage of savings directed to an employer-provided individual account. It includes fixed annuity options that can be used to supplement defined benefit income guarantees.    

Phoenix Life and Reassurance of NY Is Sold to Philadelphia Financial and Renamed 

A company that recently split off from the Phoenix Companies Inc. is the new parent of Phoenix Life and Reassurance Company of New York, National Underwriter reported.

Philadelphia Financial, Plymouth Meeting, Pa., a firm that specializes in selling private placement insurance through advisors who serve wealthy individuals, says it has acquired Phoenix Life and Reassurance of New York and renamed the company Philadelphia Financial Life Assurance Company of New York.

Phoenix Companies, Hartford, a 159-year-old insurer that has been hit hard by the recession, sold Philadelphia Financial to Tiptree Financial Partners L.P., New York, in June. Phoenix has been reporting the Philadelphia Financial business as a discontinued operation since 2009.

The main life operating subsidiary of Phoenix Companies is domiciled in New York state, and the Phoenix Companies did not need Phoenix Life and Reassurance to sell life and annuity products in New York state, a Phoenix Companies representative says.

John Hillman is the president of Philadelphia Financial. Tiptree, the current majority owner of Philadelphia Financial is, a holding company controlled by large financial institutions.

Goldman Executive Joins New York Life’s RIS Business

Benjamin Woloshin has joined New York Life as senior vice president and head of relationship management for its Retirement Income Security (RIS) business, reporting to executive vice president Chris Blunt.

Woloshin had most recently been vice president responsible for institutional relationships in Goldman Sachs’ Reinsurance Group.  He also worked at MetLife and Putnam Investments.

Blunt said he planned to hire several additional senior-level relationship managers who will report to Woloshin, who replaces senior vice president Allyson McDonald, who has assumed responsibility for the external sales operation of RIS, also reporting to. Blunt. 

New York Life’s income annuity business set a new six-month record of $870 million in 2010, Blunt said.  On the accumulation side, mutual funds set a sales record of more than $5 billion in the first six months, with third-party channels accounting for more than $4 billion of the total.  First half net sales of mutual funds were $2.3 billion, a record pace.  

Principal ‘White Paper’ Describes DoL Fee Disclosure Rule

Starting July 16, 2011, a new Department of Labor rule will require many financial professionals to disclose to their retirement plan fiduciary clients the fees they receive and the services they provide. To help professionals understand the implications of the rule, the Principal Financial Group has posted a number of resources on its fee disclosure education website.

The new resources include:

• A white paper by ERISA attorney Jamey Delaplane, partner, Davis & Harman LLP, New Fee Disclosure Rule for Retirement Plan Service Providers: What Financial Professionals Need to Know.
• Commitment of Services. A document allowing financial professionals to outline the services they provide and demonstrate their value to clients.
• Checklist for financial professionals. This overview of ERISA §408(b)(2) can show financial professionals how to comply with the new regulation.

Putnam Makes Fees Transparent for Plan Participants

Putnam Investments will offer transparent and comprehensive disclosure of fees and expenses to participants in the 401(k) plans it administers, the Boston-based fund company announced. The new disclosures will be available online through Putnam’s plan participant web site later this month.

The new disclosures will:

• Give participants access to real-time information about their total fund expense ratios, as well as any transaction fees associated with their plan.
• Address the expense ratio of each investment option, converted into a dollar value per $1,000 invested; offer a list of transactions and transaction fees as well as any fees related to services such as managed accounts or online advice.
• List the services that participants can access, including automatic plan features that help them save; educational programs; comprehensive statements; Putnam’s Lifetime Income Analysis Tool, which estimates monthly retirement income; and available investment choices.
• Be accompanied by a video tutorial that addresses: assessing plan value; the employer’s fiduciary responsibilities as they relate to the value and fees of their plan; the different types of fees that participants typically incur and an explanation of charges.   

© 2010 RIJ Publishing LLC. All rights reserved.

Only one section of the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) significantly affects the insurance industry, but that section—Title V—could have significant implications, according to Milliman.

Title V describes the creation of a Federal Insurance Office (FIO) within the Department of the Treasury and outlines a program of state-based insurance reform.

These changes “are significant because they represent a first step toward the potential transfer of regulatory authority from the states, the exclusive locus of regulatory authority until now, to the federal government,” says a new white paper written by Milliman analysts Joy Schwartzman and Gail Ross.

The FIO will collect information and monitor all lines of insurance except health insurance, long-term care insurance and crop insurance. Within 18 months, the FIO’s director must give Congress an assessment of the current state regulatory system and recommend improvements to the regulation of insurance in the U.S.

Besides covering systemic risk regulation, capital standards and consumer protection, the report will inquire into “the feasibility and potential costs and benefits of regulating insurance at the federal level and/or sharing such regulation between the states and the federal government.”

The two biggest effects of the legislation, Milliman said, would likely be greater access to market for nonadmitted insurers and single-state regulation and financial reporting for reinsurance companies.

© 2010 RIJ Publishing LLC. All rights reserved.