401(k) Specialist Issue 2 - 2020 - 38

401(k) INVESTMENT INSIGHT
mulgated important guidance supporting
plan-to-plan portability:
In 2014, IRS Revenue Ruling 2014-9 greatly
simplified the process for plan administrators
to confirm that a potential roll-in is a
valid contribution.
In 2018, the DOL issued Advisory Opinion
2018-01A, followed in 2019 by a final
Prohibited Transaction Exemption (PTE).
Together, these actions finalized auto portability's
regulatory framework.
As if to return the favor, the adoption of
plan-to-plan portability would confer benefits
upon public policy, where every past,
present and future policy initiative that
expands DC plan access and/or participation-every
single one-would become
vastly more effective in achieving their
policy aims, when more of the incremental
retirement savings they produce can be
preserved.
* Corporate Social Responsibility
DC plans are already firmly committed
to incorporating socially-responsible
features in their DC plans, as evidenced by
the inclusion of Environmental, Social and
Governance (ESG) criteria in plan investment
options.
Importantly, in August 2019, the Business
Roundtable released a statement redefining
the purpose of a corporation. In
the statement, 181 of the nation's largest
employers (including five large DC plan
recordkeepers), agreed to promote " an
economy that serves all Americans. "
For DC plans, portability could represent
the next major ESG initiative, by delivering
broad societal benefits-including benefits
to minorities, women and others-and
for making our private-sector DC plan
system more efficient, more robust and
sustainable.
Portability Makes Sense for Everyone
Since inception, DC plans have evolved from
" supplemental plans " to their present status as
the primary private-sector retirement savings
vehicle for millions of working Americans.
Similarly, corporations have evolved,
explicitly acknowledging and acting upon
their broader social responsibilities. With the
retirement security of millions of Americans
hanging in the balance, embracing DC plan
portability makes sense for everyone.
Tom Hawkins is Senior Vice President, Marketing
and Research with Retirement Clearinghouse, and
oversees all key operational aspects of this area,
including RCH's web presence, digital marketing
and plan sponsor proposals. In other roles for RCH,
Hawkins has performed product development,
helped lead the company's re-branding, evaluated
and organized industry data and makes significant
contributions to RCH thought leadership positions.
REPRINTS HAVE POWER
Use 401(k) Specialist's brand influence to promote
your firm's products, services, and industry expertise.
Originally published on 401kSpecialist.com
Originally published on 401kSpecialist.com
Originally published on 401kSpecialistmag.com
USS Indianapolis: One Hero's Tale of Fear
and Faith in the Face of Tragedy
It's widely considered the 'worst sea disaster in U.S. Naval history'
How to Ensure You're Ignored By Clients
Jargon gets in the way of effective communication
By Marlōn Hall
JARGON IS COMMONLY defined as " words
or expressions used by a particular profession
or group and are difficult for others to
understand. "
" Fee " is one of the words that falls into that
category. The healthcare industry employs
a fee-for-service model. Most hotels and
restaurants in the U.S. charge a service fee,
often in lieu of tipping. And airline passengers
routinely get hit with a number of service fees,
including for checked or oversized baggage.
The problem with using fee to describe
these added charges is that the word implies
there is no exchange of value.
Consider these two scenarios and the different
reactions to the words fee and cost:
Scenario 1:
On your way home from work, you stop
at a convenience store to pick up a gallon of
milk and a loaf of bread. The label on the shelf
below each item says $2.50. You grab the milk
and bread, and head for the register to check
out. After the cashier swipes the items and the
total appears on the electronic display screen
in front of you, the cashier says, " That will be
a $5.00 fee. " You would probably think, " Why
would I pay a fee to buy groceries? "
Scenario 2:
On your way home from work, you stop at a
by John Sullivan, Editor-In-Chief
" WORD CAME TO abandon ship, and I
made my way to the port side and got
ahold of the rail. I looked out into the blackness
of the night and thought, 'Life is over.
This is the end.' And then to see all the oil
on the water. You have to dive into it as the
ship is sinking, which it did in 12 minutes.
I often say there are times when you pray
and there are times when you PRAY. There
is a difference. "
The riveting (and harrowing) tale of
heroism, survival and perseverance was
delivered Monday by Edgar Harrell who, at
age 94, is the last living Marine to survive
the sinking of USS Indianapolis on July 30,
1945.
With a crew of 1,196, the Indianapolis
was struck by two Japanese torpedoes
while sailing from Guam to Leyte, sending
900 men into the water.
In part due to the top-secret nature of
their mission (delivering the atomic bomb
that was eventually used against Japan),
as well as a series of miscommunications,
the crew was forced to endure five days of
hypothermia, thirst, hunger, shark attacks,
drowning, madness and a host of other
horrors.
After inadvertently being spotted by
American forces, they were rescued, but
only 317 men survived.
Considered the worst sea disaster
in U.S. Naval history, a combination of
blame-shifting and scapegoating by military
brass means the American public is still
largely unaware of what took place.
gas station to fill up your pickup truck. As you
stand at the pump, watching the price dial
click higher and higher, you wistfully think to
yourself, " I remember the good old days when
I paid less than $50.00 for a tank of gas! " But
you realize that you're not going anywhere on
an empty tank and accept the fact that today
it costs $50.00 to fill up.
Connecting value to services
When you analyze the two scenarios above,
it's clear that using the word " fee " separates
an item from its value. Likewise, using the
word " cost " does the opposite.
Cost implies that the consumer is getting
something of value in exchange for the money,
even when that something-such as an
idea-is intangible.
As financial services professionals, we know
that the word fee is prevalent in our industry.
There are fee schedules, fee-based advisors,
fee this and fee that. It's ubiquitous.
To be sure, jargon is an integral component
of any industry culture-and ours is no
different. Yet, even when jargon is detrimental
to our business, we continue to use it.
Here's an example:
Banks now must account for " fee waivers "
as line items on their balance sheets due to
growing customer demand for them.
Indeed, more and more people are requesting
that fees be waived because they don't
connect the value of a service provided by the
bank to the money that's deducted from their
accounts in exchange for the service.
If bank employees were trained to refer to
overdraft fees and stop payment fees as costs
rather than fees, there likely would be a significant
reduction in fee waivers, because customers
typically don't request costs to be waived.
They aren't asking for something for free.
Rather, they are simply asking that the bank
not take their money and provide no value
in exchange.
Purging fees
Clearly, jargon can get in the way of effective
communication and undermine your
efforts. Even so, like most financial professionals,
you probably use a fee schedule in
your business.
But understand that fee is a powerful
word-often not in a good way-and our
industry has long been blind to its negative
connotation. For this reason, I'd advise you
to consider replacing fee with cost in all your
documents outlining services that will be
delivered in exchange for money.
In your cost schedule, describe in detail the
value or service being provided for its cost.
Bottom line, if you want your clients to
reject what you're recommending and ignore
the value you're seeking to provide, using the
word fee is a perfect way to accomplish this.
On the other hand, if you want your clients to
earnestly consider what you're proposing and
appreciate the value you're striving to deliver, using
the word cost can help facilitate that positive
response and hopefully sow the seeds of a long
and mutually beneficial relationship.
Marlōn Hall, CFS, is a Regional Vice President
with Jackson National Life Distributors LLC,
where he works primarily with Financial
Advisors and Financial Institutions in the Midwest. The
married father of three began his financial services
career at a family-owned bank in the Mountain West.
Trader Joe's is Trader No's
in Latest 401k ERISA Lawsuit
The dispute centers on participant pricing and the plan's supposed revenue-sharing arrangement
By John Sullivan
OVERPAYING AT TRADER JOE'S? Who'd
of thought?
The popular grocer finds itself under fire
for failing to leverage the scale of its retirement
plan for better participant pricing, a
familiar charge first filed by high-profile tort
lawyer Jerome Schlichter a decade ago.
In the latest case, Trader Joe's allegedly
failed to use the inherent bargaining power
in its $1.6 billion-plus plan to its employees'
benefit-namely the " inclusion of low-cost
administrative and investment management
services and well-performing, low-cost investment
funds, " in the menu line-up.
" Trader Joe's chose inappropriate,
higher-cost mutual fund share classes and
caused the Plan to pay unreasonable and
excessive fees for recordkeeping and other
administrative services, " according to the
court filing.
Plaintiffs named Capital Research, the
plan's recordkeeper and the investment
adviser to American Funds, in the suit.
" Trader Joe's, as the Plan Sponsor,
breached its fiduciary duty of prudence and
loyalty and mismanaged the Plan by paying
excessive recordkeeping fees to the Plan's
recordkeeper, Capital Research & Management
Co. ( " Capital Research " ) by failing to
limit Capital Research's asset-based fees to a
reasonable amount, " it added. " This breach
cost the Plan millions of dollars over the
course of the relevant time period. "
What participants paid
The dispute centers on participant pricing
and the plan's supposed revenue-sharing
arrangement, and the filing notes that Capital
Research received a reported $183,075
in direct compensation for recordkeeping
services in 2018, and that over the past six
years, the plan paid recordkeeping fees in the
amount of roughly $140 per participant.
" A reasonable recordkeeping fee for the
Plan is $40 per plan participant, " attorneys
wrote, and the asset-based nature of the fees
were singled out with a colorful metaphor.
" One commentator likened this fee arrangement
to hiring a plumber to fix a leaky gasket
but paying the plumber not on actual work
provided but based on the amount of water
that flows through the pipe. If asset-based
fees are not monitored, the fees skyrocket as
more money flows into the Plan. "
CRN202201-258948
CONTACT: Amy Hamm | ahamm@401kspecialist.com | 303-502-2520
38
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401(k) Specialist Issue 2 - 2020

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