Hello and welcome to this week's edition of 401k Real Talk. This is WealthManagement.com's Fred Barstein Omnichannel RPA Contributing Editor & CEO at TRAU, TPSU & 401kTV – I Review everything from the past week's stories and pick out the most relevant and interesting ones, providing an open and honest discussion that you wouldn't get anyway. So let's get real!
Another day, another lawsuit against the DOL's controversial fiduciary rule filed by a group of insurance and brokerage associations in the same federal district of Texas that the previous case was filed reflecting the same allegations.
The plaintiffs contend that there is little difference between the current rule and the 2016 DOL that was released, except that there is now the SEC's Reg BI and model guidance from state insurance regulators governing annuities.
Biden's DOL is likely to protect the 2024 rule with some provisions taking effect on September 23st while it is also almost certain that a Trump DOL will not.
Unless the courts issue an injunction, the financial services and insurance industries will soon have to comply.
HSAs have been largely outside the scope of ERISA and fiduciary control, but that will change with the new DOL rule. And while the effect will be limited compared to IRAs with just $123 billion in assets as of 2023 in 37 million accounts, it could affect the practices of advisors who offer holistic financial planning.
The DOL has specifically included HSAs under the new rule if they provide investment advice, not just education. HSAs are a good way to identify high-net-worth or affluent participants who are most likely to benefit from these triple tax-free options available only within high-deductible health care plans.
Speaking of convergence, another state regulator is cracking down on wealth technology firms that allow advisers to manage their clients' DC accounts without the data keeper's knowledge or permission.
Missouri has alerted their state RIAs about potential risks also covering savings and brokerage accounts affecting firms such as Pontera, Envestnet's Yodlee, Morningstar's ByAllAccounts and Fiserv.
Convergence is here and gaining momentum, something that state regulators should not and cannot stop. The industry and regulators must find ways to allow investors to allow advisors to manage their DC accounts as part of a holistic financial plan which firms like Pontera are trying to do in a safe and compliant way.
Although not as widespread as previous data breaches, Merrill Lynch announced that an employee “inadvertently” disclosed sensitive information about 1800 participants in an unauthorized 3st the party. Although they claim no harm was done, it may be a while before they know for sure.
The breach shows the many ways data can be compromised, not always the result of hacks and cybercriminals – and as long as humans are involved, there will be mistakes and breaches like this.
Although it should be taken with a grain of salt given the source, LIMRA is claiming this DC plans and participants are not only open to in-plan annuities, but eager to adopt them. Their research shows that 4/10 plans are actively considering or have already added the feature, while 7/10 participants ages 40-80 with at least $100,000 are very or somewhat likely to choose it.
Objections to in-plan annuities?
- Very complicated
- Hard to explain
- Expensive
- Resource intensive
- Not flexible
- Not portable
Otherwise, no problem.
These issues and others, such as ways to get greater adoption, will be discussed at RPA's Retirement Income Roundtable on June 17-18 at P&I's NYC offices.
So those were the top stories from last week. I listed a few others that I thought were worth reading:
Please let me know if I missed anything or if you would like to comment. Otherwise, I look forward to talking with you next week on 401k Real Talk.