Contents
Part I:The Defined Benefit Plan Legacy
Chapter 1:An Overview of Existing Plans
Where All the Risk Is Borne by the Sponsor
The Three Risks of Retirement Savings
Chapter 3:The DB Valuation Challenge
Going Concern—The Portfolio Rate of Return Option
The Pension Benefit Guaranty Corporation
The Pension Protection Act of 2006
Plan A: Tighten the Minimum Funding Rules
Plan B: Relax Minimum Funding Standards and Increase PBGC Premiums
The Current Minimum Funding Regime
The Current PBGC Premium Regime
The Accounting Regime, Very Briefly
How DB Liabilities Are Valued for Financial Statement Purposes
Spousal Rights—the Retirement Equity Act of 1984
Tax Code Nondiscrimination Rules
Tax Code Limits on Benefits, Contributions, and Compensation
Chapter 6:Problems with the DB Design
The Inadequacy of Pre-Retirement Income as an Index of Post-Retirement Needs
The Inadequacy of a Flat Retirement Income Target
The Significance of Post-Retirement Risk
The Inadequacy of a Benefit Design Based on a Full Career
The DB Benefit Is Significantly Backloaded
Significance for Corporate Culture
Chapter 7:The Cash Balance Plan Conversion Crisis
Why Did These Plans Have a Surplus?
Why Does a Funding Surplus Matter?
Why Cash Balance Plans Solved This Problem
Cash Balance Plan Conversion = A Decrease in Benefits for Older Employees
Chapter 8:The Secular Decline in Interest Rates and the Viability of DB Plans
What About the Other Two Sponsor Risks—Investment and Mortality?
A Fundamental Lack of Transparency
The Increased Cost of Plan Termination
Getting Out Without Getting Out—The Plan Freeze
Taming Liabilities—Liability Driven Investments
Chapter 10:Managing the DB Legacy—Reducing PBGC Premiums
Pursuing a Contribution Policy That Reduces Variable-Rate Premiums
Variable-Rate Premium Fundamentals
Strategies for Maximizing the Value of the Headcount Cap
PBGC Premiums and Basic Retirement Policy
Chapter 11:The Cash Balance Alternative
The PPA Legitimizes the Cash Balance Design
Chapter 12:Intermezzo—Basic Policy Considerations Part I
What Are the Retirement Benefits?
The Status of Subsidized Benefits
A Legitimate Expectation That the Employer Would Continue the Plan
Who Pays for Retirement Benefits?
Retirement Savings Tax Policy—Two Views
Part II:Defined Contribution Plans and the 401(k) Revolution
Chapter 13:The Rise of the 401(k)
Chapter 14:DC/401(k) Plan Basics
How Contributions Are Determined
A Retirement Savings Design that Functions Like Compensation
What Happened to the Three Risks?
The Structure and Administration of 401(k) Plans
Chapter 15:The DC Adequacy Challenge
A Subjective Answer to the Adequacy Question
Towards an “Adequate” Policy Framework
Three Sorts of Answers to the Adequacy Question
Chapter 16:Adequate Savings and the Regulatory Framework—Retirement Savings Tax Incentives
Retirement Savings Tax Benefits
How Much Are These Tax Benefits Worth?
“Roth” versus Regular Contributions
Retirement Savings Tax Incentives, Rothification, and the Budget
Chapter 17:401(k) Tax Code Nondiscrimination Rules
The Dollar Limit on 401(k) Contributions
Chapter 18:Adequate Investment—The Asset Allocation Challenge
QDIA/Target Date Funds as the Preferred Asset Allocation
Chapter 19:ERISA Fiduciary Rules
Who Is a Fiduciary under ERISA?
What Are a Fiduciary’s “Duties”?
Residual Obligations of Plan Fiduciaries Under 404(c)
Prohibited Transaction Exemptions
Chapter 20:The Structure and Administration of 401(k) Plans, Revisited
Fiduciary Selection and Monitoring of Plan Service Providers
The Structure of 401(k) Plan Fee Arrangements
First: Unlike in DB Plans, in 401(k) Plans Fiduciary and Participant Interests Are Not Aligned
Second: Fees Have a Significant Effect on Retirement Outcomes
Chapter 22:401(k) Plan Fees and Fiduciary Regulation
Provider-to-Sponsor Disclosure Rules
Sponsor-to-Participant Disclosure Rules
A New Set of “Impartial Conduct” Standards
Regulation of Compensation Policy
Contract Requirement for Non-ERISA Plans and IRAs
Implementation, Criticism, Challenges
Fifth Circuit Vacates the Fiduciary Rule
Assessing Fee Regulation Efforts
Chapter 23:Fiduciary litigation
“Generic Services”—Recordkeeping
Chapter 24:Fiduciary Best Practices and Managing Fiduciary Risk
Individual Choice vs. the “Right Choice”
The Other Plan B: Moving In with the Kids
For the Most Part, a First World Problem
Chapter 27:The Demographic Background
The Age-Old Problem of Old Age
The Socialization of the Paradigm
Turning Savings into Investment
Chapter 28:The Great Transition
The Ratio of Workers to Retirees Is Going to Go Down, Significantly
In the Transition from PAYGO to Funding, Someone Will Have to Pay Twice
The Transition to the 401(k) System Caught Baby Boomers Mid-Career
Chapter 29:Covering the Uncovered
What Sorts of Employers Don’t Provide Plans?
What Is Preventing Smaller Employers from Implementing Workplace Retirement Plans?
Reducing Administrative Burden and Cost
Chapter 30:The Implications of the Software Revolution for Retirement Savings
The Distributed Ledger Technology Revolution
Are There Situations in Which Friction Is a Feature, Not a Bug?
Are There Situations in Which Transparency Is a Bug, Not a Feature?
Chapter 31:The Role of the Employer
What Is in All This for the Employer?