New adviser rules may bolster retirement plans
New rules for financial planners advising retirement plans and Health Savings Accounts could have an unexpected benefit for small businesses.
The rules, from the U.S. Department of Labor, place new “fiduciary” responsibilities on financial advisers and consultants. They must pick the most economical plans – without regard to their own compensation — when advising clients.
While the rule sounds technical, it does remove one of the major barriers for smaller companies thinking about offering retirement plans. That barrier has been the potential liability imposed on employers when retirees are unhappy with their plans and particularly their costs.
Let’s face it. Many small companies are not able to tell a high-cost mutual fund from a low-cost fund and therefore are reluctant to take on new potential liabilities.
The new Department of Labor rules will shift at least part of the responsibility on to the adviser and not the employer, perhaps smoothing the path for many smaller companies to offer retirement plans.
As we wrote recently on these pages, a separate push in California’s legislature this year would create a low-cost retirement plan that would offer all employees an opt-out model, making it much more likely that they would participate.
The death of the pension in much of private industry is part of the reason that a National Institute on Retirement Security study shows that two thirds of those ages 55-64 have less than a year’s worth of expenses saved up. A separate study by the Employee Benefits Research Institute shows that 43 percent of Baby Boomers aren’t prepared to support themselves in retirement.
In the absence of a defined benefit pension, American workers are going to have to provide enough income to fill the gap between Social Security and what’s truly needed to cover the cost of retirement.
Lower costs and opt-out plans are going to be an important part of the equation, particularly for families and individuals who typically live paycheck to paycheck.
For Millennials, who so far show little interest in home ownership, having a big nest egg is going to be even more critical.
A train to nowhere
We applaud recent moves by a California Senate oversight panel to question the cost and route of the so-called bullet train.
In an April 4 session, the California High Speed Rail Authority came under heavy criticism for delays, cost overruns and a route change that makes it a fair question to ask when and how the train’s route will finally make it to downtown Los Angeles.
Even Assembly Speaker Anthony Rendon, an advocate of the project, expressed some concern about the rising criticism in a meeting with the Fresno Bee’s editorial board.
At $64 billion and rising every day, the train looks more and more like a make work project for the Central Valley and less and less like an economic development program that will bring prosperity and convenience to business travelers at a fair price.
The bullet train’s benefits to the Central Coast pale in comparison with the benefits that improved air service would bring to our region. If the bullet train pencils out, then so be it. But we continue to have our doubts.