Los Angeles partner Fred Reish was quoted in a recent ThinkAdvisor article titled, “Advisors Brace for More Exams in 2014; DOL ‘Game Changer’ on Horizon.”
Fred commented on the Department of Labor’s (DOL) expected proposal requiring plans to project the amount of a participant’s retirement income based on their account balances, saying he and believes it will be a “game changer” for plans and their advisers.
He noted that the proposed regulation “will change the way plans are seen.” He continued, “now, (401(k) and 403(b) account balances are seen as wealth; DOL is changing that to have then seen as sources of monthly income,” which will ultimately result in “more guaranteed insurance product discussions.”
Fred added that these discussions will force “RIAs that are primarily in the business of advising on securities to learn about insurance, and [advisors] will have to be able to work with individuals and plans to provide insured products.” In addition, “there will be more investments, like mutual funds and collective trusts, and more services like managed accounts that will be design to provide a regular monthly income – all of this will flow out of the DOL regulation,” he said.
He predicted that this proposal on retirement income projections will be released in 2014, with a final regulation to be seen within the next 18 to 24 months. In the distant future, Fred sees a 401(k) landscape with less government involvement and more individualization of these plans.
“Everything [in the retirement plan world] now is a mass experience – all the participants in the plan have the same investment options, same communications, but that is beginning to change. We’re going to see a more individualized experience — people will join plans and will get information about the amounts of deferrals they need to make based on their age and compensation and anticipated Social Security benefits,” he said. “Along the way they will be given updates — and maybe they’ll have managed accounts designed for them.”
Lastly, Fred added that the treatment of participants as a “mass” to the treatment of them as individuals “will roll in over a longer period of time, and will be competition-driven. It’s my view of what the future of 401(k) plans has to be.”
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