Art by Dadu Shin
Each new year arrives with a mixture of optimism,
trepidation and excitement. Historically, the final six weeks of each calendar
year are reserved for getting clients’ plans in good order for the next 12
months, whether that means revising asset class lineups, updating client
documentation, business-planning or restructuring client defaults.
During their 2013 year-end plan reviews, retirement plan
advisers undoubtedly discussed with their clients such topics as maximizing
plan outcomes, retirement plan industry norms, benchmarks and peer group
However, this year, your clients will experience yet another
key employee benefits concern, namely the administration and costs associated
with the Patient Protection and Affordable Care Act (ACA). Retirement plan
advisers must now engage in conversations with plan trustees concerning the ACA
and the corresponding influence it will have on their plan sponsor clients and
their work forces.
Embarking on a New Era
As consumers and managers of our own health care, we were directed
by House Minority Leader John Rusche, D-Idaho, to embrace the ACA. In essence,
Rusche said the act will expand health care coverage for Americans, lower
expenses for those currently insured and improve the cost of health care,
overall. So far, however—as of my writing this column—America’s health care
consumers have faced sign-up and execution hurdles due to glitches with the
For us as advisers, our initial education includes being
introduced to terms and practices that had heretofore been foreign or
unnecessary. One of the bigger learning curves coming through the ACA is
attributable to introducing exchanges at both the federal and state levels.
Retirement plan advisers are no strangers to exchanges, as we have worked with,
in and around them throughout our careers. Exchanges have been prevalent and
used in an orderly fashion in our industry for far longer than anyone alive
today can recall.
Insurance exchanges have existed since the 1600s, when those
gathering at Lloyd’s Coffee House on Tower Street near the Thames in London
would isolate and mitigate risks associated with the safe passage of merchant
ships that, at the time, transported spices, tobacco, silk and other goods
around the globe. Coffee house exchanges would operationally function by
matching a willing buyer of risk (an investor) with a willing seller of risk (a
merchant), so that the loss of a single ship (by weather, war, pirates or some
unknown event) would not bankrupt a merchant shipping concern. These exchanges,
born of necessity, served the willing buyer and the willing seller, thus
birthing the basis for what we know today as the insurance industry.