Products October 19, 2015

Voya Urges ‘Born to Save’ Mentality

It’s a trite-but-true piece of retirement planning advice: consciously consider your nonessential expenses and you’ll be surprised what you could save.
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Voya Financial says it will offer every baby born today a $500 mutual fund investment to mark the company’s second annual Born to Save campaign—and the first day of National Save for Retirement Week.

Alongside the offer of a $500 mutual fund investment, Voya is highlighting research showing 40% of new parents admit to spending at least this amount on “nonessential baby items.” In a recent survey of more than 1,000 new parents, Voya found that roughly four-in-10 spent at least $500 on baby-related items in the first year “that they later determined were nonessential or they never used.” At the same time, Voya says 20% of the moms and dads spent over $1,000 on these unnecessary items.

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According to James Nichols, Voya’s head of retirement income and advice strategy, the firm hopes the campaign will push more people to consider how small amounts of money can be invested during day-to-day life to build a secure financial future.

Nichols tells PLANADVISER that Voya also found that a majority of this overspending “went to clothing, toys and baby entertainment,” while approximately one in five unessential dollars went to upgraded strollers, baby carriers and accessories. He says a similar amount also went to expensive nursery furniture and décor.

“The goal [of Born to Save] is to get people to start early and consider the real power of small-but-regular investments made over a lifetime,” he says. “We want to encourage all Americans to think differently about how they can prepare for retirement.”

NEXT: On the right path 

Voya’s research cites U.S. Census data showing more than 10,000 babies are born each day in this country, while approximately 10,000 Baby Boomers turn 65 every day. The trends are expected to last at least for the next 15 years, Nichols says.

The research goes on to argue families just starting out and those for whom retirement is pending can benefit by cutting back on the more expensive items, and by setting and sticking to a formal written budget. “Making sure to pay your retirement plan first” is another key piece of advice for those with access to a 401(k) plan or an individual retirement account (IRA) at work, Nichols adds. The unifying goal for Americans of all ages is to make regular contributions to savings and investments whenever possible, no matter how large or small.

Nichols says Voya will also “reinforce the benefits of consistent saving” by giving each Born to Save program participant who joined in the initial 2014 class an additional $50 investment.  

“We think this birthday gift is a great reminder that saving for retirement requires regular attention, planning and contributions,” notes Charlie Nelson, CEO of Retirement for Voya Financial. “While the realities of life can get in the way—especially for new parents during the early years—we encourage everyone to find simple ways to make saving a priority.”

Information on registering for the program is at http://voya.com/borntosave. Parents and guardians of eligible babies must register for this offer by December 18, 2015. 

In Practice October 19, 2015

A New Player in the Retirement Industry

Thinking the retirement industry has failed to deliver on its goals, state governments are trying to get into the retirement business.
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“Our issues are becoming more political,” Brian H. Graff, Esq., executive director and CEO of the American Retirement Association, told attendees of the 2015 ASPPA annual conference.

Retirement is front and center, and there is a lot of concern that many people do not have access to retirement plans at work, he explained. “The government finally gets it that retirement plans are important, but now it’s not sure we are the best to deliver those plans,” Graff told retirement plan advisers and service providers.

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A movement has started to expand access to retirement plans. Graff noted that it is focused on the same issues as health care reform—lack of coverage, access and costs.

However, while state governments have started the movement, they are not just mandating that employers provide retirement plans; they are creating state products. “It’s as if states are getting into the retirement business,” Graff stated.

Now, the federal government is getting involved. In Interpretive Bulletin 99-1, the Department of Labor (DOL) established a framework for non-Employee Retirement Income Security Act (ERISA) payroll deduction individual retirement accounts (IRAs). According to Graff, as California, Illinois and Oregon worked on their state products, they asked the DOL for clarification that automatic-enrollment does not make payroll deduction IRAs ERISA plans, Graff explained. The DOL was reluctant to respond, but earlier this year, President Obama told the DOL to develop guidance facilitating state programs.

NEXT: Giving states a competitive advantage

The guidance from the DOL has not been proposed yet, but it is awaiting approval from the Office of Management and Budget (OMB), so it is expected to be published soon. Officials at the American Retirement Association have not seen the guidance, but Graff shared what they’ve gleaned from discussions with the DOL.

It seems the guidance will have two components: a proposal that auto-enrollment IRAs would not be ERISA plans if employers are required to participate—avoiding pre-emption by ERISA, and a rule allowing states to offer open multiple-employer retirement plans (MEPs) that would be treated as an MEP for affiliated employers—meaning, there would only need to be one plan document, one summary plan description and one Form 5500 per year filed. Graff says the first component would be delayed by the proposal, comment period and hearing process, while the second component would be effective immediately.

“This gives a competitive advantage to state products; it’s not a level playing field,” Graff said. In a 2012 advisory opinion, the DOL said an MEP open to unrelated employers does not constitute a single employee pension benefit plan. Graff contended that if the DOL gives states a competitive advantage over private providers, the uneven playing field will lead to less competition, less innovation and worse outcomes for savers.

Judy A. Miller, executive director of the ASPPA college of pension actuaries and director of retirement policy at the American Retirement Association, noted that the DOL is probably wanting to allow states to offer MEPs, because they want something with ERISA protections.

NEXT: Problems with state plans

But, Miller notes that there are many problems or unanswered questions about state plans. How will they define participants; what if employees live in different states? How would states be held accountable for and correct errors? Who will run and control investments?

While the DOL guidance may address how these plans should be structured or run, right now it depends on rules set by each state, Miller noted. For example, Illinois issued a request for proposals (RFP) for an investment provider and it has a board that acts as an investment committee. The American Retirement Association is asking that the DOL require a designated service provider, registered with the DOL, to make sure rules are being followed, she said.

Miller also contended that the MEP concept will not work unless there’s an employer mandate to participate. Graff agreed, noting that this movement by states is based on the notion that the retirement industry is not offering a cost-effective solution for small businesses. “There are many cost-effective solutions available. The problem is distribution. It takes time and effort to set up plans for businesses,” he says.

Why would employers jump on board just because a state is providing the product, Miller added.

Miller also noted that the federal government’s Thrift Savings Plan (TSP) has usually followed the trends of the private sector. “States will be laggards; they won’t be ahead of the curve,” she contended.

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