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The NAGDCA board recently returned from its annual visit to Capitol Hill in Washington D.C. Cherry blossoms were in full bloom and the city was more beautiful than ever. As Congress readies itself for either a compromise or a government shutdown, the mood could have been dire, but everyone we met with was very accommodating and gracious. This year for the first time, we met with the Securities Exchange Commission (SEC) where we visited with at least 10 SEC employees regarding prospective regulations surrounding wraps and municipal advisors. They seemed very open to our suggestions and we hope our visit leads to a positive outcome. One of the most prevalent topics was again that of combining the various defined contribution plans to simplify them for employers and participants. NAGDCA’s stance is that we believe it is important to keep the provisions in the 457 plan that make it unique, including the exemption from the 10% penalty, the 3-year catch-up and the ability for our employees to contribute to both a 457 and a 403(b) or 401(k) plan without coordinating the benefits. The House of Representatives is no longer providing resolutions, but we are hopeful that the Senate will do so for the next National Save for Retirement Week. This year’s priority letter was focused on permitting non-spousal beneficiaries to roll assets out of to other eligible DC plans, eliminating the “first day of the month” requirement, maintaining benefit eligibility upon separation from service, increasing the eligibility for low income savers tax credit, and fee disclosure. We also asked about the Required Minimum Distribution for Roth 457 plans and we hope to hear more on that topic in the near future. The NAGDCA board also asked Lew Minsky, Executive Director of the Defined Contribution Institutional Investment Association (DCIIA) and Josh Franzel, PhD, Vice President, Research Center for State and Local Government Excellence to meet with the Board and give an overview of their organizations.
NAGDCA’s recent survey indicates that even in this economic downturn, participants have not made significant changes to their savings behavior. During the last two years, only 5% of the responding members saw a significant number of participants stop their deferrals. Fifty-two percent said there was no change when it came to reducing deferrals, and 40% actually saw a slight increase in the number of new enrollments. There was a slight increase in loans and hardships. However, average participation rates for all plans were approximately 22% in 2010; down from 29% from 2009. Fifty-three percent of the plan sponsors said they were very concerned about the level of retirement savings. Many believe that the main reason for this is that participants do not really understand how much they need in retirement. Other factors are the increasing health care costs; furlough days, pay reductions or freezes, and employee apathy (most have defined benefit plans). Plan sponsors are taking action to help their participants prepare for retirement by making enrollment easier, offering the Roth 457, and participating in NS4RW which draws attention to the retirement plans. They are using their websites, worksite visits and newsletters to get the word out. Currently, 28% say they are considering using social networks. While only 11% are considering auto enrollment, 64% indicate that they believe it would have a huge impact on their participation rates.
Many plan sponsors are working to get the Roth 457 added to their plans. Some states have to have statute changes, while others are working with their record keepers to get them in place. In fact, the recent NAGDCA survey indicated that 41% of the respondents plan to implement a Roth 457. The Roth will give participants another savings vehicle and we’re hopeful most plans will see an increase in participation, especially for younger employers. There are still a lot of provisions that are confusing, and NAGDCA will be offering more educational opportunities, both during our legislative webcast scheduled for April 11 and then at the conference in September, where there will be a general session. Registration information for the webcast has been sent to members. Cheryl Press from the IRS will be on the panel, and members have been asked to submit questions for her prior to the call.
Speaking engagements are now open for the 2011 conference. An email was sent out on March 31 calling for interested members to sign up to speak at the conference. If you are interested, please visit http://www.nagdca.org/content.cfm/id/speaker_interest.
The Arthur N. Caple (ANC) Foundation scholarship applications are now available for interested students. InFRE is reaching out to universities to encourage students to complete the application. NAGDCA also prepared an e-postcard for NAGDCA members to forward to colleges and universities close to them to promote the scholarship and NAGDCA’s other education initiatives. The Board will be reviewing the applications and awarding scholarships in the next few months. The ANC fundraising committee is working diligently to get donations for the raffle at this year’s conference. If you receive a call from one of the committee members, we hope you will volunteer to donate something specific from your state or monetary donations are always very welcome.
One last note; registration for the 2011 Annual Conference is now open! Click here to register.
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Greetings NAGDCA Members: