With over $10 trillion in assets accumulated in defined contribution plans and over $12 trillion in IRAs, the real work of managing decumulation is just beginning. While most of the 110 million DC accounts are not large enough to retire on, we have found successful solutions like automatic enrollment, auto-escalation and professionally managed investments to help with accumulation.
But decumulation and dealing with other financial issues are much more complex and trickier especially for participants that cannot afford customized, personalized advice from a licensed financial advisor that may require the elusive engagement.
Though technology and maybe different types of advisors will help, everything starts, and stops, with data, which is the new oil without which the engine cannot start.
Along with payroll and healthcare data, recordkeepers have and need participant data to service a plan properly and economically. Who owns this data might start with the question of whether data is a plan asset, a question recently decided in the Harmon v. Shell Oil case and discussed in the Hughes Supreme Court decision.
Published along with this column is a brilliant and much more detailed expose about the dangers of labeling plan assets by SPARK Institute Executive Director Tim Rouse and Mike Hadley, partner at Davis & Harmon.
While acknowledging the value and need to deploy data to fuel financial wellness programs at work, Rouse and Hadley also point out the dangers and consequences if assets are considered a plan asset including the fact that anyone handling it would be considered a fiduciary.
But beyond the legal and practical issues raised if data is considered a plan asset, there is no doubt of its value.
So who owns it?
The current enlightened answer is the participant owns their data but that could that mean anyone who wants to use it must get permission from them even to execute mundane tasks like discrimination testing. Data use and ownership require different rules within employee benefit plans.
Rouse and Hadley suggest that the industry must create “a legal framework that respects the duties fiduciaries owe participants, respects the privacy needs of participants, allows participants to use their own information without derailing plan administration, and allows data to be used to improve outcomes through better financial wellness solutions.”
Which is important as we turn to the practical question of who has the right to work with participants in the plan. First, Rouse and Hadley suggest, the provider and/or the plan advisor in collaboration with the plan sponsor must clearly state, “in the contract when and how data will be used, the fiduciary ensures data is used for only appropriate purposes, and the service provider has clear guidelines for what it can and cannot do.”
Just because the record keeper houses the data does not give them the right to use it. But neither does the plan advisor have a God-given right.
Advisors and providers must come together to partner on the sale and running of a plan. Both need each other. But as we turn our attention to serving the participants, there needs to be clear rules of engagement based on the appetites and capabilities of each party. If an advisor has capabilities to serve the financial needs of participants beyond the Triple Fs and cannot come to some agreement with the recordkeeper, then perhaps they should move the plan assuming, of course, with the plan sponsor’s blessing. Which might be an interesting and telling conversation about who the plan sponsor values more.
But before we address this sticky wicket, we need to get access to the data but it appears that claiming it is a plan asset is not the solution as a plaintiff’s attorney would argue because it could lead to unintended consequences as Rouse and Hadley suggest.