April 12, 2024 • 12 mins
Welcome to the quarterly retirement plan update with Gordon Asset Management. In today's episode, Todd Zempel will recap the first quarter 2024 market performance, touch on retirement income, and discuss developments in fiduciary duties for group health plans.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Welcome to the Quarterly Retirement Plan Update
with Gordon Asset Management.
In today's episode, todd Zempelwill recap the first quarter
2024 market performance, touchon retirement income and discuss
developments in fiduciaryduties for group health plans.
Please stay tuned to the endfor important disclosures about
our firm.
Please stay tuned to the endfor important disclosures about
(00:25):
our firm.
Speaker 2 (00:26):
This is Todd Zimple, retirement Plan Services,
director and Partner at GordonAsset Management.
Thanks for joining me today.
First, let's touch on themarkets.
The US economy continues toshow resilience, avoiding
recession with moderate growthand easing inflation.
However, uncertainties remainas we navigate through numerous
(00:50):
geopolitical risks towards theUS election.
Investors finished the quarterin high spirits, after a 10.56%
rise in the S&P 500 index.
Smaller companies lagged theirlarger peers, with the Russell
2000 index rising 5.18%.
International markets werenoticeably more subdued, with
(01:12):
the International DevelopedMarkets Index up just shy of 6%
and the Emerging Markets Indexup 2.44% 4.4%.
Bonds were mostly flat on theyear as of quarter end.
However, in April inflationcame in hotter and stickier than
(01:32):
the Fed would like, so rate cutexpectations have started to
fade and most bond indexes havesince gone negative on the year.
Sector-wise, energy, asrepresented by the XLE, was the
strongest performer, up 12.61%,likely a result of heightened
geopolitical risk.
The communications servicessector, the XLC, was up 12.39%,
(02:00):
fueled by the trend toward AI.
Looking forward, manyeconomists are anticipating
economic momentum to slow as theconsumer becomes more strapped
for cash as they navigate highercosts.
Business spending remainsrobust, particularly in
(02:23):
artificial intelligence, thoughcaution is warranted due to
tightening credit and softercorporate profits.
Overall, the first quarterproved yet again that staying
invested and maintaining adiversified portfolio, despite
the noise, is often the key tolong-term investment success.
Switching gears I recently gotback from the National
Association of Plan Advisorsannual conference.
The hot topic of the year wasretirement income.
(02:46):
Most of the discussion centeredaround in-plan income solutions
, or, in other words, solutionsfor retired employees to draw
income directly from their 401kaccount.
The industry is heating up withnew solutions, but in my
opinion, I think we're still inthe early stages.
Many of the current offeringsare complex, not portable and a
(03:10):
one-size-fits-all solution,which I think is less than ideal
for most plan participants.
While I'm all for innovatingretirement income strategies, I
believe it's premature torecommend an in-plan solution.
As a fiduciary, I find itextremely difficult to justify
adding an unproven and complexnew strategy.
(03:33):
However, I will keenly followdevelopments as we wait for a
track record to materialize.
Instead of one-size-fits-allin-plan solutions, I think the
better approach is to tailorincome plans to each
individual's uniquecircumstances and behavioral
quirks.
That's why we've introduced anew tool the Retirement Income
(03:56):
Style Awareness, or the RESAassessment.
The RESA is essentially akin toa risk tolerance assessment
that takes into considerationyour unique personality traits
to map out a personal retirementincome plan that fits with your
individual comfort with marketvolatility and income
(04:16):
expectations.
Whether you're market savvy andflexible with spending or
prefer a predictable paycheckfor life, the RESA assessment
brings clarity to the best fitapproach for you.
If you're interested, you cantake the RESA for free on our
website at wealthqbcom.
We are also planning on holdingeducational sessions on
(04:38):
retirement income planning orthose near to retirement, using
the RESA construct to guide theconversation.
More to come on this.
Stay tuned.
Let's shift gears to a vitalissue that's emerging for
employers, that is, fiduciaryresponsibilities for group
health plans.
(04:58):
I briefly touched on this lastquarter, but I wanted to circle
back, as I think it is one ofthe most important topics that
employers aren't talking about.
Appropriations Act of 2021, theCAA-21, along with the
Transparency and Coverage Rule,represent the most significant
(05:24):
reforms to health planlegislation since the
introduction of the AffordableCare Act.
They impose fresh mandates ongroup health plans and health
insurers regarding thedisclosure of plan fees and the
transparency of pricing.
Enacted on December 27, 2020,and effective for plan years
starting in 2021, theConsolidated Appropriations Act
of 21 introduced a requirementfor group health plans to
(05:48):
disclose fees, echoing themandate for retirement plans
established since 2012.
Echoing the mandate forretirement plans established
since 2012.
Under ERISA Section 408b-2, itis considered a prohibited
(06:13):
transaction if a group healthplan enters into a contract
without fully disclosing inwriting any compensation, direct
or indirect, of $1,000 or more.
These disclosures are intendedto equip fiduciaries of group
health plans with the necessaryinformation to assess the
reasonableness of fees, in linewith IRIS's fiduciary guidelines
.
This law also serves toheighten fee awareness among
health plan participants.
It is anticipated that theinformation from these
(06:34):
disclosures, or lack thereof,could be pivotal in legal claims
pursued by participants againstfiduciaries of ERISA health
plans and their serviceproviders.
Alongside the new fee disclosurerule, we also have the new
transparency and coverage or TICrule.
Unveiled in 2020 and phased inbetween 2022 and 2024,.
(06:57):
The TIC rule mandates thatgroup health plans make
available data that detailspayment rates for services
within their network, allowableamounts for out-of-network care
and prescription drug pricing.
This requirement aims todemystify health care costs for
participants, granting them theability to understand the
(07:18):
expenses for services andmedications prior to use.
Building on the TIC rule, theCAA 21 necessitates a more
comprehensive reporting on costsrelated to prescription drugs
and medical services by grouphealth plans, this is
particularly relevant, thank you.
This expanded transparency notonly aids fiduciaries in
(07:51):
assessing fee reasonableness inaccordance with DOL guidelines,
but may also play a role in theincrease of legal actions
regarding excessive plan fees.
And with that regulatorybackground, let's talk about
some pending litigation.
On February 5th 2024, a lawsuitwas brought against Johnson
Johnson.
(08:11):
February 5th 2024, a lawsuitwas brought against Johnson
Johnson alleging that its healthplan fiduciaries violated ERISA
by causing participants toincur excessively high costs for
prescription drugs compared toother options.
The suit claims mismanagementled to significantly higher drug
(08:33):
payments, premiums, deductiblesand co-pays.
It also accuses fiduciaries ofnot securing the most
competitive drug prices, failingto properly oversee expenses,
inadequately negotiating withtheir pharmacy benefit manager
and not fully disclosingcostlier mail-order drug pricing
.
One stark example cited is ageneric multiple sclerosis drug
(08:55):
costing the plan over $10,000for a 90-day supply, whereas it
was available for between $28and $77 in retail outlets.
Though this case is still beinglitigated, I suspect it will
serve as a template for otherlitigators to go after other
employers and, just like withretirement plans, I suspect
(09:19):
hundreds of follow-on lawsuitsthat will serve to reshape group
health benefits.
What's this mean for us?
Well, it's a clear signal thatwe must vigilantly manage and
monitor our health plan vendorsand fees, just like we do with
retirement plans.
The days of high brokercommissions and undisclosed and
(09:41):
opaque revenue sharingagreements are coming to an end,
just like they did forretirement plans.
Competition is about to heat upand at last, I suspect, there
may finally be a meaningfulopportunity for employers to
take back control over spiralinghealth care costs.
If you'd like to learn more, Isuggest you search up the
(10:02):
Department of Labor's Guide toUnderstanding your Fiduciary
Responsibilities Under a GroupHealth Plan.
This guide was published inSeptember 2023.
When you read it, you'llrealize that this guide is
(10:23):
essentially a carbon copy of theDOL's 2021 meeting your
fiduciary responsibilitiesguidebook for retirement plans.
That said, fiduciaries alreadyfamiliar with prudent governance
structures for their retirementplans will be well positioned
to apply the same concepts totheir group health plans, and
that is why our firm is keenlywatching developments.
(10:45):
In fact, we have even steppedin to do some consulting in this
space, and the results havebeen shocking.
In to do some consulting inthis space and the results have
been shocking.
We helped one company witharound 150 employees save around
$143,000 per year on theirbenefit spend.
The savings for another70-employee firm was roughly
(11:08):
$90,000.
Needless to say, I think thereis a huge opportunity for
employers to really make adifference and potentially save
a ton of money With that.
I hope you enjoyed thisquarter's update.
If you'd like to learn more orif you'd like a second opinion
on what you're doing, please donot hesitate to reach out.
Speaker 3 (11:33):
Thanks for tuning in.
To learn more, please visit ourwebsite, wealthqbcom.
Todd Zempel is a registeredinvestment advisor.
Opinions expressed in this showare those of the speaker and do
not necessarily reflect theopinions of Gordon Asset
Management LLC.
All statements and opinionsexpressed are based upon
information considered reliable,although it should not be
relied upon as such.
Any statements or opinions aresubject to change without notice
(12:05):
.
Information presented is foreducational purposes.
Thank you, not guaranteed.
Information expressed does nottake into account your specific
situation or objectives and isnot intended as recommendations
appropriate for any individual.
Listeners are encouraged toseek advice from a qualified tax
, legal or investment advisor todetermine whether any
information presented may besuitable for their specific
situation.
Past performance is notindicative of future performance
(12:26):
.
Welcome to the Quarterly Retirement Plan Update
with Gordon Asset Management.
In today's episode, todd Zempelwill recap the first quarter
2024 market performance, touchon retirement income and discuss
developments in fiduciaryduties for group health plans.
Please stay tuned to the endfor important disclosures about
our firm.
Please stay tuned to the endfor important disclosures about
(00:25):
our firm.
Speaker 2 (00:26):
This is Todd Zimple, retirement Plan Services,
director and Partner at GordonAsset Management.
Thanks for joining me today.
First, let's touch on themarkets.
The US economy continues toshow resilience, avoiding
recession with moderate growthand easing inflation.
However, uncertainties remainas we navigate through numerous
(00:50):
geopolitical risks towards theUS election.
Investors finished the quarterin high spirits, after a 10.56%
rise in the S&P 500 index.
Smaller companies lagged theirlarger peers, with the Russell
2000 index rising 5.18%.
International markets werenoticeably more subdued, with
(01:12):
the International DevelopedMarkets Index up just shy of 6%
and the Emerging Markets Indexup 2.44% 4.4%.
Bonds were mostly flat on theyear as of quarter end.
However, in April inflationcame in hotter and stickier than
(01:32):
the Fed would like, so rate cutexpectations have started to
fade and most bond indexes havesince gone negative on the year.
Sector-wise, energy, asrepresented by the XLE, was the
strongest performer, up 12.61%,likely a result of heightened
geopolitical risk.
The communications servicessector, the XLC, was up 12.39%,
(02:00):
fueled by the trend toward AI.
Looking forward, manyeconomists are anticipating
economic momentum to slow as theconsumer becomes more strapped
for cash as they navigate highercosts.
Business spending remainsrobust, particularly in
(02:23):
artificial intelligence, thoughcaution is warranted due to
tightening credit and softercorporate profits.
Overall, the first quarterproved yet again that staying
invested and maintaining adiversified portfolio, despite
the noise, is often the key tolong-term investment success.
Switching gears I recently gotback from the National
Association of Plan Advisorsannual conference.
The hot topic of the year wasretirement income.
(02:46):
Most of the discussion centeredaround in-plan income solutions
, or, in other words, solutionsfor retired employees to draw
income directly from their 401kaccount.
The industry is heating up withnew solutions, but in my
opinion, I think we're still inthe early stages.
Many of the current offeringsare complex, not portable and a
(03:10):
one-size-fits-all solution,which I think is less than ideal
for most plan participants.
While I'm all for innovatingretirement income strategies, I
believe it's premature torecommend an in-plan solution.
As a fiduciary, I find itextremely difficult to justify
adding an unproven and complexnew strategy.
(03:33):
However, I will keenly followdevelopments as we wait for a
track record to materialize.
Instead of one-size-fits-allin-plan solutions, I think the
better approach is to tailorincome plans to each
individual's uniquecircumstances and behavioral
quirks.
That's why we've introduced anew tool the Retirement Income
(03:56):
Style Awareness, or the RESAassessment.
The RESA is essentially akin toa risk tolerance assessment
that takes into considerationyour unique personality traits
to map out a personal retirementincome plan that fits with your
individual comfort with marketvolatility and income
(04:16):
expectations.
Whether you're market savvy andflexible with spending or
prefer a predictable paycheckfor life, the RESA assessment
brings clarity to the best fitapproach for you.
If you're interested, you cantake the RESA for free on our
website at wealthqbcom.
We are also planning on holdingeducational sessions on
(04:38):
retirement income planning orthose near to retirement, using
the RESA construct to guide theconversation.
More to come on this.
Stay tuned.
Let's shift gears to a vitalissue that's emerging for
employers, that is, fiduciaryresponsibilities for group
health plans.
(04:58):
I briefly touched on this lastquarter, but I wanted to circle
back, as I think it is one ofthe most important topics that
employers aren't talking about.
Appropriations Act of 2021, theCAA-21, along with the
Transparency and Coverage Rule,represent the most significant
(05:24):
reforms to health planlegislation since the
introduction of the AffordableCare Act.
They impose fresh mandates ongroup health plans and health
insurers regarding thedisclosure of plan fees and the
transparency of pricing.
Enacted on December 27, 2020,and effective for plan years
starting in 2021, theConsolidated Appropriations Act
of 21 introduced a requirementfor group health plans to
(05:48):
disclose fees, echoing themandate for retirement plans
established since 2012.
Echoing the mandate forretirement plans established
since 2012.
Under ERISA Section 408b-2, itis considered a prohibited
(06:13):
transaction if a group healthplan enters into a contract
without fully disclosing inwriting any compensation, direct
or indirect, of $1,000 or more.
These disclosures are intendedto equip fiduciaries of group
health plans with the necessaryinformation to assess the
reasonableness of fees, in linewith IRIS's fiduciary guidelines
.
This law also serves toheighten fee awareness among
health plan participants.
It is anticipated that theinformation from these
(06:34):
disclosures, or lack thereof,could be pivotal in legal claims
pursued by participants againstfiduciaries of ERISA health
plans and their serviceproviders.
Alongside the new fee disclosurerule, we also have the new
transparency and coverage or TICrule.
Unveiled in 2020 and phased inbetween 2022 and 2024,.
(06:57):
The TIC rule mandates thatgroup health plans make
available data that detailspayment rates for services
within their network, allowableamounts for out-of-network care
and prescription drug pricing.
This requirement aims todemystify health care costs for
participants, granting them theability to understand the
(07:18):
expenses for services andmedications prior to use.
Building on the TIC rule, theCAA 21 necessitates a more
comprehensive reporting on costsrelated to prescription drugs
and medical services by grouphealth plans, this is
particularly relevant, thank you.
This expanded transparency notonly aids fiduciaries in
(07:51):
assessing fee reasonableness inaccordance with DOL guidelines,
but may also play a role in theincrease of legal actions
regarding excessive plan fees.
And with that regulatorybackground, let's talk about
some pending litigation.
On February 5th 2024, a lawsuitwas brought against Johnson
Johnson.
(08:11):
February 5th 2024, a lawsuitwas brought against Johnson
Johnson alleging that its healthplan fiduciaries violated ERISA
by causing participants toincur excessively high costs for
prescription drugs compared toother options.
The suit claims mismanagementled to significantly higher drug
(08:33):
payments, premiums, deductiblesand co-pays.
It also accuses fiduciaries ofnot securing the most
competitive drug prices, failingto properly oversee expenses,
inadequately negotiating withtheir pharmacy benefit manager
and not fully disclosingcostlier mail-order drug pricing
.
One stark example cited is ageneric multiple sclerosis drug
(08:55):
costing the plan over $10,000for a 90-day supply, whereas it
was available for between $28and $77 in retail outlets.
Though this case is still beinglitigated, I suspect it will
serve as a template for otherlitigators to go after other
employers and, just like withretirement plans, I suspect
(09:19):
hundreds of follow-on lawsuitsthat will serve to reshape group
health benefits.
What's this mean for us?
Well, it's a clear signal thatwe must vigilantly manage and
monitor our health plan vendorsand fees, just like we do with
retirement plans.
The days of high brokercommissions and undisclosed and
(09:41):
opaque revenue sharingagreements are coming to an end,
just like they did forretirement plans.
Competition is about to heat upand at last, I suspect, there
may finally be a meaningfulopportunity for employers to
take back control over spiralinghealth care costs.
If you'd like to learn more, Isuggest you search up the
(10:02):
Department of Labor's Guide toUnderstanding your Fiduciary
Responsibilities Under a GroupHealth Plan.
This guide was published inSeptember 2023.
When you read it, you'llrealize that this guide is
(10:23):
essentially a carbon copy of theDOL's 2021 meeting your
fiduciary responsibilitiesguidebook for retirement plans.
That said, fiduciaries alreadyfamiliar with prudent governance
structures for their retirementplans will be well positioned
to apply the same concepts totheir group health plans, and
that is why our firm is keenlywatching developments.
(10:45):
In fact, we have even steppedin to do some consulting in this
space, and the results havebeen shocking.
In to do some consulting inthis space and the results have
been shocking.
We helped one company witharound 150 employees save around
$143,000 per year on theirbenefit spend.
The savings for another70-employee firm was roughly
(11:08):
$90,000.
Needless to say, I think thereis a huge opportunity for
employers to really make adifference and potentially save
a ton of money With that.
I hope you enjoyed thisquarter's update.
If you'd like to learn more orif you'd like a second opinion
on what you're doing, please donot hesitate to reach out.
Speaker 3 (11:33):
Thanks for tuning in.
To learn more, please visit ourwebsite, wealthqbcom.
Todd Zempel is a registeredinvestment advisor.
Opinions expressed in this showare those of the speaker and do
not necessarily reflect theopinions of Gordon Asset
Management LLC.
All statements and opinionsexpressed are based upon
information considered reliable,although it should not be
relied upon as such.
Any statements or opinions aresubject to change without notice
(12:05):
.
Information presented is foreducational purposes.
Thank you, not guaranteed.
Information expressed does nottake into account your specific
situation or objectives and isnot intended as recommendations
appropriate for any individual.
Listeners are encouraged toseek advice from a qualified tax
, legal or investment advisor todetermine whether any
information presented may besuitable for their specific
situation.
Past performance is notindicative of future performance
(12:26):
.
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