Mike brings to this work his comprehensive experience and consummate technical talent in a beautifully readable book. A treasure.

Part I: The Defined Benefit Plan Legacy 1 Chapter 1: An Overview of Existing Plans 3 Chapter 2: DB Plan Basics 7 A Formula Benefit 7 Where All the Risk Is Borne by the Sponsor 9 The Three Risks of Retirement Savings 9 Chapter 3: The DB Valuation Challenge 13 The Challenge 13 The ¿Time Value of Money¿ 14 Going Concern¿The Portfolio Rate of Return Option 17 Chapter 4: The Regulatory Framework¿Benefit Insurance, Minimum Funding Rules and Accounting Standards Affecting DB Plan Finance 21 The Pension Benefit Guaranty Corporation 22 The Pension Protection Act of 2006 22 Plan A: Tighten the Minimum Funding Rules 23 Plan B: Relax Minimum Funding Standards and Increase PBGC Premiums 24 The Current Minimum Funding Regime 25 The Current PBGC Premium Regime 26 The Accounting Regime, Very Briefly 27 How DB Liabilities Are Valued for Financial Statement Purposes 28 Chapter 5: The Regulatory Framework¿Minimum Standards for Retirement Plan Design and Tax Code Nondiscrimination Rules 31 Minimum Standards 31 Spousal Rights¿the Retirement Equity Act of 1984 33 Tax Code Nondiscrimination Rules 34 Tax Code Limits on Benefits, Contributions, and Compensation 34 Chapter 6: Problems with the DB Design 37 Issues with DB Design 37 The Inadequacy of Pre-Retirement Income as an Index of Post-Retirement Needs 37 The Inadequacy of a Flat Retirement Income Target 39 DOI 10.1515/9781547400294-206 The Significance of Post-Retirement Risk 39 The Inadequacy of a Benefit Design Based on a Full Career 40 The DB Benefit Is Significantly Backloaded 40 Significance for Corporate Culture 41 Chapter 7: The Cash Balance Plan Conversion Crisis 43 What Is a Cash Balance Plan? 43 Why a Cash Balance Plan? 45 Why Did These Plans Have a Surplus? 45 Why Does a Funding Surplus Matter? 46 Why Cash Balance Plans Solved This Problem 46 Cash Balance Plan Conversion = A Decrease in Benefits for Older Employees 48 Massive Employee Pushback 49 Chapter 8: The Secular Decline in Interest Rates and the Viability of DB Plans 53 What About the Other Two Sponsor Risks¿Investment and Mortality? 54 A Fundamental Lack of Transparency 55 Chapter 9: Getting Out, Slowly 57 The Increased Cost of Plan Termination 57 Getting Out Without Getting Out¿The Plan Freeze 58 Taming Liabilities¿Liability Driven Investments 58 The LDI Overlay 59 Chapter 10: Managing the DB Legacy¿Reducing PBGC Premiums 63 Plan Funding, Briefly 63 PBGC Premiums, At Length 63 Pursuing a Contribution Policy That Reduces Variable-Rate Premiums 67 Variable-Rate Premium Fundamentals 67 Two Broad Strategies 68 Strategies for Maximizing the Value of the Headcount Cap 69 PBGC Premiums and Basic Retirement Policy 71 Chapter 11: The Cash Balance Alternative 73 The PPA Legitimizes the Cash Balance Design 73 Market Cash Balance Plans 74 Chapter 12: IntermezzöBasic Policy Considerations Part I 75 Two Kinds of Office 75 What Are the Retirement Benefits? 76 The Status of Subsidized Benefits 77 A Legitimate Expectation That the Employer Would Continue the Plan 78 DB Plans, a Verdict 79 Who Pays for Retirement Benefits? 80 Retirement Savings Tax Policy¿Two Views 81 Part II: Defined Contribution Plans and the 401(k) Revolution 83 Chapter 13: The Rise of the 401(k) 85 Chapter 14: DC/401(k) Plan Basics 89 How Contributions Are Determined 89 How Assets Are Invested 89 How Benefits Are Paid 90 A Retirement Savings Design that Functions Like Compensation 90 What Happened to the Three Risks? 90 The Structure and Administration of 401(k) Plans 92 Chapter 15: The DC Adequacy Challenge 95 What Is Adequacy? 95 A Subjective Answer to the Adequacy Question 96 Towards an ¿Adequate¿ Policy Framework 96 Ambiguities 96 Three Sorts of Answers to the Adequacy Question 97 Adequacy of Investment 101 Payout 104 Chapter 16: Adequate Savings and the Regulatory Framework¿Retirement Savings Tax Incentives 105 The Current System 105 Retirement Savings Tax Benefits 106 How Much Are These Tax Benefits Worth? 106 Methodology 107 ¿Roth¿ versus Regular Contributions 110 Retirement Savings Tax Incentives, Rothification, and the Budget 111 A Middle-Class Tax Benefit? 112 Does This System Work? 113 Chapter 17: 401(k) Tax Code Nondiscrimination Rules 115 The ADP Test 115 The Dollar Limit on 401(k) Contributions 116 Passing the ADP Test 117 Participant Education 117 Matching Contributions 117 Safe Harbors 118 Defaults 118 Chapter 18: Adequate Investment¿The Asset Allocation Challenge 121 Participant Education 122 Default Investments 122 2007 QDIA Rules 123 DOL¿s QDIA Regulation 123 QDIA/Target Date Funds as the Preferred Asset Allocation 125 Chapter 19: ERISA Fiduciary Rules 127 Who Is a Fiduciary under ERISA? 128 What Are a Fiduciary¿s ¿Duties¿? 128 ERISA Section 404(c) 129 Residual Obligations of Plan Fiduciaries Under 404(c) 129 General Fiduciary Standards 130 Prohibited Transactions 130 Prohibited Transaction Exemptions 131 Chapter 20: The Structure and Administration of 401(k) Plans, Revisited 133 Basic Organization 133 Fiduciary Selection and Monitoring of Plan Service Providers 133 The Structure of 401(k) Plan Fee Arrangements 134 Current Practice 137 Chapter 21: Why Fees? 139 First: Unlike in DB Plans, in 401(k) Plans Fiduciary and Participant Interests Are Not Aligned 139 Second: Fees Have a Significant Effect on Retirement Outcomes 139 Third: Plan Fiduciaries Limit Participant Investment Choices and Negotiate the Deal with Plan Service Providers 140 Academic Work on Fees 140 Chapter 22: 401(k) Plan Fees and Fiduciary Regulation 143 Fee Disclosure 144 Provider-to-Sponsor Disclosure Rules 145 Sponsor-to-Participant Disclosure Rules 146 The Fiduciary Rule, Round 1 146 Round 2 147 The Fiduciary Rule in Brief 148 A New Set of ¿Impartial Conduct¿ Standards 150 Regulation of Compensation Policy 150 Disclosures 151 Contract Requirement for Non-ERISA Plans and IRAs 151 Implementation, Criticism, Challenges 151 Fifth Circuit Vacates the Fiduciary Rule 152 Assessing Fee Regulation Efforts 152 Chapter 23: Fiduciary litigation 155 The Problem of Proof 155 ¿Generic Services¿¿Recordkeeping 156 Chapter 24: Fiduciary Best Practices and Managing Fiduciary Risk 161 Key Process Elements 161 A Broad Range of Alternatives 163 Chapter 25: An Adequate Payout 169 The 401(k) Payout Challenge 169 Individual Choice vs. the ¿Right Choice¿ 176 Chapter 26: IntermezzöPlan B 183 Continued Work¿the Good News 183 The Other Plan B: Moving In with the Kids 185 The Worst Case 186 For the Most Part, a First World Problem 188 Part III: The Future 189 Chapter 27: The Demographic Background 191 The Age-Old Problem of Old Age 191 The Wealth Transfer Paradigm 194 The Socialization of the Paradigm 195 Money versus Time 199 Turning Savings into Investment 199 Chapter 28: The Great Transition 201 The Ratio of Workers to Retirees Is Going to Go Down, Significantly 201 In the Transition from PAYGO to Funding, Someone Will Have to Pay Twice 202 The Transition to the 401(k) System Caught Baby Boomers Mid-Career 204 Chapter 29: Covering the Uncovered 207 How Big Is This Problem? 207 What Sorts of Employers Don¿t Provide Plans? 208 What Is Preventing Smaller Employers from Implementing Workplace Retirement Plans? 208 Reducing Administrative Burden and Cost 210 Increasing Incentives 213 And the Gig Economy 215 Chapter 30: The Implications of the Software Revolution for Retirement Savings 219 The Current System 219 The Distributed Ledger Technology Revolution 221 Are There Situations in Which Friction Is a Feature, Not a Bug? 223 Are There Situations in Which Transparency Is a Bug, Not a Feature? 223 Chapter 31: The Role of the Employer 225 What Is in All This for the Employer? 227 Chapter 32: The Bureaucratization of Capital 231 Chapter 33: Coda 233 What is Retirement? 233 The Way Forward 234 Index 237