Episode 23: E is for ERISA with Christine Roberts

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to Revamping Retirement, a podcast brought to you by Cammack Retirement Group, where we tackle the retirement plan related issues plaguing fiduciaries and plan sponsors. Our host, Mike Webb, has more than 25 years of experience in the retirement plan industry and is a nationally recognized subject matter expert. We hope you enjoy Revamping Retirement.

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Thanks Kara. Kara McCauley, our wonderful executive producer as always. Welcome once again to what promises to be another informative and entertaining episode of Revamping Retirement. My name as always is Mike Webb and I’m so happy to have another special guest. This month’s guest is the author of the extremely popular, at least in my world, E is for ERISA blog. And she’s a very prominent ERISA and benefits attorney.

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been doing this as long as I have, I bet she’s been doing essentially since she was five years old. Just so everybody’s clear, okay? Much younger than me, even though probably doing it at same time. Welcome, please, Christine Roberts. Christine, so glad to have you on the podcast today. Thank you, Mike. I’m excited to join. Just to get right in, there are some people in our audience because we have a lot of different members of our audience, some plan sponsors, some industry folks, even some participants.

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And some of them might never have heard of the name Christine Roberts. I know it’s hard to believe. Some of them haven’t even heard my name sometimes, till I did this podcast. So just for some people who might not know you, maybe a little bit more about your background. Well, thanks for that opportunity. One of the reasons people might not have awareness of me is that I’ve lived and worked in Santa Barbara, California for the better part of 30 years. Santa Barbara is located between San Francisco and LA, a little closer to LA. And it’s just not as big a

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platform. My firm is big for Santa Barbara but small compared to a lot of other firms that house ERISA specialists. I came to Santa Barbara in 1994 after spending time in LA. I actually moved to Santa Barbara 18 hours before the Northridge earthquake hit LA. I had been living in LA five years after attending UCLA Law School. I grew up in the East Coast. My family’s still all in the Boston suburbs.

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So yeah, and I started working in the ERISA field about three years out of law school. Now, I guess I probably explained part of the reason why you started your blog. Like I said, your tremendously popular E is for ERISA blog probably is a way to say, I’m in Santa Barbara. want to get a national, that’s just conjecture on my part. I want to get a national audience. What better way to do a blog? It’s so cool to me because I don’t see a lot of attorneys do blogs. And when I do,

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They tend to speak at my level, meaning that’s not the level I wanna communicate to others in. It’s kind of like, you know, a very technical high level, whereas you kind of take concepts and kind of say, okay, how am gonna explain this to like the average plan sponsor or HR person? So they’ll actually understand it. So that’s what I love so much about the blog. I wanna delve into that a little bit more, especially the name, it fascinates me. Now, first I thought,

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E is for ERISA. Maybe she’s kind of taking the Sesame Street approach where she wants to make it kind of like that basic to people. Like, this is a fun blog. It’s E is for ERISA. But I think that’s probably an oversimplistic assessment of how you came up with the name. So let’s hear how you came up with the name. I came up with the name because of the Kinsey Mahone murder mysteries, which are set in a town called Santa Teresa, California, which is basically Santa Barbara.

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a wonderful writer named Sue Grafton wrote them and she started with A is for alibi. And then she worked her way through the alphabet. And so I just thought E is for ERISA is a way to, it’s a sort of secret signal that I’m coming from Santa Barbara and it’s a Santa Barbara connection to the benefits world. You know, it’s funny how something simple like that can be an immediate grabber.

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because there’s probably a lot of really good blogs out there that I don’t read because they don’t have a good title. And E is for ERISA just grabbed me right away. I was like, oh, I’ve got to read this. I don’t care. It could be terrible, but I’ve just had to. And it’s not terrible. To be your credit, it’s not terrible. Well, A lot of attorneys, if they have a benefits practice at a law firm, don’t write these blogs. Why do you think that is? It seems like such a cool thing to do.

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Well, really love, I’m fortunate to have a significant part of my practice be preventative, proactive, of problem preventing, not just problem fixing. I like to say that I help employers prevent and fix problems with their tax advantage benefit plans so the plans provide the tax advantages they’re meant to do and to ultimately preserve the saleability of their business. Because we all know that in the due diligence process and mergers and acquisitions, benefit plan problems can really set things askew.

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So I love the preventative proactive teaching part of my job. And when the Affordable Care Act came about in 2010, because I work not just on the retirement side, but also in health and welfare. When the Affordable Care Act came about, I couldn’t keep up with the pace of developments without sort of having a broadcast platform. So I set up the blog, I’m lucky to have a brother in the computer security journalism field who helped me get my name, my blog on GoDaddy and do sort of a no cost.

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uh… blog where is back in the day in two thousand ten firms were charging attorneys lots and lots of money to set up and sort of fee and care gap so it’s a set the blog out and then it is sort of grew like topsy and i still only post about every month six weeks because i just don’t want to be that that kind you know i i i like to kind of first of all the blog post take some time i’d like them to be organic i don’t really preach use my topics the topics present themselves to me

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And I like to keep it like I said, about every month to six weeks I post and put some content up on there. So I do one every week, am I doing it wrong? No, you’re not. You’re in a different space than I am. You are. I mean, the investment world is changing microsecond by microsecond, whereas the legal changes are on a much more gradual process. And also the nature of content from lawyers

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is different from people who were constantly interacting with the investment world. So I think you’re doing exactly the right thing. In fact, I think you’re a trendsetter. Oh, cool. I like to hear that. Speaking of trends, one thing I think you both you and I have noticed lately is that between the Secure Act, which kind of brought the whole concept of annuities back, nobody liked annuities because of the name annuities, but now they’re calling them retirement income solutions and everybody loves them.

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but we’re starting to see not only what annuities, but with all the auto features and really automatic enrollment and auto escalation really taking off and default investments. It’s almost like we’re seeing a return of the DB plan in a little disguise known as the DC plan. Like where a lot of this is coming back because people now realize, hey, leaving participants to their own devices just doesn’t work. How do you feel about, do you think five years from now or 10 years from now? We’ll just say.

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Do you think that that’s gonna continue and we’re gonna be almost like DC plans were back to DB plans? Like some people are even talking about, and I this is a weird idea, that they wouldn’t let participants direct the investments anymore and go back to the employer. Do you think we’re gonna see that? I think we’re going to see defined contribution plans just look and act and feel more like DB plans without returning to the full defined benefit.

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setting because nothing scares an employer more than the mandated contributions you must make to defined benefit plan, especially when there’s a market turn down. I mean, think defined benefit plans scare employers pretty profoundly, even large employers. And you see even large employers like Exxon beginning to gradually drift away from the DB promise.

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So I think what we’ve seen is we’ve had 40 years basically of 401k plans where you go from the employer’s gonna invest it, the employer’s gonna put it away, invest it, and sit on it until you’re 65. You can’t touch it, you can’t change the investments. And there will be a guaranteed stream of income, not a lump sum, a guaranteed stream of income for your life expectancy. That’s the DB promise. I think we’re gonna see a situation where

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uh… you still have to pull out of paycheck the employers to supplement i think the employer control investments is going to be greater and greater i mean it really already is almost a player control of investments with most people defaulting into lifestyle funds anyway uh… and i think that the the don’t give me a lump sum because i can’t be trusted with it phenomenon is going to continue to grow and the new the form of payout uh… when their actual and you’re using up in uniform of pay it is going to become more popular

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There is still some distrust with insurance companies failing, although less and less. But I do think you’re going to see the DBification of defined contribution plans without a total return to the DB promise, which leaves the employer and the business at risk for drops in assets and making up the difference in funding. And I agree.

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how fast that will happen, I think, will depend on the whole annuity thing. And unfortunately, the DOL came out with this, what they thought was this wonderful workable illustration of someone, and they’ll say, oh, people are gonna look at this illustration now and want to have annuities. What they didn’t tell you, unfortunately, they’re not projections. if I’m a 21-year-old, it’s gonna look terrible because it’s gonna look too, if I’m 65. And annuities are hard enough to understand anyway.

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They’re hard enough. So my thought on it is until that education gets ramped up, until the products, the annuity products out there, until the fees come down and I can explain it to the average person because you can’t right now. I think the pace at which that happens, and I do think it will happen, the pace at which that happens is going to dictate whether DC plans become more like DB five years from now, 10 years from now, or, you know,

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when I’m long retired. How do you feel about that? I agree. I mean, the Secure Act mandates the annuity illustration of a defined contribution plan account, but the assumptions that go into the illustrations are flawed. They’re not gonna be true snapshots. So it’s gonna be a very skewed portrait of what your annuity stream of income would look like based on your account balance. But I think the thing that does that is so fundamental

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is that it does take the lump sum and it turns it into what your actual monthly budget is, which is really important. Because very few people think about their lump sum as a monthly budget. Very few people think about their life expectancy, interest rates, and how those all work. But I do think that if there is careful education and a fundamental understanding of the interplay of interest rates, life expectancy, and the lump sum start to gain traction among the planned population,

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then I think the annuity, the trend towards, you don’t give me a lump sum, dribble it out to me over a lifetime is gonna be more popular. Because when you think about the financial independence retire early movement, it’s all about having a stream of income. It’s all about supporting a lifetime of enjoying life and not just sort of having a vague idea of what you can live on. I mean, it’s all about getting really concrete about what you can live on. And I think that this annuity illustration and the annuity payouts

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really help people build that concept of a sustainable source of income during retirement, which has been totally lost in the plot of 401k plans. And I completely agree. like people forgot that Social Security is an annuity and it works so well. it’s like people like this unfavorable view of annuities and say, would never purchase the annuity of my 401k, it never happen. And your 401k sponsors don’t even have annuities for the most part. But the best, you

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the retirement benefit, people, the retirement benefit that people rely on or look forward to. I never see people bashing the actual concept of social security itself, but they don’t realize that it’s an annuity. And if we could just have an annuity benefit in 401k plans that actually works and was simple, social security can be complicated too. I think it would work. We are in a country where individualism and independence are prized above all.

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And so that means that individual means, so you decide how much you need to save. Okay, so you decide how to invest it in this incredibly complex investment market. Okay, you decide whether you need it early or you really should sit on it. So all of these, so the assumption that independence and choice is valuable in the financial arena is a flawed assumption. Most people don’t make good decisions on their own behalf because really these retirement assets are not your money, which is how most people view it.

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sort of as a savings account, it’s a trust for your older, sicker self. And very few people can make that imaginative leap and be really aggressive in saving, really aggressive in not touching it, really careful and smart in investing it. Very few people can hit that trifecta. So I think that’s why we’re gonna see the trend towards more employer control, more form of payout control and less employee.

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discretion when it comes to these pots of money that are sitting there needing to support you for a very prolonged life expectancy. Well stated. All right, now’s the time of the program before we conclude that I put you on the spot because I love doing this. If you were like, let’s just say you were, I don’t know, if you could wave a magic wand and change one

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aspect of a retirement law out there in relation to retirement plans. For the better, presumably you wouldn’t change it, but you use your magic powers for good. Change it for the better. Is there any one provision that stands out there that says, you know what, this is really an outdated provision or for whatever reason it doesn’t work. I really like to change this. Is there anything that stands out for you?

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Well, you you’ve shared with me that you would like to get rid of the required minimum distributions, which used to be at seven and a half, now we’re at 72, may go up to 75 under the Secure 2.0 legislation that’s pending. And I share that desire with you. And Secure 2.0 would radically cut down the excise tax on late required minimum distributions, which I sense is sort of this trending understanding that they are outliving their usefulness, especially with people living longer and longer.

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You know, maybe get rid of them, maybe keep them for revenue stream purposes for people who are still very high earners in their later years. The other thing, I happen to work with a lot of nonprofit organizations and do a lot of deferred compensation for nonprofit executives. And I don’t know if you know this, but 457(b) and 457(f) deferred comp plans for nonprofit executives cannot be rolled over to IRAs.

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And that’s a big problem for people who’ve worked in the nonprofit sector for years and all of a they have a big tax hit because they can’t roll over their deferred accounts. And so that’s a little more arcane thing I would do, but it affects my practice on a regular basis. Yeah, it’s always been really strange to me. And I know there’s a reason for it. There is a reason. We could spend a whole other, probably a whole other podcast on it. But it’s always been strange to me as the, like,

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advisor and strange to plan sponsors to that you know if you’re a government if you’re a public employee and you have yeah 457 you get to roll it over it’s got all these bells and whistles yeah if you’re if you’re a if you just happen to be a private sector not-for-profit employee oh you’re here’s here’s 457 here’s the your special 457(b) and 457(f) that doesn’t have any of the good rules that public it’s just always been

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I know why it is. It’s just the way the history of the way the law grew up. it just doesn’t make sense, the plan sponsors. That’s a real good one. I think that’s even better than my get rid of minimum distributions. that’s one of my, that one I really like, that being able to roll over. Because that’s terrible. You get people who have like, you know, it’s even really, know, it’s select management highly compensated, but sometimes they’re not always like tremendously wealthy people. And taking a tax hit on what they’ve

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because they have to take the hacks at all at once on what they put in there for years and years and years and a lot of times it’s their own money. Forget about it. A lot of times it is their own money. And it’s like, what did I do wrong? I could have worked for a public entity. Right. Well, I I think that in our society, there is this massive assumption that any retirement account you have can always be rolled to an IRA. And so I do a lot of early education to the participants in these plans, making sure they understand and they plan.

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tax-wise for the inability to roll over. But I can’t tell you how many times, despite all the prep work, they still are shocked and they’re still unprepared. And so it’s just one of those things I wish would go away. I do think there is a trend for the differences between 403Bs, 401Ks, and 457 plans to start to erode over time. But the tax code, the changes to it are on the sort of a glacial,

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schedule. you know, the last time it was the code was substantially revised was in 1986. So we’ll see if the next revision starts to erode at some of those arcane distinctions that frustrate people so much. Well, this has been a lot of fun. Christine Roberts, check out her blog. Absolutely today. Don’t waste another minute. E is for ERISA. Just Google E is for ERISA. Her blog will come up. For Christine Roberts.

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Kara McCauley and our entire production team. I’m Mike Webb and this has been another exciting episode of Revamping Retirement.

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The content in this podcast is for institutional investors and plan sponsors. The information is intended to be educational and is not tailored to the investment needs of any specific investor. All examples of investor gains and losses are hypothetical and intended to illustrate the importance of early saving and consistent retirement contributions over time. Investment decisions should be based on an individual’s own goals, time horizon, and risk tolerance. Nothing in this content should be considered as legal or tax advice, and listeners are encouraged to consult their own lawyer.

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accountant or other advisor before making any financial decision. Thank you for listening to Revamping Retirement.