Pittsburgh, PA (February 26, 2009) Inspira, a national administrator of private-labeled Individual Retirement Accounts, has concerns over some of the proposals and opinions expressed during the House Education and Labor Committee hearing held on February 24, 2009.
“Congressman Miller’s (D-CA and Chairman of the House Education and Labor Committee) mission to improve the defined contribution system is laudable,” states Lowell Smith, President of Inspira.
“The concept of combining 401(k), 403(b) and 457 plans into one plan-type will eliminate confusion and cost, while potentially adding fiduciary protections to plans of non-profits and government entities that have no protection under the Employee Retirement Income Security Act’s (ERISA) fiduciary provisions. However, some of the other suggestions made at the hearing such as mandating default investments into annuities, restructuring IRAs or having an option where the Federal government manages retirement assets present unique problems,” cautions Smith.
Annuities are generally structured as insurance products, meaning the underlying assets are general assets of the insurance company issuing the annuity. Should an insurance company go bankrupt; the annuity accountholders become creditors in the bankruptcy proceedings. The point is while annuities are viable investment vehicles; they come with their own unique risks.
Since IRAs are primarily a supplemental retirement savings vehicle or a rollover vehicle offering more choice and estate planning options to individuals, merging them into one plan structure can create more confusion and may affect the flexibility and investment choices unique to an IRA. Further complicating the issue is that there are significantly more assets and accounts in IRAs than in 401(k) plans.
Finally, having the Federal government manage assets of individuals is something the government has never done, meaning there is little evidence to support the assertion that the government is equipped to undertake this task. Issues to consider include:
· How will the fund be run?
· How will recordkeeping be accomplished?
· How will contributions be received?
· What would be the investment vehicles?
· Who would regulate the fund/plan?
“It is critical that we have a viable retirement system, but Congress should tread carefully when addressing these issues and link any changes to its long-term solution for Social Security and Medicare,” concludes Smith.
Headquartered in Pittsburgh, PA, Inspira was created by retirement industry experts who identified a need for an independent IRA management service. As a result, Inspira provides the IRA servicing and technology solutions that enable institutional clients to eliminate costly back-office operations while enhancing their product offerings and profits. Inspira becomes your back-office, freeing your organization to concentrate on efforts with higher-margin asset-based fees tied to selling the IRA.
No matter what type of IRA – Roth, Traditional, SEP, or SIMPLE – Inspira is the ideal third-party administrator for a financial services company’s IRA business.
Sincerely,
Lowell Smith
Inspira is a portfolio company of ABG Capital.
