August 2007
401(k) Newsletter
General Issues
Enhancing 401k Value and Participation — Summary: Concerns about low levels of 401k participation and the need to make these plans more valuable to support a range of workforce goals have prompted some employers to enhance their plans by adding automatic features, such as automatic enrollment, escalation, rebalancing of investments, and "lifecycle" funds. To help employers better understand recent trends in 401k design and the pros and cons of automating 401k features, AARP commissioned Towers Perrin to prepare this 2007 report focused on midsize and large U.S. companies. Located at: AARP. Click on headline for full article.
Encouraging Spanish-speakers' Participation in Retirement Plans — Summary: This article is the third in a four-part series about effectively crafting benefits programs and communications for Spanish-speaking workers. Located at: Employee Benefit News (free registration may be required). Click on headline for full article.
Frequently Asked Questions About 401k Plans — Summary: This FAQ on 401k plans is updated annually by the ICI. At year-end 2006, 401k plans held an estimated $2.7 trillion in assets and represented approximately 17 percent of the $16.4 trillion U.S. retirement market. Located at: Investment Company Institute. Click on headline for full article.
PPA Makes Additional Changes to DC Plan Rules for 2008 and Beyond — Summary: This is a detailed overview of specific aspects of the 2006 pension reform legislation (PPA) affecting defined contribution plans that are effective in 2008 and beyond. Located at: Prudential Retirement (PDF File). Click on headline for full article.
What Women Need to Know About Retirement — Summary: WISER, in conjunction with the Heinz Family Foundation, released What Women Need to Know About Retirement, a free e-book available for PDF download. The book includes specifics about paying for healthcare, planning for a lifetime of income, social security and more. Located at: WISER. Click on headline for full article.
Solo 401k Plans - Great Benefit for the Sole Proprietor — Summary: Solo 401k plans are ideal for individuals who can save large sums. With an individual 401k, you save both as an employee and an employer. That feature allows the typical business owner to put away more than in most retirement plans. Located at: Accountingweb.com. Click on headline for full article.
Fiduciary Issues
How to Tell the Difference Between Financial Education and Advice — Summary: Recent changes to federal law helped employers feel more comfortable providing investment advice to their workers. However, some confusion remains over the legal distinctions between financial education and investment advice, which triggers extra fiduciary responsibilities. Located at: Employee Benefit News (free registration may be required). Click on headline for full article.
Retirement Plan Disclosure: Ethical Principles and Legal Obligations — Summary: In the author's opinion, there is an excellent prospect of resolving the fundamental issues of inadequate disclosure of all relevant information to 401k plan decision makers and thus avoid potentially unfavorable long-term consequences which participants and beneficiaries would otherwise bear. Located at: Social Science Electronic Publishing. Click on headline for full article.
Evolving Fiduciary Standards for Defined Contribution Plan Sponsors — Summary: This white paper attempts to answer the question, do the recent changes in the defined contribution landscape mean that fiduciary duty standards have evolved to the point where plan sponsors may be required to make significant changes in the designs of their DC plans? Located at: Alliance Bernstein (PDF File). Click on headline for full article.
Research
401k Participants' Awareness and Understanding Of Fees — Summary: Despite their lack of knowledge about fees, many plan participants realize they can have a significant impact on their returns, and express a desire to have a better understanding of the long-term impact of fees. Located at: AARP. Click on headline for full article.
The Retirement Savings Crisis Strikes Women Hardest — Summary: The retirement savings crisis in America is widely known by financial professionals, but is only starting to trickle into the consciousness of the public which it will affect most. Within this issue is the alarming reality that women, on average, are saving less than men for a retirement that will start sooner and last longer. Located at: Spectrem Group. Click on headline for full article.
Red, Yellow, and Green: A Taxonomy of 401k Portfolio Choices — Summary: One measure of financial literacy is the quality of portfolio decision-making in 401k plans. This study applied a qualitative framework to a dataset of nearly three million 401k accounts to discover what percentage of participants construct good (green), too-aggressive or too-conservative (yellow) or poor (red) portfolios. Located at: Pension Research Council, The Wharton School (free registration may be required). Click on headline for full article.
DOL and IRS Issues
Elimination of Schedule P of Form 5500 Series — Summary: The IRS has determined that the continued use of a Schedule P, Annual Return of Fiduciary Benefit Trust, in connection with the filing of a plan’s Form 5500 is no longer necessary for the efficient administration of the Internal Revenue laws. Located at: IRS (PDF File). Click on headline for full article.
IRS Issues Partial Termination Guidance — Summary: The IRS has issued a revenue ruling providing the latest IRS guidelines for determining whether a partial termination has occurred. Rev. Rul. 2007-43 analyzes a factual situation in which an employer ceases operations at one of four business locations, resulting in a 23% reduction in the number of participants in the employer's qualified plan. Located at: Sungard/Relius. Click on headline for full article.
Headline News
