March 2006
401(k) Newsletter
General Issues
The Five Biggest Financial Retirement Mistakes — Summary: The biggest surprise many Baby Boomers and retirees encounter is the realization that their "bulletproof" retirement savings plan is riddled with bullet holes. Living longer, ironically, often means outliving nest-eggs intended to ensure financial comfort. Located at: 401khelpcenter.com. Click on headline for full article.
To Roth or Not to Roth — Summary: A Roth 401k can be very valuable to some people, but much less so to others. In fact, in some plans (for example, plans with low average account balances), it offers little value, but substantial complexity. Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.
Is Auto-Enrollment Right for You? — Summary: Automatically enrolling employees into a 401k plan is not right for every employer, but creative implementation strategies can overcome many of its drawbacks. Located at: Plansponsor.com (free registration required). Click on headline for full article.
An Automatic Affair: Promoting Retirement Plan Participation — Summary: Plan sponsors are taking notice of the value of automatic enrollment. Automatic plans, where you have automatic enrollment, automatic step ups and automatic rebalancing, are going to let people put more and more money into their plans and will be more likely to achieve their replacement income needs than they are under the current scenario. Located at: BCsolutionsmag.com (PDF file). Click on headline for full article.
Implications of Participant Behavior for Plan Design — Summary: Anyone with responsibility for a corporate defined contribution plan knows that employees need help. The responsibility for retirement funding has shifted almost entirely from the employer to the worker. For insights into how behavioral finance can play a significant role in an employee's retirement savings, AllianceBernstein turned to a leading behavioral expert, Professor Shlomo Benartzi of UCLA, to author this special report. Located at: AllianceBernstein. Click on headline for full article.
Obtaining Quality Employee Benefit Plan Audit Services — Summary: The AICPA Employee Benefit Plan Audit Quality Center has prepared this document to assist plan sponsors and other stakeholders in the proposal and evaluation process to obtain quality audit services for employee benefit plans. This tool addresses each step of the proposal and evaluation process. It describes the Request for Proposal (RFP) contents and contains a checklist of items that should be considered in preparing an RFP. Located at: American Institute of Certified Public Accountants (PDF file). Click on headline for full article.
U.S. Legislative Tracking Chart — Retirement — Summary: This chart summarize selected federal legislation that would affect employee benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors. Located at: Towers Perrin (PDF file). Click on headline for full article.
Fiduciary Issues
Prudence in Advice Selection — Summary: Many mutual fund companies, brokerage houses, insurance companies, and independent recordkeepers that market 401k plans have added investment advice to their offerings, either at the plan or at the participant level. Where a plan decides to use those advisory services, the fiduciaries need to engage in a prudent process—for selecting the investment advisor and for periodically reviewing, or monitoring, its activities. Located at: Plansponsor.com (free registration required). Click on headline for full article.
Individual Financial Planners May Be ERISA Fiduciaries — Summary: An Advisory Opinion recently issued by the Department of Labor may come as quite a shock to many personal financial planners and investment advisors. Located at: Spencer Fane Britt & Browne LLP. Click on headline for full article.
How to Manage the Pitfalls of Company Stock in 401k Plans — Summary: Companies that allow employees to invest their 401k accounts in company stock face a serious risk if the stock declines precipitously. Faced with large losses, employees can take legal action to recover their retirement savings. There are steps CPAs can recommend companies take to avoid such lawsuits. Located at: Journal of Accountancy. Click on headline for full article.
Research
401k Plans are Still Coming Up Short — Summary: The release of the Federal Reserve's 2004 Survey of Consumer Finances is a wonderful opportunity to re-assess the role that 401k plans are playing in the provision of retirement income. Because the SCF over-samples wealthy individuals, it provides the most comprehensive measure of wealth of any household survey. The 2001 survey showed that 401k accumulations were coming up short. The 2004 survey shows some progress but most of the problems persist. Located at: Center for Retirement Research at Boston College. Click on headline for full article.
Why Are Healthy Employers Freezing Their Pensions? — Summary: Historically, the only companies closing their defined benefit pension plans were facing bankruptcy or struggling to stay alive. Now the pension landscape has changed. Today, large healthy companies are either closing their defined benefit plan to new entrants or ending pension accruals for current as well as future employees. Why are healthy employers taking this action? And why now? Located at: Center for Retirement Research at Boston College. Click on headline for full article.
This eNewsletter is a digest of information published by a variety of sources on 401(k) and related issues. It is is provided for informational purposes only and is not intended as legal, tax, or investment advice. We hope you find the information useful.
