Headlines about "401(k) plans"

Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Common Plan Mistake: Miscalculating Matching Contributions
"If your 401(k) plan document calls for an annual matching contribution, you should consider one of the following options: Waiting until year-end to make the matching contribution; Contributing each pay period, but then making a true-up contribution at year-end (if necessary); [and] Amending the plan to provide for the calculation of matching contributions on a pay-period basis.' (Spencer Fane)

[Opinion] 401(k)s in The Crossfire
"Perhaps the most commonly cited concern about 401(k)s is the size of current account balances. The typical investor approaching retirement has around $100,000 saved in various tax-deferred accounts. That amount might generate $4,000-$5,000 a year in income. It's been 30 years since 401(k)s appeared on the scene, so the thinking is that older investors should have much more money in these accounts than they do. This argument, however, overlooks the rapid expansion of 401(k) plans over the past three decades. More people have come into the system over the years, and many who are ready to retire haven't spent their full working careers saving in these plans." (Vanguard Blog)

McDonald's Recognized for its Strong Benefits Programs and 'Compelling' 401(k)
"McDonald's has achieved a wildly successful 401(k) plan, with 98 percent participation for restaurant managers and above. This broad coverage is the result of several initiatives: Automatic enrollment; A unique and generous, front-end loaded match, which provides for an employer contribution of 3 percent for the first 1 percent contributed by the employee and increases to a 11 percent employer contribution for employee contributions of 5 percent; Multi-layered communication approaches to targeted affinity groups; Educational seminars on topics ranging from retirement to investment advice; and Permitting only one loan at a time from the plan." (HR Policy Association)

Average 401(k) Balance 62% Above 2009, Fidelity Says
"The average account balance in the U.S. was $74,600 compared with $46,200 at the end of the first quarter of 2009, according to a report released [by Fidelity Investments].... The stock market recovery and renewed commitment to saving has driven the increase[.]" (Bloomberg)

Many 401(k) Participants Show High Aversion to Risk
"Schwab's survey found that 35 percent of Americans consider protecting retirement assets more important than growing those assets, while only eight percent consider growing retirement assets more important than protecting them.... The 2008 downturn may have had a particular impact on younger Americans [because the] survey found 29 percent of those age 18-34 plan to pull money out of the market, with only 11 percent of older Americans indicating they would take this action." (Charles Schwab)

[Guidance Overview] A Bridge Too Far: Early Retirement Exception from 10% Tax Was Available from Participant's 401(k), But Not After IRA Rollover
"The court held that the taxpayer would not have been subject to the 10% tax if he had taken the distribution directly from the 401(k) plan upon termination because of the exception in section 72(t)(2)(A)(v) of the Internal Revenue Code for post-separation distributions to an employee who has attained age 55, but because he chose to roll over his balance, the exception no longer applied to a distribution from an IRA." (Haynes and Boone)

Think Twice About Rolling Your 401(k) into an IRA -- Consider Investment Management Fees When You Receive New Disclosure Report
"Before you make a move, compare the fees of your 401(k) plan's funds with any retail funds you're considering at the IRA rollover institution. The new 401(k) fee-disclosure rules that become fully effective in August will make this comparison easier. [The author's] recent post showed average and median fees for various types of mutual funds. You'll want to invest in funds with expenses well below these averages, and there's a good chance your 401(k) plan will accomplish this." (CBS MoneyWatch)

Is It Safe to Own Company's Stock in a 401(k) or Profit Sharing Plan?
"Buying stock that then falls sharply is painful, especially for investors who also happen to be company employees.... Financial advisers say employees like to invest in their employers for several reasons, including loyalty, hopes to profit from their work and a sense that they have a better read on the company than ordinary investors. But many advisers say that the practice increases the risk of losing your job and your retirement savings at the same time if your employer fails." (Reuters)

Longtime Chief of Colorado State Pension Plans Resigns, Calls 401(k) Savings Model a 'Failure'
"We can no longer talk in terms of 'plain vanilla' defined benefit or defined contribution plans. Instead, we see a blending of features to meet the unique needs of particular jurisdictions. However, pooling of investment and longevity risk in a base-defined benefit plan remains the low cost provider of a retirement dollar.... The real story is that Americans in general are unprepared for retirement. They typically have no resources to support them if they should become unable to work, let alone sustain them in retirement. The 401(k) experiment is a failure. The social service cost implication of this situation is not being acknowledged and will become a huge burden in the future [said Meredith Williams, former executive director of the Colorado Public Employees� Retirement Association]." (Governing)

IRS Proposals for Encouraging Longevity Annuities Might Not Impress 401(k) Sponsors
"[T]here are potential liability issues. For example, while many insurance companies offer such products (including several launched within the past year), each insurer offers only its own solution. That undermines a plan sponsor�s fiduciary duty to prudently select investment options.... The plan sponsor also has a duty to pick an insurer that will be able to make annuity payments long into the future. 'You�ve got to pick a provider that�s going to be around for 50 or more years,' says Robyn Credico, director of defined-contribution consulting at Towers Watson." (CFO)

Research Supports Limits on Number of Concurrent Loans from a 401(k) Plan
"The research, which analyzed 2010 data for roughly a quarter million participants in seven large, defined-contribution retirement plans that are administered by Vanguard, found that 401(k) loans are much more common in plans that allow multiple loans." (The New York Times; free registration required)

Young Workers Want Guaranteed Income Option in 401(k) Plans
"Fully 95% of workers under 30 who don't have access to a guaranteed income option at work said that they'd like to be able to do so, according to a poll ... by The Hartford Financial Services Group Inc. Those numbers remained high for individuals in their 30s and 40s, too. About nine of 10 individuals in both age cohorts said that they would like to turn some portion of their retirement savings into guaranteed income[.]" (Investment News)

Employers� Outreach Methods Fail to Engage Employees in Retirement Savings
"Employers and their employees in the U.S. hold different perspectives on how to achieve retirement preparedness through 401(k) plans ... [D]espite efforts by employers to educate workers on the 401(k) offering, most workers remain disengaged and unprepared financially for retirement.... Relatively few 401(k) participants have the desire to manage their workplace savings plan ... [and] many employers are doubling down on outreach efforts that have not been effective:" (Society for Human Resource Management)

[Opinion] 401(k)s Are Too Risky for Retirement
"Retirement experts find that [401(k)-style defined contribution] plans have numerous shortcomings, including high operation costs and low investment returns. The biggest problem with defined contribution plans is that alone they do not provide retirees with guaranteed retirement income. If employees don't make the right large contributions into the right investment mix at the right time, they are at high risk for poverty during retirement." (CNN)

Are Employers Expecting Too Much from Self-Directed Plan Participants?
"More than half (54%) of employers report that employees participating in plans are not taking full advantage of the investment options, features and services offered in connection with their 401(k) plan.... More than half (52%) [of employees, on the other hand,] say they don't have the time, interest or knowledge to properly manage their 401(k) portfolio. Nearly three-quarters (73%) spend less than eight hours per year managing their 401(k) plan account." (MarketWatch)

[Official Guidance] Text of DOL Field Assistance Bulletin 2012-02: FAQs on Participant-Level Fee Disclosures and Service Provider Fee Disclosures
38 Questions and Answers, supplementing the final regulations. Example: "Paragraph (c)(2)(i)(A) of the [final participant-level fee disclosure] regulation requires an explanation of any fees and expenses for general plan administrative services which may be charged against participants' and beneficiaries' accounts and the basis on which such charges will be allocated. How specific does this explanation have to be in order to comply with this requirement?" (Employee Benefits Security Administration)

'Institutionalizing' DC Plans: Reasons Why and Methods How (PDF)
"Using DB plans as the institutional model for retirement, institutionalization of DC plans can encompass a broad spectrum of practices, including: Managing toward a financial target (e.g., income replacement percentage); Recognizing the role of funding (in DC plans, funding equates to contribution levels) in achieving the financial target; Use of institutional investment vehicles that enable scale pricing (separate accounts, collective trusts); Improving diversification by offering exposure to alternative asset classes; Managing risk -- specifically risk to achieve an income target through the DC account [and more]." (Defined Contribution Institutional Investment Association)

Another Reason for Offering Annuity-Type Distributions From 401(k) Plans: Cognitive Impairment of Older Participants
"The battle to get annuities into 401(k) plans has been hard-fought, and it's not over yet. Insurance companies see a need to get 'lifetime income products' into retirement plans, and have had some success making the case that most plan participants aren't prepared to create an income plan on their own.... But [one economist] pointed to an as-yet-unheard argument for including them in D.C. plans: the decline in cognitive ability as we get older." (insurancenewsnet.com)

'Co-Sourcing' Trends of DC Plan Management
"Under the co-sourcing model, the adviser plays an inside role, side by side with the plan sponsor, often acting as an extension of the sponsor�s staff. As insiders, advisers have access to details and background information that allow them to proactively identify problems and risks." (Mercer)

[Opinion] ERIC Offers Recommendations to Improve Treasury Lifetime Income Guidance
"[ERIC] submitted to [Treasury and IRS] a series of three comment letters in response to their February 2012 package of proposed regulations and revenue rulings regarding lifetime-income options for participants and beneficiaries in retirement plans.... ERIC's three comment letters offer recommendations addressing the longevity annuity contract regulations, the partial annuity regulations, and the revenue ruling concerning rollovers from defined contribution [plans to defined benefit] plans[.]" (The ERISA Industry Committee)

Most Self-Directed Plan Participants Avoid Extreme All-Equities or No-Equities Positions
"Over the last ten years, there has been a definite trend away from extreme equity positions in [DC] participants' portfolios.... Research from CRR shows that fewer participants are at the tail ends of the spectrum -- with either their entire plan portfolios in stocks or no position in equities at all." (Vanguard)

Benefits and Challenges of Offering Retirement Income Strategies in Your DC Plan
"[A panel of industry experts share] their insights and perspectives on what's going on in the retirement industry to address the retirement income needs of participants." (Invesco)

[Opinion] Revenue Sharing on Trial: Complex, Inefficient and Unnecessarily Expensive
"The basic problem with revenue-sharing is that it is an inefficient and opaque way to compensate service providers. Its needless complexity leaves many plan sponsors unable to line up costs with the value of services so that they can prudently fulfill their fiduciary duty to determine the reasonableness of costs. In this way, revenue-sharing is like any other third-party payer system. In cases such as Tussey, revenue-sharing costs incurred by plan participants went unnoticed by the plan sponsor and therefore remained unknown, harming plan participants while generating [what a court called] 'unreasonable' profit for Fidelity." (Morningstar)

[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
My wife (age 70, born September 1, 1931) and I both work for a small company (C corp) that had an SEP IRA but has recently switched to a calendar year 401(k) plan. My wife would like to roll over funds from the SEP IRA into the 401(k) plan. She would also like to roll other 'regular' IRA funds into the plan, as well as some 403(b) funds saved while working for a former employer. The goal is to avoid required minimum distributions. Can we? She is the President of the C corp and owns 4.96%. I am the CEO and own 4.5%. (BenefitsLink.com)

[Guidance Overview] Final DOL Regs Address Fee Disclosures to Participants in Self-Directed Retirement Plans
"Plan sponsors of covered participant-directed individual account plans should review their summary plan descriptions, plan prospectuses, benefit statements, plan websites and other plan communications to determine what additional information must be provided under the final regulations and how they will comply with the information and disclosure requirement." (Pillsbury)

Average 401(k) Balance 62% Above 2009, Fidelity Says
"Stock market performance accounted for about 80 percent of the average $5,500 increase in the first quarter of 2012 compared with the prior quarter, while the remaining 20 percent was from employer and worker contributions, Fidelity said." (Bloomberg)

Better Returns for 401(k) Investors: Looking Back at First Quarter 2012
"With such a broad reach and appeal, one would think investing in such plans would be streamlined and simplified. Unfortunately, it is anything but. The very nature of 401(k) plans is to blame: plans are specific from one company to the next, and within each plan, only a small -- and again, unique -- number of investment options are made available. For most investors, this translates into confusion and a lack of a systematic way to go about and properly allocate their 401(k) contributions." (Seeking Alpha)

401(k) Fee Litigation, April 2012
"Initially, the lawsuits were brought by plan participants against plan sponsors and alleged that, by allowing plan service providers to receive revenue sharing payments, the plan sponsors caused the participants to pay excessive fees, in breach of the sponsors' fiduciary duties to the participants. The focus of these lawsuits against the plan sponsors has evolved over time to include broader challenges to, among other things, the plan sponsors' selection of actively managed mutual funds as plan investment options. [The target page links to the Groom chart of 'Participant Claims Against Sponsors and Related Fiduciaries' and 'Plan Fiduciary Claims Against Plan Providers' and 'Plan and Participant Claims Against Plan Providers.']" (Groom Law Group)

401(k) Salary Deferrals: Better as Single-Sum, or Divided Per-Paycheck?
"If your plan allows you to max out with one contribution or just a few over several pay periods -- and still get your full match -- well, then, putting your money to work sooner than later is likely a wise move, particularly if you have a bullish outlook for the year. But you may find restrictions or drawbacks at the plan level. Seventy-one percent of employers issue their match on a payroll basis, calculating it as a percentage of your compensation during that payroll period[.]" (CNN Money)

[Guidance Overview] OK to Levy Recordkeeping and Investment Management Fees Only on Certain 401(k) Participants? Federal Case Asks But Doesn't Answer
"A significant issue raised but not resolved in the ABB case -- a matter that may very well be the next frontier in fiduciary oversight litigation -- is, whether the record keeping costs of a 401(k) plan may be borne exclusively by those participants whose investment funds enjoy revenue sharing (also known as 12b-1 fees) while participants whose accounts are invested in investment funds with no revenue sharing pay little or nothing." (Troutman Sanders)

Get Proactive, Don't Wait for Legislation to Enhance 401(k) Savings Vehicle, Says Treasury Policymaker
"Mark Iwry, senior advisor to the Secretary of the Treasury for retirement policy, acknowledges that automatic 401(k) features have gone a long way to improve retirement saving opportunities for American workers.... Rather than settling for the standard 3% default rate for the initial salary deferral of new employees who are automatically enrolled in their company 401(k) plan, Iwry suggested starting at a higher level, perhaps 5 or 6%. And instead of limiting auto enrollment to new employees, why not expand it to existing employees who are not participating in the retirement plan?" (Investment News)

[Opinion] Company Stock Ought Not Be Legal as Defined Contribution Retirement Plan Investment
"It's time to end the tax deduction for a contribution of company stock to qualified retirement plans. It's bad for employees, bad public policy, bad accounting and bad tax policy. Here's a modest suggestion: If you hold your employer's stock in your 401(k) dump it; if you are a plan sponsor you should terminate any option for company stock in your plan. In fact, the SEC and Department of Labor should prohibit it." (Forbes)

Encouraging Employees to Push Savings to the Code Section 402(g) Maximum (PDF)
"How do you respond when an employee asks you 'how much should I be contributing to my 401(k) plan?' If you are like most plan sponsors, providers or advisors, you will typically respond by beginning a dialogue about how employees should be deferring at least a certain 'percentage' of pay, that this 'percentage' should be high enough to capture the employer match and that this 'percentage' should be increased annually. But if you ask us, our answer is simply this: '$17,000...the maximum the law allows.'" (MJM401k)

[Guidance Overview] 401(k) Plan Fees in Turmoil: District Court in Tussey Case Finds Fiduciary Breaches but Third Circuit Does Not
"Overall, the courts' decision in Tussey and Renfro appear to show that the ... outcome is less dictated by the choices made by plan fiduciaries than by the thoroughness and care by which the plan fiduciaries investigated, considered and compared their investment selections and fees. Accordingly ... it is critical for plan sponsors to understand and follow their plan's investment policy procedures and guidelines, to understand their plan's fees and compare them to the marketplace, to document all actions taken with respect to investment selections and plan fees, and to act for the exclusive benefit of plan participants and beneficiaries." (Trucker Huss)

How Retirement Plan Sponsors and Participants Can Make the Most of Matching Contributions (PDF)
"[M]ore than 93 percent of companies make some sort of contribution to employees' retirement savings, and nearly 40 percent use a matching formula in order to do so. An employer match has a clear value to employees, but how do employers maximize that value? Match amounts, match formulas, and vesting schedules vary widely across plans. The match formula may affect safe harbor, participation, non-discrimination testing, contribution rates, automatic features, employee retention, and, perhaps most importantly, retirement outcomes. [The authors] take a look at some of the options and how they're currently used, and then explore the ways that you and your employees can reap the greatest benefit from a match." (Arnerich Massena, Inc.)

[Guidance Overview] Considerations for Plan Sponsors and Fiduciaries in Minimizing Potential Fiduciary Liability After Tussey v. ABB, Inc.
"[The Tussey v. ABB, Inc. case] suggests that plan sponsors and fiduciaries should press service providers/recordkeepers to provide enough information about revenue sharing arrangements to allow them to: [i] Calculate total revenue sharing paid to service providers; [ii] Determine the plan administrative costs that would be charged in the absence of revenue sharing; [iii] Compare to the level of plan administrative costs paid by plans of comparable size; [iv] Determine whether revenue sharing payments provide the service providers/recordkeepers with compensation beyond the administrative cost in the absence of revenue sharing (i.e., beyond the �market rate�); and [v] Negotiate rebates of revenue sharing that exceed the market rate." (Porter Wright)

Operational Changes in Defined Contribution Plans for Plan Sponsors to Consider in 2012
"Many plan fiduciaries may not be aware that it is both a fiduciary breach and prohibited transaction to allow the plan to pay more than what is considered reasonable expenses. In practice, how does a fiduciary determine if plan fees are reasonable? If you've taken your plan out to bid within the last three years, you should have current market information and documentation for your due diligence files to support the fees you are paying, or have taken action by going back to your service provider(s) to negotiate lower fees on behalf of plan participants." (Milliman)

Small but Significant 401(k) Fixes Urged at House Hearing
"'There is no need for dramatic changes, but measures should definitely be considered to make it easier for employers, particularly small businesses, to offer a workplace savings plan to their employees,' [Judy A. Miller of ASPPA] advised, noting that some complications are statutory and some are regulatory." (Society for Human Resource Management)

GAO Report on Defined Contribution Plans: Approaches in Other Countries Offer Beneficial Strategies in Several Areas
"GAO was asked to examine, for selected countries' DC systems, (1) how are service providers overseen by regulatory agencies; (2) what key strategies are used to improve fee disclosure to participants; and (3) what key strategies are used to reduce fees? GAO selected Australia, Chile, Sweden and the United Kingdom based on, among other factors, the importance of the DC plans to the country's retirement system and the use of strategies to address service providers' fees." (Government Accountability Office)

Congress Eyes Cutbacks to 401(k)s As It Looks for Ways to Raise Revenue
"As policy makers gear up for the tax-reform effort expected after the presidential election, they are asking: Can 401(k) plans, individual retirement accounts, and other tax-deferred vehicles be streamlined while getting more traction among people with lower incomes? ... At the very least, the increasing focus on retirement savings is a reminder that tax treatment of the accounts, once considered permanent, is anything but." (The Wall Street Journal)

[Guidance Overview] Cracks in the Piggy Bank: 401(k)s Are Inadequate for Many Americans
"The financial crisis is partly to blame. It knocked $1.6 trillion, or about a third of the total value, off the nation's 401(k) accounts. But the larger truth is that most Americans do a poor job of anticipating the future and saving money. People don't seem to grasp that the pensions their parents' generation enjoyed have been almost entirely supplanted by 401(k)s, leaving them largely on their own to fund the final stage of their lives." (The Week)

[Guidance Overview] Sixth Circuit Makes It Harder to Contribute to 401(k) During Bankruptcy
"[A]ppellants were going through Chapter 13 bankruptcy, and as part of their Chapter 13 repayment plans, they were repaying 401(k) loans. At the time they filed bankruptcy petitions, none of the appellants were making contributions to their employer-sponsored 401(k) retirement plans. Well before the end of their repayment plan terms, the appellants were projected to have their 401(k) loans fully repaid. At that point, they proposed that the income made available by repayment of the 401(k) loans be contributed directly to their 401(k) retirement accounts." (Jeffrey D Best Attorney at Law)

Generation Y Facing Retirement As Go-It-Alone Affair
"Roughly between 18 and 34 years old, [Generation Y's] table is wobbling on its last two legs: a job and a 401(k), which are co-dependent. Thus instead of protection, Gen Yers have inherited a great deal of pressure. More than ever, they know they better be employable, and they better be skilled 401(k) investors. The trouble is, it is quite difficult to do this when faced with high unemployment, and ever-higher student loan debt." (msnbc.com)

[Guidance Overview] Court Finds a Neglected Investment Policy Statement Can Be Costly
"In 2000, without informing plan participants, the plans� investment committee took several steps that proved to be in conflict with its [investment policy statement, or "IPS"] and fatal to its legal defense.... The lengthy [Missouri District court] opinion holds additional lessons in how a company failed to follow a prudent process in its investment decisions, in monitoring plan costs, and in the penalties involved in ignoring its own IPS. Although it did not find that [the employer] concealed its fiduciary breaches, the court seemed troubled by what it called a �conflicted relationship� with [the plan's investments provider (Fidelity)]." (fi360 blog)

[Opinion] Statement of Consumer, Labor, Women's and Retiree Organizations Opposing Efforts to Eliminate Paper-Based Disclosures to Retirement Plan Participants
"Receiving clear and accessible information about 401(k) fees and investment options is critical if people are to be able to protect and understand their 401(k) benefits. In our view, [DOL] has already provided employers and financial institutions with sufficient latitude by allowing them to automatically provide information electronically to those people who work with their employer's computer network as an integral part of their day job. This is a compromise we support. But where employees do not use a computer in their everyday work, it must be up to them to decide -- not financial institutions or their employers -- whether they should get this critical information by mail or electronically." (Pension Rights Center)

[Guidance Overview] Failure to Monitor Recordkeeping Fees Is Breach of Fiduciary Duty
"In Tussey v. ABB, Inc., the US District Court for the Western District of Missouri held that a company breached its fiduciary duty to its 401(k) plans when it failed to monitor recordkeeping fees and revenue-sharing payments, selected more expensive share classes when less expensive classes were available, replaced an investment fund in violation of the investment policy statement and paid recordkeeping fees in excess of the market cost to subsidize other recordkeeping services." (Practical Law Company)

[Guidance Overview] Failure to Monitor Revenue Sharing and Negotiate Rebates for Recordkeeping Fees Violated Governing Documents and Fiduciary Duties
"Although many of the [Missouri District] court's conclusions related to revenue sharing are grounded in its interpretation of a somewhat idiosyncratic [investment policy statement], its analysis strongly suggests that fiduciaries overseeing plans with revenue sharing arrangements really do need to know whether their service providers are receiving more than market compensation. This information allows plan fiduciaries to know whether requested hard-dollar service fees are reasonable, and when there are no hard-dollar fees, it allows fiduciaries with sufficient bargaining power to seek rebates." (Thomson Reuters/EBIA)

[Opinion] Testimony of EBRI at Hearing on Tax Reform and Tax-Favored Retirement Accounts (PDF)
"[The testimony deals] with the following questions: What is the size of Americans' retirement savings gap? What is the impact of tax favored retirement accounts on retirement income adequacy? What is the value of tax-favored retirement accounts under current tax incentives (with particular emphasis on 401(k) plans)? How might workers react to changing tax incentives? What is the potential impact of two recent tax reform proposals on retirement security?" (Employee Benefit Research Institute)

401(k) Excessive Fees Lawsuit against John Hancock Will Proceed
"In Santomenno v. John Hancock Life Insurance Company [3d Cir. April 16, 2012], the [U.S. Court of Appeals for the Third Circuit] vacated the district court's grant of summary judgment in favor of John Hancock regarding the plaintiffs' ERISA claims and remanded the case back to the U.S. District Court for the District of New Jersey for further proceedings." (The Pension Protection Act Blog)

Bringing Annuities to 401(k)s: Comments by Mark Iwry
"The federal government is proposing new regulations to make it much easier for annuities and other forms of steady income to be included in 401(k) retirement plans and individual retirement accounts (IRAs).... By pooling those who live shorter and longer than average, everybody can essentially put away what's necessary to reach the average life expectancy, and those who live longer than average will be protected. The longevity risk pooling means that an annuity might provide an annual income of more like 6 percent or 7 percent, rather than 4 percent, depending on interest rates and the terms of the annuity." (Bloomberg BusinessWeek)

NBCUniversal Takes Pieces from Parents Plus Some of Its Own for New 401(k) Plan
"The 401(k) plan at NBCUniversal, which started from scratch in early 2011, has grown to $340 million by adopting some ideas from its joint-venture parents while adding investment and plan design ingredients of its own." (Pensions & Investments)

Thrift Savings Plan Roth Option Delayed for Pentagon Employees
"The Federal Retirement Thrift Investment Board, which oversees the TSP, said earlier this week that not all federal agencies have completed the transition required to implement the Roth 401(k) and some would need additional time after May 7. The Roth option will be available to Marine Corps members in June; to Defense and Veterans Affairs Department civilians in July; and to Army, Navy and Air Force service members by October; according to the Defense Finance and Accounting Service, which cites complicated pay systems as the reason for the delay." (Government Executive)

Stable Value Funds: Still Popular, Despite Fewer Guarantees
"Despite a low interest-rate environment, 401(k) participants at New York Life Retirement Plan Services haven't given up on stable value funds. In an analysis released Wednesday of its client base, the firm found half of all participants across its retirement platform have some of their 401(k) savings in a stable value investment." (AdvisorOne)

EP Exam Efforts Focus on 401(k) Compliance Problems
"EP has performed 401(k) plan examinations in three market segments: (1) the Accommodation & Food Services Industry, (2) the Administrative & Support, Waste Management & Remediation Industry, and (3) the Wholesale Industry. In each of these three projects, the two most common errors found were ADP/ACP discrimination testing results and untimely deposit of employee elective deferrals." (Wolters Kluwer Law & Business / CCH)

[Guidance Overview] Deceased Participant's Estate Can Sue to Recover Benefits Paid to Ex-Spouse
"The Third Circuit Court of Appeals ruled that ERISA does not bar the estate of a deceased 401(k) plan participant from suing the participant's ex-spouse to recover benefits distributed to her as the named beneficiary where she previously waived the right to those benefits as part of their divorce decree. The case is the first in which a federal Court of Appeals has addressed the issue." (Deloitte)

Defined Contribution Equals Social Security in Retirement Importance to Baby Boomers
"Defined contribution retirement plans now equal Social Security in importance when it comes to retirement security among people ages 50 to 66, according to a new survey from the Insured Retirement Institute.... Even fewer baby boomers are relying on a defined benefit plan, according to the survey, with 42% relying on employer-provided defined contribution plans, compared to 36% last year." (Pensions & Investments)

Four Employee Benefit Plan Tips for HR and Finance Departments
"The Society of Actuaries exposure draft of a new mortality improvement scale, if adopted, is expected to result in increases in traditional pension plan liabilities of 2% to 4% and in retiree health care liabilities of 6% to 9%.... [I]f you have never had your [401(k)] safe harbor notice reviewed by counsel, now is a great time to make sure it is compliant.... The IRS has given employers an opportunity to correct deficiencies [under section 409A] in release language [in employment contracts and severance agreements] without any penalties or reporting requirements, but to be entitled to relief, agreements must be amended no later than December 31, 2012.... Some of the nation�s largest consulting firms (Aon Hewitt and Mercer), as well as other companies in the insurance business, are rolling out private health insurance exchanges for employers." (Poyner Spruill LLP)

Generation Y: What You Need to Know About Financial Literacy
"[Late teens and early 20s:] This may be the time of your life when your earnings are at their lowest, so managing expenses should be a top priority.... [Mid- to late-20s: 401(k) plans] are portable, which is important, since many people in their 20s change jobs and even careers several times. They are also flexible, allowing you to make changes to your investments at any time or even put your contributions on hold if you run into dire financial straits.... [Early 30s:] If you have children whom you hope to put through college, now is a good time to start a college fund for them." (TIAA-CREF)

[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
A county government says it owns and controls a county hospital. An IRS letter to the hospital does not say it is qualified under Internal Revenue Code section 501(c)(3), although it says the hospital is an organization described in sections 509(a)(1) and 170(b)(1)(A)(iii). The hospital wants to establish a retirement plan to cover its employees. Can the hospital sponsor a 401(k) plan, or is it considered a "governmental" entity and hence ineligible to sponsor a 401(k) plan? (BenefitsLink.com)

Measuring a 401(k) Plan's Success: The Income Replacement Ratio
"Sponsors of defined contribution retirement plans often encounter the problem of how to measure the success of their plan in meeting the future needs of their employees. As part of offering a retirement plan, they need a gauge of results.... [A]n important metric used to help determine if a person is on track for adequate retirement savings is the income replacement ratio." (Society for Human Resource Management)

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