Headlines about "Ret plan investments - self-directed"
Gathered from the web by the editors at BenefitsLink.com.
The Effect of Uncertain Labor Income and Social Security on Life-Cycle Portfolios
Excerpt: "This paper examines how labor income volatility and social security benefits influence life-cycle household portfolios. We examine how much the individual saves, and where, taking into account liquid financial wealth and annuities, and stocks versus bonds. Higher labor income uncertainty and lower old-age benefits boost demand for stable income in retirement, but also when young. In addition, a declining equity glide path with age is appropriate for the worker with low income uncertainty but for the high income risk worker, equity exposure rises until retirement. We also evaluate how changes in social security benefits influence retirement risk management." (Pension Research Council; registration required to download fulltext of paper)
Advisers Step In Amid 401(k) Match Cuts
Excerpt: "Financial advisers are stepping in when companies stop matching 401(k) retirement plan contributions. They're encouraging clients to continue saving and, in some cases, they're taking a second look at the types of retirement accounts clients are using. . . . 'When they take the match off the table, it's a whole different ballgame,' says Charles Bennett Sachs, a certified financial planner at wealth management firm Evensky & Katz. That's because financial advisers have long advised clients to contribute at least enough to their company-sponsored retirement plan to capture any matching contributions - which is essentially free money. Without the match, investors need to look more closely at their specific situation, including their projected tax exposure, and decide whether they need to adjust their retirement savings strategy." (The Wall Street Journal)
Debate: Should All Advisors Be Required to Meet the Fiduciary Standard, or Should Everyone Fall Under a Suitability Standard
Excerpt: "At the heart of this debate lies a contentious word: fiduciary. In essence it means that advisors who fall under the fiduciary standard, namely investment advisors who run a fee-based business, must always put clients' interests before of their own. This generally means recommending the lowest-priced product that meets the client's needs and disclosing all conflicts of interest. On the other hand, broker-dealer registered representatives must meet a 'suitability' standard of care." (On Wall Street and SourceMedia, Inc.)
Defined Benefit Funding Relief at Risk Over an Advice Provision
Excerpt: "A House committee yanked a pension bill provision safeguarding existing investment advice arrangements for DC plans -- jeopardizing employer support for a package that also provides critical funding relief for DB plans. At the 11th hour, Democrats on the House Education and Labor Committee deleted the provision that would have made clear the legislation would not pre-empt existing investment advice arrangements that rely on the Department of Labor's SunAmerica advisory opinion or other DOL advice exemptions." (Pensions & Investments)
DOL/SEC Target-Date Hearing Webcast Now Online
Excerpt: "The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has posted on its Web site the archived Webcast of the June 18, 2009, joint target-date fund hearing with the Securities and Exchange Commission (SEC). The hearing received testimony from 36 witnesses on issues relating to target-date funds and other similar investment options. According to EBSA, the Webcast archive is broken down by witness panels to make it easier to view. It can be viewed at http://www.dol.gov/dol/media/webcast/hearing/." (PLANSPONSOR.com; free registration required)
Seventh Circuit Comments on Denial of Petition for Rehearing in case of Hecker v. Deere
Excerpt: "The Seventh Circuit has denied a rehearing in the Hecker v. Deere case. . . . Plaintiffs, the Department of Labor and other interest groups had called for a rehearing. You can access a couple of the amicus briefs filed in the petition for rehearing on the Guidebook's 404(c) webpage. The Seventh Circuit made [several] points in response to the Amicus Brief filed by the DOL . . . ." (ERISA Fiduciary Guidebook)
Picking the Right Target-Date Fund
Excerpt: "[T]he concept is still valid for some investors, especially for those who are too busy to rebalance their portfolios to make them more conservative over time. The tricky part, of course, is picking the right fund. . . . The pace at which a fund becomes more conservative is known as its glide path. Find out how often the fund reduces its stock allocation. Ideally, it will do so gradually each year -- by about 1 percent. Avoid funds that make big adjustments every five or 10 years . . . ." (The New York Times; free registration required)
[Opinion] Joint-Trade Letter Concerning H.R. 1988, 'The Conflicted Investment Advice Prohibition Act of 2009' (PDF)
2 pages. Excerpt: "Under ERISA, anyone providing investment advice to a plan or its participants or beneficiaries is already a fiduciary and subject to the highest standards of duty. There is no evidence of a violation of these standards, and Representative Andrews has not presented evidence of any problems with the current system. HR 1988 is not necessary. By establishing new barriers for firms who are well-qualified to provide advice, it will result in fewer American workers, including baby-boomers approaching retirement, receiving critically important investment advice." (U.S. Chamber of Commerce)
House Committee Approves Bill That Restricts 401(k) Advice to Independent Advisers
Excerpt: "Today's bill merged two proposals that were introduced this year: one made by Rep. Rob Andrews, D-N.J., focused on conflicted investment advice, the other sponsored by the committee's chairman, Rep. George Miller, D-Calif., would have required increased disclosure of fees and expenses in 401(k) plans. The new bill incorporates a proposal to provide corporate plan sponsors with temporary relief from making required contributions to their traditional defined benefit pension plans." (Investment News; free registration required)
[Guidance Overview] A Decided Victory for Plan Fiduciaries in Company Stock Case as Court Follows Lead of Hecker v. Deere
Excerpt: "In denying the plaintiffs' Motion for Summary Judgment and granting the defendants' Motions for Summary Judgment, the court held as follows: (1) Regarding the plaintiffs' argument that the plan failed to meet ERISA Section 404(c) by not disclosing 'in advance that liability would be shifted to Plaintiffs under the 404(c) plan', the court held that language in a prospectus satisfied that requirement. (2) Regarding the plaintiffs' argument that the plan failed to meet 404(c) by not adequately describing the investment objectives and the 'risk and return' characteristics of the investment options offered by the plan, the court pointed to a general benefits pamphlet which had been distributed to employees and contained a chart describing the investment alternatives." (ERISA Fiduciary Guidebook)
Hope for Pre-Retirees' Savings Recovery Shown in Analysis
Excerpt: "Financial Engines says its new analysis on the impact of the market decline in 2008 on investors nearing retirement found that even for investors within five years of retirement, modest increases in savings combined with slightly delayed retirement can recover their pre-2008 retirement outlooks if they stay in a diversified, age-appropriate portfolio. According to a press release, many 401(k) participants assume that the large portfolio losses experienced in 2008 mean needing to work five or 10 years longer than planned, but Financial Engines' analysis shows that large portfolio losses do not translate into equally large percentage decreases in projected retirement income." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Judge Says Motorola Didn't Breach Fiduciary Duties
Excerpt: "The U.S. District Court for the Northern District of Illinois ruled that Motorola Inc. and fiduciaries of its 401(k) plan did not breach their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by continuing to offer company stock as an investment option in the plan. Granting summary judgment for the Motorola defendants, Judge Rebecca R. Pallmeyer said they were protected from liability under ERISA Section 404(c). The plaintiffs alleged that the defendants did not disclose in advance that liability would be shifted to them under the 404(c) plan, but Pallmeyer pointed out that a plan prospectus sent to participants clearly stated that the plan was intended to be a 404(c) plan with defendants not liable for participant investment decisions." (planadvisor)
Amendment to Conflicted Advice Bill Regarding Retirement Education (PDF)
3 pages. Excerpt: "Page 27, add at the end the following: SEC. 4. EXPANSION OF OUTREACH TO PROMOTE RETIREMENT INCOME SAVINGS TO INCLUDE PROMOTION OF EDUCATION ON FINANCIAL LITERACY WITH RESPECT TO INVESTMENT FOR RETIREMENT." (U.S. House of Representatives via The Spark Institute)
Amendment in the Nature of a Substitute for the 'Conflicted Investment Advice Prohibition Act of 2009' (PDF)
27 pages. (U.S. House of Representatives via The Spark Institute)
Three Ways to Get Your 401(k) Back on Track
Excerpt: "The easiest fix would, of course, be a full recovery of the stock market. But the returns necessary to repair your retirement accounts are unlikely to happen any time soon. Baby boomers over age 55 who wish to retire in the next two years will need annual investment returns of 13.64 percent to recoup their losses between January 1, 2008 and April 30, 2009, according to calculations released today by Mercer, a benefits administrator and consulting company. Investors who have 5 years to recover will need returns of 5.44 percent annually to get back to where they were a year and a half ago. Those with a longer time horizon will need only a 2.72 annual rate of return to recover over 10 years and just 1.81 percent annually over 15 years." (U.S. News & World Report)
Fun, Easy and Automatic: Not a Sure Path to Sufficient Retirement Income (PDF)
Excerpt: "[G]ood communication and education must attract employees' attention. And attention-gaining techniques often include fun and games?snappy brochures, fun YouTube videos, intriguing Facebook pages for the plan, and maybe even scratch and sniff enrollment forms. But every education and communication effort must be aimed at enlightening employees about the things successful users of 401k plans do. Getting employees' attention is the start -- not the end." (Ackley Associates)
Rep. Pomeroy Introduces Bill to Boost Annuity Tax Breaks
Excerpt: "Rep. Earl Pomeroy (D-ND) and Rep. Ginny Brown-Waite (R-FL) have introduced the Retirement Security Needs Lifetime Pay Act (H.R. 2748). Similar to legislation introduced by Pomeroy in the 110th Congress, the bill contains several provisions to encourage retirees to create annuities as part of their retirement savings plans. The bill excludes from income a portion of lifetime income payments received from IRAs, qualified retirement plans (other than defined benefit plans), and non-qualified annuities. It also excludes the value of longevity insurance from amounts subject to required minimum distributions (RMDs); and it clarifies the taxation of payments from deferred annuity contracts." (ICMA-RC)
ABC Suggests Improvements to Fee, Advice Bills
Excerpt: "The House Subcommittee on Health, Employment, Pensions and Labor has approved The 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984), which requires simple-to-understand fee disclosure on the investment options contained in employers' 401(k) plans, as well as the Conflicted Investment Advice Prohibition Act (H.R. 1988). . . . However, before the committee's vote, American Benefits Council President James A. Klein commended the subcommittee for preserving the broad-based provision of investment advice to employees while still protecting the many non-conflicted advice arrangements approved by IRS before the enactment of the Pension Protection Act of 2006 (PPA), but identified several liability issues raised under the bills." (PLANSPONSOR.com; free registration required)
The SEC's and DOL's Cross Agency Retirement Plan 'Compliance Waltz'
Excerpt: "It is striking . . . how separate the securities compliance world is from the ERISA compliance world-though it is a 'separation' which will eventually die a natural death. Security practitioners and ERISA practitioners will be getting to know each other well, and probably sooner than later. So this is my contribution to that effort. The link below brings you an article which describes ERISA compliance for the security law compliance officer. To many of you, this will be very basic, and pretty boring stuff. The securities folks, however, have expressed amazement of some of the basic things I have written about, things which we take for granted. ['SEC's and DOL's Cross Agency Waltz: The ERISA Connection to Disclosure, Advice, Compensation and Conflict of Interest' at http://www.businessofbenefits.com/uploads/file/Toth_PCRM_03-09(2).pdf]" (Giller & Calhoun, LLC)
Bill Would Allow Independent Advisers to Counsel 401(k) Participants
Excerpt: "This bill aims to allow only independent investment advisers -- essentially those advisers whose compensation is not affected by the counsel they provide -- to work directly with 401(k) participants. . . . [The] bill effectively would repeal the Labor Department's ruling update this year of the Pension Protection Act of 2006." (Investment News; free registration required)
Pension 'Perfect Storm' Could Derail Retirement Plans, Global Study Finds
Excerpt: "Unless people prepare for it properly in advance, a perfect storm of demographic and financial trends could derail people's retirement plans, a global survey from HSBC Insurance finds. In its fifth annual Future of Retirement study, HSBC's It's Time to Prepare finds 9% of the 15,000 people it surveyed in 15 countries expect to delay their retirement because of the economic downturn and only 19% intend to retire as they had previously planned. Many are doing the opposite of what they should be doing: 17% are reducing retirement savings or have stopped saving for retirement altogether." (The National Post Company)
Text of Defined Contribution Plan Fee Transparency Act of 2009, H.R. 2779 (PDF)
26 pages. Excerpt: "To amend the Internal Revenue Code of 1986 to provide transparency with respect to fees and expenses charged to participant-directed defined contribution plans, and to improve participant communication." (U.S. House of Representatives via American Benefits Council)
Target-Date Funds in the Spotlight: An Overview
Excerpt: "Employers . . . cannot rely entirely on the fact that under Department of Labor rules, target-date funds are qualified default investment alternatives (QDIA's) in a company's 401(k) plan. They are still liable as fiduciaries in choosing an appropriate set of target date funds for employees in the fund." (Mind Over Market)
Investment Risk Considerations for Pre-Retirees and Retirees
Excerpt: "Investors who are nearing retirement -- or already in retirement -- face a special challenge when it comes to investment risk: They may need to maintain more exposure to the stock market than they think." (The Vanguard Group, Inc.)
Update on Participant Behavior Through First Quarter 2009 (PDF)
4 pages. Excerpt: "This note extends our analysis of participant behavior during volatile markets through the first quarter of 2009, and should be read in conjunction with our prior report. [See Vanguard, 2009, Inertia and Retirement Savings: Participant Behavior in 2008, Vanguard Center for Retirement Research, vanguard.com/retirementresearch.] Despite high levels of volatility in the first quarter of 2009, most plan participants made no changes to their retirement savings and investment program, continuing the trend observed during 2008." (The Vanguard Group, Inc.)
Vanguard Provides Three Expert Perspectives on Target-Date Funds
Excerpt: "In a recent publication, Target-Date Funds: A Solid Foundation for Retirement Investors , three Vanguard experts weigh in on the benefits of target-date investing and why we believe these funds are still a sound approach even in challenging market conditions." (The Vanguard Group, Inc.)
Target-Date Funds Favored by Hands-Off Investors
Excerpt: "What recent events have taught us . . . is that all target-date funds aren't alike, even if they have similar names. The funds need better disclosures and workers need more information on how the investments work and their risks. And investors must remember that while these funds make most of the decisions for us, we can never be too complacent or too hands-off." (The Baltimore Sun)
Whats in a Target-Date Funds Name? Misled Investors and Troubling Results Might Lead to Crackdown
Excerpt: "The SEC is considering cracking down on the use of target-date retirement fund names that could be 'misleading or confusing to investors,' SEC Chairwoman Mary L. Schapiro testifies during a Senate subcommittee hearing." (Workforce.com)
Links to Surveys Relating to ERISA Fiduciary Performance and Litigation
Excerpt: "The following surveys contain some great information about how fiduciaries are doing and the risks that they are facing: . . ." (ERISA Fiduciary Guidebook)
EBRI Study Addresses Plan Demographics, Participants' Saving Behavior, and Target-Date Fund Investments
Excerpt: "This analysis explores (1) whether plan demographic characteristics would affect individual participant contribution rates and target-date fund investments and (2) equity glide paths for participants in relation to plan demographics by considering target replacement income and its success rate." (Employee Benefit Research Institute (EBRI))
[Opinion] Text of Comments Filed to Date re DOL/SEC Hearing on Target Date Funds and Similar Investment Options
The web page of hypertext links is published by the Employee Benefits Security Administration. (Employee Benefits Security Administration, U.S. Department of Labor)
Investing After Retirement: Consider TIPS as Part of Diversified Portfolio
Excerpt: "Your portfolio may be safe from losses, but that's no help if it doesn't keep up with the rising cost of living. Economists and investors differ on the outlook for inflation in the near term, but even slow steady price increases can take a toll. . . . For conservative, risk-averse investors who are also worried about the long-term inflation threat, there is one relatively simple solution: Treasury Inflation-Protected Securities, or TIPS, are bonds issued by the federal government that are guaranteed to keep pace with increases in the government-calculated consumer price index." (Business Week)
Retirement Plan Trade Association Opposes Mandatory Index Funds in 401(k) Plans
Excerpt: "Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee, wants to reform 401(k) plans by [requiring] plan providers to offer investors at least one low-cost index fund. . . . [In a white paper, the SPARK Institute said it] 'does not believe that the wholesale use of passively managed funds by legal mandate will reduce plan fees and expenses or that policy makers should unilaterally determine which approach to investing is better for American workers saving for retirement . . . .' " (Financial Planning)
Rethinking Conventional Wisdom About 401(k) Loans: Better In Debt to a Plan Than a Credit Card Company
Excerpt: "Americans could save as much as $5 billion a year -- or $275 per household -- by borrowing from their 401(k) retirement accounts instead of more costly consumer loans, Federal Reserve economists Geng Li and Paul A. Smith conclude in a recent Fed working paper." (Wall Street Journal)
[Opinion] American Benefits Council Comments on H.R. 1988, the 'Conflicted Investment Advice Prohibition Act of 2009' (PDF)
3 pages. Excerpt: "The Conflicted Investment Advice Prohibition Act of 2009 (H.R. 1988) repeals the investment advice provision enacted in the Pension Protection Act of 2006 ('PPA'). The bill also prohibits several investment advice practices that existed prior to PPA and that do not involve conflicted advice. This document examines the non-PPA effect of H.R. 1988 [particularly 'SunAmerica' arrangements]." (American Benefits Council)
[Guidance Overview] Debtor's Chapter 7 Bankruptcy Filing Was 'Presumptively Abusive'; 401k Loan Repayments Not 'Necessary Expense'
Excerpt: "Applying the 'means test' from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the United States Court of Appeals for the 9th Circuit held (in an issue of first impression for the court) that the section 401(k) plan loan was not a 'secured debt' or a 'necessary expense' of the debtor." (PLANSPONSOR.com; free registration required)
Plan Demographics, Participants' Saving Behavior, and Target-Date Fund Investments
Excerpt: "This analysis explores (1) whether plan demographic characteristics would affect individual participant contribution rates and target-date fund investments and (2) equity glide paths for participants in relation to plan demographics by considering target replacement income and its success rate." (Employee Benefit Research Institute)
More Details on EBSA/SEC Hearing on Target-Date Funds
Excerpt: "The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission (SEC) have provided more information regarding a one-day hearing on June 18, 2009, to explore issues relating to target-date funds and other similar investment options. A news release said the 'purpose of the hearing is to examine the need for additional guidance given the importance of these investments to the retirement savings of investors.'" (PLANSPONSOR.com; free registration required)
Hearing on Target Date Funds Announced by Department of Labor and the Securities and Exchange Commission
Excerpt: "[T]hey will hold a joint one-day hearing on June 18, 2009 on issues relating to investments in target date funds and similar investment options by 401(k) plan participants and other investors. . . . The Agencies are specifically interested in obtaining information on: how TDF managers determine asset allocations and changes to asset allocations (including glide paths) over the course of a TDF's operation; how they select and monitor underlying investments; how the foregoing, and related risks, are disclosed to investors; and the approaches or factors for comparing and evaluating TDFs." (International Foundation of Employee Benefit Plans)
Informed Participation: The Path to Retirement Security (PDF)
3 pages. Excerpt: "Automatic plan design sets a new paradigm for financial education in the workplace. Since the goal of getting employees into the plan can be met largely through automatic enrollment, sponsors can focus on what participants need to know about the value of the plan, and how to use it to achieve financial security in retirement." (Retirement Made Simpler)
Despite the Market Downturn, Participants Continue Contributions to Their Retirement Plans
Excerpt: "That's supposed to be 'good news,' but underlying the stay-the-course mentality is either a stubbornness or inertia that could be hazardous to wealth. It's not that experts are suggesting ordinary investors ought to stop kicking funds into the retirement kitty or that they should completely overhaul the investment strategy. It's that investors can't ignore the last few years of volatility, as well as a decade where the broad market has been flat to down, when picking the proper investment strategy for their retirement savings. Hewitt Associates released a study showing that, despite record losses in 401(k) accounts in 2008, savings and investing habits barely changed at all." (MarketWatch via The Seattle Times)
[Guidance Overview] Introduction of 'Conflicted Investment Advice Prohibition Act of 2009'
Excerpt: "Congressman Rob Andrews (D-NJ) recently introduced the 'Conflicted Investment Advice Prohibition Act of 2009,' a bill that would significantly restrict the types of advice programs that providers and sponsors of 401(k) plans could offer to participants. In this article we review the bill, focusing particularly on the issues of fiduciary exposure and compliance for plan sponsors." (JPMorgan Chase & Co.)
[Opinion] American Benefits Council Comments on The Conflicted Investment Advice Prohibition Act of 2009 (PDF)
3 pages. Excerpt: "The Conflicted Investment Advice Prohibition Act of 2009 (H.R. 1988) repeals the investment advice provision enacted in the Pension Protection Act of 2006 ('PPA'). The bill also prohibits several investment advice practices that existed prior to PPA and that do not involve conflicted advice. This document examines the non-PPA effect of H.R. 1988." (American Benefits Council)
[Official Guidance] DOL Defers Effective Date of Investment Advice Rule; May 22 Date Moved to November 18 (PDF)
5 pages. Excerpt: "This document delays the effective and applicability dates of final rules under [ERISA] and parallel provisions of the Internal Revenue Code . . . relating to the provision of investment advice to participants and beneficiaries in individual account plans, such as 401(k) plans, and beneficiaries of individual retirement accounts (and certain similar plans). These rules were published in the Federal Register on January 21, 2009, and were to have become effective and applicable on March 23, 2009, but were delayed until May 22, 2009 . . . . This document further delays the effective and applicability dates of these final rules from May 22, 2009, until November 18, 2009, to allow additional time for the Department to evaluate questions of law and policy conerning the rules." (Employee Benefits Security Administration, U.S. Department of Labor)
[Guidance Overview] 401(k) Fee Litigation, May 2009 Update
The target page provides links to a 25-page paper titled: '401(k) FEE LITIGATION' and to a 38-page chart of 401(k) Fee Cases. (Groom Law Group)
Finding Out How Your Company's Retirement Plan Compares with Others
Excerpt: "[T]here are a few ways you may be able to evaluate your 401(k) in terms of the cost, breadth of offerings, the company match and other policies, and perhaps even get a sense of how it rates versus other plans. The first place you should try is the Web site of a new independent rating service called BrightScope. The company uses data culled mostly from public filings to assign numerical scores to company 401(k) plans on a scale of 0 (lowest) to 100 (highest) based on such factors as the generosity of the employer match, the quality of the investment options, the vesting schedule and the level of fees." (CNNMoney.com)
Your Retirement Plan May Need a New Investment Strategy
Excerpt: "Fidelity Investments didn't do a survey but instead relied on actual behavior of the 11.3 million participants in the 17,500-plus corporate-defined benefit plans it runs, and found that worker contributions were down slightly from a year ago, but that exchange levels were low and declining. Fidelity's numbers showed that about 1 out of every 20 plan participants traded out of one fund and into another in their plan. That's where the numbers draw some measure of concern because that low level of activity would indicate that investors, for the most part, are sticking with the investment strategy they started with, which may no longer be suitable or appropriate. For most workers, however, having the same portfolio makeup after many years is akin to a monster wardrobe malfunction. The wardrobe that worked in your first days on the job might not be appropriate for you to wear years later." (Star-Telegram.com)
[Opinion] What Would Be Different Under a 'Universal' Fiduciary Standard?
Excerpt: "Now that we've called for a fiduciary standard for all investment advice (and we mean a real fiduciary standard), the next question is, 'ok, why?' or, 'how would it change things?' In [a May Fiduciary Corner column, the author] takes a look at this question and arrives at six significant changes for the benefit of the investor." (fi360)
[Guidance Overview] The New Take on 404(c): Confusion in the Federal Courts (PDF)
3 pages. Excerpt: "ERISA Section 404(c) provides fiduciaries with a defense against losses incurred by participants who exercise control over their accounts. But the protection applies only to the investment decisions made by the participants (that is, how the participants use the plan's investment options) and not to the selection and monitoring of the investment options offered to the participants ?.right? Maybe. For the present, we have an anomaly; the answer depends on where you live." (Reish Luftman Reicher & Cohen)
[Opinion] Social Security Healthier Than Your 401(k)
Excerpt: "The bottom line . . . is that the 2009 Trustees Report did not reveal any important new information about the finances of the Social Security system. The system has enough money to pay full benefits for decades, although for a few years less than previously reported because of the financial/economic crisis. And the system faces a long run financial shortfall of about 2 percent of taxable payrolls, a figure that is higher than last year's estimate because of the financial/economic crisis but well within the range of deficits estimated over the past 15 years. The new information that we have about Social Security is how well it has withstood the onslaught of the financial/economic crisis. Social Security checks have gone out on time. Though the amounts are not large, the benefits are increased each year to reflect changes in the cost of living, and they continue for as long as the recipient lives. So, despite the modest amounts, the benefits are extremely valuable and people can count on them regardless of what happens to financial markets or the real economy." (Alicia H. Munnell via CNNPolitics.com)
[Guidance Overview] Self-Directed IRA Myths (PDF)
10 pages. Excerpt: "Many of [the self-directed individual retirement account] products are quite legitimate, and the sponsors work hard to provide meaningful information to help accountholders distinguish between legally acceptable investment practices and activities that may result in unfavorable tax consequences or, worse, complete loss of the tax-advantaged IRA status. Sometimes it is simply impossible to cover a subject in a comprehensive manner, and the materials warn accountholders to hire knowledgeable counsel. Nonetheless, in the opinion of the Richard Matta, most of these materials perpetuate certain myths ? even among the lawyers ? that range from merely incomplete to outright wrong. [This] article addresses certain self-directed IRA 'myths'." (Groom Law Group)
ETF Providers Target the 401(k) Market
Excerpt: "Until a few years ago exchange-traded funds were not a practical tool for retirement investors; since they could only be traded like stocks, each individual buy or sell entailed its own fee. 'That drove transaction costs through the roof,' . . . . Current technology allows exchange-traded funds to be traded in aggregate within a group plan. Also, more minor wrinkles have been ironed out, according to Barclays. For instance, fractional shares of ETFs can now be bought, so 401(k) investors who want to be fully invested at all times can be." (Financial Planning)
Rep. Rob Andrews' Investment Advice Bill
Excerpt: "Pension and financial industry lobbyists say that the legislation, if enacted, would result in fewer DC plan participants receiving advice about their investment options." (Workforce Management; free registration required)
Repairing Fractures in Some Long-Held Assumptions About Investing and Planning for Retirement
Excerpt: "[A]s employees see prospects dimming for affordable retirement, more may request -- and more employers may approve -- retirement in stepped-down phases over several years. Phased retirement is just one possible retirement system change that experts say could emerge from the current financial crisis. Others include greater use of so-called hybrid or cash balance retirement plans; they could provide insulation from stock market swings that can whipsaw 401(k) accounts. In fact, some critics contend that 401(k) accounts' vulnerability to turbulence in the markets is a fundamental flaw in their design." (Society for Human Resource Management)
Inertia and Retirement Savings: Participant Behavior in 2008, Plus Q1 2009
Excerpt: "A study from the Vanguard Center for Retirement Research reveals that participants' tendency to avoid making investment decisions can sometimes be beneficial. During the 2008 market decline, this inclination toward inertia meant that most participants didn't overreact to the economic turmoil. Find out how this impacted their accounts and how it may affect their financial futures." (The Vanguard Group, Inc.)
Not All Target-Date Portfolios Are Created Equal (PDF)
10 pages. Excerpt: "Even with education, participants tend to make naive and/or emotional choices when creating an investment strategy, resulting in an asset allocation that is less than optimal. Risk-based lifestyle portfolios, target-date portfolios, and managed portfolios have offered potential ways to address this challenge. Final qualified default investment alternatives regulations cemented each of these solidly as viable options for plan sponsors. Target-date funds, which provide a cost-effective, one-stop shopping approach but still offer a level of personalization, are arguably one of the most elegant solutions." (Arnerich Massena & Associates, Inc.)
For Risk-Averse 401(k) Participants, the Usual Havens of Money-Market, Stable-Value and Short-Term Bond Funds Pose New Risks
Excerpt: "[A]ll of these supposedly stodgy investments have come under serious strain in the financial crisis. In September, a money-market fund that held Lehman Brothers debt fell below the sacrosanct $1 level, sparking massive withdrawals from certain money funds. In recent months, at least two stable-value funds have dished up losses to retirement-plan investors. And a number of short-term bond funds posted large declines last year as mortgage-related holdings hit the skids. 'There's no vehicle that's absolutely safe in today's world,' says Mike Francis, president and chief investment officer of Francis Investment Counsel LLC, a retirement-plan consulting firm in Pewaukee, Wis." (The Wall Street Journal)
Pension Lobbyists Wary of Investment Advice Change
Excerpt: "Pension and financial industry lobbyists are concerned that, along with slamming the door on the Bush administration's effort to loosen the advice regulations, Mr. Andrews' bill also could undermine existing advice arrangements offered under the DOL's SunAmerica advisory opinion. Under the SunAmerica opinion, mutual funds can offer advice to plan participants when that advice is generated by a computer model created by an independent third party, such as Financial Engines or Ibbotson Associates." (Pensions & Investments)
HR Leaders Turning to New Products and Tools Designed to Strengthen Defined-Contribution Plans
Excerpt: "[P]lummeting returns are contributing to the enormous pressure on HR leaders to arm their workforces with better fund choices and a more expansive toolset for making informed decisions about retirement planning. [M]ore and more companies are also making available auto-pilot features to simplify enrollment, deferrals and fund choices. They're also offering investment advice and annuitized new products designed to make defined-contribution plans act more like defined-benefit plans by guaranteeing payouts for life." (Human Resource Executive Online)
[Guidance Overview] 401(k) Fair Disclosure Bill Is Introduced
Excerpt: "As expected, George Miller (D-CA), Chairman of the House Education & Labor Committee, introduced a bill (H.R. 1984) to impose special reporting and disclosure rules ? focused primarily on investment related fees ? for individual account plans. The bill is similar to one which the Committee approved in April 2008, but has some notable additions, including the requirement that a plan must include at least one low-cost index fund to be eligible for ERISA ? 404(c) protection." (Deloitte via BenefitsLink.com)
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