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DOL Issues Final Rules on Advice in 401(k) Plans


The Department of Labor issued new regulations that aim to broaden access to personalized investment advice for workers engaged in retirement savings plans.

DOL's Employee Benefits Security Administration is granting a limited exemption for advisers to offer fiduciary advice to participants of a plan from which the adviser receives additional fees. The rules follow from the Employee Retirement and Income Security Act (ERISA) and Internal Revenue Code, which authorize DOL to carve out exemptions to the prohibitions against offering advice to investors in situations where the advisors might have a conflict of interest.

Those safeguards include provisions that the investment advice must emanate from a computer model certified by a third party as unbiased. Alternatively, advisors could qualify for the exemption if they are compensated on a "level-fee" basis whereby fees remain constant irrespective of the investments they select. Advisors would also be subject to other conditions to qualify for the exemption, and submit to annual audits and disclose details of their fees.

IRS Increases 401(k)

Contribution Limits to $17k

The IRS said that many tax benefits for the 2012 tax year will increase due to inflation adjustments. Investors will be able to contribute an additional $500 to their 401(k), for a total of $17,000 for those under 50 and $22,500 for those 50 or older. For those fortunate to have a pension, the maximum annual benefit that can be funded will rise from $195,000 to $200,000.

The new tax changes also include personal exemptions and standard deductions, with tax brackets also widening next year. By law, the dollar amounts for various tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation.

Putnam Offers Customized

Retirement Income Tactics

Putnam Investments is addressing the need for customized retirement income withdrawal strategies through the launch of the Putnam Retirement Income Lifestyle Funds, a suite of three income-oriented mutual funds, and a Retirement Income Analysis Tool.

"The biggest hurdles Americans face in securing a quality retirement is first accumulating sufficient assets and then ensuring that those assets generate sustainable income for life," said Robert L. Reynolds, president and chief executive officer of Putnam. "Putnam is offering the marketplace a thoughtful, intuitive approach that tries to provide a solid and sufficiently long runway for people to experience a dignified retirement."

The Lifestyle 1, Lifestyle 2 and Lifestyle 3 retirement income funds include a mix of domestic and foreign equities, convertible and fixed income securities as well as the Putnam Absolute Return Funds.

The Lifestyle 1 fund is the new name of the Putnam RetirementReady Maturity Fund and is a conservative fund that seeks to preserve capital while generating income..

The Lifestyle 2 fund takes a more moderate approach to generate "income consistent with prudent risk," Putnam said, while the Lifestyle 3 fund is the most aggressive, in that it, too, seeks income but also capital growth. The funds are sold through 401(k)s and advisers. The Retirement Income Tool is based on income needs, life expectancy, risk tolerance, legacy goals and other key financial variables.MME