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401(k)s

Target-Date Fund Hearing Focuses on Disclosure

June 22, 2009 - At the hearing on target-date funds that the Department of Labor and the Securities and Exchange Commission held in Washington last Thursday, the focus was on better disclosure of holdings. Even though the makeup and glidepaths of target-date funds vary so considerably, as proven by the range of minus 7% to minus 41% that 2010 target-date funds delivered in 2008, fund executives resisted government-mandated caps on holdings.

Providers Look for Auto Rollover Solutions to Include Job Changers

June 22, 2009 - WASHINGTON - With 47% of 401(k) plans now using automatic enrollment, the programs have helped get millions of new workers enrolled to start saving early for retirement, but industry experts say the automatic nature of these plans needs to extend to helping 'hands-off' investors when they change jobs. When an employee leaves a job, he or she can choose to roll over their money into an individual retirement account (IRA), take a lump-sum payment minus taxes and a 10% penalty, or do nothing and leave their money in the 401(k). Sir Isaac Newton would predict the latter.

401k Fee Transparency Push Could Increase Fees, Confusion

June 22, 2009 - WASHINGTON - Many investment industry leaders are worried that the proposed 401(k) fee disclosure regulations currently being pushed through Congress will actually increase the fees investors pay and increase their confusion. 'Regulators feel they need to add nuances to 401(k) fee disclosure, but what's it going to cost the industry to comply?' asked Fred Teufel, a principal of institutional retirement plan services at The Vanguard Group, during the Society of Professional Asset-Managers and Record Keepers' conference titled 'Retirement Plans at a Crossroad' held here last week at the Mandarin Oriental Hotel. 'We spend an increasing amount of our budget on regulatory compliance,' said Barbara March, executive vice president of workplace investing for defined contribution plan services at Fidelity Investments. 'This reminds me of redemption fees. The cost of complying with the rules was more than anyone would have been hurt by the fees.'

Sponsors Continue to Add Many Features to 401(k)s

June 15, 2009 - Although there have been reports of one-third of employers cutting back on or eliminating 401(k) matches, for the most part, they have continued to add other features to the plans to increase participation and investment rates, Charles Schwab found. And that has helped most workers stay the retirement savings course. In fact, of the plans that Schwab manages, participation increased in 2008 to 77%, up from 73% from the year before. Plans with between 500 and 1,000 participants displayed the highest participation rate (88%). A majority of employers, 70%, continued to offer a 401(k) match in 2008, down from 78% in 2007. Of those that did offer a match, only 8% reduced it.

401(k)s Will Supplant Pensions in Our Lifetimes

June 1, 2009 - How far the 401(k) has come since employers first introduced the savings plan in 1981. And how far it has yet to go. 401(k)s, I predict, will become universal in our lifetimes, supplanting all forms of pension plans. The first time I heard about 401(k)s, when I entered the workforce in 1982, was from a fellow classmate from the University of Pennsylvania, who was familiar with then-esoteric 401(k) section of the IRS code (then being touted merely as a tax benefit), since she worked as an accountant for Coopers & Lybrand.

ETF Providers Make A Run for 401(k) Market

June 1, 2009 - In a challenge to one of mutual funds' strongholds, exchange-traded fund providers are targeting defined contribution plans. Barclays Global Investors' iShares, the largest ETF provider, just launched its iShares in 401(k) Program with the goal of helping financial advisers use the funds as standard options in retirement plans.

Industry Opposes Mandatory Index Funds In 401(k) Plans

June 1, 2009 - While index funds already have a place in the lineup of most 401(k) plans, a proposed federal mandate to require at least one index fund option in these plans is intrusive and unnecessary, according to industry experts. Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee, wants to reform 401(k) plans by improving fee disclosure. In the interest of lowering 401(k) fees, Miller's proposal requires plan providers to offer investors at least one low-cost index fund.

Investing Habits Held Steady in 2008: Hewitt

May 18, 2009 - Few investors changed their saving or investing habits in 2008, Hewitt Associates reports, citing data from 2.7 million participants. However, equity fund allocations reached record lows. Last year, only 11% of 401(k) participants broke even or saw modest gains. Forty-four percent lost 30% or more of their 401(k) savings, which dropped an average 28% from $79,600 at the end of 2007 to $57,200 at the end of last year.

401(k)s, Take Two

May 18, 2009 - With pension plans headed for virtual extinction, the 401(k) will inevitably become the sole qualified retirement savings vehicle in the nation, and as such, the defined contribution model must be vastly improved, speakers at the Investment Company Institute's General Membership Meeting in Washington said. Indeed, a milestone for 401(k)s was reached last week, when consulting firm Watson Wyatt revealed that more than half of Fortune 100 companies now offer only a 401(k) plan, the first time the majority of the nation's 100 biggest companies aren't offering a pension plan.

Execs Not Giving Up On Target-Date Funds

May 18, 2009 - The investment community is hopeful that with a little tweaking, target-date funds could be the ideal solution for getting apathetic investors into an age-appropriate asset allocation. Still in their early, formative years, target-date funds are not perfect and will probably never replace individually customized portfolio management, but when used as the default option in automatically enrolled 401(k) plans and combined with automatic escalation, the funds can get hands-off investors channeled into a pretty good product.

Schapiro Intends Strong Regulatory Revamp

May 18, 2009 - Those hoping for a return to the good old days of self-regulated, self-correcting markets need to face reality: Those days are over. Investment industry leaders are already bracing themselves for the approaching tsunami of new regulations, and many fear these changes could easily go too far. Regulators are sensitive to these concerns and understand that the changes they make will shape the investment landscape for decades.

View Point

May 11, 2009 - Turning 401(k) Investors Into Educated Consumers Asking investors to properly maneuver their 401(k) plans in a market like this is akin to an airline pilot stepping aside and telling passengers to take the controls mid-flight.

The De-Wealth Effect

May 11, 2009 - For years, Americans enjoyed the 'wealth effect,' the sense that their assets were gaining value rapidly enough that they didn't have to save much. This perception of ever-expanding prosperity gave them freedom to spend lavishly and enjoy life. The effect was a function of feeling wealthy as well as being wealthy. Well, that was then. Since 2008, Americans have endured a de-wealthing, so to speak, as the value of their assets plummeted and many jobs disappeared. Those who can are saving like crazy.

Cost-Basis Reporting Challenges Brokers

May 11, 2009 - New Internal Revenue Service accounting rules aim to reconfigure the way investors report gains and losses when they sell stocks and mutual funds by putting the burden on those who handle the transactions. While the rules won't affect equities until 2011 and mutual funds until 2012, the changes to IRS Form 1099-B represent an entirely new method of managing accounts and are intended to curtail what is thought to be widespread tax avoidance.

ICI Speakers Urge Execs to Remind Investors Of Mutual Funds' Great Ability to Reward

May 11, 2009 - WASHINGTON - Mutual funds remain a sound investment choice, and will, once again, grow through the perseverance of American ingenuity. Investment firms must stress this to investors to restore their faith. Nonetheless, fund advisors must still search for new investment solutions, disclose risks and performance more clearly and strengthen 401(k)s through automatic enrollment and additional tax advantages.