The Perils of Your Company's Stock - Summary: The 401k retirement plan has long been a popular way for employees to hold equity in the companies they work for. As with other methods of profit sharing, the reasoning was that employees with a vested interest would work more diligently to increase the value of their company - and its shares. Additionally, companies saw it as a way to build a relatively friendly base of shareholders. But companies and shareholders are learning, however, there are perils as well as advantages in employees owning shares in the companies they work for. Located at: New York Times (free registration required). Click on headline for full article.
Retirement Investor Report Card - Summary: Vanguard's semiannual report on investment performance and behavior among defined contribution plan participants has expanded to include IRA investors, providing a more complete view of retirement savings, and the opportunity to compare the saving and investment behavior of the two groups. Located at: Vanguard Center for Retirement Research (PDF file). Click on headline for full article.
How To Increase Worker Savings? 401k's Provide Ideas - Summary: What does it take to get workers to save more in their retirement plan? Based on the 401k experience, the message from workers is clear: Show me the money-the matching money-according to the 2005 Retirement Confidence Survey just released. Located at: 401khelpcenter.com. Click on headline for full article.
How Lifecycle Funds Ease Investing Angst - Summary: When you think of retirement investing, does the thought of doing research, making choices and monitoring your progress give you a headache? If you're like most people, the answer is yes. In response, mutual-fund companies have created "lifecycle" funds to ease our headache. Located at: Chicago Sun-Times. Click on headline for full article.
The Automatic 401k: A Simple Way to Strengthen Retirement Savings - Summary: The steps involved in building an automatic 401k are not complicated, and the benefits could be substantial; indeed, a growing body of empirical evidence suggests that the automatic 401k may be the most promising approach to bolstering retirement security for millions of American families. Located at: Retirement Security Project (PDF file). Click on headline for full article.
Retirement Programs an Increasing Challenge for Financial Executives - Summary: Add one more item to the growing list of concerns for today's financial executives - their companies' retirement programs. A new survey conducted by Hewitt Associates reveals that the most pressing retirement plan challenges for financial executives in managing their companies' retirement programs include growth/volatility of costs, global plan needs and improving their employees' ability to retire. Located at: 401khelpcenter.com. Click on headline for full article.
Many Workers Failing to Manage 401k - Summary: The reasons employees' actions don't necessarily match up with the information is very simple. Either they don't feel up to the challenge, they don't have time or it's just not getting on their "to do" lists. Located at: Pittsburgh Post-Gazette. Click on headline for full article.
Target Date Funds: Retirement Planning Made Easy? - Summary: The formula seems simple. Determine the year in which you want to retire and put a bull's-eye on the calendar. Go to your 401k and find the "target date" mutual fund that matches your retirement date. Start pouring your retirement dollars into that one fund. But you have to wonder whether one fund can really be appropriate for everyone who retires in a given year. Located at: Bankrate.com. Click on headline for full article.
The Upcoming 401k Dilemma - Summary: For plans that will allow Roth elective deferrals, the question for plan participants soon will be: traditional 401k elective deferral or Roth after-tax elective deferral? What the right decision is for any individual will depend on a number of unknown factors, including the future investment returns of the deferrals, the future inflation rate, the future personal income and expense expectations of the employee and the future tax system of the U.S. Located at: Benefitslink.com (PDF file). Click on headline for full article.
IBM, SBC Retirement Plans May Give Glimpse of Future - Summary: It's a tale of two retirement plans that's keeping benefits professionals on the edge of their seats and the radically different strategies have observers watching and wondering. Located at: Benefitnews.com. Click on headline for full article.
OPINION: Let's Make 401k Entry Automatic - Summary: After a constant drumbeat of advice from personal finance experts, still not enough people are saving aggressively for retirement, if they're saving at all. So why not force the saving on them by automatically enrolling them in a 401k and put the burden on them to opt out? I say bring it on. Located at: Dallasnews.com (free registration required). Click on headline for full article.
Fiduciary Issue
Use of an Administrative Committee to Address Fiduciary Obligations of a Retirement Plan Sponsor - Summary: Given the gravity of these fiduciary obligations, many employers choose to create an administrative committee (a "Committee") devoted to the proper management and control of the operation and administration of the retirement plans they sponsor. This article is intended to provide an overview of the fiduciary duties imposed by ERISA and to offer some general guidelines for plan sponsors and Committee members to consider with regard to the operation of a Committee. Located at: Trucker Huss. Click on headline for full article.
Technical Issues
IRS Addresses How Medical Expense Exception to 10% Early Distribution Penalty Applies - Summary: Although the Information Letter does not describe the facts under which the issue arose, it appears that the early distribution was taken for a medical expense hardship under a 401k plan. The hardship rules permit a distribution to be made for medical expenses without regard to the 7.5% floor that applies under the medical expense exception to the 10% penalty. Thus, in many cases a hardship distribution for medical expenses--like other hardship distributions--will be subject to both regular income tax and the 10% early distribution penalty. Located at: Employee Benefits Institute of America. Click on headline for full article.
Correcting Ineligible Participant Deferrals - Summary: What is the best method for correcting early entry into 401k (i.e., deferring prior to date of eligibility)? Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.
Reporting of Late Deposit of Deferrals - Summary: What disclosure is required if the independent qualified public accountant ("IQPA") determines that information on Line 4a of Schedule H (large plans) or Schedule I (small plans) of the Form 5500 concerning the timing of transmittal of elective contributions is not presented in accordance with DOL's regulatory requirements? Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.
Department of Labor and IRS Issues
DOL Revises Voluntary Fiduciary Correction Program - Summary: By correcting a breach under the VFC Program, the fiduciary receives a "no action" letter and thereby avoids any enforcement proceeding by the DOL, the imposition of the 20% penalty under Section 502(l) of ERISA on the amount of money involved in the breach, and in certain cases relief from the excise tax imposed under Section 4975 of the Internal Revenue Code. The DOL now proposes to expand and simplify the VFC Program. Located at: Dechert LLP (PDF file). Click on headline for full article.
Changes to EBSA's Voluntary Fiduciary Correction Program - Summary: The Department of Labor's EBSA announced that it was amending and restating the Voluntary Fiduciary Correction Program which permits ERISA fiduciaries to correct certain violations that occur under ERISA. Located at: Benefitsblog.com. Click on headline for full article.
DOL Revises VFC Program - Summary: The DOL's Voluntary Fiduciary Correction Program (VFC Program) allows persons potentially liable for fiduciary breaches to voluntarily apply to the DOL and correct specific breaches in exchange for a "no action" letter and relief from penalties under ERISA Section 502(l). This Notice contains numerous changes that update and revise the Program, some of which are highlighted below. The changes are generally effective immediately. Located at: Employee Benefits Institute of America. Click on headline for full article.
Final Regulations Under Code Sections 401(k) and 401(m) Update, Clarify and Modify Existing Rules - Summary: Although some commentators note that the Regulations do not make broad, sweeping changes to the administration of so-called 401k plans, there are, in fact, a number of important changes that plan administrators and their advisors need to be aware of, the most significant of which are generally summarized in this article. Located at: White & Case LLP (PDF file). Click on headline for full article.
IRS Employee Plans News - Special Edition Dated 04/11/2005 - Summary: EP and EO Examination Areas Realigned; Special Edition of the DOL Corner on the expanded and simplified Voluntary Fiduciary Correction Program. Located at: IRS. Click on headline for full article.
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