Retirement Made Simpler News
July 14, 2011
Each issue of Retirement Made Simpler News delivers important news, research, updates and more to your inbox. Meet the Organizations
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In the News
Automatic Rollovers May Help Address Small Account Concerns
What happens when an employee leaves a company that sponsors a 401(k) plan? As with traditional plan design, the employer is responsible under Department of Labor (DOL) regulations to treat the former employees as it treats current participants. The employer must continue to communicate required plan information, ensure a valid investment election is on file and manage death benefit distributions to beneficiaries when applicable. If former employees move or otherwise fail to respond to communication, the plan sponsor must try to track them down. Failure to take these actions can result in fines, penalties and possibly lawsuits.
Plan sponsors may be wary of a growth in left-behind small account balances, given the continued fiduciary liability exposure they represent—and this concern may get in the way of automatic plan design adoption. But read more to learn how a combination of factors can minimize this concern.
How do automatic rollovers work?
Questions to Ask Potential Rollover Custodians
What Do You Call a Glass That Is 60-85 Percent Full?
Jack VanDerhei, The Employee Benefit Research Institute’s Research Director, quickly responded to a recent Wall Street Journal headline suggesting EBRI data shows that automatic enrollment in 401(k) plans actually reduces savings for some people. “What it failed to mention,” blogged VanDerhei, “is that it’s increasing savings for many more—especially the lowest-income 401(k) participants.”
VanDerhei concluded, “The Wall Street Journal did not report the positive impact of auto-enrollment 401(k) plans on many workers who began to participate due to automatic enrollment. As with any change, some people will not have the desired results; but if the focus of auto-enrollment is to increase participation among lower-income participants (and, as a result, their retirement financial preparedness), objective analysis suggests auto-enrollment does obtain that goal.”
Read the EBRI blog post
Seven Signs of a Good 401(k) Plan
A good 401(k) plan with generous employer contributions can help propel you toward a secure retirement. But high fees and poor investment choices make some 401(k) plans a bad deal, even after accounting for the tax breaks. US News and World Report’s Emily Brandon reports that signs of a good plan include immediate vesting, low fees, a Roth option and automation.
- Employees in plans with automatic enrollment had a participation rate of 82 percent in 2010, compared with 57 percent participation among workers in plans with voluntary enrollment.
Read the US News article
Boomers Fear Outliving Their Money in Retirement
More than 90 percent of Baby Boomers feel the United States is facing a retirement crisis, yet most have a limited understanding of how much money they’ll need and fear they’ll outlive their income according to a new survey from Allianz Life Insurance Company of North America. The study, Reclaiming the Future: Challenging Retirement Income Perceptions, was conducted in May 2010 with more than 3,200 Baby Boomers ranging in age from 44 to 75.
- 61 percent of Boomers fear outliving their money in retirement more than death.
- 36 percent have no idea if their income will last.
Read the White Paper
White Papers on Automatic Issues
Automatic 403(b) Toolkit
Automatic 401(k) Directory
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