Critics of 401(k) plans say they have failed the nation's workers because they don't equip them with financial advice. Although the Pension Protection Act prescribes giving guidance, it is vague on what it should constitute and, therefore, hasn't prompted many plan sponsors or administrators to provide such assistance. Without clear rules, they are afraid of fiduciary liability.

But that could change due to a bold decision at IBM to equip its 127,000 U.S. workers with financial education and one-on-one personal coaching about their 401(k)s and a myriad of other money issues-particularly because IBM is such a large firm.

Next year, when IBM freezes its pension and moves to a defined contribution plan, the firm will give its employees and their spouses or partners free online planning tools, seminars and one-on-one coaching, either in person or over the phone. The program, which will be administered by Ayco and Fidelity Investments and cost IBM $50 million over five years, will go beyond retirement planning to encompass college savings, debt, wills, trusts, taxes, insurance and healthcare.

While IBM said it will review participation rates after two years and pull the plug if they are low, the firm is hopeful the program will be a success.

"We're going to give them the tools and the guidance and the knowledge to make decisions on their own," Randy MacDonald, IBM senior vice president of human resources, told the Raleigh News & Observer. "We don't want people to make decisions in a vacuum. We believe this establishes a new benchmark for retirement programs in this country."

Big Blue certainly could use the goodwill among its employees. The firm began cutting back on its pension in the past few years. Then, last year, some of its employees filed an age-discrimination lawsuit. IBM won the case, and again on appeal in the Supreme Court in January.

Although medium and large employers are increasingly offering financial education, only a handful offer one-on-one counseling, concurred Tom Garman, a professor emeritus at Virginia Tech.

Ed Ferrigno, vice president of Washington affairs at the Profit Sharing/401(k) Council of America, also believes IBM's move to provide personal advice is significant. "IBM is a bellwether company, and certainly a lot of others follow the lead of IBM, so it's a very positive sign," Ferrigno said.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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