Retirement benefits

UAT Inc. has developed a 401(k) tool for sponsors offering target-date funds that will allow them to scrutinize the holdings and glidepath of the funds.

There is a big disconnect between employers’ perceptions of workers’ understanding of 401(k) fees and the reality, according to a survey by the Transamerica Center for Retirement Studies and Harris Interactive.

Nearly one-quarter, or 23%, of employers have eliminated 401(k) matches, according to a study by CFO Research Services for Charles Schwab. And 35% don’t expect to reverse the elimination, according to a separate survey by Watson Wyatt.

At the hearing on target-date funds Thursday, target-date fund managers, along with the Investment Company Institute, asked the Securities and Exchange Commission to butt out of asset management.ICI General Counsel Karrie McMillan said interfering in the mix of assets would be unprecedented: “In the 70-year history of mutual fund regulation, the government has never regulated the investment choices of mutual funds. Nor should it start now.”“We strongly oppose any efforts to regulate the glide paths or other aspects of the investment design or construction of target-date funds,” concurred John Ameriks, a Vanguard principal.Fund executives also said they were opposed to labeling target-date funds conservative, moderate or aggressive, based on the mandate of their glide path and current holdings.But SEC Chairman Mary Schapiro countered that target-date fund losses last year ranged from minus 3.6% to minus 41%, with an average loss of 25%. “These varying results should cause all of us to pause and consider whether regulatory changes, industry reforms or other revisions are needed with respect to target date funds.”Financial planners who testified Thursday tended to agree with the SEC that a target-date fund’s name should give some indication of its level of equity and other risk exposure. “The name of each fund must bear some relationship to the way the fund is managed, that is, its glide path,” said Joseph Nagengast of Target Date Analytics, which provides benchmarks for target-date funds. “If a fund labeled 2010 is really targeted to land at 2040, it should be relabeled as a 2040 fund.”

A significant number of older workers 50 or older, 44%, have decided to delay their retirement age, and 34% overall have upped their target date for leaving the workforce, Watson Wyatt found in a February survey of 2,200 employees. By comparison, only 25% of those under age 40 have changed their plans for years in the workforce.Nonetheless, among all workers 65 is still the average age at which they expect to retire.Among the older workers, when asked what factors have impacted their decision to delay retirement, 76% said declining 401(k) balances, followed by 63% citing high healthcare costs and 62% pointing to high costs of living.“The economic crisis has affected many workers’ retirement plans and nest eggs, but those nearest to retirement have been especially hard hit,” said Dvid Speier, senior retirement consultant at Watson Wyatt. “Older workers do not have the time to offset declining retirement account values, either by recouping their investment losses or significantly increasing their savings rate. For many, the only choice is to delay retirement.”With older workers remaining on the job longer, that could present hiring issues for employers along with higher benefits costs, noted Lisa Canafax, another senior retirement consultant at Watson Wyatt. For that reason, employers might want to reconsider defined benefit plans.

Lawmakers on the House Education and Labor Committee voted 13-8 each on two measures concerning 401(k) plans Wednesday, one that would require them to clearing disclose fees and break them down, another that would only permit investment advice to come from independent advisers.Fees would have to be displayed in all four categories: administrative, investment management, transaction and other.“The lack of transparency in the 401(k) system is unacceptable and must end now,” subcommittee Chairman Robert Andrews (D-N.J.) told Dow Jones.

The rapid increase in bankruptcies in the U.S. could result in more abandoned retirement plans, which occurs when a company goes out of business and assets in a defined contribution plan are left at a custodian or mutual fund company that is not authorized to distribute the monies.

Congress once again is scrutinizing 401(k)s this week, this time through two bills that would disallow advice through an interested party and require clear disclosure of fees.

For most Baby Boomers, even younger ones, the recession has done such a number on their retirement savings that they are gearing up to work longer, set aside more now and live a more modest lifestyle in their so-called golden years, USA Today reports.

At the hearing on target-date funds that the Department of Labor and the Securities and Exchange Commission is holding tomorrow, the focus is likely to be on better disclosure of holdings.

The Department of Labor and the Securities and Exchange Commission have released the agenda and list of speakers at this Thursday’s hearing on target-date funds.

Americans are increasingly worried about their preparedness for retirement, The Hartford found in a survey. Thirty-four percent were either “extremely” or “very” worried about their ability to save for retirement, and 56% said they feared they would have to cut back on their contributions.

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.

The U.S. House of Representatives has reintroduced a 401(k) fee disclosure bill, the fifth such bill to be considered by Congress.

Although there have been reports of about 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.

Citing the positive effects of diversification and continued contributions, Vanguard announced that the median decline in the three million defined contribution accounts it administers fell 17% in the 15 months ended March 31, as opposed to the market’s overall 44% decline.

The growing trend for companies to suspend or even eliminate 401(k) matches in this recession will inevitably translate into fewer people contributing to their retirement savings, writes Rockefeller Foundation Associate Vice President Janice M. Nittoli in an editorial in The Wall Street Journal titled, “Now Is No Time to Skimp on Retirement Plans.”

Great-West Retirement Services has launched an updated set of target-date funds that it believes will address some of the problems that were found with target-date funds in 2008.

After so many 2010 target-date funds came up short last year, Prudential Retirement investigated how they might be improved, and decided that including retirement income guarantees would be a key benefit. They would freeze the asset allocations of target-date funds five or 10 years prior to retirement, in exchange for guaranteed income.

Financial Engines has improved its 401(k) advice services with the launch of the Financial Engines Retirement Plan, a personalized statement that addresses each investor’s savings, investments and retirement income needs.