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| Your 401(k) Resource
December 2008 |
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Andrew Sweeny, Jr.
Vice President
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For more information about these topics, please contact
Andy Sweeny
at 513.745.0707.
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Greetings!:
Thank you for your continued business. If you know of anyone that could benefit from my services, please feel free to forward this newsletter on to them. |
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2008 Year-End Retirement Plan Checklist
Before we say good bye to 2008 it is important to review your qualified plan to identify any action items which should be addressed prior to the end of the year. The following checklist describes some of the potential year-end items that may be necessary to maintain the tax-qualified status of your retirement plan. You should contact your service provider to ascertain what is specific to your plan.
Annual Notice Requirements
Depending on the type of qualified plan and the plan's features, one or more annual notices may be required. Please carefully review the list of annual notices below to confirm if any are required to be issued for your plan.
- Safe Harbor 401(k) Annual Notice
- Qualified IDefault Investment Alternative (QDIA) Notice
- 401(k) Plan Annual Automatic Enrollment Notice
- Defined Benefit Pension Plan Annual Funding Notice
Participant Benefit Statements
Depending upon the type of qualified plan, specific participant benefit statement requirements apply.
Plan Amendments
While amendments to comply with the Pension Protection Act of 2006 are generally not required to be adopted until 2009 (or later in some instances), certain plan amendments relating to discretionary or other compliance changes may be required to be adopted before the end of the plan year. Please review the list below to confirm if any of the plan amendments may apply to your plan. |
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- Discretionary Changes
- Code Section 415 Amendments
- Pension Funding Equity Act Amendments for Defined Benefit Plans
To view the complete checklist, see full story, located at 401khelpcenter.com. |
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Roth 401(k)s Expected to Join the Mainstream
Employers are adopting Roth 401(k) savings plans faster than employees are embracing them, but many observers expect the plans to join the mainstream of employer-sponsored retirement packages in the coming years.
According to a September survey of 1,000 employers by the Chicago-based Profit Sharing/401k Council of America, about 30% of 401(k) plans offered a Roth 401(k) feature in 2007, up from 18.4% the previous year. However, only 12.6% of employees used that option in 2007, up from 11.6% the previous year.
Slightly more than half of workers already using Roth 401(k) accounts also invest in a traditional 401(k) or another account, according to a 2006 survey by Fidelity Investments. Many observers say the 2006 Pension Protection Act that made Roth 401(k) plans permanent assured employers and was a key impetus for the recent increase in the number of organizations offering such plans. Eventually, half of employers are expected to have the Roth option as part of their 401(k) plans. Worker confusion remains a concern for employers considering offering the Roth option as part of their 401(k) program. Businesses should explain the new option frequently and in detail to avoid wasting the effort and time of implementing a new plan that few workers use. See full story, located at Insurancenewsnet. |
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Retirement Out of Reach
With pensions and retiree health benefits largely things of the past and financial markets devastating
401(k)s, companies are at risk of losing their competitive edge if they become storehouses of embittered older employees who put in only the minimum effort to keep their jobs.
With defined-benefit plans and retiree health care all but fading away and Social Security at risk, many midcareer workers already were confronting the fact that they would not have enough money to retire in their 60s, experts say. And as the past weeks have demonstrated, it can take just a few days of a plummeting stock market to seriously damage a nest egg.
When 401(k) plans were introduced in 1974, many large employers used them as a supplement to their defined-benefit plans. But over the past 20 years, 401(k) plans have virtually replaced such plans. As of 2005, 63 percent of active workers had access only to a defined-contribution plan, the Employee Benefit Research Institute says.
"We have a great experiment going on right now," says Don Stone, president of Plan Sponsor Advisors, a Chicago-based 401(k) plan consultant. "And that experiment is about seeing whether people are willing and able to fund their own retirement."
Most companies aren't worried about a workforce of aging Gen X slackers yet, experts say. Most are still focused on the talent shortage that they anticipate as the baby boomers leave the workforce. If companies really want to get ahead of the issue, they should connect their benefits experts with their workforce planning. See full story, located at Workforce Management. |
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It's Time to Rethink Our Retirement Plans
While our nation has experienced other financial crises, the current one is the first to occur when so many Americans bear so much responsibility for their own retirement savings. Never before have those savings been as exposed to the markets, as workers are now experiencing acutely.
A new approach, combining the best of traditional pensions and new savings vehicles, is needed. Here are the elements:
- Automate participation and savings. Automatic enrollment plans should mandate employer and employee contributions, and the percentage amounts of each.
- Give workers the information they need. Retirement plans must include advice for everyone who signs up.
- Guarantee an income floor. Retirement plans should provide that by automatically converting all or a portion of the account balance to a low-cost annuity at retirement.
- Encourage health-related savings. According to the Employee Benefit Research Institute, a couple that retires today will need from $200,000 to $635,000 to pay out-of-pocket health-care costs (above Medicare).
- Diversify risk. Individuals need to properly diversify, and rebalance their accounts regularly to maintain a prudent mix of assets.
Taken together, these measures offer a way to convert our patchwork of individually owned accounts into a stronger retirement system. All are achievable, provided that policy makers, public officials and companies seize the opportunity this crisis presents to help ensure that workers will have the retirement savings they'll need.
See full story, located at The Wall Street Journal.
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Questions or Comments?
Do you have a question or topic you would like addressed in our next issue?
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Horan Securities, Inc., doing business since 1996.
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