Donohue Feiman Retirement Plan Services, Inc.

Plan Ahead for New Disclosures

admin — Wed, 07 Sep 2011 18:40:56 +0000

The Department of Labor (DOL) issued final participant fee disclosure regulations that apply to participant-directed individual account plans, including those that intend to comply with ERISA Section 404(c). Their purpose is to provide uniform disclosure to participants about fees and expenses of a plan’s investment options.

The final rules were effective on December 20, 2010, for plan years beginning on or after November 1, 2011. For calendar year plans, compliance is required on January 1, 2012.

Disclose plan-related information

Plan administrators must disclose basic plan information, including a list of investment options and when and how partici- pants may give investment instructions. Administrative expenses for plan services that may be deducted from all individual accounts must be described, as well as actual charges that may be deducted from certain participants’ accounts, such as loan origination fees.

Actual charges assessed to individual accounts must be disclosed on at least a quarterly basis, either through a confirmation statement or regular quarterly plan account statements.

Investment-related information must be provided

For each investment option, performance data (such as the average annual total return for 1-, 5- and 10-year periods) and a comparison of returns to a benchmark must be disclosed. Fees and expenses information for each option’s operating expenses is also required. Further, a website address where participants can get specific additional investment information must be announced. A glossary of investment terms must also be included.

Initial disclosures are required within 60 days after the date the rules apply to the plan (by February 29, 2012 for calendar year plans), and annually thereafter.

Resources for new disclosure rules

DOL’s Fact Sheet: http://tinyurl.com/ DOLFeeFinalRule

DOL’s Model Comparative Chart: http://tinyurl.com/ DOLFeeModelNotice

Profit Sharing/401(k) Council of America’s detailed summary: http://tinyurl.com/PSCAFeeDisclosure

How Does Your Plan Compare?

admin — Tue, 30 Aug 2011 22:05:23 +0000

Participation Rate Stayed Steady

The average participation rate in 401(k) plans was 82.3 percent at the end of 2009, according to the 53rd Annual Survey of Profit Sharing and 401(k) Plans by the Profit Sharing/401(k) Council of America (PSCA). The rate the year before was 82.7 percent. Small plans (1 to 49 participants) had a participation rate of 91.4 percent. The pre-tax participant deferral rate averaged 5.2 percent for non-highly compensated employees and 6.7 percent for highly compensated employees.

Auto enrollment remained popular

Nearly 40 percent of 401(k) plans had an automatic enrollment feature. It applied to new hires in 34 percent of these plans and to all non-participants in 6 percent of these plans. The most common default deferral rate was 3 percent of pay (58 percent of plans). Target retirement date funds remained the most common default investment option (57 percent of plans). Automatic increases in contribution rates were reported by 53 percent of plans. Most plans cap the auto increases at 6 percent of pay.

Roth feature usage rose

Over 41 percent of plans permitted Roth 401(k) contributions, up from 37 percent the previous year. Of those eligible to make Roth contributions, 13 percent did so.

Investment options didn’t change

The average number of investment choices offered to participants remained at 18.Almost 63 percent of plans offered target date funds.

Investment advice grew

Advice was available in 60 percent of plans, up from 52 percent inthe previous year’s survey. About 22 percent of participants used advice when offered. Small plans tended to have the highest usage.

Other survey results included:
• The typical plan had about 60 percent of assets invested in equities.
• Less than 14 percent of plans offered company stock as an investment option.
• Almost 86 percent of plans allowed hardship withdrawals, and about 2 percent of participants had such a distribution in 2009.
• Loans were permitted in 90 percent of plans.
• Almost 24 percent of plans used a safe harbor match, and 11 percent used a safe harbor non-elective contribution.
• About 40 percent of plans offered immediate vesting of the company match.

The survey reflects 2009 experience of 931 plans with 8.6 million participants and more than $628 billion in plan assets.
The survey may be ordered from the PSCA at www.psca.org.

Women’s Financial Security Studied

admin — Wed, 24 Aug 2011 15:00:04 +0000

A survey of American women found that many lack confidence in making financial decisions and don’t have a good understanding of today’s sophisticated financial products. Prudential’s Financial Experience & Behaviors Among Women also revealed that women are optimistic about the future and want financial education and guidance.

Despite the fact that a majority (55%) believe they will need to work longer and delay retirement, three-fourths said they are on track to meet their long-term financial goals or are positioned well to catch up.

Those feeling “very prepared” to make smart financial decisions made up less than 20% of respondents. One-third said they “need a lot” of assistance.

About one-third have a detailed financial plan. In the 25-34 age group, only 10% have a plan.

Over half of the respondents are willing to have others make retirement planning decisions for them. More than 60% look to family and friends for guidance, rather than financial advisors. Those using financial professionals are more likely to say they are on track financially than those who do their own planning.

The study is available at http://tinyurl.com/ WomenFinancialExperience.

Boomers “At Risk” in Retirement

admin — Wed, 17 Aug 2011 01:33:45 +0000

The Employee Benefit Research Institute’s (EBRI) Retirement Readiness Rating suggests that almost half of early baby boomers (ages 56-62) are “at risk” of running short of money for basic retirement expenses and uninsured health care costs.

Among late boomers (ages 46-55), about 44 percent are “at risk,” and 44 percent of Generation X (now ages 36-45) are “at risk.”

The “at risk” results are lower than when the Retirement Readiness Rating was established in 2003 due largely to the automatic enrollment and contribution rate provisions of the Pension Protection Act of 2006, and more diversified default investments in 401(k) plans. These have resulted in higher 401(k) participation rates, larger account balances and better retirement preparedness of many workers.

When ranked by pre-retirement household income, those in the lowest third are “at risk” 70 percent of the time, while the middle income group is “at risk” 42 percent of the time. The rate drops to 23 percent for the highest income group. EBRI’s study is at http://tinyurl.com/EBRIRetireReadiness.

Retirement Plan Design

admin — Fri, 17 Jun 2011 15:18:00 +0000

There is no such thing as a “One Size Fit’s All” Retirement Plan. In fact, the care that goes into the design and implementation of your retirement or employee benefits program is key to the plan’s ultimate success.

Plans can be designed as savings programs for employees, or as incentives for owners and key executives. When you work with our firm, a Plan Design Specialist will methodically go through the steps to make sure that your Retirement Plan will not only meet the goals of the business and its owners, but do so cost effectively.

Proper plan design includes the following considerations:

* Determining corporate and personal goals
* Analysis of legal requirements
* Analysis of income and estate tax implications
* Determining the funding of the plan
* Analysis of actuarial considerations
* Obtaining government approval
* Design of effective administrative procedures
* Education of key personnel
* Establishing effective employee communication systems