The employee benefits discussion is extremely tuned in to healthcare these days. However, the second great tenant of benefits – retirement savings – has some interesting trends going on as well. Check out these 4 articles on retirement plans.
Target-Date Fund Investors Need Better Graphics and Data
Target-date funds have become a key feature of employer-sponsored defined contribution (DC) plans. According to a study from Vanguard, 82% of its retirement plans offer target-date funds, the letter said. The Pension Protection Act of 2006 allows target-date funds to be designated as Qualified Default Investment Alternatives Assets, which has accelerated the asset growth of these funds. Morningstar estimates that target-date mutual funds held approximately $378 billion at year-end 2011, and billions more are invested in institutional and private target-date accounts, such as collective investment trusts, that are not yet required to disclose assets under management.
These funds have also become more diverse. There are now 48 distinct target-date mutual fund series, each with its own interpretation of how a target-date fund should be constructed. While some target-date series are relatively straightforward, many of the industry’s newest entrants are notable for their very distinctive designs, according to Morningstar.
more from PlanAdviser >>
Guaranteed Income Option Most Appealing to Younger Workers
Many American workers find it appealing to have a guaranteed income in retirement—the younger the employee, the greater the attraction.
The Hartford’s Guaranteed Retirement Income study finds that three out of five Americans (64%) say their employer’s 401(k) or other retirement plan does not allow them to turn their savings into guaranteed income in retirement or they are unsure if it does. Overall, 87% of respondents of all ages say they find it “very” or “somewhat” appealing to be able to turn at least a portion of their retirement savings into a guaranteed income.
Ninety-five percent of workers younger than 30 say the same, as did 90% of respondents ages 30 to 39, 89% of those ages 40 to 49, 88% of those ages 50 to 59, and 77% of respondents age 60 and older.
The Hartford’s study found some differences related to gender and income. Women (89%) have a greater preference for guaranteed retirement income than men (84%).
The concept of guaranteed retirement income appeals most to those with a combined annual household income of $50,000 to $74,000. A total of 92% in that demographic would like their employer to offer a guaranteed income option compared to 87% of those earning $30,000 to $49,000, 86% earning less than $30,000, and 84% earning $75,000 or more.
The Hartford’s study surveyed 2,500 Americans ages 18 and older.
(article from PLANSPONSOR.com)
403(b)s Show Culture of Continuous Improvement
The latest 403(b) plan sponsor survey from the Plan Sponsor Council of America (PSCA), by the Principal Financial Group, shows more stability and less uncertainty among 403(b) plan sponsors. The percent of plan sponsors who do not know their Employee Retirement Income Security Act (ERISA) status decreased, from 10% in 2010 to 6.8% in 2011. Twenty-percent fewer sponsors are uncertain whether they have an investment policy statement.
Greater use of target-date funds continues, with 72.5% of plan sponsors offering target-date funds as an investment option, up from 69.1% in 2010.
The number of plans permitting Roth after-tax contributions has doubled in the past four years. In 2011, 21.7% of 403(b) plans allowed Roth, up from 16.9% in 2010 and 10.9% in 2007.
more from PlanAdviser >>
How to Split a 401(k) in a Divorce
The divorce rate for Americans ages 50 and over is at a record level. And because employer-sponsored retirement plans comprise a large portion of the wealth of this age group, it’s important to understand the rules that govern the division of these assets in a divorce.
The key to dividing an employer-sponsored retirement account is a Qualified Domestic Relations Order, or QDRO, which establishes a former spouse’s right to a portion of his or her ex’s retirement benefits. It also protects the account owner from paying taxes and early-withdrawal penalties on assets transferred to a former spouse.
An order should be prepared by an experienced attorney, approved by a court, and submitted to the administrator of your former spouse’s 401(k), 403(b), 457, employee stock-ownership, profit-sharing or defined-benefit pension plan. Generally, you’ll need a separate QDRO for each account an ex-spouse owns, says Emily McBurney, a QDRO expert and partner at Kegel McBurney, a family law practice in Atlanta. (Individual retirement accounts don’t require QDROs. Ask your IRA’s custodian for guidance.)
more from Wall Street Journal >>