Retirement Plans Take Different Tack on Money Funds

via Wall Street Journal

People saving for retirement in workplace 401(k) plans may soon see changes to the lowest-risk choices on their investment menus.

The adjustments—which have occurred already at some plans but are under consideration at many more, consultants said—are in response to new rules for money-market mutual funds that will take effect in October. “Prime” money funds that buy both corporate and government debt will be required to charge redemption fees if they are swamped by withdrawals amid market turmoil. They also will be required to set up procedures to suspend redemptions in some cases.

As a result, many 401(k) plans are looking at shifting to money funds that buy only government debt, which aren’t required to have redemption fees or set up “gates” to block withdrawals.

“Plan sponsors do not want to be exposed to a situation where plan participants can’t get their money, regardless of how remote that possibility is,” said Philip Suess, a partner at investment consulting firm Mercer LLC in Chicago.

Read the full article here

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Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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