Are you
ready for 2012 Business Retirement Planning Changes?
Fee disclosure
With the
U.S. Department of Labor set to release its final rules on fee disclosure to
both plan sponsors and plan participants, 2012 will be a year of changes for
the retirement planning marketplace, especially with more focus on 401(k)
plans.
Transparency: For the
first time, companies and individuals will know what they are paying for record
keeping, administration and advice. The general public will finally realize how
much of their retirement earnings are going to pay for hidden fees. The fee
disclosure rules are scheduled for implementation by August, unless the DOL
grants an industry request for an extension.
401(k)
advice
Industry experts predict that 401(k) advice will be more
plentiful in 2012. The Employee Benefits Security Administration issued a new
regulation in October that gives smaller companies the opportunity to bundle
investment advice as part of their 401(k) and IRA plans. The regulation will
allow fiduciary investment advisers to receive compensation from investment
vehicles they recommend if the investment they provide is based on a computer
model that is certified as unbiased and applies generally to accepted
investment theories, or the adviser is compensated on a “level-fee” basis,
meaning the fee doesn’t vary based on the investments a participant selects.
The Department of Labor and
U.S. Securities and Exchange Commission also are working on competing
definitions of fiduciary. The goal is to get more individuals the advice they
need so they can save enough for retirement.
The downturn in the market and the losses most retirement
plans experienced has made it clear that most investors don’t have any idea how
to invest their money, and most are unwilling to pay someone for that kind of
help. Having access to advice within a plan they are currently enrolled in will
make saving for retirement much easier.
Investment
models will change
401(k) investment models will include target date funds,
which will take into account how much time participants have left until
retirement and how much risk they should take at that point in their careers.
Simple,
low-cost options will expand
The industry already has seen a trend toward simple, low
cost alternatives to past plans. Recently, many large 401(k) plan providers
have started offering small business 401(k) plans. This trend will only
continue as rules change, making it easier for people to see what fees they are
paying to their plan providers.
Individuals
should save more
If the financial services industry is successful
in fending off Congressional attacks on 401(k) plan tax incentives, if the
economy improves and workers feel more stable in their jobs, 2012 should be a
good year for retirement savings.
