BOSTON - Although 401(k) plans are soaring in popularity and cash flow is at record levels, most participants don't understand the basics of how their plans work, according to a survey by AARP Investment Program from Scudder.
Only 28% of workers older than 55 admit they don't know how, or in what form, they will receive their retirement benefits, the survey reported. But 25% of participants don't know what it means that their retirement plans are tax-deferred and only about half knew that early withdrawal of retirement savings will result in penalty taxes.
Arthur Anderson, 401(k) Forum
form strategic alliance
SAN FRANCISCO - Arthur Andersen has agreed to a strategic alliance with 401(k) Forum Inc. to provide integrated financial information, education and investment advice to help employees maximize their retirement benefits and financial planning.
The venture initially will combine Arthur Andersen's financial education programs with 401(k) Forum's advisory service for 401(k) plan participants.
Education top priority,
benefits professionals say
NEW ORLEANS - Investment education is the top benefit priority for 1998 among employee benefits professionals and employees, according to a survey by the International Society of Certified Employee Benefit Specialists and Deloitte & Touche.
Rounding out the top five priorities for the coming year among benefits specialists are refining and improving managed health-care programs, monitoring health-care reform legislation, improving the quality of employee communications materials and implementing Internet and intranet applications.
Women owners consider plans
more often than men
WASHINGTON - Among companies that do not have retirement plans, female business owners discuss retirement issues more frequently than do male business owners, according to a report from the National Foundation for Women Business Owners and Massachusetts Mutual Life Insurance Co.
While men-owned and women-owned businesses are about the same in offering retirement plans (54% vs. 49%), more women business owners are discussing the issue (43%) with an adviser than men (25%). More women (37%) intend to put a plan into place than men (25%). In addition, the study found 49% of female business owners offer their employees six or more investment options in 401(k)s, while 41% of male business owners offer that many options.
Overall financial status
focus of new program
HARTFORD, Conn. - CIGNA Retirement & Investment Services has launched a specialized money management education program for 401(k) plan participants designed to teach workers how to manage their overall financial assets, not solely their 401(k) plans.
Academy by CIGNA will help show workers how to invest retirement assets and save and invest outside qualified retirement programs.
Academy by CIGNA programs include how to manage credit card debt or household budgets and how people's overall financial picture affects retirement planning.
The program is designed for all income levels.
CIGNA plans to introduce the program courses to its 3,000 corporate 401(k) clients this year.
Sponsors say performance key
in selecting options
LINCOLNSHIRE, Ill. - Only 55% of 401(k) plan sponsors have written investment policy statements covering fund selection criteria and monitoring, according to a study by Hewitt Associates.
A total of 92% of employers say investment performance is the most important factor in selecting investment options, only 3% say fees and expenses are the most important factor.
Fees and expenses were cited by 53%, making it the second most important factor.
The Hewitt survey found that company stock accounts for 33% of assets in plans for which that is an investment option; stable value funds account for 32% of assets for plans offering that option. A total of 40% of plan sponsors said the most common mistake plan participants make with 401(k) accounts is investing too conservatively, 53% held that opinion in 1995.
Investment expenses account
for 80% of plan costs
BALTIMORE - More than 80% of 401(k) plan costs are associated with investment expenses, according to data included in the just released 1997 401(k) Provider Directory Averages Book by HR Investment Consultants.
Most employers don't know how much they are paying for 401(k) plan services, said Joe Valetta, principal at HR. Per-participant fees charged on 500-participant plans ranged from $158 to $767, with an average of $371, according to the Averages Book.