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June 12, 2000 01:00 AM

Poor education may lead to lawsuits later

FINANCIAL PLANNING; Strategy hopes to avert a `retirement crisis'

Arleen Jacobius
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    MCLEAN, Va. -- Plan sponsors could be held legally accountable by participants who do not have adequate retirement nest eggs because they received faulty financial planning information, according to leaders of The International Foundation for Retirement Education.

    That plan participants are receiving inaccurate or incomplete financial planning information at a time when Social Security and Medicare system changes are in the air could lead to a "retirement crisis," they said.

    So the McLean-based InFRE -- a private foundation, information clearinghouse and retirement education provider developed, in part, by the National Association of Government Deferred Compensation Administrators -- has developed a three-tiered strategy to help Americans have a more successful retirement. The strategy includes: an initiative to alert employers to their responsibilities in educating workers on retirement planning issues; two certification programs -- certified retirement counselor and certified retirement administrator -- and public awareness campaigns to urge Americans to plan for retirement.

    Employers and financial service providers are giving employees a lot of information on what their 401(k) options are, but they are not doing financial planning, said Marysue J. Wechsler, InFRE managing director.

    At the same time, this is the only retirement planning most people will get, said Ms. Wechsler. "People are asking how to take money out of their 401(k) when half of the people do not understand the time value of money," she said.

    And the people who are teaching employees about 401(k) plans are not trained in retirement planning, said Betty Meredith, a member of InFRE's board of governors.

    Companies that provide investment advice to participants in defined contribution plans are not providing overall retirement planning, said Ms. Meredith, who also is president of Discover Learning Inc., defined contribution consulting firm based in Ann Arbor, Mich.

    "They are just doing investment planning. Retirement planning is very lacking and I have a lot of concern," Ms. Meredith said. "Plan sponsors are handing people the tools they need to make some cookies, but they are not giving them the recipe."

    The certification is designed to train the trainers. It is a 12-month program covering investments, retirement planning, pension law and counseling and ethics. The certified retirement counselor is for people who answer the 800 numbers and who answer participant questions during enrollment. The certified retirement administrator designation is designed for administrators of both defined benefit and defined contribution plans, Ms. Wechsler said.

    InFRE was formed through a partnership with The National Association of Government Deferred Compensation Administrators, the Davenport Educational Foundation, the Center for Financial Responsibility at Texas Tech University and the National Preretirement Education Association. InFRE is also backed by American Community Service Network, founder of The Learning Channel.

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