LOS ANGELES - Nearly 54% of current retirees or departing participants who have assets in employer-sponsored defined contribution plans took cash payments, according to a new study by Cerulli Associates.
Participants with larger account balances are more likely to roll their money into an IRA than those with smaller balances. As a result, 37% of lump-sum distributions were rolled over to IRAs, which accounted for more than 77% of total IRA assets. Total IRA rollover assets have grown to $2.47 trillion in 1999, from $20 billion in 1980. This emerging IRA rollover market, combined with the increasing need for retirees to secure lifetime income, will push annuity sales to higher levels, Cerulli predicted. The consulting firm estimates IRA assets in annuities will grow to $690 billion by 2010, with the portion of these assets from rollovers growing to 78% from 60% over the same time period.
Guidance issued for low-income 401(k) participants' tax credit
WASHINGTON - The IRS released guidance on a tax credit for low-income 401(k) participants that was included in the pension reform bill passed earlier this year. The guidance spells out how the tax credit works and gives assistance to plan sponsors on communicating with participants about the tax credit.
Florida selects finalists for DC plan providers
TALLAHASSEE, Fla. - The Florida State Board of Administration's board of trustees selected finalists in its search for bundled providers for the state's defined contribution plan, set to be launched in March.
Prudential, Fidelity and INVESCO are finalists for investment options with no additional services; Prudential, SunAmerica, Fidelity, ING Aetna and Nationwide are finalists for provider offering moderate levels of service; and Fidelity, VALIC and TIAA-CREF are finalists for provider offering significant service.
Eliminated from the running were T. Rowe Price, Vanguard, Oppenheimer and A.G. Edwards in the no-service category; SAFECO, Horace Mann and First Union, moderate service; and Hartford and SAFECO, significant service.
The Tallahassee, Fla.-based board is expected to make a final decision at its Nov. 14 meeting on how many and which type of bundled providers it will hire.
Separately, the board compiled a list of legislative changes it wants made to the defined contribution program. The changes include: wording allowing the plan to accept, on behalf of participants, eligible rollovers and trustee-to-trustee transfers from other plans; allowing surviving spouses to roll over benefits from the plan to another eligible retirement plan, not just an IRA; and allowing members of the State Community College System Optional Retirement Program and the State University System Optional Retirement Program to join the defined contribution plan.
Flint Ink to add Fidelity, Dodge & Cox funds as options
ANN ARBOR, Mich. - Flint Ink next year will add the Fidelity Midcap and Dodge & Cox Balanced funds to the lineup of 12 investment options in its $290 million 401(k) plan, said Anne C. Wolf, director of benefits and compensation. The plan's bundled provider is Northern Trust Retirement Services.
Delaware, Legg Mason create bundled plan
PHILADELPHIA - Delaware Investments and Legg Mason Wood Walker jointly created a full-service defined contribution plan for sponsors with a minimum of 100 participants or $1 million in assets. The new bundled offering includes 51 funds by Legg Mason, Delaware, AIM, Janus, Liberty, MFS, Pioneer, PIMCO and State Street Research. Plan sponsors will be able to choose 15 investment options.
Hartford starts multimanager group annuity service
HARTFORD, Conn. - Hartford Life Insurance launched Hartford 401 Cornerstone, a new multimanager 401(k) group annuity service developed for plan sponsors with up to 500 employees. Hartford 401 Cornerstone has 43 investment choices managed by The America Funds Group, Federated Investment Management, Goldman Sachs, Hartford Investment Management, Lord Abbett, Putnam Investments, Van Kampen Investments and Wellington. The service is available bundled with Hartford Life or through one of Hartford's approved third-party administrators. Edward Jones' retirement plan marketing division will distribute the service through its 8,000 investment representatives.
PensionTrend, Security Trust form partnership
PHOENIX, Ariz. - PensionTrend, a third-party administrator and advisory firm, formed a partnership with Security Trust to provide independent trust and daily valuation for defined contribution retirement plans it services. Those plans, all in Michigan, have $700 million total in retirement assets, said Lee Kliebert, director of operations.
New Manulife application submits info via web
TORONTO - Manulife Financial announced a new software application called i: contributions that allows 401(k) plan administrators to submit participant contribution and address files directly to Manulife's system via the Internet. The information is automatically updated for each Internet submission.
Colorado PERA adds 4 Fidelity lifestyle funds
DENVER - Colorado Public Employees' Retirement Association, Denver, will add a set of four Fidelity lifestyle funds to its $578 million statewide 401(k) plan on Jan. 1. It now has 11 investment options.