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Executive Summary
SIGNIFICANCE OF AUTO-ENROLLMENT: Automatic enrollment of participants in 401(k) plans, which was encouraged by provisions in the Pension Protect Act of 2006, is designed to overcome the drawbacks of voluntary enrollment by getting more workers to save in their work place retirement plan. Auto-enrollment for 401(k) plans has been demonstrated by previous EBRI research to have substantial potential benefits for some employees.
Showing posts with label what is 401 k plan. Show all posts
Showing posts with label what is 401 k plan. Show all posts
The Impact of Automatic Enrollment in 401(k)
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stock market drops
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On May 20, 2010 I was attending day 2 of the NAPFA National Conference and the Dow Jones Average dropped 376 points. On September 15, 2008 I was attending a TD Ameritrade Conference and the Dow dropped about 500 points (and Lehman Brothers declared bankruptcy).
I enjoy attending conferences (especially NAPFA conferences) because I have the opportunity to attend educational sessions on various financial topics and most importantly I have the opportunity to talk with and learn from my fellow financial advisors.
The secret sauce for 401 kplan
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Many registered reps selling 401(k) plans in the small to mid-sized market would have you believe this.
To be clear, I have enormous respect and admiration for American Funds as a fund family. They offer a number of excellent funds. They have a deep management/research group. I use several of their funds in 401(k) plan line-ups and in the accounts of some of my individual clients (no-load share classes).
Contrary to what these registered reps may tell you, an all American Funds lineup is not, in my opinion, a complete 401(k) solution.
401k plan sponsors
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If you are wondering what these topics have to do with each other please read on.
Recently my wife and I wanted to try a restaurant on North Rush Street in Chicago. It was early in the dinner hour on a warm Saturday evening and they had an open table right on Rush Street. Nobody was waiting but the snooty hostess wouldn't let us have it as the table was for four. Half the fun of dining out in this area during nice weather is sitting along Rush Street and watching the array of people who parade by.
explains 401(k) Plan
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Caps placed by the plan and/or IRS regulations usually limit the percentage of salary deferral contributions. There are also restrictions on how and when employees can withdraw these assets, and penalties may apply if the amount is withdrawn while an employee is under the retirement age as defined by the plan. Plans that allow participants to direct their own investments provide a core group of investment products from which participants may choose. Otherwise, professionals hired by the employer direct and manage the employees' investments.
What Does 401(k) Plan
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A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.
What is a 401k plan
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Employer-funded pensions are usually divided into two broad categories: defined benefit (DB) and defined contribution (DC). In a DB plan, the employer promises a defined amount to retirees to pay for meeting certain eligibility criteria. In other words, the plan defines the service received to be. In its typical form, a DB plan pays a lifetime monthly benefit for retirees to meet
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