Alix Stuart, CFO Magazine
October 1, 2008

The first step to sole the nest egg problem

This article is correct that it is very difficult to get employees to participate in their company?s 401(k) plan, when the employees that do participate do not contribute an adequate amount, or make the correct investment decisions to achieve an adequate retirement income. Most companies are spending more time and money to educate their employees with little to no results.
The sixty four million dollar question is: What can I do that will produce results? The answer to participation was created by Pension Protection Act of 2006 with Automatic Enrollment of all employees. The data has proven that most employees do the time or effort to enroll but when they are auto enrolled they do not opt-out. When the Qualified Automatic Contribution Arrangement is used participants that do not increase their contributions will have their contributions increased by 1% a year until they are contributing 6%. This is not to final solution but it is the first step for a successful 401(k) plan.
To solve the investment problem companies should hire an investment advisor that will chose the investment options, design and manage QDIAs (Asset Allocation Models) for their participants.
This article states 44% of the respondents are concerned about, Increased risk of fiduciary and legal responsibly. The solution to this is to hire an investment advisor that agrees in writing that they are a plan fiduciary. Once the fiduciary-advisor contract is consummated? the other fiduciaries are relieved of the responsibility for the investment decisions made by the advisor. An ERISA-defined investment advisor removes from the shoulders of the plan fiduciaries virtually all of the fiduciary responsibility related to the investment decisions.
Darwin Abrahamson CEO & Founder, Invest n Retire, LLC

Posted by Darwin Abrahamson | Oct 23, 2008 6:54 PM ET