http://westportbenefitsgroup.com/news/index.php/site/index/ Westport Benefits Group news and information you can use. en sep@westportbenefitsgroup.com Copyright 2009 2009-12-21T15:51:34+00:00 http://westportbenefitsgroup.com/news/index.php/site/time_to_rebalance_your_401k/ http://westportbenefitsgroup.com/news/index.php/site/time_to_rebalance_your_401k/#When:15:51:34Z 401(k) Participants need to rebalance According to a study by The Wharton School, 79% of 401(k) participants make no trades within their account over a 2-year period. The advantages of rebalancing have been well documented, but here is a good way to look at it. Suppose that several years ago you completed the allocation exercise in your enrollment book and decided that a 60% equity/ 40% bond allocation was appropriate….and you did nothing further. You may very well have had an 80/20 allocation when the market went sour…meaning that you took a bigger hit than you needed to. By rebalancing on an annual basis, you “snap back” to your original 60/40 allocation, which is the one you wanted in the first place. And you take the emotion out of trying to guess how much higher the market will go, where the “top” is, etc. Most 401(k) platforms have an automatic rebalancing feature, so there is really no excuse. You don’t need to mark your calendar, just check the box. If you set it now for rebalancing every January 1, you’ll be ahead of the pack at retirement time. News 2009-12-21T15:51:34+00:00 http://westportbenefitsgroup.com/news/index.php/site/brightscope_2009_top_30_401k_plan_list/ http://westportbenefitsgroup.com/news/index.php/site/brightscope_2009_top_30_401k_plan_list/#When:00:28:48Z Learn what the top rated 401(k) plans do to be successful Brightscope, an organization which rates 401(k) plans on how effective they are in getting participants to retirement, has announced their top 30 plans for 2009. As you might suspect, these are LARGE plans who have the resources to provide (if they want to) the highest possible quality plan, and some have the resources to provide a “can’t miss” experience. For instance, the number one plan on the list provides a 100% match on the first 9% of contributions. But the information IS useful when it comes to designing your own program. There are common themes and “best practices” which can be adopted regardless of your resources…like shortening the eligibility time. If you have a 6 month or one year wait because of high employee turnover, you may want to leave it be. However, if it’s 6 months and nobody knows why (“its always been that”), then you may want to revisit. For a look at the complete list of top 30 plans and the criteria used, here is the link: http://tinyurl.com/y8rv5oz News 2009-12-15T00:28:48+00:00 http://westportbenefitsgroup.com/news/index.php/site/you_and_larue/ http://westportbenefitsgroup.com/news/index.php/site/you_and_larue/#When:18:05:27Z Protecting yourself from participant lawsuits Its been over a year since the Supreme Court ruled that individual participants in 401(k) and other retirement plans subject to ERISA can sue plan fiduciaries to recover investment losses from their accounts. Although it caused quite a stir at the time in the vendor and legal communities, we are surprised that many plan sponsors are still either unaware or are dismissing it as unimportant. It IS important, and it’s easily addressed. If you have an up to date Fiduciary File and you are working with an advisor who can act as a co-fiduciary, you’ll be able to thoroughly protect yourself, starting with these two critical areas: 1) reviewing the plans’ investment policies and procedures designed to ensure that the plans’ investments options are prudent 2) analyzing (and documenting the analysis of) fees charged by service providers. You’ll gain fiduciary protection, identify (and probably improve) your expense structure, and optimize you fund lineup.   News 2009-12-05T18:05:27+00:00 http://westportbenefitsgroup.com/news/index.php/site/etfs_in_a_401k_plan/ http://westportbenefitsgroup.com/news/index.php/site/etfs_in_a_401k_plan/#When:18:51:24Z Low cost ETF 401(k)‘s are becoming more common If you are looking to maximize performance in a 401(k) plan, a good place to start is with fund expenses. A Government Accountability Office report illustrates exactly how much expenses matter: over the course of 20 years, a $20,000 investment, earning 7% annually and paying 0.5% annual fees, will grow to about $70,500. But if fees are 1.5%—a mere 1% difference—that same $20,000 will only grow to about $58,400. This is approximately a 17% reduction in asset value. A 401(k) fund menu made up primarily - or exclusively - of ETF’s can address this issue, but you do have to shop around. Because ETF’s aren’t laden with subsidies, you probably won’t find them inside packaged programs (like those from insurance companies). And a broker might be hesitant to bring them to your attention (no commisssions bulit in, either). But an advisor, who charges a fee, is a good candidate. An advisor can easily choose ETF’s and build portfolios using one of several available platforms and, because the advisor, ETF, and platform fees are all transparent, you can be assured of low cost performance. News 2009-10-17T18:51:24+00:00 http://westportbenefitsgroup.com/news/index.php/site/the_best_book_weve_seen_on_401ks/ http://westportbenefitsgroup.com/news/index.php/site/the_best_book_weve_seen_on_401ks/#When:17:54:26Z Josh Itzoe’s book is a must for 401(k) Fiduciaries For those of us who meant to write a book which tells everything there is to know about 401(k) Fiduciary duties, well, Josh went ahead and did it. It came out last year to great fanfare, but we are still surprised at how many 401(k) plan sponsors still don’t “get it”. Josh has briefly - but completely, provided a step by step guide to fulfilling these duties which, by the way, leads to a low cost, high performing plan you can be proud of. In addition, the book shows how to address the fiduciary liablity question in order to protect youself…it’s still a PERSONAL liability at the end of the day. And he explains who the players are…this chapter alone is worth the price of the book. When you see who has a vested interest in what, it becomes clear where there can be conflicts of interest or worse. For more information, you can visit Josh’s site: http://www.fixingthe401k.com/ News 2009-08-09T17:54:26+00:00 http://westportbenefitsgroup.com/news/index.php/site/make_wall_street_put_investors_best_interest_first/ http://westportbenefitsgroup.com/news/index.php/site/make_wall_street_put_investors_best_interest_first/#When:01:44:21Z Petition to ask for a Fiduciary, rather than a suitability standard We don’t usually go in for petitions, but we feel that this one is worth signing…and worth it for others, too. At stake is whether investors will continue to be serviced by brokers who use a “suitability” standard, or Advisors, who are required by law to put their clients’ interest first. There is a long list of abuses by FINRA supervised brokers, who can easily be tempted by certain products that pay a bigger commission, stocks or bonds which are recommended by a sales manager (‘Let’s put some lipstick on this pig”), trips to exotic places, account churning, and more. And, of course, there are a great many brokers who rise above this and provide exemplary advice/service by adopting a fiduciary standard even if they don’t have to. But shouldn’t everyone do that? What kind of finacial system has two sets of rules like this? In case you haven’t guessed, we are in favor of a Fiduciary Standard: the clients’ interest always come first. Period. To see the petition and view a more in depth discussion of this subject, please go to:  http://tinyurl.com/nsr97g And thanks to our friends at fi360, the Center for Fiduciary Studies, for being pro-active on this matter News 2009-08-03T01:44:21+00:00 http://westportbenefitsgroup.com/news/index.php/site/snakes_on_a_plan/ http://westportbenefitsgroup.com/news/index.php/site/snakes_on_a_plan/#When:00:53:06Z Snakes On A Plan can cost you If you’re not paying close attention to your 401(k) plan, you may be in for the same kind of thrills as the movie with a similar name. So…what can you do to make sure that your 401(k) plan has a terror free summer? The best overall strategy is to benchmark your plan against other vendors, especially if you haven’t done so in the last three years. Just like any other industry, some vendors are more aggressive than others at any particular point in time, and several insurance companies have had a tough go of it. Make sure you have the right combination of funds and expense structure. If you don’t have a regular procedure to monitor funds, then now is a good time to start. June 30 numbers are fresh and readily available News 2009-07-18T00:53:06+00:00 http://westportbenefitsgroup.com/news/index.php/site/do_you_have_a_401k_investment_policy_statement/ http://westportbenefitsgroup.com/news/index.php/site/do_you_have_a_401k_investment_policy_statement/#When:18:58:08Z Every 401(k) Plan needs an Investment Policy Statement One of the primary obligations of a 401(k) plan sponsor is to prudently identify, retain, and monitor the investment options in the plan. According to several industry surveys, there are as many as half of all plans which have no written guidelines for doing this. The written guidelines are known as an Investment Policy Statement (IPS), and there are lots of templates and resources which make it easy to do. A good IPS will define the investment categories which are available to the trustees, and give specific guidlines for inclusion/elimination of a fund. We like the fi360 approach (http://www.fi360.com) which consolidates factors such as manager tenure, performance (of course!), style drift, composition, alpha, Sharpe ratio, and more into a Fiduciary Score of 0-100. But there are others, as well - the important thing is to choose an IPS that you are actually going to follow. I would have to consult with counsel to say which is worse: no IPS, or an IPS that you don’t pay attention to. Probably the latter. So, if you don’t have an IPS, get one. Now. And if you have one, make sure that you are following the guidelines. The funny thing is that, if you follow the guidelines and make sure that you always have the best available funds, you’ll have better fund performance and a happier participant population. Why wouldn’t you? News 2009-06-27T18:58:08+00:00 http://westportbenefitsgroup.com/news/index.php/site/ria_versus_broker_whats_the_difference/ http://westportbenefitsgroup.com/news/index.php/site/ria_versus_broker_whats_the_difference/#When:20:31:29Z The difference between advisors and brokers, and why you should care Although this has been a hot topic in the industry for quite a while, the general investing public does not understand the difference between a broker and an advisor. So, what’s the difference? and why should you care? It’s actually pretty simple: RIAs registered with the Securities and Exchange Commission are governed by the fiduciary standard that requires advisors to act in their clients’ best interests. This fiduciary standard of care is the highest know to law and, given a choice, most plan sponsors would prefer to have an advisor who is a “co-fiduciary”. Wouldn’t you prefer to work with someone who is required by law to put your interest first? On the other hand, broker-dealers registered with the Financial Industry Regulatory Authority (FINRA) are held to the suitability standard that requires them to make recommendations that fit a client’s risk tolerance, objectives and financial status. In other words, brokers are trained and monitored to make sure that they are providing suitable investments, but normally stop short of accepting co-fiduciary status. At the end of the day, it will depend on the individual broker or advisor, of course…there are great people on both sides of industry. But you might want to think about what happens when the chips are down and you want someone to share, in writing, the fiduciary responsibility   News 2009-06-21T20:31:29+00:00 http://westportbenefitsgroup.com/news/index.php/site/do_you_know_your_401k_expenses/ http://westportbenefitsgroup.com/news/index.php/site/do_you_know_your_401k_expenses/#When:16:53:16Z It’s important to know 401(k) fees, especially non-diclosed I had a meeting this week with a company who had no idea that his insurance company vendor was paying a subsidy to the Third Party Administator. How do you know if you are getting good value if you can’t account for all the expenses? I also noticed that the State of Alabama cancelled their deferred Compensation arrangement with Nationwide, and wanted to pass along the following comments: 1) The State Personnel Board cited a lack of financial transparency Wednesday when it canceled a contract with Nationwide Retirement Solutions to provide a deferred compensation plan for active and retired state workers in Alabama. 2) “We’ve leaned over backward to ask these people to come square,” board Chairman Joe Dickson of Birmingham said. 3) Board members say they were unaware the 1994 agreement provided for Nationwide, based in Columbus, Ohio, to make large payments to ASEA. The association’s tax returns show those payments have reached almost $6 million since 2002, board attorney Alice Ann Byrne said Wednesday. If you are in charge of a 401(k) plan, be sure to ask - in writing - for a total list of fees associated with your plan. Not only is it in the best interest of participants, but it’s good business, as well.   News 2009-06-21T16:53:16+00:00