Top Ten 401k Plan Trends

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

What will those progressive plan sponsors who wish to maintain leading edge 401k plans be doing in 2016? Read on below to learn the top ten 401k trends for 2016. [Read more…]

Why You Shouldn’t Use Custom TDFs In Your 401k

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Recently, it has become popular for large corporations to adopt customized target date fund approaches for their 401k plans. Before jumping into why this approach has never made much sense to me, it might be good to start out with a couple definitions.

What are Target Date Funds (TDFs)?

Many mutual fund families have created an integrated series of investment funds with dates in their names. The dates approximate the time period that a participant will turn age 65 and retire. These professionally managed investment funds vary their bond/stock allocation percentages as time goes by so that as a participant gets closer to age 65 his/her allocation becomes more conservative. Target date funds are generally considered to be the most appropriate investment for the vast majority of your 401k plan participants.

What are custom TDFs?

Custom TDFs use a unique set of underlying investments and/or alter the bond/stock percentages significantly for the different funds in the series. These different bond/stock allocations are based upon demographic assumptions unique to the client. The intent is to create a non-standard glide path for the target date series.

Why I don’t like custom TDFs

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Seven Signs Of A Successful 401k

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PSI Newsletter and Website Header 10.2.15

By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

For more than 30 years I have helped plan sponsors create successful 401k plans. During that time I have noticed that a successful 401k plan appears to possess the following seven attributes: [Read more…]

401k Executive Benefit Opportunity Results From Weak Markets

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PSI Newsletter and Website Header 10.2.15

By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

The bad equity markets have one silver lining for those executives in your organization that might have large 401k account balances: In-plan Roth 401k conversions.

Why now?

Most of us have experienced significant declines in the value of our 401k account balances as a result of weak equity markets. For executives, these losses may have been even greater if they had a well diversified 401k account with a heavy allocation to equities and exposure to commodities. These executives may have unrealized losses in their accounts of as much as 20% or 30%.

Converting pre-tax 401k balances into after-tax Roth 401k balances results in taxation of the previously tax-free amounts. Converting when the account value is lower may result in a substantial tax savings. Following is an example.

Example of in-plan Roth 401k conversions [Read more…]

Plugging 401k Plan Leakage

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

In 2013 Time Magazine reported that one in four Americans tapped into their 401k account. Research from Fidelity indicates that 22% of participants in plans they administer have an outstanding loan. This is troubling because the high rate of 401k plan loan defaults results in annual 401k plan leakage of around $6 billion per year. Boston Research Group reports that 45% of 401k participants who leave a job take a distribution of their account balance. Significant amounts of participant balances are leaking out of 401k plans and not being replenished, with potentially disastrous results.

What is 401k plan leakage?

[Read more…]

Hottest 401k Plan Enhancement For Your Executives

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Whether you sponsor a large or small 401k plan, the addition of a Roth in-plan conversion feature may be viewed by your executives as an important tax planning tool. A major benefit of Roth accounts is that vested balances residing in the accounts for five or more years may be withdrawn tax-free (contributions and earnings) when a distributable event occurs.

A Roth in-plan conversion option is a unique tax planning tool. Roth 401k accounts are the only investments I can think of where the investor has control over when an investment is taxed, without actually having to liquidate the investment! Normally, taxation on an investment is triggered when it is sold, not re-characterized into a different account or form. Consider these other reasons to offer a Roth in-plan conversion feature in your 401k plan: [Read more…]

White Labeling 401k Investment Funds A Bad Idea

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Recently, most plan sponsors were forced to make a decision about keeping a particular fixed income fund in their line-up that many participants feel is the anchor to their 401k plan investment strategy. When Bill Gross left PIMCO, plan sponsors needed to consider whether PIMCO’s flagship Total Return Fund should remain part of their investment menus. Many observers have used this situation to outline the benefits of white-labeling 401k plan investment funds. I don’t believe that white labeling makes sense, for the following reasons: [Read more…]

Top Five 401k Plan Trends For 2015

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

What will those progressive plan sponsors who wish to maintain leading edge retirement plans be doing in 2015? Read on below to learn the top five 401k plan trends for 2015. [Read more…]

Five Low-Cost Ways To Improve Your 401k Plan

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

After working with thousands of 401k plans over a nearly 30-year consulting career, I have consistently run into a relatively small number of easily fixable problems that can make a big difference in many 401k plans. Check out this list of suggested low-cost 401k plan improvements. [Read more…]

Congress Should Consider These Eight 401k Plan Fixes

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

As Congress continues to explore ways of making our retirement system stronger, legislators should consider the 401k plan fixes outlined below. I have ranked these suggestions from 1 to 10 (with 10 being a major impact) based upon how I feel the fix would impact participant retirement readiness: [Read more…]