Products March 30, 2007

Consultant Introduces 401(k) Plan Optimization Services

The Advisory Group of San Francisco has launched a suite of services to help employers optimize their 401(k) plan and costs to determine whether fiduciaries and their participants are making sound decisions and paying fair fees.
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The new offering, 401(k) Effectiveness Analysis, provides insight into investment design and participant behavior to determine the degree to which a plan is helping or hurting participants, according to a company news release.

It also includes a total cost study that makes costs transparent to employers, giving them the power to decide whether they and their participants are paying fair fees in relation to their plan size.

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“Many plan sponsors don’t know their true total costs, or who is capturing that revenue,” said Greg Patterson, CEO and a senior consultant at The Advisory Group, in the news release. “This is especially true for plans using the big brand name 401(k) providers that often have hidden costs that neither employers nor their participant employees have the time to weed out or optimize.”

According to the news release, the company’s lineup of 401(k) services includes a vendor search function.

The Advisory Group (www.advisorygroupsf.com) provides guidance and resources for the management of investment decisions and fiduciary responsibility, according to the company.

In Practice March 29, 2007

Fidelity Investments to End DB Plan

The fund giant will instead offer a richer 401(k) match and an annual credit to a health savings plan.
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Further, beginning in 2008, Anne Crowley, a company spokesman, told the Boston Globe that employees will be able to roll over their existing pension benefits into an existing company profit-sharing plan or they can choose to take those benefits as an annuity upon retirement.

The firm’s matching contribution will be increased from 5% to 7% and, beginning in 2008, Fidelity will credit employee health care savings accounts with $3,000 annually to help pay for retiree healthcare. This money will be accrued in an account in which distributions are not taxed.

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Health Care Concerns

The change comes as Fidelity released data that the average 65-year-old couple needs an estimated $215,000 to cover health care costs in retirement (see Estimated $215,000 Needed for Retiree Health Care Costs). According to the Globe, Crowley said that 71% of Fidelity’s employees (who have an average age of about 35) reported they did not know how they would pay for healthcare in retirement. Their average employee is around 35, according to the report.

The pension plan, which the firm says is fully funded to meet current obligations, will be eliminated for approximately 32,000 of the company’s employees, according to the Boston Globe report. According to a filing with the U.S. Department of Labor, the pension plan has 36,800 participants, including current employees, former workers due future benefits, and retirees.

Fidelity will stop making payments into the pension plan June 1, the report said. The report did not say whether there will be any cost savings by the change.

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