Dying Rich: Feds Give You 2 Ways to Offer 401(k) Advice

By offering investment advice to their employees, companies can improve worker saving habits and grow the value of their retirement plans. And the feds just finalized the rule on what?s allowed when offering such advice.

In a nutshell, it says plans sponsors can offer investment advice to 401(k) and IRA participants in two ways:

• The plan sponsor can offer advice as long as it?s based on a computer model that applies generally accepted investment theories and is certified as unbiased, and
• A third-party adviser can be hired as long as the adviser is compensated on a ?level-fee? basis, meaning the compensation does not vary based on investments selected by plan participants.

Detailed guidance on this rule, which takes effect Dec. 27, 2011, can be found in the final regulation, here.

Regardless of which option a plan sponsor chooses, the party, computer model or people providing the advice must use generally accepted investment theories that are based on historical risks and the performance of different asset classes over a defined time frame.

What does this mean?

For years, many plan sponsors wanted to give participants investment advice. But they feared doing so would violate the Employee Retirement Income Security Act (ERISA), particularly the part that protects workers from falling victim to conflicts of interest among the parties managing the plan.

An example of a conflict of interest: Some plan sponsors get a cut of revenue from certain funds. A plan sponsor?s adviser could then recommend one of those funds to plan participants. If that were to happen, it would be clear the parties involved weren?t looking out for plan participants? best interests.

The new rule gives employers a way to ensure the advice given does not cause a conflict of interest and violate ERISA.

Source:http://www.hrmorning.com/feds-give-you-2-ways-to-offer-401k-advice/

Source: http://dyingrich.blogspot.com/2012/02/feds-give-you-2-ways-to-offer-401k.html

major league major league alicia sacramone occupy chicago occupy chicago alcs alcs