BPP401k.com Newsletter
May 21, 2008

>> News Highlights Why Tapping Your 401k Early Can Sting For young adults with high-interest debt and few other options, tapping into retirement funds can be tempting. However, there's one major reason why it's a bad idea: It can cost a lot more than it saves. The Intricate Web of Plan Amendments Explained The purpose of this article is to identify, and generally describe, the various categories of amendments that must be made to individually designed tax-qualified plans during and after the 2008 plan year, and to describe when such amendments must be made. QDIA Notices -- Who is Responsible? Plan sponsors who do not have knowledgeable in-house benefits staff will likely not be able to fully understand and comply with the QDIA notice requirements. As a result, most small and mid-sized plan sponsors will need to turn to their providers for help. But, which provider is going to handle that job? Roth 401k: A Benefit to Some Employees; A Challenge to Employers The Roth 401k can benefit some employees, but not all. It may be difficult for some people to decide whether this new option is right for them. Employers have a potential challenge also. This is a white paper on the various issues.

Digest

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The Intricate Web of Plan Amendments Explained - Summary: The purpose of this article is to identify, and generally describe, the various categories of amendments that must be made to individually designed tax-qualified plans during and after the 2008 plan year, and to describe when such amendments must be made. Located at: White & Case LLP.

Merrill Lynch Sees Strong Adoption of Roth 401k - Summary: The Merrill Lynch Retirement Group reported that among the 1,700 plans on its proprietary recordkeeping system, almost 200 (12%) had added a Roth 401k option as of the end of March. Located at: Planadviser.com.

Fred Reish Asks: What About LaRue? - Summary: The LaRue decision is a 'friend' for competent advisers whose practices are focused on 401k plans. That is because the use of a competent, non-conflicted adviser is material evidence that fiduciaries have engaged in a prudent process. Located at: Reish Luftman Reicher & Cohen.

QDIA Notices -- Who is Responsible? - Summary: Plan sponsors who do not have knowledgeable in-house benefits staff will likely not be able to fully understand and comply with the QDIA notice requirements. As a result, most small and mid-sized plan sponsors will need to turn to their providers for help. But, which provider is going to handle that job? Located at: Reish Luftman Reicher & Cohen.

Low-Income and Older Workers Make 401k Investing Mistakes - Summary: New research shows that 401k participants with lower salaries have smaller plan balances, compared to those with higher salaries and those nearing retirement tend to do a poor job on managing their investments. Located at: Employee Benefit News (free registration may be required).

Financial Engines Issues National 401k Evaluation - Summary: "The Financial Engines National 401k Evaluation" is a new report that assesses nearly one million 401k participant portfolios to determine how well Americans are handling their 401k plans. The report also estimates the costs associated with common investing mistakes. Located at: 401khelpcenter.com.

Court and Legislative Items

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Business Groups Bash Pivotal 401k Suit - Summary: Yet another set of outside voices has now formally weighed in on the 401k fee lawsuit against Deere & Co., this time in support of the Moline, IL-based manufacturer. Trade groups decry lawsuit charging Deere, Fidelity with excessive fees. Located at: Financialweek.com.

Amicus Brief in Hecker et al v. Deere & Company/Fidelity - Summary: This is the Brief file by The ERISA Industry Committee, The National Association of Manufacturers, and the American Benefits Council as Amici Curiae in Support of Appellees. Located at: American Benefits Council (PDF File).

Wal-Mart 401k Suit - Benchmark Bias - Summary: Biased benchmarking is undoubtedly one of the largest sources of perceived or marketed "alpha" in the investment industry. We wondered if biased benchmarking might account for some of the alleged participant losses claimed in this case. Located at: Fiduciary Investor Blog.

Research

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The Influence of Time Diversification on Horizon-Based Asset Allocations - Summary: Academic opinion is divided over the existence of time diversification -- the premise that investments in stocks are less risky over longer periods. Located at: Vanguard Investment Counseling & Research (PDF File).

Roth 401k: A Benefit to Some Employees; A Challenge to Employers - Summary: The Roth 401k can benefit some employees, but not all. It may be difficult for some people to decide whether this new option is right for them. Employers have a potential challenge also. This is a white paper on the various issues. Located at: AAML.org (PDF File).

401k-Type Plans, Participants Grow at Slower Pace - Summary: Growth in the number of 401k-type plans and the number of participants in those plans, which increased sharply in the 1990s, has slowed in recent years, according to a study released today by the nonpartisan EBRI. Located at: Employee Benefit Research Institute (PDF File).

DOL and IRS Items

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