Funding the future: the evolving responsibilities of 401k plan sponsors.

• Author: Vanek, Jeff
• Position: Wealth Management

An ever-increasing percentage of are adopting 401(k) plans, which ultimately puts the responsibility for retirement savings on individuals. As such, the laws that govern 401(k) plans have been undergoing significant changes--all meant to increase savings and give individuals the information they need to invest their money wisely.

"Thirty years ago there were pensions. The company did all the investing for the employee. Now the investment responsibility is on the employee," says Corby Da11, president of 401(k) Advisors Intermountain. "Recent reforms are being put into place to help participants be ready for retirement. The provisions require disclosures that are meant to help participants make the right decisions so they will have enough money to retire."

Pension Protection

In a statement Sen. Orrin Hatch made to the Senate Finance Committee in September 2014, he said: "Since 2000, retirement assets in defined contribution plans have grown from $3 trillion to nearly $6 trillion, despite the market downturn in 2008. The retirement policies we have pursued have always been about helping Americans help themselves save more of their hard-earned money, not less."

In 2006, the Pension Protection Act was passed, which provides safe-harbor protections for companies that adopt plans that have automatic enrollment and savings escalation provisions. Provided the plan adheres to certain rules, companies can automatically enroll participants in qualified default investment alternatives. Participants can always change or opt out of these enrollments, but without any action on an employee's part, a company may enroll them in the 401(k) plan at a pre-set rate of savings in a pre-set investment. A company may even set up automatic savings escalations for employees.

"The Pension Protection Act of 2006 provided the plan fiduciary protection for allowing for participants to be placed in a plan automatically, and defaulted into a certain investment, as long as the proper notices were given," says Kim Anderson, vice president of retirement plan services at Soltis Investment Advisors. "This act helped address financial behavioral issues. Most people are victims of inertia. They mean to save for retirement but never seem to get around to doing it. Employees can opt out, but less than 10 percent do. Thirty to 40 percent of plans are now designed with automatic enrollment features."

Participants can always choose what investment they wish to put their money into...