Other Current Developments Heuristics and Biases in Retirement Savings Behavior This paper was written by Shlomo Benartzi of The Anderson School at UCLA and Richard Thaler of the University of Chicago. It examines participant behavior in deferral-based, participant-directed retirement plans. The paper describes several ways in which, through plan design or investment processes, participants can, with plan sponsor and fiduciary assistance, achieve greater retirement security. As the paper indicates, our law firm contributed to the funding of this research as a part of our efforts to improve the quality of benefits being provided by 401(k) and 403(b) plans through a better understanding of participant behavior. Posted July 2007 Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment Three key issues face companies in improving the quality of their 401(k) plans. Those are: participation; participant investing; and deferral rates. While, in terms of increasing participation, automatic enrollment is receiving most of the attention, 401(k) consultants are developing other practices that are successful in increasing participation. The same is true in terms of participant investing. This study found that, through a simplified enrollment process, participation increased by 10 to 20 percentage points among the affected employees. Since the participant asset allocation decisions were also expedited the same percent of employees enjoyed the benefits of quality asset allocation. Posted March 2007 Revenue Procedure 2006-27; IR 2006-75 Updated A new revenue procedure updates and expands IRS's voluntary correction program (VCP) for employee retirement plans--the Employee Plans Compliance Resolution System (EPCRS). There were many key changes to the EPCRS. Posted May 2006 Money Attitudes and Retirement Plan Design: One Size Does Not Fit All Donna M. MacFarland, Carolyn D. Marconi and Stephen P. Utkus This paper, from the Wharton School Pension Research Council, reports on a study of participant behavior and classifies participants into five money attitude segments, it then discusses the needs and desires of those participants in terms of financial planning in the defined contribution plan context. Posted June 2005 The Psychological Costs of Ever Increasing Choice: A Fallback to the Sure Bet Sheena S. Iyengar & Wei Jiang, Columbia University This study analyzes the impact of increasing the number of investment options in a 401(k) plan. It reports that, as the number is increased, the level of participation gradually drops and the participants tend to invest more conservatively. Posted April 2005 NASD Investor Alert In February 2005, the NASD issued an investor alert concerning company stock in 401(k) plans. Posted March 2005 Bruce Ashton Testifies Before the ERISA Advisory Council On September 21, 2004, Bruce Ashton testified before the ERISA Advisory Council on behalf of the American Society of Pension Actuaries Working Group on Fee and Related Disclosures to Participants. Posted September 2004 Company Stock, Market Rationality, and Legal Reform Some eleven million 401(k) plan participants take a concentrated equity position in their retirement savings account, investing more than 20% of the balance in their employer's common stock. Yet investing in the stock of one's employer is a risky investment on two accounts: single securities are riskier than diversified portfolios (such as mutual funds), and the employee's human capital is typically positive correlated with the performance of the company. This study evaluates alternatives for coping with these issues. Posted July 2004 Fee and Related Disclosure to 401(K) Plan Participants: Testimony of Mercer E. Bullard Before the DOL’s Advisory Council on Employee Welfare and Pension Benefit Plans Mercer E. Bullard is an Assistant Professor at the University of Mississippi School of Law. Mercer is a former SEC attorney and is the Founder of Fund Democracy, Inc. Mercer's testimony concluded that "The Department of Labor should develop a uniform disclosure document for 401(k) plans that uses the mutual fund profile (including particularly the mutual fund fee table) as a guideline." Mercer's rationale and conclusions are "must" reading for an understanding of best practices in the 401(k)/403(b) universe. Posted July 2004 Statement of Ann L. Combs, Assistant Secretary, EBSA, "Duties of Fiduciaries in Light of Recent Mutual Fund Investigations" Posted February 2004 Maryland's Inquiry into Mutual Fund Trading Practices The State of Maryland has developed a questionnaire for the investment management firms that provides services to its defined contribution and defined benefit plans. The questionnaire is helpful to the sponsors and fiduciaries of 401(k) plans which permit participant direction of investments. It provides a starting point for the inquiry required by the fiduciary responsibility rules. Posted December 2003