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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Fidelity Investments has released an analysis highlighting the positive impact of the Pension Protection Act of 2006 (PPA; P.L. 109-280) on both 401(k) plan design and participant savings behavior. The study found that more than half (51%) of Fidelity's 401(k) participants are now in a plan that offers auto enrollment, up from just 16% five years ago, having a dramatic impact on participation rates. Additionally, the percentage of plans defaulting participants into age-based lifecycle funds has increased from 11% to 73%.
"The PPA is proving to be one of the most significant legislative initiatives helping American workers save for retirement," said James M. MacDonald, president, Workplace Investing, Fidelity Investments. "While the PPA enabled sweeping reforms across workplace retirement savings plans for all workers, it has had the greatest impact on younger investors. The auto features have significantly boosted participation among younger workers and have simplified the investing process, giving them a solid start to investing for the future."
Impact of auto enrollment
Since 2006, Fidelity plans that offer auto enrollment have grown to 21%, up from just 2% five years ago. Among the largest plans of more than 50,000 participants, 63% offer the plan design feature. The average participation rate for eligible employees in plans without auto enrollment is 55%, contrasted with a participation rate of 82% for plans that offer the feature.
Fidelity found that auto enrollment is having a powerful effect on younger, eligible employees ages 20 to 24 where the participation rate is 76% in plans with auto enrollment but only 20% in those plans without it.
Lifecycle funds
Lifecycle funds (also referred to as "target date funds") are a type of mutual fund that automatically rebalances assets following a predetermined reallocation over time. Such funds typically rebalance to more conservative and income-producing assets as the participant's target date of retirement approaches. Fidelity found that nearly three quarters of plan sponsors now utilize lifecycle funds as their default investment option and 16% of total 401(k) assets are currently invested in these funds.
Roth 401(k) plans
The PPA allows plan sponsors to offer Roth 401(k) deferrals in workplace retirement plans. Since 2006 the number of plans offering Roth 401(k)s has grown to 31% from 4%, the Fidelity analysis found, and today nearly half of all 401(k) participants are in plans that offer the investment plan feature.
Fidelity also found that participant usage of Roth 401(k)s has doubled to approximately 6%, up from 3% five years ago. Participant usage among the Gen Y cohort is 9%.
Source: Fidelity Investments press release, November 30, 2011.
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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