| Test Your Human Resources Knowledge | ||
|
| Labor Law Journal Submissions | ||
|
| Labor Arbitrators' Awards and Biographies | ||
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.
401(k) participants who invest in target-date funds (TDFs) overwhelmingly tend to stick with these investments over time, according to a report by the Employee Benefit Research Institute (EBRI). The EBRI study examined the use of TDFs by a consistent group of 401(k) participants in plans that offered them in 2007 through 2009, using unique data from the EBRI/ICI 401(k) database.
Target date funds, also known as "life cycle" funds, which are often available through 401(k) plans, are designed to simplify long-term investing by automatically adjusting to more conservative investments as the fund approaches a set date, typically the year at or near which a participant would be expected to retire. For example, a TDF for an older employee about to retire would have a lower percentage of equities in its asset mix and a higher percentage of bonds and cash equivalents. Conversely, a TDF for a younger worker would have a higher percentage of equities and fewer bonds and cash equivalents.
Rapid increase in use of TDFs
The use of target-date funds (TDFs) in 401(k) plans has increased rapidly in recent years, the EBRI report found. The number of participants using TDFs increased from 25% in 2007 to 31% in 2008 and to 33% in 2009. One of the reasons for this growth is that TDFs have been a popular choice for the default fund when 401(k) plans have an auto-enrollment feature. Consequently, younger participants, participants with lower account balances, and participants with shorter tenure at their current job have been found to be more likely to use them.
The EBRI research found that just over 90% of 401(k) participants investing in TDFs in 2007 stuck with them through 2009. Those participants identified as automatic enrollees were even more likely to have stayed with TDFs, at a rate over 95%. The EBRI found that 401(k) participants who were younger and had lower account balances were more likely to use TDFs and to continue to use them. Those more likely to stop investing in TDFs were older, had longer tenure, or had higher account balances, although these participants also stayed with TDFs at a high rate.
"Target-date funds are still very new in 401(k) plans, but these results suggest that once they are used, TDFs are very likely to continue to be used for a number of years afterward, certainly in the short term," said Craig Copeland, senior research associate at the EBRI and author of the report. "Consequently, the auto enrollment of participants into TDFs appears likely to stick, which means that the asset allocation within the TDFs is likely to be the asset allocation many of these participants will have while they remain in their 401(k) plan."
SOURCE: EBRI press release, PR #934, August 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.
Visit our News Library to read more news stories.
©2005-2024 CCH Incorporated or its affiliates
