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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.
From Spencer's Benefits Reports: Despite the recent market upheaval and poor investment returns, employees are maintaining a long-term focus on retirement saving by continuing to invest in their 401(k) plans, according to a recent analysis by Hewitt Associates. However, some workers are reacting to the market volatility by moving their 401(k) assets into less risky investment funds. Furthermore, the tight economic times are prompting more employees to tap into their retirement savings in the form of hardship withdrawals.
Hewitt’s analysis of 2.7 million U.S. employees revealed that the average 401(k) plan balance has dropped 14% in 2008 to $68,000, down from $79,000 in 2007. In the past two months alone, employees, on average, have lost nearly 18% of their 401(k) plan savings, and some have lost more than 30%. Despite the significant market declines, savings rates have dropped marginally, from 8.0% in 2007 to 7.8% in 2008. Only 4% of employees have terminated their 401(k) plan contributions altogether.
As a result of workers adjusting their investment mixes and moving money into less risky funds, the amount of 401(k) plan assets held in equities is at an all-time low of only 53.8% of assets, on average, compared to 68.1% one year ago and down from its high of 74.2% in 2000, Hewitt reported. In addition, while the number of employees making trades has risen slightly—19.3% versus 18.7% in 2007—the amount of 401(k) plan assets being transferred has been significantly higher. To date, 5.3% of employees’ 401(k) plan savings has been traded, compared to 3.5% in 2007. In October alone, 1.25% of employees’ 401(k) plan balances were traded, nearly three times the historical average.
“401(k) plan balances are taking an obvious hit in the current market environment, but it’s encouraging to see that most employees are sticking to their long-term investment strategy and not making rash decisions that ultimately could derail their retirement goals,” noted Pamela Hess, director of retirement research at Hewitt. “The concerning behavior we are seeing, however, is some evidence of knee-jerk investment decisions, with a significant increase in the number of investment transfers immediately after the market drops. In the vast majority of cases, employees who impulsively respond to the fluctuations of the market can dramatically reduce their overall retirement savings, as employees are unlikely to readjust their investment portfolio when the market makes a turn for the better.”
Despite stable 401(k) plan savings rates, Hewitt’s data revealed an increase in the number of employees tapping into their 401(k) plans. More than 6.0% of employees withdrew money from their 401(k) plans in 2008, up from 5.4% in 2007. The increase is due to an upsurge—by 16%—in hardship withdrawals. However, 401(k) plan loan activity has remained consistent, with 22% of employees currently having a loan outstanding.
For further information, visit http://www.hewitt.com.
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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