An article published early this year discussed a survey by State Street Global Advisors (SSgA) proudly boasted that 74% of participants in 401k plans want to better understand how their savings will pay off in retirement. This should come as no surprise. Most workers have little or no formal or informal education in investing. Thanks to shifts in the financial services industry in the 90s most workers no longer have pensions. Pensions allowed workers to do their jobs and let their employers manage the pension fund investments.
With 401k plans and other defined contribution plans, employers have shifted the investment responsibility and saving responsibility to their workers. Effectively cutting compensation as the responsibility to finance the retirement plan shifted towards workers and away from employers.
Both plan types fall under federal law governance which sets a high standard for administration of the plan. When employers violate employee benefits law it may create a claim against the plan to recover losses related to the violation. If you believe your employer acted unlawfully or violated its own rules then you should contact an employment attorney familiar with benefit plans near you to discuss your options.
401k and ERISA attorney for employees
As ERISA statutory and regulatory changes have required or enticed 401k plans to diversify and offer a wide range of investment options, the typical worker generally has little idea how any of it works. A well paid worker may hire an advisor to make the decisions. However, for most workers, that is usually not a viable option. Instead, workers tend to follow less suitable paths, often following investment fads. Some employees do strike out on their own and figure it all out on their own.
ERISA is one of the most complex regulatory systems of law. Employers often fail to obtain help from employment attorneys that they need to comply with ERISA. Many times small ERISA violations do not result in clear losses to employees so nothing happens. However, sometimes these violations result in losses and employees have a right to compensation. If you believe your employer violated ERISA then you should talk to employment lawyers who can help assess your potential claims.
Understanding 401k plan investment options from your employer
Employees have little choice these days but to either pay for advice or put in the time to understand their plan and available investments at least enough to make out a good financial plan. Some employers and/or the company that assists them in administering the employer’s plan offer some useful planning tools and guidance. Some plans even offer free or discounted advisers as part of the plan benefits. If you find yourself in a plan with few resources you may have no choice but to research yourself.
The problem here is that a lot of the information and advice online is either inaccurate or just wrong. It may be covert propaganda for the companies offering 401k plans hoping you will meet their needs. There are reputable sites, such as Morningstar.com that offer excellent information about mutual funds and can help start your process of better understanding your plan. If your plan offers a customer service phone number, the phone associates may be able to offer some assistance although likely unable to offer you advice or recommendations directly.
Although we may be mere spectators to the financial crisis in Washington this year, we can be more than spectators in our own financial situation. Many people in this country suffer from too little income, too little savings, too little financial planning and too much consumer spending and too much debt. There may not be an easy solution for having too little income but with some self-education and planning some of those other issues can be resolved. Retirement planning and saving is essentially a must in today’s economy.
It’s easy to think that you will save for retirement when you are older or make more money. You will lose out on the tax-advantaged savings today and the power of tax-deferred growth. If your employer offers 401k match and you do not take advantage of it, it’s giving yourself a pay cut. You could have the match dollars but chose to let the employer keep it. If your employer wrongfully denies match benefits under the plan rules then you should talk to an employment lawyer near you right away.