Benefits July 29, 2003

Employees See 401(k) As Main Retirement Vehicle

July 29, 2003 (PLANSPONSOR.com) - Two-thirds of the participants in AMVESCAP sponsored 401(k) plan plans see their plans as the main vehicle driving them through retirement, with one-third beefing up their contributions to better prepare for life after their careers.
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With fewer and fewer participants looking toward Social Security to carry them through retirement, investments in 401(k)s become more crucial than ever for participants. In fact, in addition to contributions levels increasing – and remaining the same for 54% – the majority also considers themselves either conservative (47%) or moderate (39%) in their investment style in an effort to preserve their wealth accumulations, according to the AMVESCAP research.

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“The results of the survey indicate that participants value employer-provided 401(k) plans and 87% of the respondents said they intend to increase or maintain their contributions in 2003,” said Hubert Harris, chairman and chief executive officer of AMVESCAP Retirement, Inc., in a statement. “Defined contribution plans continue to play a critical part of the savings equation for retirement in the United States.”

The increase in defined contribution plans is also a direct result of the erosion of faith in the Social Security system. Only 27% of the group aged 60 and older see Social Security being a source of retirement income, with that number plummeting to 12% for the 20 to 29 age bracket.

Many participants are also buoyed by the apparent turnaround of the market looming on the horizon. Overall, three quarters of respondents think the economy will be no worse than last year, and 77% predicted the economy and stock market will be better than or the same as 2002.

“Participants have weathered the ‘perfect storm’ over the past two years and today most are going through an entirely new experience surrounding their retirement plans. This new participant experience means that people are focusing on getting back to the basics.” Bob Benish, director of participant services said, in a statement, “Participants are resilient and are learning that education is more important than ever in helping them achieve retirement security.”

AMVESCAP Retirement surveyed 615 plan participants on a number of issues to gauge their investing sentiment, investment strategy for their 401(k) account, and views on how much they plan to rely on Social Security income in their retirement.Survey results are viewable at: http://www.amvescapretirement.com/sponsors/news/pressreleases/survey.html .

Products July 28, 2003

BPP Rolls Out New Small Entrepreneurs 401(k) Plan

July 28, 2003 (PLANSPONSOR.com) - BSW Benefit Plans Plus, LLC (BPP) has rolled out a new retirement solution tailored for business owners with no employees other than a spouse.
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The Small Business Owner (SBO) 401k-Plan offers unlimited investment options and a choice between self-directed or professional fund management at the financial institution of the participant’s choosing, according to a news release.

The so-called Individual (k) plan is unique in that it is designed explicitly for owner-only businesses and businesses with part-time or seasonal employees that can be excluded from participation in traditional 401(k) plans in accordance with federal law. The product enables small-business owners to contribute significant amounts of income, in some cases more than twice as much as they are allowed under traditional small-business plan regulations.

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The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 lifted many of the limits on the amount and deductibility of contributions for 401(k) plans. Prior to that, single-owner businesses were better off saving for retirement in other types of plans. However, EGTRRA effectively put 401(k) plans on an equal—and, in some cases, better—footing compared with other tax-deferred savings plans for sole proprietorships—giving life to a “new” product, the “Individual (k)” or “solo (k).”

BPP Particulars

The BPP plan also allows individuals to squirrel away up to $40,000 annually by maximizing salary deferrals and employers contributions for 2003.   Participants age 50 and older can tack on an extra $2,000 to that annual contribution amount.

BPP is also offering a variety of resources at their Web site ( www.bpp401k.com ) to assist participants and financial advisors.   Those include:

  • A free plan analysis
  • Comparison of a SEP verses the SBO-401k-Plan
  • Online application

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