Benefits November 30, 2010

Employer Match Still Powerful Deferral Incentive

November 30, 2010 (PLANSPONSOR.com) – The design of the employer match can be a powerful motivator in boosting the amount participants put into their 401(k) accounts even when the employer’s total contribution doesn’t change.
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That was a key conclusion of an analysis from the Principal Financial Group of 6,560 contracts involving plans at Principal that show a stated match formula.  In each of three scenarios studied with the same match, the participant contribution increases as the matching formula targets higher contributions. 

“The data tells us that while the employer contribution stays at 2%, the higher target deferral in the match formula is spurring participants to save more,” said Barrie Christman, vice president of individual investor services at The Principal,in a news release. “This is significant because it shows that employers can incent better savings behavior without having to increase their costs.”

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In addition, the analysis shows that stretching the matching contribution to a higher level does not negatively impact participation rates.

Further analysis of a sample group of participants making a contribution and having an employer match shows that 43% of those participants fall within the 6% -10% contribution range, and 26% are contributing 11%-15%.  Of that sample group, 75% are deferring up to their employers’ matching contribution.

                                                       

Match Formula 

Maximum Employer Contribution 

 Average Participant Contribution 

Total Contribution[1] 

100% up to 2% of pay 

2%

 5.3%

7.3%

50% up to 4% of pay 

2%

 5.6%

7.6%

25% up to 8% of pay 

2%

 7.0%

8.8%

 
Administration November 29, 2010

Holder Confirms Government’s Insider Trading Probe

November 29, 2010 (PLANSPONSOR.com) – U.S. Attorney General Eric Holder confirmed Monday that the Justice Department is conducting a criminal investigation related to trading on Wall Street.
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According to Bloomberg News, the Holder comments came in response to questions about the probe of insider trading during a news conference. Holder said an “investigation is ongoing” and described it as “very serious.”

“I don’t want to get into the details,” he said, according to Bloomberg. The investigation is being conducted by the U.S. attorney’s office in New York, he said.

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The Federal Bureau of Investigation searched the offices of three hedge funds in New York, Connecticut and Massachusetts last week as the investigation became public. As part of the investigation, Steven A. Cohen’s Capital Advisors LP received a government subpoena for documents.

Federal Bureau of Investigation agents on November 22 searched the offices of Level Global Investors LP and Diamondback Capital Management LLC. Both firms were founded by former employees of Stamford, Connecticut-based SAC.  A third hedge fund, Boston-based Loch Capital Management, was searched the same day. The Massachusetts state pension fund has $65.6 million invested in two Connecticut hedge funds that were raided by the FBI.

U.S. Attorney Preet Bharara in Manhattan has been leading a crackdown on what he said in a speech this month was “rampant” insider trading on Wall Street and is devoting “significant resources” to the investigations, Bloomberg said.

The Massachusetts state pension fund has $65.6 million invested in two Connecticut hedge funds that were the subject of FBI raids (see Raided Hedge Funds Have MA State Pension Assets). 

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