Benefits March 14, 2008

SPARK Calls for Provider/Sponsor Input on 403(b) Issues

March 14, 2008 (PLANSPONSOR.com) - The SPARK Institute has scheduled a "403(b) Plans Data Sharing Technology Summit" for Wednesday, March 26, in Hartford, Connecticut, to discuss the technology issues involved in the information sharing process that is required under the new regulations.
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“By bringing together the technology and business people who will be responsible for transmitting and collecting the information, we hope to help establish practices that will make it easier and more cost effective for all parties to comply with the new rules,” said Larry Goldbrum, general counsel of The SPARK Institute, in a news release. Senior level information technology and business representatives from service provider firms and organizations sponsoring 403(b) plans are invited to attend the Summit, but Goldbrum said space is limited and priority will be given to SPARK Institute members for this first meeting.

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The SPARK Institute formed a special task force in December to assess a wide range of administrative and recordkeeping issues relating to the new regulations affecting 403(b) plans. The Institute is working to get clarification from regulators about the regulations and to develop practical and cost effective ways to comply with the rules, Goldbrum said.

The Institute’s goal is to develop best practices and model documents that will be widely accepted and available throughout the 403(b) community.

For additional information about the Summit, Goldbrum may be contacted via email at larry@sparkinstitute.org .

Benefits March 13, 2008

Target-Date Mutual Funds a Sponsor Smash Hit for QDIAs

March 13, 2008 (PLANSPONSOR.com) - The latest Callan Associates study of the impact of the Pension Protection Act (PPA) provides yet another confirmation of the popularity of target-date funds.
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A Callan news release of about 90 large plan sponsors with a total of $120 billion in assets and more than two million participants, found that 79% of the plan sponsors preferred using a qualified default investment alternative (QDIA) (see Building a Better Default ) and target date funds are the QDIA of choice, particularly mutual funds.

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Some 49% of those offering or anticipating offering a target date or target risk fund as the QDIA will use a mutual fund structure, Callan said.

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Momentum Building

However, the Callan data showed momentum building for collective trusts and a customized mix of asset allocation funds. Eighteen percent of plan sponsors in the survey currently use or intend to use a custom mix of funds for their QDIA, up from 11% in Callan’s 2007 QDIA Survey, the announcement said.

“The movement towards customization within target date funds is likely attributable to new QDIA regulations that allow plan sponsors to manage a custom mix without being a registered investment adviser,” said Lori Lucas, DC practice leader at Callan Associates, in the news release. “It rewards large plan sponsors that have inexpensive DC cost structures and offer best-in-class DC funds for the benefit of plan participants.”

Callan also found that fee analysis and fee disclosure are priorities for plan sponsors in 2008. Forty-eight percent of respondent firms anticipate or will consider engaging in a fee analysis of their DC plan, compared to 23% who have no interest. Meanwhile, 32% of plan sponsors intend to voluntarily enhance fee disclosure.

Automatic Trends

The study also found that by the close of 2007, 44% of those surveyed offered auto enrollment with another 6% reporting they were likely to add it in 2008 – an increase from 35% at the end of 2006.

Finally, Callan found that a significant number of plans, 87%, do not offer a guaranteed income for life investment option and that most, 99%, were unlikely to offer it in 2008.

Callan said of the respondents in the latest poll 77% represent 401(k) plans; 11% are 401(a) and 6% are profit sharing plans. Forty-three percent qualify as “mega” plans worth more than $1 billion in assets and fewer than 17% have assets of less than $100 million.

More information is at http://www.callan.com/.

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