Products November 9, 2006

Vanguard Cuts 529 Plan Expenses

November 9, 2006 (PLANSPONSOR.com) -The Vanguard 529 College Savings Plan will reduce expenses across its lineup of investment options by 10 to 12 basis points, resulting in an annual participant savings of more than $2 million.
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A Vanguard news release said that the cost reductions, which are effective December 1, 2006, will bring the all-in costs of 11 of the plan’s 22 investment choices to 0.50%. The plan is sponsored by the State of Nevada.

The all-in costs of two index portfolios – Vanguard 500 Index Portfolio and Vanguard Total Stock Market Index Portfolio – will decline 12 basis points to 0.50%. All remaining investment choices will decline 10 basis points, resulting in an investment lineup with expense ratios of 0.50% to 0.70%.

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Also, the plan is also adding three actively managed portfolios to its lineup and closing one portfolio, bringing its total offerings to 22. The new portfolios are:  

  • Vanguard Windsor Portfolio
  • Vanguard Morgan Growth Portfolio, and
  • Vanguard STAR Portfolio.

Vanguard Balanced Index Portfolio will be closed and its assets will be transferred to the Vanguard Moderate Growth Portfolio, according to the announcement.

In addition, the asset allocation models of several offerings will change to provide increased exposure to equities over a longer period of time. The plan’s equity-oriented portfolios will also increase their exposure to international stocks by 5%.

Benefits November 8, 2006

MeadWestvaco Adds Cash Balance to DB Offering

November 8, 2006 (PLANSPONSOR.com) - MeadWestvaco Corporation has announced it is changing its US defined benefit pension plan covering salaried and non-union hourly employees, adding a cash balance formula.
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According to the October 30 announcement, under the new cash balance formula, eligible employees will receive an annual contribution from the company at a specific percentage of eligible pay based on an employee’s combined age and years of service that grows at a guaranteed rate of interest until retirement or termination of employment.

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Effective January 1, 2007, all new employees will accrue benefits under the cash balance formula. Current employees will transition to the new cash balance formula on January 1, 2008, and those age 40 and over will have the option to remain in the current pension formula or transition to the new formula, the announcement said. The changes do not affect MeadWestvaco’s current US retirees, former employees with vested benefits or employees who retire prior to December 31, 2007.

The company said the changes are being made to provide employees with a more portable and flexible retirement plan and create a program with more stable and predictable growth.

According to Business Insurance, MeadWestvaco is the first major company to implement a cash balance arrangement since the Pension Protection Act was passed – providing protection for cash balance plans from age discrimination lawsuits (See Cover: The Pension Protection Act: This Changes Everything ).

A 7 th US Circuit Court of Appeals decision last August overturning a decision that IBM’s cash balance plan was age discriminatory was also consider to be a boost for cash balance programs (See Appellate Cash Balance Ruling Applauded for being Succinct, Clear ).

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