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Providing 401k plan participants with information about retirement investing guidance services helps your company meet its ERISA 404c compliance responsibilities.

Investing guidance services can help boost your 401k plan's participation and allocation rates.

Investing guidance services can be paid for by the individual 401k participants using them or by your company.

Listing of personalized retirement planning, 401k investing advice services available online for 401k participants.

MDB401k helps you meet your 401k plan's 404c requirements on several fronts.

404c protection for 401k plans that use personal brokerage accounts

About the required fidelity bond ("ERISA bond" or "fiduciary bond")

Providing 401k plan participants with information about retirement investing guidance services helps your company meet its ERISA 404c compliance responsibilities.

ERISA Section 404c says 401k-sponsoring companies need to, among other things, provide their employees with adequate information about their plans' investments, 401k investing and related matters.

MDB401k includes general and plan-specific disclosure and investment education materials for your employees. In addition, your company receives informative materials for your employees about personal investment advice services available online and/or available from SEC-registered Investment Advisors. Plan participants can choose to utilize investment advice services to help them make educated 401k investment decisions.

-- There are many credible sources that deliver fast, timely, professional 401k investment advice to individual 401k participants.

-- Personalized investment advice is available online and from SEC-registered Investment Advisors.

-- The services are generally for people a few years or more away from retirement, not the ready-to-retire or already retired.

-- Plan participants generally pay for the services themselves (those who use the services pay, those who don't, don't), although most services allow employers to choose to pick up the tab.

-- Having participants pay for 401k investment guidance services themselves, gives your 401k participants the freedom to choose the service that best suits their needs. Not all your 401k plan participants who choose to use a private retirement investment consulting service need choose to use the same service.

-- Informing plan participants about such 401k investment guidance services, coupled with providing the basic investing information included in your MDB401k package and provided by the investment companies, helps employers fulfill their ERISA 404c responsibility to provide adequate investment information and guidance to 401k participants.

 

Investing guidance services can help boost your 401k plan's participation and allocation rates.

Individual retirement investment guidance services help your plan participants decide how much to defer into the 401k and how to invest those deferrals. Their advice often boosts participation in 401k plans:

-- Statistically speaking, 401k participants left on their own rarely defer as much as experts would recommend, especially down the road, years after initially joining the plan, when income has generally increased (often substantially) yet participants have not adjusted their contribution rates have not been accordingly.

-- Most non-salaried employees generally do not join 401ks, even though they, too, could benefit greatly from the tax-deferred savings potential the plans offer. Having them consult with an independent professional retirement planner can motivate them to join their company 401k.

-- Because uncounselled 401k participants often don't invest their deferrals optimally nor adjust their investment allocations as they move through their employment years, most 401k participants don't maximize their account growth potential.

-- Helping your employees find professional, unbiased retirement planning advice that they can afford can help boost your plan's participation and deferral rates.

The information and services help individuals answer three important questions:

-- Will I have enough to retire?

-- How should I invest for retirement?

-- What do I do when markets change?

Investing guidance services can be paid for by the individual 401k participants using them or by your company.

Most personal retirement investing services allow for either the employer to pay for the service or for the individual employees using the service to pay.

-- All of the online 401k investment guidance services described in this website permit individual employees using the services to pay for the advice. None obligate the employer to pay any fees for employees' use of the 401k investment guidance services.

Listing of personalized retirement planning, 401k investing advice services available online for 401k participants

Below are the industry leaders in online retirement advice (listed in alphabetical order). Informing 401k participants and prospective participants about more than one service gives the participants the freedom to choose the service best-suited to individual needs.

-- All of the below are INDEPENDENT investment advisors. None sell mutual funds, stocks, insurance products or any other investments nor receive commissions of any kind on investments they recommend. In addition, none have paid any fee for their listing or otherwise compensated MDB401k for inclusion in this website.

-- All of the below offer personalized, specific information about how much to invest in which plan investments.

Services Notes
ClearFuture
morningstar.com/

-- Bases recommendations on retirement income goals, not risk toleration

-- Derives several potential investment strategies based on investments available and retirement income goals

-- Ongoing projections include showing potential effects of holding or selling during turbulent market times

-- Integrated with Morningstar reports and information (quick access to "view Morningstar report" on investments being considered)

-- by Morningstar, the industry leader in providing mutual fund, stock and variable-annuity investment information
FinancialEngines
financialengines.com

-- FOR FREE: Extensive "Monte Carlo" style of modeling that, rather than assuming static investment returns and inflation rates over time, takes into account numerous possible economic cycle scenarios based on varying combinations of future investment returns and inflation rates in determining the probability that the client will reach his/her retirement goals

-- FOR PAYING CLIENTS: Advice on exactly how much to invest in which of your plan's specific 401k investments to improve your chances of reaching your retirement goals; daily tracking of the clients 401k investments' performances and their effect on his/her account; ongoing advice about needed changes in the account due to current and projected investment performance and economic cycles

-- Do not counsel on investments outside the 401k but do take client's outside holdings into account in making 401k recommendations

-- Computerized modeling system by Nobel Prize-winning economist Bill Sharpe and others

-- Highly touted by the Los Angeles Times (8/5/99), San Francisco Chronicle (11/23/99), and The Wall Street Journal (8/12/99), among others

-- $28.95 per 3 months (April, 2000)

-- Accepts fiduciary responsibility for advice it gives, relieving employers from such responsibility
mPower
 (formerly Emergent Advisors)
mpower.com

-- Investment guidance for either only 401k assets or all retirement assets

-- Customized risk profiling

-- Portfolio tracking and analysis, including a comparison between current and recommended allocation levels

-- Advice on employee stock plans

-- One-year, five-year, at-retirement portfolio simulation

-- Parent company of 401k Forum (www.401kforum.com), a registered investment advisor

-- Parent company to 401 Kafe (www.401kafe.com), an online community and content site dedicated exclusively to 401k participants nationwide

Other services include Directadvice.com. The Wall Street Journal favors FinancialEngines services to Directadvice's for being simpler and easier to understand, and for more useful projections about investments actually meeting your retirement goals (Thursday, August 12, 1999) -- but your 401k plan participants find it valuable to know Directadvice.com is out there, too.

MDB401k helps you meet your 401k plan's 404c requirements on several fronts.

With MDB401k, meeting ERISA 404c requirements regarding investment diversity and availability of pertinent information is easy:

-- The MDB401k software permanently logs all employees' requests for information regarding 401k enrollment, investing, loans, hardship withdrawals and more.

-- Your plan has an extensive array of 401k investments with Mydiscountbroker.com self-directed discount brokerage accounts.

-- Your 401k plan participants' can change their investment choices and/or contribution levels as often as you choose to allow.

-- Participants' accounts receive daily asset valuation.

-- Participants receive MONTHLY statements regarding their 401k accounts.

-- Participants have 24-hour-a-day, seven-day-a-week access to their personal account information and easy access to prospectuses for all 401k investments offered within your plan.

-- MDB401k comes with written materials to be passed out at your enrollment meetings that introduce your employees to the online retirement guidance and education services described above. Participants can individually choose to sign up for services from such industry leaders as FinancialEngines. Individuals pay for the services themselves, yet your company benefits in meeting its 404c compliance by providing the introduction.

-- MDB401k comes with plan-specific disclosure materials for your employees.

-- MDB401k comes with general 401k and investment education materials in both printed and video format for your employees.

-- MDB401k automatically prepares and updates account statements for each participant every month (and prepares mailing labels that make distributing statements quick and simple).

-- The MDB401k User's Guide tells you what information to distribute when and to whom.

404c protection for 401k plans that use personal brokerage accounts

Because participant-directed brokerage accounts do not fall under the definition of "designated investments" for 401k plans, companies have no specific sets of information, such as investment prospectuses and performance information, that they must provide to plan participants regarding participant-directed brokerage account investments. What does need to be provided is:

-- A statement that the plan intends to be a 404c plan and that the fiduciaries will be relieved of liability.

-- The identity of a 404c fiduciary.

-- A description of available investment alternatives, with specific information about designated alternatives (i.e., specific mutual funds being offered within the plan in addition to the self-directed brokerage accounts).

-- General disclosure regarding investment through a self-directed brokerage account.

With the exception of disclosure regarding investment through self-directed brokerage accounts, the above must also be supplied for plans using "designated" investments, such as mutual funds.

-- With MDB401k, you're covered: your plan's customized Summary Plan Description, Plan Enrollment Form and related documents provide the above 404c-related information to your employees — and all MDB401k documents are easy for laypeople to read and understand! 

For more information about designated and nondesignated investments and their 404c compliance ramifications, please read Panel Publishers 401(k) Advisor article, "Personal Brokerage Accounts: Is 404c Protection Available?" September, 1999.

About the required fidelity bond ("ERISA bond" or "fiduciary bond")

ERISA regulations require that all pension plans, including 401k plans, be insured by an ERISA bond that has a payout equal to 10% of plan assets or $500,000, whichever is less. The annual premiums for these special ERISA bonds (also called "fiduciary bonds") are very low, averaging approximately $200 per year or less.

-- An ERISA bond that covers a 401(k) plan with $100,000 in assets can cost as little as $100 per year--an ERISA bond covering plan assets of $1 million costs approximately $275 per year).

ERISA bonds are not only inexpensive, but they are readily available and easy to purchase. Your business insurance agent is the best person to contact for ERISA bond coverage. Insurance companies that provide inexpensive ERISA bond coverage include:

-- CHUBB Insurance (contact local agent)

-- Hartford Insurance, call (888) 656-0817

-- Travelers Insurance, call (860) 954-2650

-- Maloney & Associates, call (760) 738-2610

Here are answers to a few frequentlly asked questions about ERISA bonds…

What's the difference between an ERISA bond, a fidelity bond, and a fiduciary bond?

-- There's no difference. ERISA bonds and fiduciary bonds are essentially amended fidelity bonds. All three respond to claims involving dishonest acts on the part of asset investment advisors or the employer. The ERISA bond, sometimes referred to as a fiduciary bond, pays claims directly to the plan participants. The fidelity bond pays the claims of the investment advisor that resulted from the dishonest acts of the investment advisor's employees.

How do fidelity bonds and ERISA or fiduciary bonds differ from errors & omissions insurance?

The fidelity, ERISA and fiduciary bonds cover against losses due to a criminal act. The errors & omissions insurance provides employers and advisors with coverage against losses due to any actual or alleged negligent act or error committed while engaged in performing professional services.

What's the difference between errors & omissions insurance and fiduciary liability insurance? 

Errors & omissions policies protect the investment advisor and employer from losses due to an actual or alleged negligent act. In comparison, fiduciary liability insurance is a sub-category of errors & omission insurance, and provides additional coverage against a breach by any plan fiduciary. This coverage is not the same as provided by an ERISA bond because it does not insure against criminal acts on the part of a plan fiduciary.


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