Black People : Employers Trying to Hold Onto Laidoff 401ks

Discussion in 'Black People Open Forum' started by Kemetstry, Apr 23, 2010.

  1. Kemetstry

    Kemetstry going above and beyond PREMIUM MEMBER

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    Employers want to keep ex-workers' 401k's
    Retiring and even laid-off workers are finding that their old bosses don't want them to leave their retirement plans. But big IRA players are after their nest eggs, too.

    [Related content: 401k, funds, IRA, retirement, financial planning]
    By The Wall Street Journal
    Attention, workers: A battle is brewing over your 401k.

    A number of people who are changing jobs, being laid off or retiring are finding themselves in a tug of war between their former employers and investment firms eager to win their business. At stake: almost $400 billion of assets in 401k's and similar retirement plans that are eligible to be rolled over into other vehicles this year, according to Allianz's Pacific Investment Management, or Pimco.




    Can you retire without a 401k?
    When an employee leaves a job, he or she is generally free to roll over certain retirement accounts like a 401k into an individual retirement account. But many employers are now trying to hang on to their 401k participants.

    Find a broker who's right for you

    Some plan providers and employers, including International Paper (IP, news, msgs), are dangling carrots like low-cost investment options, financial planning or annuitylike products. Others are using sticks, criticizing IRA rollover advertisements or dragging their feet when workers ask for withdrawals.

    A few, such as National Football League, have even erected barriers to keep people in their plans for a certain number of years. NFL spokesman Brian McCarthy says a rule change "could be considered as part of a new collective bargaining agreement."


    Big IRA players are fighting back. Charles Schwab, Fidelity Investments, Scottrade and other firms in recent months have rolled out new online calculators, blogs and other features in an effort to boost their IRA business.

    Some firms even shower investors with cash to attract rollover dollars. TD Ameritrade and E-Trade Financial, for example, are offering up to $500 to people who sign on.

    Change in strategy
    Historically, most employers have been happy to see retirees and job-changers take 401k balances with them, in part because of the headaches involved in keeping them in the plans. But that is changing. According to a survey by management consultant Casey Quirk & Associates, roughly two-thirds of plans with more than $1 billion in assets said they want to retain worker accounts after retirement. The result "was a shocker," says Ben Phillips, a partner at the firm.

    It all adds up to confusion for many workers. Scott Madden, 46, of Portland, Ore., left his job as a project manager for a software company in mid-March, but his 401k, with $240,000 in assets, is sitting with his old employer. Madden is leaning toward rolling over that money to a traditional IRA but has also considered a Roth, which would mean paying taxes up front but getting future tax-free withdrawals.

    He got a brochure from his 401k plan provider highlighting the benefits of leaving his money where it is, but he isn't convinced that that is the best option.

    "The most difficult thing about retirement is all these suppositions you have to make" about tax rates, expected returns and other factors, Madden says. Having maxed out his 401k for the past 15 years, he says, "I like to have my future secure, and I'm having a hard time doing that" because of all the uncertainties.

    Should you convert to a Roth IRA?

    Investors deciding what to do with an old 401k must consider a range of factors, from fees and investment options to potential future tax-rate changes. Though the 401k plan may offer investment choices not otherwise available to individual investors, it may also offer a more limited menu overall, with just a couple of dozen choices. A 401k plan's fees can also be difficult to decipher. And some workers may simply have more trust in a longtime employer than in a financial-services firm seeking to attract their IRA business.

    New tools are emerging to help investors weigh their options. BrightScope, a retirement-plan research firm, earlier this year introduced a "personal 401k fee report," which offers a quick snapshot of plan costs and how they'll affect a nest egg over the long haul. (See "How does your 401k measure up?")

    Users can then compare these costs to their IRA alternatives.

    Employers want to hang on to workers' money for several reasons. The larger the plan's assets, generally, the lower the fees employers can negotiate with plan providers and fund firms like Fidelity, T. Rowe Price Group and Vanguard. A bigger asset base also helps employers get nonmutual fund options such as collective funds, which often have lower costs, and more customized investments, including target-date funds composed of other funds on the plan's menu. (See "Funds for newbies cut back on risk" for more on target-date funds.)

    With employers seeing the start of the baby-boomer retirement wave, large plans "realized they weren't going to be so large anymore and wouldn't get the same level of price breaks," says Casey Quirk's Phillips.

    Regulators and lawmakers have lately lent a hand to employers. The Labor and Treasury departments in February asked for public comments on the notion of providing annuities and other income-producing products in employer-sponsored retirement plans.

    And after being lobbied by groups representing plan providers and employers, the Senate in March passed a measure that would allow certain 401k assets to be converted to Roth 401k's. Currently, workers can convert existing retirement-plan savings to Roth accounts only using IRAs.





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  2. Kemetstry

    Kemetstry going above and beyond PREMIUM MEMBER

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    Lobbying hard
    Employers aren't waiting around for legislative help, though. North Carolina recognized the importance of keeping people in its $4.5 billion defined-contribution plan a couple of years ago, as financial markets started to sink. Now, it offers pre-retirement counseling sessions in which state workers are encouraged to stay in the plan. Employees who contact the plan's call center to ask for lump-sum distributions are led through discussions of other options before they're sent checks.

    Though departing workers in the past were handed retirement-plan withdrawal forms, "we're really trying to train folks so that's not the first form that goes in front of a departing employee," says Janet Cowell, the state treasurer. Cowell has crisscrossed the state in recent weeks, promoting the benefits of retirement counseling and other services for plan participants.


    Employers are also making more use of annuitylike investments and other products designed to deliver a steady stream of income to retired 401k participants. The number of retirement plans offering Prudential Financial's IncomeFlex Target, which provides guaranteed lifetime income, nearly doubled last year, to about 170. Prudential late last year unveiled a 401k package that encourages employers to enroll workers automatically and direct employee contributions to that product.

    Some employers, meanwhile, are enticing workers to stay in 401k's by playing up their cheap or unique investment options. These might include non-mutual-fund products not available in IRAs, such as collective funds and stable-value funds, which are designed to protect principal and deliver steady returns.

    At International Paper, for example, the most popular 401k investment is the stable-value fund. "That's another reason that people might want to stay in the plan," says Bob Hunkeler, the vice president of investments.


    In some cases, such options can be more attractive than what workers can find on their own. When Todd Dolan, of Mechanicsburg, Pa., left an old employer in 2003, he rolled his 401k into an IRA. But his IRA funds with Ameriprise Financial charge sales loads of 5.75% and annual expenses of about 2%. So Dolan, 33, is reversing course, moving his IRA savings into the ultracheap defined-contribution plan offered by his current employer, the federal government.

    Locked in by the NFL
    But some investors who want out of an old 401k find that they're fenced in. Chris Green, a former football player for the Miami Dolphins and Buffalo Bills, left the NFL in 1996, but he's stuck in its 401k plan. Green, 42 and now an account manager for S&D Coffee, would like to consolidate his savings in his current employer's 401k.

    But when he asked the NFL about a rollover, he was told he couldn't touch his money until age 45. "They have our money for over 20 years and know we can't take the money out," he says. "What kind of fees are they charging us?"

    The NFL's McCarthy says the age rule was proposed by the players union during a previous collective bargaining process.

    Though it's unusual for employers to block the exits in this way, some companies discourage rollovers simply by dragging their feet. Nowadays, says Tom Modestino, an associate director at research and consulting firm Cerulli Associates, some are thinking, "We want to maybe slow down the process if it's a request for a rollover that's going to lead to assets rolling away."

    In some cases, such options can be more attractive than what workers can find on their own. When Todd Dolan, of Mechanicsburg, Pa., left an old employer in 2003, he rolled his 401k into an IRA. But his IRA funds with Ameriprise Financial charge sales loads of 5.75% and annual expenses of about 2%. So Dolan, 33, is reversing course, moving his IRA savings into the ultracheap defined-contribution plan offered by his current employer, the federal government.

    Locked in by the NFL
    But some investors who want out of an old 401k find that they're fenced in. Chris Green, a former football player for the Miami Dolphins and Buffalo Bills, left the NFL in 1996, but he's stuck in its 401k plan. Green, 42 and now an account manager for S&D Coffee, would like to consolidate his savings in his current employer's 401k.

    But when he asked the NFL about a rollover, he was told he couldn't touch his money until age 45. "They have our money for over 20 years and know we can't take the money out," he says. "What kind of fees are they charging us?"

    The NFL's McCarthy says the age rule was proposed by the players union during a previous collective bargaining process.

    Though it's unusual for employers to block the exits in this way, some companies discourage rollovers simply by dragging their feet. Nowadays, says Tom Modestino, an associate director at research and consulting firm Cerulli Associates, some are thinking, "We want to maybe slow down the process if it's a request for a rollover that's going to lead to assets rolling away."

    In some cases, such options can be more attractive than what workers can find on their own. When Todd Dolan, of Mechanicsburg, Pa., left an old employer in 2003, he rolled his 401k into an IRA. But his IRA funds with Ameriprise Financial charge sales loads of 5.75% and annual expenses of about 2%. So Dolan, 33, is reversing course, moving his IRA savings into the ultracheap defined-contribution plan offered by his current employer, the federal government.

    Locked in by the NFL
    But some investors who want out of an old 401k find that they're fenced in. Chris Green, a former football player for the Miami Dolphins and Buffalo Bills, left the NFL in 1996, but he's stuck in its 401k plan. Green, 42 and now an account manager for S&D Coffee, would like to consolidate his savings in his current employer's 401k.

    But when he asked the NFL about a rollover, he was told he couldn't touch his money until age 45. "They have our money for over 20 years and know we can't take the money out," he says. "What kind of fees are they charging us?"

    The NFL's McCarthy says the age rule was proposed by the players union during a previous collective bargaining process.

    Though it's unusual for employers to block the exits in this way, some companies discourage rollovers simply by dragging their feet. Nowadays, says Tom Modestino, an associate director at research and consulting firm Cerulli Associates, some are thinking, "We want to maybe slow down the process if it's a request for a rollover that's going to lead to assets rolling away."



     
  3. Ankhur

    Ankhur Well-Known Member MEMBER

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    When you watch, Capitalism a Love story by Michael Moore, he presents and illustrates the case of where a persons life insurance policy was renigged.


    As for us as a people, I had told dfolks to buy gold back when it was 376 an ounce and many laughed at me, saying their mutual funds and what not investing in thestock marklet would be much better.

    When Bush first took office I tranfered the stock profits I made under Clinton to savings and municipal bonds, cause I knew that knucka was going to ruin War street (no Typo!)
     
  4. Kemetstry

    Kemetstry going above and beyond PREMIUM MEMBER

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    Most companies count on people not being able to afford lawyers. The company gets to keep millions from their employees and you're just stuck!

    :bully:













    :em0200:


     
  5. Ankhur

    Ankhur Well-Known Member MEMBER

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    the Federal Reserve would be more then happy if they were given the green light to do that with ssome of the Social security
     
  6. Kemetstry

    Kemetstry going above and beyond PREMIUM MEMBER

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    I think congress is about to rip Wall Street a new one!













    :em0200:



     
  7. $$RICH$$

    $$RICH$$ Lyon King Admin. STAFF

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    somebody need to slow wall street down , I hope this don't happen where i work
    many of us need that 401k
     
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