Employers taking closer look at retirement plans

Thu Nov 6, 2008 10:42am EST
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By Ellen Wulfhorst

NEW YORK (Reuters) - American workers have lost a fortune invested in 401(k) retirement plans in recent weeks, prompting employers to reconsider how they are managed, experts say.

Employers are examining such aspects of the plans as how they communicate "to reassure their employees what's going on with market risk," said Garry Jerome, who handles defined contribution retirement consulting at Mercer Inc.

"The forward-thinking employer always included a strategy for helping employees with investment risks," he said, adding, "It would be a little soon for employers to be thinking about wholesale changes as a result of what happened."

The 401(k) account allows workers to defer taxes on some income and typically put the money in a mix of stock and bond mutual funds and other investments.

Stock-heavy accounts have suffered of late; stocks in the benchmark Standard & Poor's 500 index have lost more than a third of their value after peaking last year.

Measures passed by Congress encouraging automatic enrollment in 401(k)s, which took effect in January, should help protect against market volatility ahead, said Jack VanDerhei, research director of the Employee Benefit Research Institute.

The average 401(k) account balance has dropped as much as 23 percent this year, he said.

A study of who has lost money in 401(k) plans showed one out of four people within 10 years of retirement had more than 90 percent of the money invested in equities, he said.   Continued...

<p>An elderly man walks through a lobby in Denver, Colorado August 2, 2007. REUTERS/Rick Wilking</p>