SOME
401(K) INVESTORS PREFER HANDS-OFF APPROACH
A new survey reveals
that most employees eligible for a 401(k) are
unprepared or reluctant to review, manage and
monitor their retirement plan investments.
The report by AllianceBernstein says 61% of investors
aren't confident in managing their investments,
don't
enjoy it and pay little attention to their accounts.
In fact, nearly half those investors review their
investments no more than once a year, and 32%
don't view it at all.
"As defined contribution plans quickly replace
defined benefit plans, a logical assumption would
be that employees are ready to accept control
of their retirement investments," says Dick Davies,
head of institutional defined contribution services
at AllianceBernstein. "That is not the case."
The new Pension Protection Act has made enrolling
in and managing 401(k) plans easier than ever.
The PPA promotes a 401(k) approach that harnesses
employee inertia, rather than fighting it, Davies
says.
The findings of another survey, however, contradict
this hands-off attitude. According to asset management
company Eaton Vance Corp., investors want retirement
plan control. In fact, 85% of workers say they
should structure their retirement plans, rather
than the government or their employers. Just 8%
of workers feel employers should be in charge,
and only 7% think the government should structure
retirement plans. December 12, 2006
LAWSUITS
FOCUS ATTENTION ON 401(K) FEES
Your 401(k) plan
may be costing you more than you think.
Many consumers don't
realize it, but businesses and employees pay fees
for the investment, maintenance and marketing
of their retirement plans. People frequently overlook
the charges because they're often hard to identify, but even
slightly higher fees could mean thousands of dollars
lost in savings when you retire.
Now, 10 lawsuits
against some major companies have focused more
attention on the issue of retirement plan fees
and put businesses on notice.
And Nov. 30, a Government
Accountability Office report recommended that
Congress amend rules governing 401(k) plans because
the "piecemeal" disclosure of fees is hurting
investors.
"You want to know
what kind of returns an investment has historically
had, what kind of risk it represents and what
kind of fees you're
paying," said Barbara Bovbjerg, GAO director for
education, work force and income security and
an author of the study. "If people have to go
looking for something and put it together themselves,
how many people are going to do that?"
According to the
GAO report, about 47 million Americans had more
than $2 trillion in assets in 401(k) plans as
of 2005. But 80 percent of plan participants don't know how much they are paying
in fees.
Most of the fees
in question are investment fees, paid for selecting
and managing a fund's
portfolio, marketing the fund and compensating
brokers. This report did not look to the question
of the appropriate level of fees, which typically
are less than 1 percent of assets per year but
are often as high as 2 percent to 3 percent, especially
in smaller plans. These expenses routinely are
deducted from returns earned by investors in the
plans.
It's difficult to find those fees because
investors must search through multiple sources
and throughout the retirement plan's prospectus, said Bovbjerg. That's
why the GAO has asked Congress to amend laws governing
pensions so that Department of Labor documentation
makes the information more detailed and easily
accessible.
The report was the
first of what is expected to be several by the
GAO on 401(k) plans.
"I think the genie
is out of the bottle, and there will be a movement
to make the expenses more transparent," said Alicia
Munnell, director of Boston College's Center for Retirement Research.
Earlier this fall,
lawsuits were filed by Schlichter Bogard &
Denton, a law firm in St. Louis, against 10 major
U.S. companies, including Lockheed Martin Corp.,
General Dynamics Corp. and International Paper
Co.
The suits contend
that 401(k) fees and expenses paid by the plans
- and largely borne by employees - are too high,
and that the companies didn't
disclose them properly. While the Labor Department
is working on several measures to increase fee
transparency, additional lawsuits are expected.
AP FindLaw.com December 11, 2006
EMPLOYERS
FAVOR PAY-FOR-PERFORMANCE OVER HOLIDAY BONUSES
Sixty-six percent
of companies will not offer holiday bonuses this
year, giving way to a gradual trend toward performance-based
compensation, a recent survey revealed.
According to a survey
by Hewitt Associates of 300 organizations, a little
more than half (52%) of the respondents never
gave out holiday bonuses and 14% have discontinued
the practice.
The most common
reason for eliminating the bonuses was because
they were too expensive (61%). Meanwhile
35% said they did so because employees did not
value it, 33% cited entitlement issues and 21%
said it was because they switched to pay-for-performance
programs.
Of those companies
that never offered a holiday bonus program, 45%
said the reason was that all rewards are
tied to performance, 36% said it was because the
bonuses cost too much and 30% said they never
considered such a program.
The most popular
form of holiday bonus is cash (39%), closely followed
by gift certificates (37%). Some 27% of employers
will give employees a food gift, such as a turkey
or ham. These organizations continue to provide
holiday bonuses as a way to say thank you/show
appreciation (61%), maintain tradition (15%) and
boost morale (15%). More than half (58%) of companies
surveyed said that all employee groups are eligible
for holiday bonuses, while 20% said only full-time
employees are eligible. BenefitsLink.com
PLANSPONSOR.com December 11, 2006
EMPLOYER
COSTS FOR EMPLOYEE COMPENSATION-SEPTEMBER 2006
Employer costs for
employee compensation averaged $27.31 per hour
worked in September 2006, the U.S. Department
of Labor’s Bureau of Labor Statistics reported
today.
Wages and salaries,
which averaged $19.12, accounted for 70 percent
of these costs, while benefits, which averaged
$8.18, accounted for the remaining 30 percent.
Employer Costs for
Employee Compensation, a product of the National
Compensation Survey, measures employer costs for
wages, salaries, and employee benefits for non-farm
private and state and local government workers.
Employer costs for
insurance benefits - life, health, and disability
- averaged $2.22 per hour (8.1 percent of total
compensation). Legally required benefits,
including Social Security, Medicare, unemployment
insurance, and workers’ compensation, averaged
$2.19 per hour (8.0 percent of total compensation);
paid leave benefits (vacations, holidays, sick
leave, and other leave) averaged $1.91 (7.0 percent);
and retirement and savings benefits averaged $1.18
(4.3 percent) per hour worked.
Private Industry
In September 2006,
private industry employer compensation costs averaged
$25.52 per hour worked. Wages and salaries
averaged $18.04 per hour (70.7 percent), while
benefits averaged $7.48 (29.3 percent).
Employer costs for legally required benefits averaged
$2.18 (8.6 percent) per hour worked, insurance
benefits averaged $1.89 (7.4 percent), paid leave
averaged $1.73 (6.8 percent), retirement and savings
averaged 93 cents (3.6 percent), and supplemental
pay averaged 75 cents (2.9 percent).
Compensation costs
in state and local governments
In September 2006,
employer costs in state and local governments
averaged $37.91 per hour worked. Wages and
salaries, which accounted for 67.3 percent of
the total, averaged $25.53, while benefits, which
accounted for the remaining 32.7 percent, averaged
$12.38. Benefit costs increased from 31.4
percent of total compensation and $10.89 per hour
for state and local government workers in September
2004. BLS News Service December 13, 2006
GOOGLE
CREATES NEW MONEYMAKING OPTION FOR EMPLOYEE STOCK
OPTIONS
Google Inc. employs
a lot of brilliant minds, but even smart people
have trouble figuring out how much their stock
options are really worth.
The Mountain View,
California-based company hopes to simplify the
task by creating a new online market that will
show how much sophisticated investors are willing
to pay for the company's
options and enable rank-and-file workers to cash
out at the prices being dangled.
"We think this will
be very valuable in helping our employees understand
what they own right from the beginning," said
Dave Rolefson, Google's
equity and executive compensation manager.
The shift to transferable
stock options, announced late Tuesday, is scheduled
to occur during next year's second quarter.
Accounting for the
change will lower Google's anticipated profit for next year,
but the diminished earnings won't necessarily undercut the company's
lofty market value because the analyst estimates
that guide investor expectations already ignore
stock compensation expenses.
With the switch,
Google is hoping to make itself an even more appealing
place to work than it already has become by feeding
employees with free daily meals and ample opportunities
to get rich off the company's
high-flying stock.
"This should give
Google something of an edge" over other employers,
said James Glassman, a senior fellow for the American
Enterprise Institute, a think tank in Washington,
D.C. "Google is going to get more bang for its
buck by making its stock options more transparent."
Recruiting and retaining
talented employees is a top priority for Google
because it's
in the midst of a hiring spree that is expected
to continue for several more years. Since the
end of 2004, Google has been hiring an average
of about 10 new employees per day to expand its
payroll to nearly 10,000 employees. Michael
Liedtke AP Business Writer FindLaw.com December
13, 2006
UNIVERSAL
FORM CLAMP, BELLWOOD, ILL., CITED FOR WORKPLACE
SAFETY VIOLATIONS FOLLOWING FEDERAL INVESTIGATION
INTO JUNE EXPLOSION
U.S.
Department of Labor's OSHA Proposes $151,650 in Penalties
The U.S. Labor Department's
Occupational Safety and Health Administration
(OSHA) has proposed $151,650 in fines against
Universal Form Clamp Inc., Bellwood, Ill., for
40 alleged serious violations of federal workplace
safety and health standards following an investigation
into a June 14, 2006 explosion and fire at the
facility that took the life of one worker.
The explosion occurred in a solvent blending
area and an adjacent blending area for oil based
products at the concrete formwork products manufacturer
and distributor. The employee who lost his life
due to injuries sustained in the blast and resultant
fire was an independent trucker making a delivery
and not an employee of Universal Form Clamp.
Serious citations were issued
against the company for violations associated
with fixed industrial stairs, flammable and combustible
liquids, process safety management of hazardous
chemicals, hazardous waste operations and emergency
response, emergency action plans, personal protective
equipment, fire extinguishers, powered industrial
trucks, machine guarding and hazard communication.
"Any one of these violations
has the potential to cause serious harm or death
to workers," said OSHA Area Director Diane Turek.
"Finding hazards and insisting they be corrected
are among the best services we can perform for
working men and women."
Universal Form Clamp had
previously been inspected in March 1997 and cited
for hearing conservation deficiencies, power source
lockout issues, machine guarding, personal protective
equipment and electrical violations. The company
has 15 working days from receipt of the current
citations to appeal before the independent Occupational
Safety and Health Review Commission. December
12,2006
BENESOWITZ
V. METROPOLITAN LIFE INS. CO.
Dispositive issue
arising from dismissal of claim for long-term
disability benefits is certified to the New York
Court of Appeals as whether New York Insurance
Law section 3234(a)(2) means that: 1) a policy
may impose a 12-month waiting period during which
no benefits will be paid for disability stemming
from a pre-existing condition and arising in the
first 12 months of coverage; or 2) a policy may
lawfully include a permanent absolute bar to coverage
of disabilities resulting from pre-existing conditions
that trigger disability within the first twelve
months of the employee's coverage. FindLaw.com December
15, 2006
KOROTYNSKA
V. METROPOLITAN LIFE INS. CO.
In case seeking
equitable relief under ERISA for breach of fiduciary
duties by engaging in improper claims procedures
to deny claims for long-term disability, judgment
on the pleadings for defendant is affirmed, because
adequate relief for plaintiff is available through
review of individual benefits claim under 29 U.S.C.
section 1132(a)(1)(B) and relief under section
1132(a)(3) will not lie. FindLaw.com
December 15, 2006