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Wednesday, May 07, 2008|
The ICI Makes 401k a Top Priority
The ICI is putting 401(k) plans front and center at its 50th Annual General Membership Meeting. Paul Schott Stevens, president and CEO of the mutual fund industry trade and lobbying group named 1981 as one of the most important years in the nation's history. That was the year that Section 401(k) of the tax code took effect.
"When one thinks of celebrated dates in American history, the list might include 1776, when America declared its independence from Great Britain; 1862 when Lincoln issued the Emancipation Proclamation; 1945, when World War II ended; and 1969, when Neil Armstrong stepped onto the moon," Stevens told conference attendees Wednesday afternoon at the Marriott Wardman Park Hotel in Washington, D.C.
"My list would also include the year 1981, for three reasons. It was the year when Ronald Reagan became president. It was the year when IBM unveiled the first personal computer. And it was the year when the IRS issued a regulation allowing workers to divert a portion of their pre-tax wages to a 401(k) plan."
Stevens added that the average 401(k) balance has jumped to $121,000 this year from $67,800 in 1999.
Even with the growth, Stevens said that there remain ways for the government to remove obstacles to even more savings through the plans. More than half -- 56 percent -- of small employers do not currently offer a plan, said Stevens. In addition, 30 percent of eligible workers covered by a plan do not use it.
Stevens called for full and complete disclosure to employers of what it means to sponsor a 401(k) plan. Those details should include the services they are buying, who is providing the services, how much they cost, who will pay for them and the economic ties and relationships between the service providers to the plan.
He also called for an improvement in the quality of the information provided to plan participants. Stevens noted that the Department of Labor is already working on this task and that he hopes the DoL effort will dovetail with efforts by the Securities and Exchange Commission.
"But the onus for perfecting the system does not lie entirely on the government's shoulders. We in the private sector have our jobs to do, as well," Stevens added.
He also hopes that the "various industries involved will resist the tempation to try to impose their particular ways of doing business on others, by lobbying Congress for legislation that will enshrine one approach over others."
That comment most likely refers to a struggle between the mutual fund, insurance, banking and asset management industries. The products of each -- group annuities, mutual funds, collective trusts and separate accounts -- operate with different rules on disclosure and embedded costs.
See also The MFWire's other coverage on the ICI GMM: "Brennan Heads Up All-Star Investing Panel," May 9, 2008
"ICI Guide: 50th Anniversary Edition," May 6, 2008
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