July 2004

Welcome to Prairie Post, Blue Prairie Group's monthly e-Newsletter about Human Resource, Employee Benefits, and Institutional Retirement & Investment issues. The articles have been carefully chosen from a variety of high-quality sources including government, research and academic institutions.

Disclosure Statement:
Blue Prairie Group, L.L.C. does not endorse and disclaims any and all responsibility or liability for the accuracy, content, completeness, legality, or reliability of the material. All articles are copyrighted to their publishers.

In this Issue...
  - Employees Sluggish in Interacting With 401(k) Plans
  - 401(k) Participants Need Investment Advice
  - Avoiding Mistakes in 401(k) Plan Communications
  - Hewitt Survey Shows Employers Making Efforts to Reduce 401(k) Costs
  - Too Many Investment Choices May Overwhelm Even Sophisticated 401(k) Plan Participants
  - ERISA Fiduciary Responsibility: CEOs and Directors In the Bull's Eye
  - Hidden Costs and High Fees Eat Into 401(k) Plan Benefits
  - Does a High-Deductible Plan Lead to Good Purchasing Decisions? (PDF) (Contingencies Magazine)
  - Positive Results Put Insurers Behind Consumer-Driven Health Plans (Inside Consumer-Directed Care via AISHealth.com)
  - FASB Might Delay Stock Compensation Expensing Rule (Mercer)  
 

Employees Sluggish in Interacting With 401(k) Plans

A strengthened U.S. economy and stock market resulted in slight increases in 401(k) plan participation in 2003, but many employees are still falling short in maximizing the value of their 401(k) plans, according to new research by Hewitt Associates. Located at: 401khelpcenter.com.

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401(k) Participants Need Investment Advice

Fear of adding to their fiduciary liability has led many 401(k) plan sponsors to err on the side of caution, providing only limited information to plan participants rather than risk being accused of providing investment advice. In reality, however, plan sponsors may face greater risk by not offering advice than if they do. Located at: 401khelpcenter.com.  

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Avoiding Mistakes in 401(k) Plan Communications

A successful 401(k) plan communication and education plan goes far beyond the words you use or the media involved. Here's what will get your plan voted off the island. Located at: Benefitnews.com.

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Hewitt Survey Shows Employers Making Efforts to Reduce 401(k) Costs

More than 70 percent of employers are concerned about the total cost of their 401(k) plans, and many have taken steps to reduce expenses, according to a new survey by Hewitt Associates. Located at: 401khelpcenter.com.

 
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Too Many Investment Choices May Overwhelm Even Sophisticated 401(k) Plan Participants

There are many possible explanations for this increase in the number of investment options available to 401(k) plan participants. One is that employees asked for more options, and employers responded. Another is that employers have concluded a greater number and range of investment choices will better protect them from possible fiduciary liability for one or more "bad" options. Whatever the reason, Professors Agnew's and Szykman's research suggests many participants lack the financial knowledge to make good use of their options, and even those with sufficient knowledge may be overwhelmed by the number of choices they have.  Located at: Beneftislink.com.

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ERISA Fiduciary Responsibility: CEOs and Directors In the Bull's Eye

CEOs and boards of directors commonly are responsible for designating individuals to manage and administer company pension plans. The DOL and others, however, are pressing executives and directors to continue overseeing those plans after the appointment process is over. In particular, the DOL has long interpreted ERISA to impose a duty of monitoring on CEOs (and other designating officials, like a board of directors), who appoint other fiduciaries to run a plan. Fiduciaries who fail to live up to their responsibilities are potentially subject to personal liability for plan losses. Located at: Pepper Hamilton LLP.

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Hidden Costs and High Fees Eat Into 401(k) Plan Benefits

Although fallout from the mutual-fund trading scandals still dominates the headlines, some companies with 401(k) plans reserve their greatest ire for another issue: fees. Complaints focus mainly on the steep fund expenses that are passed on to plan participants — an average of 156 basis points for administration, plus commissions and other transaction costs — and on how hard it is to determine what individual charges the fees include. Both those concerns reflect what plan sponsors say is an historic culture of unresponsiveness among funds to fee-related questions. Located at: CFO.com.

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Does a High-Deductible Plan Lead to Good Purchasing Decisions? (PDF) (Contingencies Magazine)

"There appears to be some evidence that the plans save money for employers, but as with any other plan that allows individual selection on the part of employees, it's difficult to determine whether the employer saves money overall. Economic theory says that properly designed products should save money. However, two key features need to be included to ensure the plans generate the right clinical and financial results: ..."

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Positive Results Put Insurers Behind Consumer-Driven Health Plans (Inside Consumer-Directed Care via AISHealth.com)

"Consumer-driven health (CDH) vendors Definity Health and Lumenos have long touted the positive effects that their plans have had on consumers. Now Aetna, Inc., and UnitedHealth Group -- two mega health insurers that once saw little value in the CDH concept -- are hyping the results their clients have had with the products."

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FASB Might Delay Stock Compensation Expensing Rule (Mercer)

"The Financial Accounting Standards Board (FASB) may delay the effective date of its proposed rules requiring fair value expensing for stock options and other equity awards. This Perspective Alert! discusses factors that may lead to the delay and suggests how companies should address the uncertainty."
 

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