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Commentary: 401(k) plans deserve attention

Robert F. Judd
Dolan Media Newswires

Rochester, NY — Business owners and managers should not forget about 401(k) plans while dealing with the financial crisis.

More and more employers are looking to save money by reducing or eliminating matching contributions to their plans. In some cases, companies are faced with financial loss that makes the removal of the match unavoidable.

But if there is a way to save them, matching contributions can pay off for employees and companies.

No matter where the stock market ends up in the short run, continued systematic contributions made during the next few years should average out to a relatively low average purchase price compared to 20 years from now. Matching contributions made today should have a significantly positive effect for employees as they reach retirement age, and the chances are great that they will desperately need it.

Companies also should review plan expenses. Who benefits from this exercise depends on who is paying the fees.

Plan expenses are not that easy to determine, or at least not as easy as they should be. Congress is considering a variety of proposals to make the job easier on employers, but you don’t have to wait for an act of Congress.

All reviews should be based on the service level requested and the quality and quantity of what is received.

There is still a wide gap in service costs and, for those paying on the higher end, there is opportunity to save money.

If a company is paying the fees, the savings will directly affect the bottom line. If employees pay the fees, improving the plan should result in some positive feelings among employees.

When Congress finally does figure out how to standardize fee disclosure to participants, you don’t want to be left explaining why they have been paying more than you thought they were.

And those participants need someone to talk to about their 401(k) investments. In a market in which many investment pros are being caught flat-footed, imagine how an average 401(k) investor feels.

Participant education, employee meetings, Web-based calculators and asset-allocation tools still do not meet all participants’ needs. Some need to discuss their plan with a competent advisor before they feel comfortable making their investment choices.

Employers count on their employees to do what is necessary to make the company a success. Likewise, employees count on their employers to make their 401(k) plan a success.

Both are necessary, particularly in difficult economic times.

Robert F. Judd is president of EPIC Advisors Inc., a provider of retirement plan programs with an emphasis on 401(k) plans.

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