Compliance March 25, 2009

Providers Need More Time, Guidance for Form 5500 Rules

A substantial majority of retirement plan service providers are unsure about how to comply with the new Form 5500 Schedule C reporting requirements, according to a recent survey by The SPARK Institute.
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Larry Goldbrum, general counsel of The SPARK Institute, said in a press release that nearly three quarters of the service providers responding to the survey said they need additional time and guidance in order to accurately comply with the new rules.

“In some instances, according to our survey, respondents were equally split on key reporting issues,” Goldbrum said, in the release. “Consequently, different interpretations and reporting practices will result in inconsistent and unreliable data and significant resources will be spent on making systems changes that will be of little or no value to plan sponsors, the DOL or anyone else that uses the data.’

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According to Goldbrum, nearly 80% of the survey respondents said they expect to make systems changes to accommodate the new regulations, and a significant number are unsure whether they will be ready in time to meet the current deadline.

Goldbrum also noted that the new regulations will have an impact on plan sponsors. “A significant majority (58%) of respondents reported that they are changing their 5500 service offering as a result of the new requirements, and many (32%) will charge an additional fee for the service,’ Goldbrum said. “More than two-thirds (68%) of the service providers surveyed also said they expect that plan sponsors will have to collect some required data that was not required of them in the past.’

Last July, federal regulators have released additional guidance about new rules for reporting service provider fees and compensation on Schedule C of Form 5500 for plan years beginning on or after January 1, 2009 (see “EBSA Issues Schedule C Fee Disclosure Guidance’).

In addition, many 403(b) sponsors will have to complete full Form 5500 reporting for the first time under new regulations effective January 1 (see “403(b) Plans to File Full Form 5500’).

Data & Research March 25, 2009

Gen X Most Financially Stressed, According to Scottrade

The number of Generation Xers (ages 27 to 42) who are unprepared for retirement is dramatically on the rise, according to a study commissioned by Scottrade.
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Gen Xers are also taking many steps to help ease their financial stress—including paying more attention to fees from brokers and investment firms (cited by one-third of respondents).

In a press release, Scottrade said more than half (52%) of Gen Xers currently have saved less than $25,000 for retirement—a significant change from 2008, when 40% reported being below the $25,000 mark. Almost two-thirds of Gen Xers (63%) saw the value of their retirement accounts decrease last year, and more Gen Xers (15%) had to withdraw funds from their retirement accounts than any other non-retired generation.

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Scottrade said that of all the generations, Gen X is the most worried that Social Security will run out (62%). The dual stresses of smaller savings and lack of confidence in Social Security are drivers of Gen X’s top financial concern: not having enough money for retirement (64%).

According to the press release, Gen X is the most financially stressed generation for the second year in a row. Given a list of 18 general financial concerns, Gen X, more than any other generation, is “extremely” or “very” concerned about the following issues:

  • paying for unexpected, major expenses (61%)
  • managing day-to-day expenses (60%)
  • having too much debt (57%)
  • paying off credit card balances (52%)
  • having no/reduced income due to job loss (52%).

However, the survey found Gen X is also the most proactive generation, with 98% taking actions to offset financial stresses, including:

  • comparing prices to find the best deal (69%)
  • using coupons (66%)
  • cutting back on entertainment (65%)
  • paying down debts (57%)
  • reducing credit card spending (55%)
  • cutting back on travel/vacations (46%)
  • paying closer attention to the fees many brokers and investment firms charge for their services (33%)
  • cutting or eliminating services such as cable TV (30%).

The 2009 American Retirement Study by Scottrade polled 1,000 Americans 18 years of age or older using Synovate’s national online omnibus survey, eNation, in January.

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