Data & Research February 1, 2008

Survey Finds Time to 401(k) Eligibility Decreasing

More employers are allowing workers to joining their 401(k) plan earlier, a new Profit Sharing/401k Council of America` (PSCA) survey says.
Reported by

PSCA said its latest eligibility survey from 2007 found the number of 401(k) plans allowing immediate eligibility more than doubled to 51% from 24% in 1998. Some 63.8% of plans with 1,000 or more employees now permit immediate 401(k) participation.

According to the PSCA, 70.5% of 401(k) plans permit workers to participate within three months of their hire date, up from 69.2% a year earlier. The survey covers 405 401(k) plans.

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“Workers benefit from early eligibility,” said PSCA president David Wray, in a news release. “They have a greater opportunity to save for retirement with fewer gaps in coverage and they are able to begin contributing without feeling the pinch that sometimes affects workers who enroll later on.’

PSCA found that for matching contributions there is a trend away from one-year eligibility requirements. In 2007 only 35.8% required one year of service or longer for matching contribution eligibility. By a slight majority (51.7%), most employers still require that employees work for the company one year or longer to be eligible for non-matching company contributions.

More information is at www.psca.org

The Markets February 1, 2008

Merrill Buys Back Subprime-Backed Securities from MA City

Merrill Lynch&Co. has bought back from the city of Springfield, Massachusetts, collateralized debt obligations (CDOs) that included subprime mortgages.
Reported by

The Wall Street Journal reports Merrill repurchased the CDOs for $13.9 million – the same price at which Springfield initially bought the securities. They are only worth $1.2 million, according to a recent account statement from Merrill, the Journal said.

A Merrill spokesman told the newspaper the firm investigated charges by the city that the investments were made without its permission and found that to be true, so it is making the city whole. Merrill also agreed to pay outside legal fees incurred by the Springfield Finance Control Board, which overseas the city’s finances.

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Springfield officials contended that Merrill violated state law by not properly telling them what investments it was making on their behalf. Merrill also did not provide Springfield officials with the CDOs’ prospectus last spring when they were purchased.

A spokesman for the Massachusetts Attorney General’s office told the Journal it continues to investigate the matter.

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