Data & Research July 10, 2007

Auto IRAs Could Help 48 Million Americans Save

With bills pending in both the U.S. Senate and House encouraging employers to sponsor auto-enrolled IRAs, an AARP-sponsored study says such a vehicle would help as many as 48 million workers amass enough of a retirement nest egg.
Reported by

An AARP press release said the study, conducted by Optimal Benefit Strategies, LLC, estimated 47.9 million Americans will be eligible to participate in an Automatic IRA through an employer, with 50% of these individuals having adjusted gross income under $20,000.

The study projected that a $l,000 annual contribution to an Auto IRA, at a 4% annual return, would yield $3l,000 of savings after 20 years and $58,300 of savings after 30 years.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

The study added that analyses have already shown that automatic enrollment 401(k) plans increase employee savings participation rates “quite dramatically,” according to the document.

“Most Americans battle with the desire to spend but the necessity to save,” said Tom Nelson, Chief Operating Office at AARP, in the news release. “Automatic enrollment in an IRA would encourage saving and simplify the decisionmaking process of planning and saving for retirement.”

According to the news release, the Senate bill is sponsored by Senators Jeff Bingaman (D-New Mexico) and Gordon Smith (R-Oregon) and in the House by Representatives Richard Neal (D-Massachusetts) and Phil English (R-Pennsylvania).

Under the Automatic IRA proposals, employers with more than 10 employees, who have been in business for at least two years and who do not currently offer a retirement plan for their employees, would facilitate direct-deposit payroll deductions to an IRA at a financial institution. The employer would not contribute to such an account.

The bills provide for a temporary employer tax credit to offset administrative costs.

The AARP study is at http://assets.aarp.org/rgcenter/econ/auto_ira.pdf.

Products July 10, 2007

UBOC Unveils Financial Planning Workshops

Union Bank of California is introducing a new benefit for its SelectBenefit retirement plan sponsor clients and plan participants.
Reported by

Drawing on a new team of Certified Financial Planner (CFP) professionals, the San Francisco-based bank is now offering retirement planning workshops for participants on-site at plan sponsor locations. SelectBenefit is Union Bank’s retirement plan administration and recordkeeping division.

Plan sponsors can arrange two Union Bank workshops per year for their employees. The sessions focus on retirement planning for individuals at various stages in their careers, from accumulators (six to 20 years from retirement), to pre-retirees (three to five years from retirement) and new retirees. According to a press release, UBOC is also able to customize sessions for special situations such as layoffs and mergers.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

These group sessions are complemented by the option of individual retirement consultations for plan participants. Following a consultation, participants receive a personalized action plan that compares their current financial situation with their objectives. They also receive an asset allocation recommendation that encompasses their entire retirement investment strategy, matching their goals to a recommended asset allocation mix. Additionally, UBOC’s CFP professionals are available to provide customized financial planning services for plan sponsors’ senior executives.

New Tools

Union Bank has also invested in a number of new Web-based tools to complement the in-person planning sessions, particularly to assist plan participants as they exit their companies. When employees retire or move to another job, SelectBenefit offers a “Rollover Wizard” that allows them to roll over their 401(k) into a brokerage IRA via the Internet. According to the company, participants are then able to invest in a variety of mutual funds, as well as stocks and bonds, totally separate from the investment options offered by their previous employers’ 401(k) programs.

Union Bank engaged Ibbotson Associates to identify a select group of mutual funds as appropriate for implementation in an asset allocation portfolio. Union Bank also integrated an asset allocation questionnaire from Ibbotson Associates into the Rollover Wizard, to help participants identify a personal preference for investment risk and reward, and enable them to determine corresponding mutual fund selections.

The SelectBenefit retirement plan Web site is located at www.selectbenefit.com.

«