Setting the Table

By Keith Hocter

The retirement dreams of Americans increasingly rest on defined contribution plans, including 401(k), 403(b), 457, and similar programs. They are incredibly popular with employers and employees. More employees are covered by these plans than traditional pensions, especially in the vast segment of smaller employers. Probably more than any other factor, the growth of employee-directed plans has converted millions of savers into investors. All defined contribution plans pass investment risk on to the employees, and the vast majority allow employees to direct their own investment strategy. Investment decision-making is a shared responsibility between the plan sponsor and employees (participants). Being a plan sponsor is a tough job - you have to make decisions affecting other people?s retirement savings, comply with various laws and fiduciary duties, manage plan administration and investments simultaneously, and be prepared to be second-guessed by employees with incredibly sharp hindsight. Who sets the table for employees? Who sifts through 10,000 mutual funds and picks a dozen or so products on which participants will bet their future? Most likely a small number of HR and finance professionals who have many other things to do with their time. Excellent plan sponsors get results from their plan without sinking large amounts of time into running the plan. They have the best of all worlds: they run cost-effective plans that require minimal attention from management and generate happy employees. In my experience, a solid governance process over investment matters does more than protect the sponsor from lawsuits - it saves time, saves money, and increases employee satisfaction. This book starts by walking the plan sponsor through a prudent and efficient governance process, designing an investment policy based on scientific and human principles to meet employee needs. We then go through the process of selecting investment products, monitoring performance, dealing with recordkeepers and "bundled" providers, and communicating effectively with participants. Throughout the book sponsors will pick up concise and practical advice on everyday management and special "hot" topics, including company stock, self-directed brokerage, investment advice, lifestyle funds, and much more. If you?re already running a plan with a strong investment program, perhaps you?ll pick up a few tips from this book to make improvements on the edges, or save yourself some time. If you are running a plan with "less than adequate" investments, or with outright investment problems, you should find the answers you need here. Finally, if your job is to manage assets or provide service to a plan sponsor, I hope you?ll gain some insight into the issues they face - the unlikely, unsung heroes that set the table for us, and make possible our retirement dreams. Click here to learn more at the Bellwether Consulting website.

• Format: Paperback
• Language: English
• ISBN: 1401056423
• ISBN13: 9781401056421
• Release Date: July 2002
• Publisher: Xlibris Corp
• Length: 256 Pages
• Weight: 0.75 lbs.
• Dimensions: 8.5" x 1.0" x 5.5"

Customer Reviews

Excellent Resource

This book proved to be a very valuable resource to our company as we evaluated 401k plans. I would recommend this book to everyone who is interested in knowing all there is about retirement plans and the many options.

Cooking Up Your 401(k) Plan

Setting the Table is a short, well organized primer for sponsors of defined contribution plans. Written by an investment consultant with years of experience counseling organizations on the design and structure of their employee directed retirement programs, the book is a practitioners guide filled with tips, insights and pointers. It is a common sense reminder for experienced pension fund and benefits executives, and a starting point for those new to the field, sorely needed in what is now the third decade since America discovered section 401(k) of the tax code.The author likens the sponsor to the host of a banquet whose job is to provide the guests with all the makings of a feast that will leave them satisfied-hence the title. A well designed defined contribution plan will deliver to employees the makings of a program each can use to serve themselves the helping of retirement plan-and the particular choices-each one wants.Specific topics are dealt with in logical sequence. After a brief chapter introducing the concept and history behind employee directed plans (a little chatty and pedantic for my taste), the book stresses the importance of an investment policy. The author offers a clear and detailed description of a process for creating one, and an appendix with a sample of what it should look like. Structuring investment options is broken into two chapters-the first provides a down-to-earth conceptual framework for thinking about the topic, and the second a hands-on guide for performing the task. Actually selecting options is divided into three chapters. After a review of investment basics, the author explains how to choose investments in an unbundled structure facing no practical constraints. He then wisely addresses the issue a second time in the context of a bundled-service that typically creates real world trade-offs. It is this approach that converts this section from a helpful theoretical exercise into a very usable practical guide. A section on monitoring investments follows, as well as a section to help people think about when to hire a consultant and how to structure an engagement to insure a satisfying outcome. A two chapter sequence on investment education and investment advice is particularly well done. It lays out clearly the importance of providing participants with the materials and tools to help them make smart decisions, and in practical terms discusses the gray area for fiduciaries along the continuum between education and advice. The author goes on to offer sound suggestions for "folks caught in that awkward squeeze between participants and their law department," most importantly a check list of questions to ask when choosing providers for these services. The work concludes with a review of a variety of issues such as the challenges sponsors of non-ERISA 403(b) plans face, special considerations for Taft-Hartley Plans, the implications of self-directed brokerage accounts and mutual fund windows, and the perils