401(k) changes give savers a brighter future

BOSTON (MarketWatch) -- If you’re one of the 72 million workers with a 401(k), you should consider 2010 a very good year. And 2011 might even be better, according to experts who track what some consider the retirement plan of record for many Americans.

So, what were some of the best (and worst) changes that were made to 401(k) plans in 2010 for the benefit of workers and what sort of changes should be made in 2011? Here’s what experts had to say.

New 401(k) fee disclosure rules

In October, the Labor Department’s Employee Benefits Security Administration issued a new rule that requires plan fiduciaries to disclose more information about 401(k) fees and expenses — including quarterly statements of plan fees and expenses and information about the cost of their investments — to participants.

Roth in-plan conversion option

The Small Business Jobs and Credit Act, which was signed into law on Sept. 27, has a number of provisions that affect those saving for retirement, including one that allows participants in 401(k), 403(b) and governmental 457 plans — beginning Jan. 1, 2011 — to roll over pretax account balances into a Roth account instead of having to roll those assets into an outside Roth IRA. And that in effect helps those saving for retirement save more money on an after-tax basis.

Employers reinstate matches

In 2009, many employers stopped matching their worker’s contributions. In 2010, however, some employers reinstated their matching programs. Widespread reinstatement of matching contributions was probably the best initiative in 2010 by plan sponsors.

Automatic enrollment, automatic escalation, and the like

Stacy Schaus, senior vice president at Pimco and author of “Designing Successful Target-Date Strategies for Defined Contribution Plans: Putting Participants on the Optimal Glide Path,” said some of the best changes to 401(k) plans center on automatic enrollment, automatic escalation and automatic rebalancing.

Investment options

More than a few experts said plan sponsors also changed the number and type of investment options in 401(k) plans for the better.

The year ahead

While 2010 will go down as a mostly good year for workers with a 401(k), there’s much more to be done in 2011 to improve retirement security.

The voluntary employer-sponsored 401(k) has helped millions of Americans save trillions. We should use this successful platform to address two key challenges: a lack of access to retirement plans and inadequate savings rates.

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