Whose Responsibility Is a 401(K) Plan?
Atlas, of Greek mythology fame, is often depicted in art supporting on his shoulders a globe representing the weight of the heavens. When you have a 401(k) and not a traditional pension, retirees must bear their own nest eggs, carrying them from job to job, nurturing them with additional contributions, and taking on the responsibility of selecting investments. Of course, sometimes employers offer a little support.
A recent online survey of 208 senior finance executives at companies with $100 million or more in revenue by CFO Research Services and Charles Schwab asked, "How would you characterize the respective roles of your company and the employee in the following areas of retirement and financial planning?" The responses:
| Employee's responsibility | Company's responsibility | Shared | |
|---|---|---|---|
| Understanding individual debt management | 87 | 2 | 9 |
| Reallocating assets in 401(k) plan | 85 | 5 | 10 |
| Choosing the right investments in an individual's 401(k) plan | 79 | 5 | 15 |
| Regularly increasing deferral [savings] rates into 401(k) plan | 72 | 8 | 20 |
| Education about investment planning outside of the 401(k) plan | 65 | 11 | 24 |
| Reviewing performance of investments in 401(k) plan | 34 | 38 | 29 |
| Enrolling in 401(k) plan | 30 | 21 | 49 |
| Education about 401(k) rollover options | 15 | 54 | 31 |
| Education about features, restrictions, and benefits in 401(k) plan | 7 | 70 | 24 |
| Education about 401(k) plan costs and fees | 5 | 71 | 24 |
Many survey respondents appear to be following Ayn Rand's famous literary advice and shrugging off the burden of nest eggs onto the people they belong to. The executives largely indicated that employees are responsible for managing their own accounts, increasing savings, and handling personal finance issues outside the 401(k) plan. However, many executives also assert that the company educates employees about the features, benefits, costs, and rollover options of its plan, the survey found. A large portion of respondents also say that the employer and employee share responsibility for enrolling workers in the 401(k) plan.
Tell us, how much help should employers offer with retirement saving and planning?
Tags: employees | 401(k) | employers
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Reader Comments
Wake up call
Employers will offer exactly how much help (on retirement or anything else) that they are required to in order to attract and retain the workers they need, and not a bit more.
Used to be that most likely required the employer maintaining both a union contract and a defined benefit pension plan. Today, not hardly. You, dear American worker, are mostly expendable. Don't like that? Then you had better elect all the Democrats you can find for government help with future policy. And without delay.
Because the "free market solution" amounts to this: Your replacement is waiting in a foreign country to eat your job and you have little to no leverage EXCEPT government.
Retirement preparation requires planning, luck, and faith.
Plan - Build a nest egg so you don't need to count on employer, government, spouse, or anyone else for your financial security. Be vocal with your company's benefits staff about what you'd like to see. Don't smoke or take crazy chances with your life.
Luck - Don't get sick, don't get injured, don't work in a dead end industry.
Faith - Believe that God watches over us all and won't give us more than we can handle.
401k
401ks should belong to the individual and it should be his responsibility since the retirement in question is his. What is needed is an educated and informed citizenry which you won't get in a system where companies and government make all the decisions for the citizens.
In a private system, people who make bad decisions will suffer the losses but where the government comes to the rescue of poor decision makers and bails them out at taxpayer expense, everyone's rights are violated for the foolish few who then learn nothing. That is not helping them or the population at large.
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