Participation in employer-sponsored 401(k) and individual retirement accounts (IRAs) is of great interest to Americans seeking to secure funds for their futures. These plans bring mainstream investment opportunities to individuals who might not otherwise take part in investing. A certain degree of protection is naturally inherent in these types of plans; the best interest of the participant is usually the focus, rather than the maximization of profit for the investment firm itself. On October 24, 2011, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) released final regulations that further protect workers taking part in employer-offered 401(k) and IRA plans.
The Employee Retirement Income Security Act (ERISA), passed in 1974, federally set guidelines for voluntarily-created private sector pension and health plans. The act sought to protect individuals participating in these types of plans. In 2006 the Pension Protection Act (PPA) was signed into law, further reforming pension regulation that was at the core of ERISA.
A key benefit of investing via 401(k)-type plans is the aspect of fiduciary compliance. Those representing the plan to the employer, along with the employer itself, are required to uphold the benefits of the plan for the worker, not for the company offering the investments. Because all of this is taking place in the private sector, regulation of what can and cannot be done on behalf of, and in regards to the employee’s investment contributions is needed. This is what EBSA has recently addressed in its final regulations of employer-sponsored investment plans.
Under these recent regulations, EBSA has allowed employers to offer workers access to investment advisors for their 401(k)-type plans. ERISA originally decreed it illegal for those third-parties representing and selling investment opportunities to profit from the suggestion of or advice related to employer-sponsored plans. Adhering to specific guidelines now outlined in EBSA’s 2011 regulations, outside investment agents may now provide unbiased advice to participating workers.
With the stability and longevity of Social Security benefits upon retirement a current topic of discussion, new light has been shed on the benefit of 401(k) and employer-sponsored investment programs. For large portions of American citizens, this is the only type of investing that will ever be done. The regulations recently published by the U.S. Department of Labor’s Employee Benefits Security Administration further seek to protect the best interest of workers participating in these types of plans.
Tags: 401k, Accounting, benefits, DOL, Employee Benefits Security Administration (EBSA), Employee Retirement Income Security Act (ERISA), employees, fiduciary compliance, health insurance plans, IRA, pension, Pension Protection Act (PPA), regulations, retirement, Social Security
The Essex Companies. All Rights Reserved
