It may be that the news has given 401(k)s less negative attention of late because nearly 80% of employees now rank medical costs as both their current and future financial priority
It seems like every two years the news likes to take issue with 401ks, with articles like top 6 problems with 401(k) accounts. This latest round of 401(k) news shifts slightly more towards the positive. While many websites seem to be spending time telling employees how to maximize 401(k)s, they aren’t urging employees away as they used to.
It may be that the news has given 401(k)s less negative attention of late because nearly 80% of employees now rank medical costs as both their current and future financial priority. Given that, you might think that employees would be racing towards investing in heath savings accounts (HSAs). If so, you would be incorrect. Only 25% of employees add dealing with their concern about medical costs through a HAS as a financial priority, below saving for retirement or paying off debt.
It could also be that the news has given 401(k)s an easier time as Congress heats up to shake them into a new formulation. In 2018, republicans in Congress circulated legislation that would modify 401(k)s. Some of those modifications are helpful, such as reducing costs for small businesses to offer these retirement plans and allowing small businesses to group together to offer plans with shared administrative costs. Other changes potentially on the horizon would reduce required minimum distributions from 401(k)s and IRAs. Other plans would change the safe harbor rules regarding offering annuities as part of retirement accounts so that companies may be less liable if the plan sponsor chooses and annuity that goes belly up before paying out the funds promised.
One proposal would allow those smaller firms to more easily band together to offer their employees a 401(k) plan, thereby sharing the cost and administration. As it stands, so-called multiple employer plans restrict exactly which businesses can team up. Another proposed change to 401(k)s would require plans to provide a snapshot of how much income a employee can expect in their planned retirement based on their current balance.
Aside from potential Congressional changes, many employees continue to hear, and be interested in, Socially Responsible Investing (SRIs). More reporting is covering SRIs, as more investors find that they can manage their retirement readiness goals and also engage in SRI. Additionally, many employees may be hearing about new plans by the SEC and DOL to issue a revised fiduciary duty rule, which may make its debut in 2019.
Many news stories cover the impact that auto-enrollment, first allowed via the last set of Congressional changes to 401(k)s in the mid-2000s. Surprisingly, almost all of that news coverage is positive. Many say that auto-enrollment corrects for a human tendency towards inertia in the investment field, others note that plan sponsor’s efforts to incorporate behavior change have had positive impacts.
Finally, the news has shifted to how to incorporate the best elements of roboinvesting. This may also show that one of the complaints previously reported in news coverage lamenting 401(k)s might have been solved in the last 2 or so years. Roboinvesting is a method to help plan participants feel that they are getting help allocating and readjusting their accounts.
In summary, news reports now focus on how plan sponsors are incorporating financial wellness and behavior change activities to help employees make the best of 401(k)s, instead of reporting on that investment tool’s shortcomings.
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