Should You Take Advice from Your 401k Provider?
John Rossheim | Monster Senior Contributing Writer
The Pension Protection Act, which both strengthens employers’ existing pension obligations and discourages them from undertaking new obligations, also makes a broader point to US workers: “The overall message of the bill is, you’re on your own,” says James Lange, a lawyer, CPA and author of Retire Secure.
Even so, the 2006 law has also made it less daunting for workers to shepherd their retirement funds, now most commonly in the form of a 401k plan, to a successful end, whatever their investment time frame.
What Does the New Law Say About 401k Investment Advice?
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A key provision of this pension law is that it enables employers, through their 401k plan providers or third parties, to give investment advice to plan participants without substantial fear of being sued by employees displeased with the investment results they get.
“Now it has become more clearly legal for these fiduciaries to provide advice,” says Stephan Roche, vice president and general manager of the small business group at Web-based brokerage ShareBuilder.
Competition for top talent should spur employers to offer retirement investment advice as a component of their 401k plans. “Plans that don’t offer investment advice going forward will be the exception rather than the rule,” says Tim McCabe, vice president of PMFM, the investment advisor to 401k Toolbox, a provider of advice to retirement-plan participants.
This advice could help fill a gap in participants’ knowledge of investment planning. “Most 401k plan participants have received absolutely no advice on how to structure their retirement portfolios,” says Wayne Schultz, an attorney, financial advisor and vice president of Your Money Matters Brokerage Services. “Participants who otherwise had no financial counselor can now have someone to guide them through their financial lives.”