401 K Plan

Beware if the firm running your 401(k) plan offers investment "education," the Government Accountability Office says in a new report. Many 401(k) plans offer broad guidance to help workers make investment decisions. The advice typically comes under the rubric of "education" and stops short of recommending specific investments. But what's portrayed as education actually may be a sales pitch, the study says. Many firms that run 401(k) plans have financial incentives to push certain investments.

Engineering giant Bechtel Corp. agreed to pay $18.5 million to settle a lawsuit alleging that the fees charged to employees in its 401(k) retirement plan were too high. The class-action lawsuit brought by two former Bechtel employees in California alleged that the San Francisco-based company should have used its massive size to negotiate lower expenses for the more than 17,000 people in its 401(k) plan. The settlement would mark the latest advance for workers who have brought suits alleging that employers allowed 401(k)

The shift by many employers from providing pensions to offering 401(k) plans has forced workers to take more responsibility for their retirement savings, but left them ill-equipped in some ways to protect themselves. Two developments in recent weeks should help improve the situation: The Department of Labor issued long-delayed rules to help employers do a better job of sifting through the piles of fees charged by investment firms bidding for their 401(k) business, and a federal judge in Los Angeles ruled that employers can be held liable when they don't ask investment firms for a better deal when one is readily available.

For decades, high fees have quietly but steadily eaten away at the value of 401(k) retirement plans. Now employees are making headway in legal battles to force employers to lower costs. Employees of Edison International won a big victory this month when a federal judge ruled that the company's 401(k) fees were excessive and said employees were entitled to recover an as-yet-undetermined amount of overcharges. U.S. District Judge Stephen Wilson said in an 82-page decision that Rosemead-based Edison did "substantial" harm by failing to negotiate lower prices with the outside firm running the 401(k)

Millions of Americans aren't saving enough for retirement, but African American and Latino investors, on average, are further behind than whites and are more likely to be a greater burden to their families because they save too little and invest too conservatively, new research has found. "It's extraordinarily disconcerting," said Mellody Hobson, president of Ariel Investments, which along with benefits firm Hewitt Associates conducted a study of 401(k) participants.

If ever there were a teaching moment about the perils of financial ignorance, it's the current economic crisis. Millions of Americans are learning the hard way about the pitfalls of teaser mortgage interest rates and runaway credit card debt. Sadly, their children may be doomed to repeat the mistakes of their overdrawn elders. Financial teaching at home and in the nation's schools is skeletal at best, educators say.

For nearly three decades, working Americans have been part of a huge experiment with their future well-being: Old-fashioned pensions that guaranteed specific retirement benefits have given way to old-age benefits that depend on personal investing in the financial markets.

Younger workers can count on 401(k) plans to replace just a modest percentage of their income when they retire in the middle of this century, according to a new study that highlights the need for changes in the nation's pension system, members of Congress said Tuesday. Overall, just 36% of workers had savings in 401(k) or similar retirement plans in 2004, with participation practically disappearing among the lowest-paid workers, the Government Accountability Office reported.

James LaRue says he lost $150,000 when his instructions to his employer for where to invest money in his retirement plan were ignored. Now the Supreme Court will decide whether a federal pension-protection law gives LaRue the right to sue to recover his losses. Arguments in the case, which is likely to have far-reaching consequences, were scheduled for today. LaRue, who used to work at a management consulting firm, is among the 42 million workers who contributed to a 401(k) retirement plan.