401 K Plans

Goodyear Tire & Rubber Co. said it would scrap its pension program for current workers and raise retiree healthcare payments to save as much as $90 million annually. In 2009, Goodyear will replace defined-benefit pension plans with 401(k) programs with matching contributions. Corporate salaried and retail store retirees will pay more for health benefits beginning next year, and some insurance benefits will be canceled, Akron, Ohio-based Goodyear said.

The gig: Mike Alfred is co-founder and chief executive of BrightScope Inc., a financial information company in San Diego that analyzes 401(k) retirement plans and publishes disciplinary records and other information on financial advisors. The company rates 46,000 retirement plans, assigning each a numerical ranking from 0 to 100. The ratings are available free on its website, at http://www.brightscope.com . Alfred, 30, started the company with his younger brother, Ryan, and another partner.

If the 1980s were the heyday of the IRA, the '90s are starting to look like the decade of the 401(k) in the big and growing business of retirement planning. As Congress created and tinkered with new programs to encourage saving for retirement over the last 10 years, individual retirement accounts, or IRAs, got most of the publicity.

Is your 401(k) plan any good? Given the significant role of 401(k)s in retirement planning, it's important to know how your company's plan stacks up. BrightScope Inc., a 401(k) rating firm in San Diego, issued a list of the 25 best plans in the Los Angeles area. Rankings are based on factors such as fees, company matching contributions, vesting schedules and quality of investment options. Biotech giant Amgen Inc. claimed the top spot. BrightScope's database covers 1,712 plans of companies within 50 miles of Los Angeles.

The Labor Department has filed suit against executives of two defunct textile firms, including one in Santa Monica, demanding the return of more than $100,000 in employee contributions to the firms' 401(k) plan. The suit, filed in U.S. District Court in New York on Thursday, alleges that Richard Haik and Mitchell Ostrover failed to forward employee contributions and loan repayments to the 401(k) retirement plan for employees of Beverly Trimming Co.

If you're one of the growing number of workers with a 401(k) company savings plan, take note: Some of your money may not be as secure as you think. Many participants in the popular 401(k) plans choose to place most of their money in fixed-income investments, putting less money in stock funds. If you choose the fixed-income route, chances are that your money will be put into so-called guaranteed investment contracts, or GICs.

If your 401(k) plan has failed to keep up with other plans in terms of investment choices, or if you are otherwise unhappy with it, you can press for change. Though company managers tend to have a big stake in 401(k) decisions, they aren't the sole instigators of change. The moves are often spurred by rank-and-file workers who decide to lobby their company benefits office. Step 1 is to identify who at your company is responsible for overseeing the plan.

The Internet is making it easier than ever to offer your workers a 401(k) plan, perhaps the most popular employee benefit ever invented. The Profit Sharing/401(k) Council of America estimates that 340,000 U.S. companies offered 401(k) plans last year, up from 175,000 five years earlier. The plans covered some 41 million workers, up from fewer than 28 million in 1994, and the assets in their accounts totaled $1.7 trillion, according to the PSCA.

Investigators for New York Atty. Gen. Eliot Spitzer are conducting a wide-ranging probe of public and private retirement plans, a spokesman said Tuesday, and are expected to reach a legal settlement soon with the state's teachers union over its endorsement deal with a major insurer.

Change is a bit slower to come in the 401(k) marketplace than in the mutual fund industry as a whole. But change is coming, nonetheless, in terms of new investment choices for 401(k) plan participants. To be sure, you're not likely to see a "concentrated" Internet fund in your company-sponsored 401(k) any time soon. However, many 401(k) plans are allowing plan participants to be much more aggressive with their retirement money than in years past.

With hundreds of thousands of homeowners facing imminent foreclosure and estimates of 2 million or more in the wings, are there any financial tools available to distressed borrowers that haven't been tried yet? And is there a way to help owners that won't rack up huge federal expenditures and add to the deficit? The Obama administration has been exploring options — including a new refinancing program expected this month — but a concept has surfaced on Capitol Hill that might offer modest help with no revenue cost to the government: Amend the tax code to allow homeowners who have 401(k)

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)

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.

Now that tax-filing and IRA season are over, it's time to turn your attention back to the tax-sheltered accounts that matter most: 401(k) plans. Millions of people have found 401(k) and similar workplace programs to be more valuable than IRAs, for two key reasons. First, you can sock away more tax-sheltered money annually in a 401(k) than you can in an IRA. Second, there's a good chance your employer kicks in matching funds on your behalf.

Furthering corporate America's move away from pensions, IBM Corp. said Thursday that it would freeze its $48-billion pension plan in 2008 and instead enhance its 401(k) benefits for its 125,000 U.S. workers. Nearly all of IBM's U.S. employees -- everyone hired before Jan. 1, 2005 -- have pension benefits accruing under a traditional annuity-like plan or a cash-balance plan, which gives workers interest-bearing funds that they can take with them when they leave the company.

The last few months have undercut Theresa Dreike's retirement savings at least 20%, but the 28-year-old Long Beach resident is still contributing $200 a month to her 401(k) account as she cuts back elsewhere in her life. "It's not like I need this money tomorrow, so it's important to keep making the investment because I don't know what's going to be there for me when I actually retire," she said. "For all I know, Social Security could be gone."