Pension Bill Catalyst for Managed 401(k) Industry

In the wake of the passage of the Pension Protection Act of 2006, the Managed 401(k) industry is poised to take off. Actium has created a blog to report on the fast-changing landscape of the managed 401(k) industry.

Birmingham, MI (PRWEB) August 18, 2006 -- The passage of the Pension Protection Act of 2006 (PPA) may mark a turning point in how individual 401(k)s are cared for and managed. It would appear that the 401(k) of tomorrow will be far different than the 401(k) of today.

The PPA removes liability from companies who decide to use managed 401(k) solutions. A managed 401(k) is when an individual allows a professional to manage their 401(k) account on their behalf. Companies offering a 401(k) plan will be looking more closely at managed 401(k) solutions in the weeks and months to come, and 401(k) account holders will soon have needed professional support, if they choose.

The managed 401(k) will also garner more attention due to the Auto enrollment feature included in the PPA. Auto-enrollment is when new and existing employees not currently enrolled in their 401(k) plan could be automatically signed up if they don’t opt-out. The DoL is scheduled to release a ruling within the next few weeks clarifying where these funds could be invested. A Managed 401(k) option is likely to be one of the “safe harbor” options.

“Choosing the right managed 401(k) provider can be difficult,” said Jeff Sinatra, Chief Operating Officer of Actium LLC, a managed 401(k) provider in Michigan (www.myActium.com). “This is a relatively new industry and there are some nuances of which many are not aware.”

3rd Party Objectivity
At the heart of the controversy surrounding the passage of the PPA of 2006 was the repeal of the long-standing “conflict of interest” rule. Beginning next year, mutual fund and insurance companies will be allowed to choose investments on behalf of 401(k) account holders. While this will bring more choices to the 401(k) marketplace, it may also bring conflicted advice. Plan Sponsors will need to be sensitive to this when selecting the right service for their employees.    

Personal Contact
As the managed 401(k) industry begins to take shape in the wake of the PPA, solutions that include personal contact, face-to-face meetings, phone calls, personal emails, etc., could become available. Look for more competition to drive a higher level of service and a new standard – Plan Sponsors will no longer need to settle for cookie cutter solutions designed for the mass market.

Fees and Expenses
Currently, some managed 401(k) providers charge as much as 1.5 percent of asset value. In this scenario, a 401(k) account holder with a $100,000 balance would pay $1,500 per year for a managed 401(k) service. These fees may drop as more competition enters the marketplace. While this 1.5 percent fee could be justified by better overall performance of the account, it should be weighed with the level of service, research, and access to professional support.

How mutual fund and insurance companies ultimately charge for a managed 401(k) service has yet to be determined. Some may charge for this service using fees within the mutual fund itself.

Join the Discussion
Actium has created a blog to report on the fast-changing landscape of the managed 401(k) industry. “We created the blog (www.myActium.com/blog) to be a part of the dialog as this industry transitions from obscurity to center-stage. We wanted to share ideas and insights with those who are trying to make sense of the new world of the 401(k),” said Sinatra, who helped create the blog along with their management team in July. “We were pleased when it became the #1 ‘Managed 401(k) Blog’ on the major search engines and began receiving emails from others who shared many of our same concerns.”

Contact:
Jeff Sinatra, Principal / COO
Actium, LLC
460 N. Old Woodward
Birmingham, MI 48009
www.bemanagednow.com (Plan Participant)
www.myActium.com (Plan Sponsor)
P: 248-341-3431
Cell: 617-943-9910