401k Fees Employee DOL PDF

401k Report: Key Pages 39 & 40 PDF

Set yourself free from the 401k Trap by having The Financial Coach & Blue Ocean Portfolio’s manage your account while advising your plan participants in a ‘Fiduciary Capacity.’  Call us today to arrange an overview of your current plan and costs along with a comparison of exactly what Blue Ocean Portfolio’s can do for you.

November 10, 2009

Ruling A Boost For 401(k) Fee Lawsuits

(Dow Jones) The tentative settlement of a lawsuit against Caterpillar Inc. over 401(k) fees could signal that this type of litigation will not disappear.

While similar cases have been thrown out, last week’s resolution in the Caterpillar case may be a first big win for 401(k) plan participants. A number of other big U.S. companies still face lawsuits accusing them of overcharging employees participating in the plans.

“I think that it brings a little wind back into the sails of the plaintiffs,” says Greg Ash, an attorney with Spencer Fane Britt & Browne in Kansas City, Mo.

While not involved in the Caterpillar case, Ash often represents companies in similar disputes. He called the settlement “a bit of a surprise.”  ”This is at least a partial victory for them. They’ve exacted some money and actions from the plan sponsor,” he noted.

The U.S. District Court in central Illinois still needs to approve the settlement. Among other things, it calls for the construction-equipment maker to pay $16.5 million, which will be distributed to about 80,000 current and former plan participants based on the number of years they maintained account balances.

“We believe we would’ve prevailed, but we made a strategic decision to settle” because the complex litigation would have taken five to seven years, and Caterpillar already has closed its investment management subsidiary, says Jim Dugan, a Caterpillar spokesman.  Plaintiff’s attorney Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis says Caterpillar also agreed to offer lower-cost institutional mutual funds rather than retail mutual funds for its core investment choices and to have an independent monitor of the plan for at least two years. Ed Ferrigno, vice president, Washington affairs for the Profit Sharing/401k Council of America, a not-for-profit association of companies that sponsor plans, says: “What we’re seeing is that generally the courts have not supported the fee lawsuits.”

But many of the pending lawsuits against large employers—while each unique—have similarities to the Caterpillar case. “Any victory for the plaintiff is going to energize additional litigation,” says Ash.

So before you invest in your 401k or if your a business owner with a 401k, read this article and start questioning the details on your plan.  You probably want to then see how much ‘your plan’ is actually costing and The Financial Coach can definitely help you find this information.

http://www.smartmoney.com/personal-finance/retirement/401-k-an-overview/

So what do you do?  Plan for it and use strategies to minimize the impacts of taxes.  Also, understand that taxes and tax planning are a continual item and your investment professional should be the one advising you–not the tax accountant who only sees the taxes after they are completed and are ready to be filed.

http://online.wsj.com/article/SB125694593227919879.html

By Kelly Greene 
Wall Street Journal 

For withdrawals to be penalty free, the five-year rule governing Roth IRAs for the most part works the same for people who open and begin periodic contributions to a Roth IRA and those who convert to a Roth from a traditional individual retirement account or other retirement plan. But as with all things involving IRAs, there is a wrinkle or two.

Let’s start with the person who opens a Roth and makes periodic contributions. That person can withdraw those original contributions anytime with no tax or penalty. The five-year clock forearnings on those contributions starts Jan. 1 of the year for which your first Roth contribution was made, and it doesn’t reset each time you make a contribution or open another Roth. You have to turn 59½ to avoid a 10% penalty for early withdrawals on any earnings, and also to avoid income tax on those earnings.

As for the person who converts to a Roth: In a conversion, you have to hold the assets in a Roth for five years or until turning 59½, whichever comes first, to make penalty-free withdrawals of your converted amounts. Here, each conversion has its own five-year clock.

If you already are 59½ and you convert traditional IRA assets to a Roth, you can withdraw the assets you convert at any time without worrying about a five-year deadline or penalties. Again, it is a different story with any earnings on those assets: You have to have held a Roth account for five years to withdraw any earnings tax free. But you generally don’t need to worry about separating the converted funds from the earnings, since the withdrawal rules for Roth IRAs say that any distributions first come from contributions, then from conversions, and finally from earnings, says Ed Slott, an IRA consultant in Rockville Centre, N.Y.

Rules are spelled out in IRS Publication 590, “Individual Retirement Arrangements,” atwww.irs.gov. See page 69 under “Ordering Rules for Distributions.”

Let’s say that 10 years ago, you put $100 into a Roth IRA and now you are 62. That means you have met the age requirement and the five-year-holding requirement for withdrawing your contribution and any earnings with no penalty or tax, Mr. Slott says. Now, let’s say you still have that $100 Roth, and you also convert $100,000 from a traditional IRA to a Roth. (Of course, you pay taxes on the conversion.) You could then withdraw the $100,000 with no tax or penalty, because it is considered to have been held for five years, Mr. Slott says. “The five-year period started the first day you opened that Roth IRA 10 years ago, so you could take out that $100,000 any time.”

If you are younger than 59½, though, you could run into trouble: Let’s say you’re 40 and you opened a Roth 10 years ago with $100. Now you convert $100,000 to a Roth IRA. If you withdraw that $100,000 a year later, at age 41, you owe a 10% penalty on all the converted funds. Even though the account has been open five years, each conversion starts a five-year clock — until you turn 59½. (You wouldn’t owe tax on that amount, though, because it is generally due for the year of the conversion.)