Saturday, July 21, 2012

How Does My 403b Plan Or 401k Plan Rate?

Smart employees enroll in their company’s 401k or 403b plan hoping to accumulate a comfortable nest egg. The employee wonders, “How does my 401k plan compare with retirement plans offered by other companies?” Until recently it was difficult to obtain 401k plan rating information for comparison.

401k Plan Ratings
The Internet and an independent research company called BrightScope changed all that. BrightScope provides a treasure trove of retirement plan information free. The firm compiles data collected from public filings and evaluates retirement plans. They offer 401k plan ratings and also rate 403b and 457 retirement plans.

BrightScope (http://www.brightscope.com/) contains information on over 45,000 401k, 403b and 457 plans. The company evaluates plans on numerous criteria, assigning every company an overall rating from a low of 0 to a high of 100.

BrightScope provides a below average, average, or above average rating for a number of factors, including:

  • The employer match, which BrightScope terms ‘company generosity’.
  • The quality and quantity of investment options.
  • Vesting schedule.
  • Total plan cost, including administrative and management fees.
  • Employee participation rate.
  • Salary deferrals.

Retirement Plan Comparisons
BrightScope compares company plans to the performance of a peer group. A company is assigned a peer group based on size and/or industry. The site provides an alphabetical listing of all companies rated. There is also a search engine. Key in a business name and information on that company fills the screen.

The name of the company and its overall retirement plan score is displayed along with the lowest score, the highest score and the average score in the peer group.
Half a dozen peer group companies with their ratings are listed. Additional information includes the top funds offered in the company’s retirement plan.
The total value of plan assets, the numbers of plan participants and the average account balance are also specified.

An invaluable tool available for review on the website is a company’s 5500 Data Form. Companies are required to file an annual report with the U.S. Department of Labor and the IRS detailing a retirement plan’s financial condition and investments. Report data includes plan investment options, an income and expense statement with the total amount of participant and employer contributions for a given year, investment earnings or losses, and administrative expenses.

Be a Knowledgeable Plan Applicant and Participant
Knowledge is power and plan participants should know the quality of their company’s plan. The information helps answer a variety of questions:

  • Should I participate in my 401k plan or if it is a low-rated plan should I seek other possibilities?
  • Should I discuss with company HR personnel the problems or low scoring areas needing attention?
  • The information is invaluable to job seekers. The quality of a retirement plan goes a long way to ensuring the ability to build a comfortable nest egg and reveals a lot about a company’s commitment to its employees.
  • When I retire should I keep my 401k plan funds within the company plan or move them to an IRA? Armed with information about the quality of investment options, plan fees and other data, the individual can make an informed decision.

Find out the rating for your 401k-plan, 457 plan or 403b plan rating and be a knowledgeable, informed retirement plan applicant and participant.


Source: http://www.seniorreport.com/money/how-does-my-403b-plan-or-401k-plan-rate/

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