The Modernization of 403(b) Plans
plan sponsors and participants who can take advantage of updated retirement plans in light of the first new regulations in decades. One reason is the final regulations that the Internal Revenue Service (IRS) issued on July 26, 2007, which provide updated guidance on several administrative requirements. The rules are designed to modernize 403(b) plans so that they are more similar to 401(k) plans, introducing a new level of fiduciary responsibility even to plans that are not subject to the Employee Retirement Income Security Act (ERISA). The new rules are expected to pack a powerful punch when combined with the landmark Pension Protection Act of 2006 (PPA), which has been described as the 21st-century ERISA. Add to that regulatory mix the continued influence of the 401(k), a growing appetite for bundled services and the downsizing trend across America, and industry observers cannot help but conclude that a new day is dawning for 403(b) plans. It is inevitable that private-sector practices such as total retirement outsourcing will seep into not-for-profit plan design and oversight. (See sidebar for highlights of survey findings that compare health care-sector and corporatesector plans.) For example, consider benefit managers who have made the leap from Fortune 500 companies to the nonprofit sector; their presence likely will bring more discipline to the feenegotiation process because they are accustomed to observing fiduciary oversight at a much deeper level. Sponsors of 403(b) plans and plan participants will benefit from greater fee disclosure and ultimately lower fees. Total retirement outsourcing also yields other advantages to plan sponsors, such as reduced time spent on vendor management, access to up-to-date regulatory information, access to state-of-the-art technology, ease of data management and reduced need for internal staffing. Participants benefit from the convenience of accessing all accounts via one call center or Web site and of consolidated communications, which provide a more holistic view of their retirement picture. The public’s fascination with mutual funds, coupled with plan sponsors’ longstanding quest
Defined Benefit Plan Freezes: Who's Affected, How Much, and Replacing Lost Accruals
This paper quantifies how workers are likely to be affected by pension freezes, and how much they would have to save in a 401(k) plan - whether provided by their employer and/or saved by themselves - to offset the loss of accrued benefits from the pension freeze. The analysis notes that how an individual worker might be affected by a pension freeze varies widely, based on the unique nature of each pension plan and the terms of each plan that is frozen; the variation in workers' age, and tenure; and future investment results. The analysis presents its findings in terms of additional compensation (in a 401(k) plan, whether provided by an employer or worker) needed to cover the accruals lost to a pension freeze. In some cases, the pension plan sponsor offsets the pension freeze by increasing its match in the workers' 401(k) plan, but each case is different, and in some cases the lost pension benefit is not replaced.
Socially responsible enterprise in Cuba: a positive role model for Corporate Social Responsibility?’
This article examines the unique institutional environment of socialist Cuba, where currently a process of controlled marketization and expansion of private enterprise is taking place. The article investigates business behaviour in Cuba with particular reference to implicit assumptions relating to socially responsible enterprise, or Corporate Social Responsibility (CSR) as the term is understood in Western Liberal Democracies. It draws upon a series of interviews with business practitioners and business commentators (both Cuban and non-Cuban residents on the island). The interviews focused on the participants’ awareness of business ethics and socially responsible enterprise, and the cultural differences in assumptions and expectations relating to the concept of CSR between the Cuban and non-Cuban interviewees. We find that Cuba at this early stage of tentative marketization presents a positive role model of socially responsible enterprise. Both the highly regulated State economy and the embedded norms and values of social equity that have emerged as a consequence of Cuba’s socialist revolution facilitate business social responsibility. The relevance of this research to current debates in relation to CSR is discussed and it is argued that capitalist economies may similarly benefit from tighter regulatory control and by cultivating more pro-social business norms that prioritise ethical over economic concerns.