Retirement and Investment Solutions Newsletter


October 2009 Issue

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Retirement Readiness

The following was taken from the recent report based on a study conducted with participants this past spring, called Anything But Certain.

Can I get there from here?

Actively investing for retirement requires a certain amount of faith that markets will generally behave in the future much as they have in the past. Such confidence, however, is often tested in tough times. Back in 2007, when the stock markets were nearing their all-time highs, half of the individuals surveyed felt confident, with 21% very or extremely confident, about reaching the goals they had set for retirement. A year and a half later, when asked the same question, only 16% of 401(k) participants were extremely or very confident of reaching their retirement financial goals. However, one in five said they were not at all confident they would reach their goals.

How confident are you that you will be able to reach your financial goals for retirement?

% of Participants

Extremely confident


Very confident




Somewhat confident


Not at all confident


The market downturn, particularly its negative impact on 401(k) balances, was a wake-up call. Participants are worried about how much it will take to make it through retirement. Almost six in 10 say they are not confident their retirement savings will be enough to last. In fact, people valued information on this topic more than information on any other topic. From the individual’s perspective, there has always been uncertainty surrounding the question of how much will be enough without a bad economy making things worse.

I am confident that I will outlive my retirement savings.

% of Participants

Agree strongly


Agree somewhat


Disagree somewhat


Disagree strongly


In truth, the question of whether or not plan participants felt they could “get there from here” depends a great deal on how they feel individually about retirement and retirement planning, and whether any of those feelings changed substantially as a result of recent economic events.

For more information on participant responses from the study, we invite you to download the PDF.

Source: Investing for Retirement, J.P. Morgan Retirement Plan Services, May 2009

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Participant Loans - A Necessary Evil?

In the quest for talent retention and talent recruitment, many plan sponsors feel the need to provide competitive retirement benefits to their valued employees. Common, compelling, competitive 401(k) plan design features generally include reasonable eligibility requirements, liberal contribution rates, competitive vesting schedules and participant loan provisions.

Does the participant loan feature encourage participant enrollment?  Plan sponsors articulate their desire to allow participant loans to encourage enrollment and to provide participants with access to their retirement savings. The paradox:  retirement savings are intended to be reserved for retirement.

In our recently published study, Anything But Certain, the majority of 401(k) participants told us that the ability to borrow against their plan balance was not important. Although 87% of those surveyed were aware that they could borrow funds from their 401(k) plans, only 26% considered the information an important feature. 59% of those surveyed said the feature was not important to them.

Which of the following best describes you in relation to the ability to take a loan from your 401(k)?

% of Participants

I wouldn't contribute to my 401(k) if I didn't know I could take a loan from it


I was not aware that I could take a loan from my 401(k)


Not sure


Being able to take a loan from my 401(k) is an important feature to me


I'm aware that I can take a loan from my 401(k), but it's not important to me


Consider this, our history of participants taking new loans trends lower than 1.55% of the participant population month to month.

2009 RPS Insights - October loan history

The retirement landscape is changing. As you engage in annual planning discussions with your J.P. Morgan representative, consider whether or not the participant loan provision is suitable for your plan and evaluate utilization. J.P. Morgan is committed to bringing our best ideas to you in an effort to keep you informed as fiduciaries and to help your participants achieve retirement readiness.

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A Framework for Evaluating Target Date Solutions

The Pension Protection Act (PPA) of 2006 introduced several important legislative features in an effort to help increase the odds that more Americans successfully invest in their financial futures. Under PPA, plan sponsors have the ability to adopt automatic enrollment features for the retirement participants using default investments that include a mix of asset classes consistent with capital preservation or long-term capital appreciation, or a blend of both. Given these guidelines, it is easy to see how target date funds (TDFs) have become the preferred default investment option for many defined contribution plans. This popularity, unsurprisingly, has sparked significant growth in the marketplace. There were more than 45 firms offering TDFs at the end of June 2008, and a 2007 survey conducted by Greenwich associates showed that roughly 80% of large companies offered a TDF option in their 401(k) plan.

The Need for Developing a Meaningful Evaluation Process

This growth has created a wide range of TDF offerings, and selecting the most suitable fund can be difficult. These products have dramatic differences in composition, particularly in terms of the wide variances in overall portfolio diversification and specific equity exposure in the crucial five years before, and at, retirement. It is these stark differences that have come under scrutiny after the 2008 market downturn. The 2010 funds with the most aggressive equity allocations near retirement were down more than 20% for calendar year 2008, according to Lipper’s Mixed Asset Target Date 2010 category.

It is against this backdrop that J.P. Morgan developed a Framework for Evaluating TDFs called the Target Date Compass.

The Target Date Compass, a Framework for Evaluating TDFs

This framework was designed to help sponsors:

  • Bring perspective to the broad universe of target date types
  • Help to identify the target date fund most closely aligned to the goals of the plan and its workforce

The process to identify a Target Date Fund Type for your retirement plan is straightforward. The first step is to determine whether the goal of the plan is to manage the investment until the participant reaches retirement at 65 or to continue beyond that age. This is followed by a series of questions about participants’ investment behavior, risk tolerance, preferences for diversification and use of traditional asset classes. Based on the answers to those questions, the Compass identifies which one of four quadrants on the Compass, with the corresponding funds, matches the goals of the plan.

For example, if your plan profile seeks to maximize participants’ savings to retirement, prefers strategies that minimize downside risk, believes that broad diversification may improve portfolio outcomes and that diversification can be achieved by extending beyond traditional asset classes, then the Compass would place your plan in the NW quadrant of the Compass.

The characteristics of this quadrant are lower equity levels at retirement and higher numbers of asset classes, including extended asset classes. The investment strategies in this quadrant focus on ensuring income replacement at retirement and managing volatility more efficiently, with a belief that diversification can be achieved by extending beyond traditional asset classes.

2009 RPS Insights - TDF

After you identify which quadrant matches your plan profile, you would compare and select the most appropriate target date funds from that quadrant.

To learn how the Target Date Compass can be beneficial to you and your organization, contact your J.P. Morgan representative, who can schedule time to walk you through the four-step method.

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Re-Enrollment in Target Date Funds

During a recent conversion of participants in the plan of a home building products manufacturer and distributor, we wanted to minimize employee confusion and anxiety while meeting the following objectives:

  • successfully complete re-enrollment of all eligible employees during conversion to J.P. Morgan
  • deliver appropriate information to an audience that consisted mostly of factory and warehouse workers, many who were non-English speaking (Hispanic and Asian)
  • ensure smooth addition of retroactive automatic enrollment and automatic increase to the plan
  • increase participation, deferral rates and diversification

Our strategy involved developing core conversion communications that included an announcement letter, newsletter, Sarbanes Oxley notice regarding the blackout and live notice letting them know the blackout period had ended. All communications were designed with a conversational tone that was clear and concise.

Required re-enrollment meetings were held prior to conversion, where kits including enrollment and beneficiary forms were provided. Sessions specifically for Hispanic workers were held in Spanish, and translators were utilized to communicate with Asian employees. These meetings were considered key to the success of this conversion.

Additionally, each participant was required to complete a paper enrollment form to re-enroll. If participants did not re-enroll or opt out, they were defaulted into a JPMorgan SmartRetirement fund based on their dates of birth. Each participant was also required to complete a new beneficiary designation form.

Robust communications were delivered to remind participants of the required re-enrollment and beneficiary designation. Materials included e-messaging, posters in break rooms and letters to terminated participants and sales representatives. We also leveraged the strong support received from Human Resources at both the locations.

By partnering with the client, holding mandatory meetings, conducting mandatory re-enrollment with a default option and providing easy-to-understand communications in a variety of channels, we achieved the following results.

  • increased average pretax deferral rate by more than 18%
  • increased participation from 56% to 90%
  • asset allocation changed from: stable value – 24.25%, bond – 11.42%, risk based – 2%
  • asset allocation changed to: stable value – 12.52%, bond 6.32%, age based 57.80%

Our post-conversion satisfaction survey reflected the highest possible rating for the communications consultant, strategy and conversion materials.

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Fiduciary Responsibility

The Pension Protection Act of 2006 (PPA) made several changes to defined contribution (DC) and defined benefit (DB) retirement plans. These changes included both mandatory and optional provisions. As is usually the case for legislative changes, plan sponsors are allowed to operate their plans in compliance with the required changes and any optional changes they adopt, prior to a plan amendment being executed. Eventually, the plan must be amended to add the provisions. The time for PPA amendments is rapidly approaching for calendar year plans – December 31, 2009. The deadline for other plans is the end of the 2009 plan year.

If your plan is covered under a master, prototype or volume submitter arrangement, the sponsor of the arrangement should be providing an amendment to you. If you have adopted optional provisions of PPA, you may be required to adopt the amendment. Otherwise, you may just have to keep a copy of the sponsor-adopted amendment with your primary document. If your plan operates under an individually designed document, your legal counsel should be preparing the amendment for your plan. All amendments should be retroactive to the effective date of the various PPA changes applicable to your plan.

Following is a partial list of PPA provisions that generally should be included in your PPA amendment if applicable to your plan. Each plan sponsor should work with its own legal counsel to identify specific amendments needed:

  • eligible automatic contribution arrangements or qualified automatic contribution arrangements
  • additional reasons for allowing hardship withdrawals under the safe-harbor standards
  • withdrawals due to the hardship of the participant’s primary beneficiary
  • stock diversification rules related to publicly traded employer securities (other than ESOPs)
  • new vesting standards related to non-elective employer contributions in DC plans
  • eligibility of non-spouse beneficiaries to roll over death benefits to inherited IRAs (this provision has been optional, but is required in 2010)
  • three-year vesting requirement for cash balance plans
  • in-service withdrawals from pension plans (DB and money purchase or target benefit DC) upon attainment of age 62
  • benefit restrictions in DB plans based on the plan’s funded status
  • qualified optional survivor annuity rules for pension plans
  • basis for calculating lump sum payments in DB plans

While PPA amendments are being drafted, plan sponsors may consider adding language to incorporate applicable provisions of the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) and the Worker, Retiree and Employer Recovery Act of 2008 (WRERA).

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       Legislative and Regulatory Update - 2009 Regulatory Guidance

To date, 2009 has been a slow year from a regulatory guidance standpoint. This is not at all uncommon during the first year of a new administration. As President Obama gets his representatives in place in the various agencies, the review of regulatory guidance slows, particularly on key issues. Earlier this year, the President appointed Phyllis Borzi to be Assistant Secretary of Labor for the Employee Benefits Security Administration, and J. Mark Iwry as Deputy Assistant Secretary for Tax Policy for Retirement and Health Policy, a new position at the U.S. Treasury Department. Both Ms. Borzi and Mr. Iwry  bring prior government service to their appointments, Ms. Borzi as pension and employee benefit counsel for the U.S. House of Representative’s Education and Labor subcommittee on Labor-Management Relations, and Mr. Iwry as benefits tax counsel at the Treasury Department, overseeing employee benefits and compensation issues from 1995 to 2001.

With the new team in place, we have begun to see the flow of regulatory guidance pick up. Over the Labor Day weekend, President Obama and Treasury Secretary Geithner announced steps to make it easier for Americans to save for retirement. To that end, the following guidance has been published:

  • sample amendments for employer retirement plans to adopt automatic enrollment provisions
  • rules for adding an automatic contribution increase feature to a plan
  • rules allowing unused vacation and similar leave (at the end of a year or upon termination of employment) to be contributed to a plan in the form of either an employer non-elective contribution or an employee elective deferral
  • more reader-friendly notices that satisfy the requirement to inform participants receiving distributions of the opportunity to preserve their retirement savings by use of a rollover to an IRA or another employer plan

The Internal Revenue Service has also created Web site materials to help employers select an appropriate retirement plan and to help employees better understand the benefits of saving for retirement. In the future, we should expect to see more on the President’s budget proposals of creating automatic IRAs for employees not eligible for an employer plan, and an expansion of the Saver’s Credit. We are still awaiting guidance on a number of key defined contribution issues such as fee disclosures and the 2009 suspension of required minimum distributions. In addition, Ms. Borzi recently indicated that the Department of Labor would be reviewing guidance on investment advice provisions under the Pension Protection Act and considering new regulations. All this bodes for an increase in regulatory guidance as we head into 2010.

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Fall 2009 Issue of Journey Magazine

Download the entire edition of Journey  

Earlier this year, we launched our first issue of Journey.

It was an admittedly ambitious foray but we felt strongly that the firm's thought leadership, legislative awareness and keen understanding of participant and plan sponsor needs were such that by opening a conversation with our friends and clients, we would enrich the dialogue.

Fall 2009 Issue of Journey

We have focused our editorial stewardship on critical issues and current ideas, not products. We emphasize an approach featuring open-ended ques­tions rather than lectures on cut-and-dried solutions. And we seek to avoid overbearing self-promotion in an attempt to bring forward a larger debate on industry-wide trends and activities.

The response so far has been tremendous -- a number of appreciative, constructive e-mails and calls directly or through relationship managers. The consensus is that the magazine is headed in the right direction -- answering the bigger questions and informing the key decisions that are foremost in the minds of plan sponsors.

We welcome the feedback and the opportunity to provide a fresh and timely perspective on topics of interest to the entire plan sponsor community.

With the change of season from summer to fall, we introduce our second issue. Focused on legislative matters, we have sought to capture a range of ideas and topics relevant to plan sponsors, investors and advisors interested in the defined contribution (and defined benefit) industry.

On behalf of our team here at J.P. Morgan, thank you for your interest. We look forward to enhancing the dialogue with you in the editions ahead.

Daniel Darst

Editor-In-Chief, Journey Magazine

Stat Life
Stat Life
“The Big Muddy”—Participant data reveals that the wisest move may have been doing nothing at all.
Speaking Investments
Speaking Investments
Our proprietary equity survey of 324 institutional investors sheds light on Corporate, Public and E&F attitudes.
Legislative Corner
Legislative Corner
A quick look at healthcare reform, proposals on DB funding relief and the use of company stock to manage funding ratios.
Texts, Tweets, Blogs & Information Overload
Texts, Tweets, Blogs & Information Overload
A consideration of what social media can do—and already is doing—to the art of participant education and communication.
On DC from D.C.
On DC from D.C.
A discussion with J.P. Morgan’s man-on-the-spot in Washington, Bob Holcomb.
Game, Set, Match
Game, Set, Match
A look at several examples of the changes company 401(k) matches are going through in a tough economy.
Ms. Lester Goes to Washington
Ms. Lester Goes to Washington
J.P. Morgan’s Anne Lester testifies before the DOL/SEC on TDF strategies.
Fast Forward
Fast Forward
Closing thoughts on legislative change, products for the de-cumulation phase and the way we make decisions about our future.

Subscribe to Journey Magazine

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Top Five Call Drivers for 2008 vs 2009

As of September 30, 2009, the year-to-date call volume has increased 10% over the same period in 2008. The continued stress on the economy, is likely contributing to the increased volume of loan and hardship calls.

 Top 5 Call Drivers












Distribution (under 10k) 



Personal Info Update



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Save the Date

Legislative Webcast -Thursday, October 29, 2009

  • 1 p.m. Central time
  • Dial-in:  800-779-2672, Participant code: 5730882

Audience instructions:

  • First time users: It may be necessary to download software to your computer. A few days before the live event, you may visit this generic meeting to make sure your computer is ready to use Microsoft Office Live Meeting 2007. For assistance, contact Microsoft Live support at 866.493.2825 or 650.526.6194.
  • Please sign on 15 minutes before the meeting. Click here to attend. When prompted to do so, enter your name, email address and company name, then click Continue. Or,  click here to enter the meeting then follow these steps:
  1. At the prompt, enter Meeting ID: LegislativeUpdate and Entry Code: 307519.
  2. At the location field, make certain is selected
  3. Click “Join.”
  4. Next, enter your name, email address and company name.
  5. Click Continue.

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Market Pulse by Stu Schweitzer

Weekly Market Update, a weekly outlook on the markets and the global economy.

MacroMinute Weekly, a short two- to three-minute audio commentary summarizing insights and outlook on the global economy, financial markets and asset allocation. MacroMinute Weekly can be delivered to your voice mail box on Monday mornings before the start of the business day. To subscribe, e-mail with “Subscribe to MacroMinute” in the message subject line, and include your name, firm name and phone number.

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In the News

Information about JPMorgan Chase & Co. in the news is available at

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Contact us at:

For questions regarding your personal 401(k) plan, contact your 401(k) plan provider.

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Availability of products and services featured in Insights vary by plan. For details, contact your J.P. Morgan representative.

Publications referenced in this material are presented for general educational purposes only. JPMorgan and its affiliates did not receive any compensation or consideration for referencing these titles. The opinions and information presented in these titles do not necessarily reflect the opinions of JPMorgan Chase & Co. and its affiliates.

This document is intended solely to report on various investment views held by J.P. Morgan Asset Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. References to asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Indices do not include fees or operating expenses and are not available for actual investment. The information contained herein may employ proprietary projections of expected returns as well as estimates of their future volatility. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. Discussions presented should not be construed as legal opinions or advice. You should consult your own attorney, accountant, financial or tax advisor or other planner or consultant with regard to your own situation or that of any entity which you represent or advise. Past performance is no guarantee of future results.

Under SEC Rule 482, an offer of a prospectus must be included with any sales material or correspondence involving registered investment companies, which includes mutual funds, unit investment trusts, direct participation programs, variable life insurance, variable annuities, and exchange traded funds.

J.P. Morgan Compensation and Benefit Strategies is wholly owned by J.P. Morgan Retirement Plan Services LLC, an affiliate of J.P. Morgan Asset Management.

Recordkeeping and administrative services for the plan are provided by J.P. Morgan Retirement Plan Services LLC (JPMRPS); securities transactions for the plan may be introduced by J.P. Morgan Institutional Investments Inc. (JPMII). Member FINRA/SIPC. JPMRPS and JPMII are affiliates of JPMorgan Chase & Co.

J.P. Morgan Asset Management is the marketing name for the investment management businesses of JPMorgan Chase & Co. and its affiliates worldwide. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., JPMorgan Investment Advisors, Inc., Security Capital Research and Management Incorporated and J.P. Morgan Alternative Asset management, Inc.

J.P. Morgan Funds are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of J.P. Morgan Retirement Plan Services LLC and JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to J.P. Morgan funds, including fees for investment management, shareholder servicing, administration, distribution, custody, fund accounting, securities lending and other services.

J.P. Morgan Retirement Plan Services LLC and its affiliates and agents may receive compensation with respect to plan investments, including, but not limited to, sub-transfer agent, recordkeeping, shareholder servicing, 12b-1 or other revenue-sharing fees.

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for investment, accounting, legal or tax advice.

Generally, the asset allocation of each target date fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears the target retirement date. The target date is the approximate date when investors plan to start withdrawing their money. The principal value of the fund(s) in a plan’s lineup is not guaranteed at any time, including at the time of target date and/or withdrawal.

IRS Circular 230 Disclosure: This communication was written in connection with the potential promotion or marketing, to the extent permitted by applicable law, of the transaction(s) or matter(s) addressed herein by persons unaffiliated with JPMorgan Chase & Co.  However, JPMorgan Chase & Co. and its affiliates do not provide tax advice.  Accordingly, to the extent this communication contains any discussion of tax matters, such communication is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.  Any recipient of this communication should seek advice from an independent tax advisor based on the recipient's particular circumstances.

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