Workers steered to high-risk investing

[deminks]

http://www.boston.com/business/personalfinance/articles/2009/04/05/workers_steered_to_high_risk_investing/

WASHINGTON - Shortly before the first signs of the stock market collapse, the Bush administration made a crucial decision that has propelled an estimated one to two million workers into stock-heavy retirement funds.

Many of the funds in which workers were automatically enrolled dropped more than 25 percent last year, while a more conservative investment strategy rejected by the Bush administration would have resulted in a gain of 4.7 percent.

The administration's decisions came in response to a congressional mandate to encourage more workers to participate in company-sponsored retirement savings plans. The Bush administration came up with a rule that enabled businesses to automatically enroll their workers in tax-free 401(k) retirement plans.

If the workers failed to specify how they wanted their money invested, the company would be required by law to place their retirement money in investment funds that, for the most part, relied heavily on stocks. The administration specifically rejected calls for a more conservative investment option.

(end snip)

Oh gawd.

[bbinacan]

1. Was the automatic enrollment

for company match or company profit sharing? Did it include what the workers contributed from their incomes?

[deminks]

2. I think it was both.

More from the article:

(snip)

If the workers failed to specify how they wanted their money invested, the company would be required by law to place their retirement money in investment funds that, for the most part, relied heavily on stocks. The administration specifically rejected calls for a more conservative investment option.

(snip)

There was bipartisan support in Congress for finding a way to increase worker participation. But many companies told Congress that they were reluctant to automatically enroll workers for fear that they would be sued if the funds performed poorly. Congress responded by passing legislation that provided protections against lawsuits if the companies put employees into certain categories of default funds and provided a match for part of an employee's contribution.


(end snips)

[bbinacan]

3. I could be wrong

but I think companies can only do that with matching funds.

[deminks]

4. I think the article is saying that Bush and Congress changed the law.

Right before the market crashed last fall. And they made damn sure we had no recourse.