Russell Retirement Report 2008: Fundamental changes underway point to a new generation DC plan that Russell labels 401(k) version 2.0 (Russell.com)

Russell Retirement Report 2008:
Fundamental changes underway point to a new generation DC plan that Russell labels 401(k) version 2.0

Tacoma, WA — September 17, 2007 — In its newly released Russell Retirement Report 2008, Russell Investment Group argues that the 401(k) plan is being redesigned in corporations across America and that the changes currently underway are so fundamental that they amount to a new generation of defined contribution plan Russell calls 401(k) version 2.0. Russell contends that income replacement has replaced wealth management as the key objective for defined contribution plans. Additionally, 401(k) plans must respond and change in concert with their developing role as the central provider of retirement income in the United States.

"Before our eyes, and at a quite remarkable pace, a new breed of 401(k) plans is being designed, built, tested and launched," said Bob Collie, director of investment strategy at Russell and author of the Russell Retirement Report 2008. "What's happening is really a redefinition of every aspect of how a 401(k) plan ought to be run, and it all flows from an acknowledgement that these now have to work as retirement provision vehicles and not just savings plans."

In the 2008 retirement report, Russell identifies 15 key features of the new breed of 401(k) plans that represent significant modifications or entirely new additions to existing versions. Examples of this redesign include: individual 401(k) account reporting tied to retirement income levels instead of net asset value; standards of investment efficiency raised to the same level that institutional investors demand for corporate defined benefit plans; and pre-mixed asset-allocated funds replacing asset class funds as the new investment foundation.

"Because workplace savings plans like 401(k)s are becoming the primary source of employer-sponsored retirement, 401(k) version 2.0 will be held to a higher standard," said Matt Smith, managing director of retirement services. "Public policy is now driving the increased focus on 401(k) plans and demanding they become more effective at providing financial security for retirement."

The Russell Retirement Report 2008 also includes a discussion of the questions that corporate plan sponsors now face as the new version of 401(k) plans takes shape. While some plan sponsors view the next generation of 401(k) plans as a superior benefit, others have just closed their defined benefit plan and may be leery of reengaging in any element of providing retirement income for their employees. Russell argues that the burden on the defined contribution fiduciary might have seemed less onerous than that of the defined benefit fiduciary, but that misconception is going away as 401(k) version 2.0 takes hold. Fiduciary responsibilities will include decisions around auto-enrollment, qualified default investment alternatives (QDIAs), brokerage window options and employee education, to name a few.

The Russell Retirement Report 2008 is available at www.russell.com/RetirementReport2008.

About Russell: Russell Investment Group provides strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. With $220 billion in assets under management, Russell serves individual, institutional and advisor clients in more than 40 countries. Russell provides access to some of the world's best money managers. It helps investors put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors. Founded in 1936, Russell is a subsidiary of Northwestern Mutual Life Insurance Company and headquartered in Tacoma, Wash. Russell has principal offices in Amsterdam, Auckland, Hong Kong, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Singapore, Sydney, Tokyo and Toronto.

Contact:
Jennifer Tice, 253-439-2921
Matt Burkhard, 718-875-2122

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.

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First used: September 2007