Signed in August 2006 by President Bush, the Pension Protection Act of 2006 also requires financial services firms to provide advice to 401(k) participants on how to best diversify assets and manage risk. "Up until now employers couldn't offer financial advice, but now financial advice can be gained from the employer or a third party," says Rabkin. "Since we are talking about how your portfolio will appreciate in the years ahead, you might see predictive analytics software and illustration vendors such as SAS [Cary, N.C.] and Business Objects [San Jose, Calif.] get into that market space."
Under the Act, employers currently are responsible for monitoring pension accounts and notifying plan participants when any one investment exceeds 20 percent of an individual's portfolio. Account monitoring and notification capabilities also are needed in order to alert plan participants 30 days ahead of the time that they are able to sell their holdings in their employers' stock.
They Are Not Alone
Already, employers are turning to insurers for support in meeting these requirements, and carriers are working to provide information about retirement products and programs for situational reporting and tracking via the Web. "Insurers will have to notify employees when their retirement risk has shifted, which means there will be more demand for reporting software," Rabkin continues.
Most insurers already communicate to employers and plan participants via Web portals, Rabkin notes. But they must take this technology to the next level by adopting new technologies such as SOA and Web services to provide the additional information and capabilities, he asserts. "Insurers will want to develop more-flexible Web services from the perspective of increasing business functionality that supports the monitoring and tracking, as well as the modeling and reporting to communicate more effectively and efficiently with both the plan managers and the plan participants," Rabkin says.