That’s the title of Sergio Leoni’s 1966 movie considered the greatest of the Italian spaghetti westerns. We know it in this country, of course, as The Good, The Bad, and The Ugly.

The movie starred Clint Eastwood (the Good), Eli Wallach (the Bad), and Lee Van Cleff (the Ugly). And just like the movie,  the year 2008 had The Good, The Bad, and The Ugly for retirement plans.

And so with apologies to the afore-mentioned director and actors, here are my nominations in each of the categories.

The Good

My vote goes to the Pension Protection Act of 2006 ("PPA") as it plays out for 401(k) plans through Department of Labor and Internal Revenue Service regulations. In our December, 2006 Client Briefing, we discussed how the PPA:

  • Eliminated the sunset provisions for benefit and contribution limits due to expire in 2010.
  • Extended the Roth 401(k) provision also due to expire in 2010.
  • Encouraged employee savings through automatic enrollment.
  • Expanded hardship provisions.
  • Required faster vesting of employer contributions.
  • Mandated more frequent benefit statements with more disclosures
  • Required diversification of investments in employer stock for participants in certain plans.

And now two years after passage of the PPA, the new provisions are continuing to enhance 401(k) plans for employees.

The Bad

The Bad is in the form of two disturbing trends.

  • Reduction or elimination of employer matching contributions.
  • Increased layoffs.

Disturbing because of the possible long-term implications for retirement savings. With the decline of defined benefit plans, 401(k) plans have become "it" as the method by which employees save for retirement. Most employees are behind now, and if these trends continue, "catch-up" will be difficult or even impossible.

The Ugly

Hands down, Ugly goes to the impact of the stock and bond market meltdown on employees’ 401(k) accounts. Top Gold News recently described the current situation as financial chaos undermines 401(k) plans. Add that to concerns about Social Security funding, and we’re beginning to see a rethinking of our retirement system.

Both the academics and the politicians have begun to examine how the system can be improved in which most of the risk now is in the hands of employees who are feeling extremely vulnerable.  Expect this issue to go public after President-Elect Obama is inaugurated and the new Congress convenes.

So for 2008, that’s a wrap. Now queue the trailer with that great theme music by Ennio Morricone