Category Archives: Retirement

401(k)/IRA Holdings in 2013: An Update from the SCF

Source: Alicia H. Munnell, Center for Retirement Research at Boston College, IB#14-15, September 2014

The brief’s key findings are:
∙ The Federal Reserve’s 2013 Survey of Consumer Finances provides an opportunity to examine trends in retirement savings over the past few years.
∙ The good news is increased use of target date funds; the bad news is no improvement in participation rates, significant leakages, and high fees.
∙ Surprisingly, for working households nearing retirement, median combined 401(k)/IRA balances actually fell from $120,000 in 2010 to $111,000 in 2013.
∙ Younger households did see rising balances but retirement savings levels are clearly inadequate, and about half of all households have no 401(k) assets at all.

2014 Employee Healthcare and Other Benefits in Higher Education Survey

Source: College and University Professional Association for Human Resources, 2014

The Employee Healthcare and Other Benefits Survey collects data on the most representative healthcare and non-healthcare benefits offered to faculty and staff employed in a cross-section of the nation’s colleges and universities. Healthcare data is collected annually and non-healthcare data every two years. The latter includes basic life insurance, short- and long-term disability, paid time-off, tuition assistance and retirement benefits.

As a result of changes to healthcare benefits stemming from the implementation of the Affordable Care Act (ACA), and in an effort to better control costs, many higher education institutions are passing more of the cost of healthcare along to their employees. According to findings from CUPA-HR’s 2014 Employee Healthcare and Other Benefits in Higher Education Survey, 41 percent of respondents have increased the employee share of premium costs since the ACA went into effect. Additionally, 26 percent have increased in-network deductibles, 27 percent have increased out-of-pocket limits, 20 percent have increased the employee share of prescription drug costs, and 24 percent have increased the employee share of dependent coverage costs. Many institutions are also ramping up their efforts to encourage healthy living among employees, with 36 percent of respondents indicating they have adopted or expanded a wellness program and 21 percent saying they have adopted or expanded the use of financial incentives to encourage healthy behaviors. …

Other Findings of Note:
Other findings from this year’s benefits survey:
PPO plans continue to be the plan of choice for a majority of institutions – 82 percent of respondents offer PPO plans. However, HDHPs continue to increase in popularity, with 44 percent of respondents offering this type of plan (up from 17 percent in 2009).
Sixty percent of institutions offer healthcare benefits to same sex domestic partners or spouses (up from 46 percent five years ago).
A substantial percentage of institutions offer healthcare benefits to part-time staff and faculty (42 percent and 36 percent, respectively), and most of those also pay part of the premium.
None of the institutions not offering healthcare benefits for part-time employees provide financial support for enrollment in a public exchange, and only 2 percent are considering doing so next year.
Almost all institutions provide basic life insurance, long-term disability, paid time-off, tuition assistance and retirement benefits. Short-term disability, however, is only offered by 64 percent of the respondents.
Press Release
Fact Sheet
3 Trends in Employee Benefits in Higher Ed

Employee Benefits: Today, Tomorrow, and Yesterday

Source: Nevin Adams and Dallas Salisbury, Employee Benefit Research Institute, Issue Brief, no. 401, July 2014

From the summary:
In 2013, the nonpartisan Employee Benefit Research Institute (EBRI) commemorated its 35th anniversary. While much has changed with health and retirement benefits during the past three decades—the first generation of the Employee Retirement Income Security Act (ERISA)—many of the issues that were present at EBRI’s beginning remain today.

But even if core issues endure, the historic shift away from “traditional” defined benefit pension plans and toward 401(k)-type defined contribution retirement plans, along with the recent enactment of the Patient Protection and Affordable Care Act of 2010 (PPACA), and the demographic shifts attendant with the retirement of the Baby Boomers and the workplace ascendency of the Generation X and Millennial cohorts, employee benefits are certain to continue to change and evolve in the future.
Each year EBRI holds two policy forums which bring together a cross-section of national experts in the benefits field, congressional and executive branch staff, and representatives from academia, interest groups, and labor to examine public policy issues affecting health and retirement benefits.

This Issue Brief summarizes the presentations and discussions at EBRI’s 73rd policy forum held in Washington, DC, on Dec. 12, 2013. Titled “Employee Benefits: Today, Tomorrow and Yesterday,” the symposium offered expert perspectives on not only the workplace and work force of the past, but the challenges of today’s multi-generational workplace, and the difficulties and opportunities that lie ahead. Following a review of the benefits landscape by EBRI’s research team, panels discussed:
• 1978 to 2013: The Changing Role of Employers in Employee Benefits.
• Employee Benefits from 2013 to 2048: The Road to Tomorrow.
• 2013 to 2048: Work Force Trends and Preferences, Today and Tomorrow.

2013 Annual Survey of Public Pensions: State-Administered Defined Benefit Data

Source: U.S. Census Bureau, August 26, 2014

From the tip sheet:
This provides a comprehensive look at the financial activity of the nation’s state-administered defined benefit pension systems, including cash and investment holdings, receipts, payments, pension obligations and membership information. Statistics are shown at the national level and for individual states. The total cash and investment holdings of the nation’s state-administered defined benefit pensions systems totaled $2.7 trillion in 2013. By comparison, total cash and investment holdings totaled $2.5 trillion in 2012, yielding a 7.8 percent increase from 2012 to 2013.
All Data of State Pension Systems

2014 Retirement Confidence Survey of the State and Local Government Workforce

Source: Paul J. Yakoboski, Joshua M. Franzel, Center for State and Local Government Excellence and TIAA-CREF Institute, August 2014

From the summary:
This report analyzes data from a recent survey initiative that examined the employment and retirement planning and saving experiences of state and local government workers, as well as their confidence in their retirement income prospects.

Highlights from the report include the following:
– Virtually all full-time state and local workers are covered by some form of retirement plan offered by their employer, but only 39 percent are very confident that they will receive all of the benefits that they have earned in retirement.
– In comparison to 2012, when 72 percent of respondents expected to work for pay after retiring, the figure has dropped to 49 percent in 2014.
– While 2014 confidence levels in overall retirement income prospects are generally consistent with 2012 (18 percent are very confident and 56 percent somewhat confident), there was a decrease in the proportion of public-sector employees who are either very confident or not at all confident. This year’s survey also revealed a 7 percentage-point shift of K-12 teachers from very confident to somewhat confident about their retirement income prospects.
– Public-sector workers are concerned about federal retirement income security programs. Only 7 percent of state and local government employees are very confident that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today, while 55 percent are not confident. The same goes for Medicare benefits, with 6 percent reporting they are very confident and 52 percent saying they are not confident.
– In 2012, 51 percent of retirement savers in the public-sector workforce said they received retirement planning advice from a professional financial advisor within the past three years. In 2014, only 38 percent reported receiving advice. But this year’s report suggests more individuals are following all the investment advice they receive. For example, 24 percent reported following all the investment advice received in 2014 vs. 18 percent in 2012.

Size of Long-term Obligations Varies Across States

Source: Sarah Babbage and Kil Huh, Pew Charitable Trusts, Fiscal 50, August 19, 2014

States commit to future spending both when they borrow and when they fall short of funding the cost of retirement benefits for their public employees. As of fiscal year 2012, the largest of these long-term obligations was unfunded pension liabilities in 35 states, unfunded retiree health care costs in seven states, and public debt in eight states.

States pass balanced budgets each year, but some spending commitments that will not come due for years go unpaid. A snapshot of debt and unfunded retirement costs in fiscal 2012 shows totals of $915 billion in unfunded pension benefits, $757 billion in outstanding public debt, and $577 billion in unfunded retiree health care and other nonpension benefits.

States take on these obligations, which are paid over decades, for different reasons. Sometimes a state borrows to build infrastructure projects that deliver services for years in the future and may spur economic growth. When the bill comes due, states usually cover these debt obligations before other expenses. In other instances, a state creates unfunded liabilities when it sets aside less than is needed to cover the full retirement costs for public services already performed, shifting those expenses to future taxpayers. …

Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World

Source: Richard L. Kaplan, Connecticut Insurance Law Journal, Vol. 20 No. 2, 2014

From the abstract:
A retiree’s single largest and most unpredictable expense is paying for health care, and this article explains the various choices and options that a retiree confronts regarding that expense. The article examines the traditional components of Medicare (Parts A and B), prescription drug plans (Medicare Part D), Medigap coverage, and managed care alternatives, as well as long-term care insurance. Each section addresses the financial trade-offs and time-sensitive decisions that are involved.

Pensionomics 2014: Measuring the Economic Impact of DB Pension Expenditures

Source: Nari Rhee, National Institute on Retirement Security, July 2014

From the summary:
A new national economic impact study finds that DB pension benefits have a significant economic impact: 6.2 million American jobs and $943 billion in economic output. The analysis finds that the benefits provided by state and local government pension plans have a sizable impact that ripples through every state and industry across the nation.

Pensionomics 2014: Measuring the Economic Impact of DB Pension Expenditures finds that expenditures made from public, private, and federal government pension benefits in 2012:
∙ Had a total economic impact of more than $943 billion.
∙ Supported 6.2 million American jobs that paid nearly $307 billion in labor income to American workers.
∙ Supported more than $135 billion in federal, state, local tax revenue.
∙ Had large multiplier effects. For every dollar paid out in pension benefits, $1.98 in total economic output was supported. For every taxpayer dollar contributed to state and local pensions $8.06 in total output was supported.
∙ Had the largest employment impact on the food services, real estate, health care, and retail trade sectors.
∙ Paid nearly $477 billion in pension benefits to 24 million retired Americans and beneficiaries.
The report also analyzes the economic impact of state and local pensions in all 50 states and the District of Columbia. Click through the image below to see state-by-state data.
Press release
State Fact Sheets/Map

How Much Should People Save?

Source: Alicia H. Munnell, Anthony Webb and Wenliang Hou, Issue Brief, Center for Retirement Research at Boston College, IB#14-11, July 2014

The brief’s key findings are:
∙ The National Retirement Risk Index framework is used to address how much working-age households need to save for retirement.
∙ A typical household should get a third of its retirement income from a savings plan, with the low income needing one quarter and the high income one half.
∙ A typical household needs to save about 15 percent of earnings, with the low income requiring less and the high income more.
∙ For those with a savings shortfall, the necessary savings hike is much more feasible for younger households than for older households.
∙ Starting to save early and retiring late dramatically reduce a household’s required saving rate.