Category Archives: Retirement

U.S. Labor Department and SEC issue guidance on target date funds

Source: U.S. Department of Labor and Securities and Exchange Commission, 2010

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the U.S. Securities and Exchange Commission (SEC) today announced guidance to help investors and plan participants better understand the operations and risks of target date fund investments.

Target date funds, also known as life cycle funds, are designed to provide a convenient way to invest for retirement by automatically changing their mix of investments in a way that is intended to become more conservative as the fund’s target date approaches. There can be significant differences among target date funds in how they invest and how they reallocate assets between equity and fixed income investments up to and after the target date of the fund. The guidance will assist investors and participants in assessing the benefits and risks associated with target date funds and the appropriateness of including such an investment as part of their retirement portfolios.

The guidance describes some basics features of target date funds, including the investment mix of such funds, the risks associated with the investments, how target date funds operate, and ways to evaluate a target date retirement fund that will help increase awareness of both the value and risks associated with these types of investments.

The Use of Health Savings Accounts for Health Care in Retirement

Source: Employee Benefit Research Institute, Vol. 31, No. 4, April 2010

From the press release:
Health savings accounts (HSAs) are likely to play a minor part in savings for health care costs in retirement, according to a report issued today by the nonpartisan Employee Benefit Research Institute.

That’s because both statutory contribution limits and currently low interest rates constrain the amount HSAs are able to generate, compared with the large amount needed to pay for retiree health expenses.

Still Out, Still Aging – The MetLife Study of Lesbian, Gay, Bisexual, and Transgender Baby Boomers

Source:MetLife Mature Market Institute and the American Society on Aging, March 2010

From the summary:
– 60% of LGBT Boomers fear being unable to care for themselves as they age; 35% fear becoming dependent on others
– Nearly two-thirds of LGBT Boomers say they have a “chosen family,” a group of people they consider family, even though they are not legally or biologically related
– Nearly half of the LGBT Boomers and four in ten Boomers from the general population say they don’t expect to retire until age 70 or older
– Men in both the LGBT and general population are nearly as likely as women to be giving care to another adult

The Grand Irony of ERISA?: Intersectionality of ERISA Preemption and Remedial Issues Symposium

Source: Hofstra Labor and Employment Law Journal, Volume 26, No. 2, Spring 2009

Articles include:
The Paternalistic Ideology of ERISA and Unforgiving Courts: Restoring Balance Through a Grand Bargain – Edward A. Zelinsky
The Next Generation of Preemption Cases: State Regulation of 401(K) Plans – Debra A. Davis
ERISA Remedies, Welfare Benefits, and Bad Faith: Losing Sight of the Cathedral – Peter K. Stris
A Regulatory Vacuum Leaves Gaping Wounds–Can Common Sense Offer a Better Way to Address the Pain of ERISA Preemption? – Andrew L. Oringer
Leaving Well Enough Alone: Reflections on the Current State of ERISA Remedial Law – Thomas P. Gies & Jane R. Foster
Where Are We Going, and Where Should We Be in Ten Years? – Jonathan Barry Forman
ERISA Misrepresentation and Nondisclosure Claims: Securities Litigation Under the Guise of ERISA? – Clovis Trevino Bravo
Safeguarding Employee Stock Ownership Plans: Insurance as Assurance – Lauren E. Berson & Nicholas L. Cushing

Workers’ Response to the Market Crash: Save More, Work More?

Source: Steven A. Sass, Courtney Monk, and Kelly Haverstick, Center for Retirement Research at Boston College, IB#10-3, February 2010

From the summary:
The stock market crash of 2008 significantly dimmed the retirement prospects of workers approaching retirement. These workers are heavily dependent on 401(k) plans, as opposed to traditional defined benefit pensions, as a source of retirement income. During the economic downturn, these plans lost about one-third of their value. Even before the crash, many older workers lacked the assets needed to enjoy a comfortable retirement.

Implications of Health Reform for Retiree Health Benefits

Source: Paul Fronstin, Employee Benefit Research Institute, Issue Brief, no. 338, January 2010

Health insurance reform legislation pending in Congress would have a mixed impact on retiree health benefits, according to a study published today by EBRI. In the short term, some provisions of the legislation would help bolster early retiree coverage, while in the longer term other provisions could create significant incentives for employers to drop retiree coverage.
See also:
Press release

Protecting Our Aging Retirees: Converting 401(K) Accounts into Federally Guaranteed Lifetime Annuities

Source: Larry Frolik, University of Pittsburgh Legal Studies Research Paper No. 2009-34, November 14, 2009

From the abstract:
America’s retirees are faced with a potential financial disaster. Economic security in retirement has long depended on Social Security, private savings and employer provided retirement plans. While much attention has been paid to the financial problems of Social Security and the lack of private saving for retirement, little attention has been paid to an alarming development in employer provided retirement plans: the likely inability of retirees during the long years of their retirement to successfully manage their retirement funds accumulated in 401(k) and similar accounts. We as a society have set up a funding system for retirement that assumes retirees will be able to successfully manage their IRAs for the 20 or 30 years of retirement. We know, however, that most will not. Some will lack the basic intelligence or knowledge of finance take on the risk, oversight and planning. Some will be fine managing an IRA at age 65, but lose the ability due to physical decline. Finally, millions of aging IRA owners will lose the ability to manage their finances because of the lost of mental capacity, primarily because of dementia. Asking individuals to husband a lump-sum payout from a 401(k) retirement account for the 20 to 30 years of retirement as they physically and mentally decline is a recipe for disaster. Unless we provide a more secure way to stretch retirement dollars into the twilight of retiree lives, we can expect to see more and more elderly retirees slide into poverty. The solution is to create federally guaranteed life-time annuities that retirees can purchase with the funds accumulated in their 401(k) retirement accounts.

The Crisis in State and Local Government Retiree Health Benefit Plans: Myths and Realities

Source: Robert L. Clark, Center for State and Local Government Excellence, Issue Brief, November 2009

States with the lowest unfunded liabilities include North Dakota, Wyoming, Iowa, Oregon, Rhode Island, and Oklahoma; states with the largest include New Jersey, New York, California, North Carolina, Connecticut, Louisiana, and Texas. The brief finds that:

– Although there are wide-spread reports of a major fiscal crisis, the reality is that some states face a fiscal crisis while others do not.
– There are substantial differences in the total liabilities of state retiree health plans, depending on the generosity of the plan and the size of the public sector.
– Retirement benefits are not protected by state laws or constitutions, and public sector employers will continue to amend their plans to reduce costs.
See also:
2008 version

401(k) Plans and Race

Source: Alicia H. Munnell and Christopher Sullivan, Center for Retirement Research at Boston College, Issue Brief, IB#9-24, November 2009

From the summary:
Many data sources show a disparity among racial and ethnic groups regarding participation in and contributions to 401(k) plans. White workers participate at a higher rate and contribute a higher percentage than African American and Hispanic workers. However, few studies have explored whether these differences persist once other factors expected to impact these decisions are taken into consideration. One recent study by Ariel/Hewitt using client data found lower participation and contributions rates in 401(k) plans for African Americans and Hispanics than for Whites, even after controlling for age, tenure, and earnings. The question is whether racial and ethnic differentials remain after controlling for a broad or array of factors included in a nationally representative sample of households, the Federal Reserve’s Survey of Consumer Finances (SCF)…