Category Archives: Retirement

Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2006

Source: Employee Benefit Research Institute, EBRI Notes, Vol. 30, No. 2, February 2009

A new study by the nonpartisan Employee Benefit Research Institute (EBRI) shows that workers increasingly see defined contribution plans (401(k)-type) as their primary retirement plan type, with about two-thirds of workers identifying these as their most important plan.
See also:
Press release

The Structure of 401(k) Fees

Source: Richard W. Kopcke, Francis Vitagliano, and Dan Muldoon, Center for Retirement Research at Boston College, Issue in Brief, IB# 9-3, February 2009

The brief’s key findings are:

    * 401(k) fees are complex and may not closely correspond to costs.
    * Fees also raise design issues, such as transfers from high-balance to low-balance participants and from participants to non-plan investors.
    * Better disclosure could help employers and participants avoid unreasonable costs.
    * Policymakers may also want to opine on the transfers embedded in today’s fee structure.

The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Boomers

Source: Barbara Butrica, Howard Iams, Karen E. Smith, Eric Toder, Urban Institute, January 29, 2009

From the abstract:
Over the last three decades there has been a steady shift from DB to DC pensions. The Pension Protection Act of 2006 may accelerate this trend. This paper examines the impact of an accelerated freeze on the retirement income of boomers. Simulations suggest that such a scenario would produce more losers than winners and reduce average retirement incomes. Income changes will be substantial among high-income workers, who have the highest DB coverage and pension incomes. Late boomers will experience the largest impacts, as they lose their high DB accrual years and have inadequate time to accumulate DC wealth before retirement.

The Vesting, Modification, And Financing of Public Retiree Health Benefits In Light of New Accounting Rules

Source: John Sanchez, John Marshall Law Review, Summer 2008

New accounting rules being phased in between 2006 and 2008 will require state and local governments, for the first time, to report the full cost of public retiree health benefits (“PRHBs”) for both current employees and retirees. … While strictly speaking the case narrowly involves public pension plans, any decision is likely to influence all public employment retirement benefits, including health benefits that offer different benefits packages for different age groups. … On the minus side, some public employers fear that pre-funding will change the nature and status of retiree health benefits from unvested to vested. … But in the public sector, what if a statute forbids the vesting of PRHBs but the contract includes a promise of lifetime retiree benefits? … An oversight board arbitration award aimed at altering retirees’ medical benefits was challenged as: 1) a breach of contract; 2) an ultra vires act; 3) a taking under the state and federal constitutions; and 4) an impairment of contract rights in violation of the federal constitution. … While nothing in the new accounting rules forces states to switch from pay-as-you-go financing, several factors will exert pressure on states to increasingly pre-fund PRHBs: (1) failure to pre-fund may result in a downgrading of a state’s creditworthiness, making it more expensive to borrow money; (2) the decreasing ratio between the numbers of active employees to retirees will increase the cost of PRHBs; (3) the aging workforce and financial incentives to retire at younger ages will increase the cost of PRHBs; and (4) if recent trends in the development of medical technology continue, the costs of healthcare will continue to outstrip inflation for the foreseeable future.

Can the Bottom Third Work Longer?

Source: Alicia H. Munnell, Geoffrey Sanzenbacher, and Steven A. Sass, Center for Retirement Research, Issue in Brief, IB#9-1, January 2009

The brief’s key findings are:

  • The labor force activity of low-skilled men age 50-64 has declined significantly since 1960.
  • The decline mirrors the growth of disability insurance, SSI, early retirement benefits, and employers’ preference for high-skilled workers.
  • Health has improved for this group, but their disability-free life expectancy remains limited.
  • So working until their mid-60s may not be realistic or even desirable for many low-skilled men.

How Much Risk is Acceptable?

Source: Alicia H. Munnell, Anthony Webb, and Alex Golub-Sass, Center for Retirement Research at Boston College, Issue in Brief, IB#8-20, November 2008

The brief’s key findings are:
• The financial crisis suggests the need for a new universal tier of retirement saving to supplement Social Security and 401(k)s.
• If the tier were a defined contribution system, asset levels would vary with market returns and payouts with interest rates.
• Replacement rates could fluctuate as much as 30 percentage points- even if everyone invested in an identical target-date fund.
• An alternative is to guarantee a fixed return, but this return will almost always be lower than that under a target-date fund, and guarantees are not costless.

Social Security and Private Savings: Complementary Roles

Source: Matthew Baumgart, Pamela Perun and Lisa Mensah, National Academy of Social Insurance, Social Security Brief No. 29, September 2008

From the summary:
Retirement policy debates often pit Social Security against private savings. Advocates of private savings often suggest that personal accounts are superior to Social Security and should replace the current retirement benefit program. Nearly all retirement policy experts agree, however, that both Social Security and private savings are needed for a financially safe and secure retirement.

Are Retirement Savings Too Exposed to Market Risk?

Source: Alicia H. Munnell and Dan Muldoon, Center for Retirement Research at Boston College, Issue in Brief, IB#8-16, October 2008

The brief’s key findings are:
• Over the past year, equities in pension plans dropped $4 trillion.
• The decline was split equally between traditional pensions and 401(k)s/IRAs.
• Individuals in traditional pensions were sheltered, but those in 401(k)s/IRAs experienced a direct hit.
Related article:
The Benefit of Defined Benefits
Source: David Madland, Center for American Progress, October 22, 2008

Sun Life Financial Unretirement Index

Source: Sun Life Financial, 2008

The Sun Life Financial Unretirement Index is a new national study on American attitudes toward retirement that will be updated several times each year. Sun Life created this Index because American attitudes toward retirement today are dramatically different from those of previous generations. As traditional views on the “golden years” continue to evolve, so will the financial needs and retirement lifestyles of future generations. The Unretirement Index will monitor these generational and demographic changes.

This web site reveals the initial findings of the first study of the Unretirement Index and includes information about how factors like the economy, careers and family influence today’s workforce. These initial results can be compared to future findings to learn how the concept of retirement is changing as the median age of Americans rises and more Baby Boomers prepare for important decisions, including when to take Social Security and why to choose to leave the workplace.
See also:
Press release

Selected State Pension and Retirement Legislation Enacted in 2008

Source: National Conference on Public Employee Retirement Systems, 2008

This report was compiled for the National Conference on Public Employee Retirement Systems by staff of the National Conference of State Legislatures (NCSL). This report summarizes selected state pensions and retirement legislation enacted through July 7, 2008. It builds upon a search of the legislation of all the states that held regular or special sessions from January through July 2008. The Arkansas, Montana, Nevada, North Dakota, Oregon and Texas legislatures did not convene in regular session in 2008. Some states continue in session at this time. This report will be updated late in 2008 to reflect actions that may occur after July 7. The legislation summarized below was compiled from several sources. The report is based upon comprehensive surveys of legislation Statenet provided NCSL. That foundation was augmented with legislation and legislative summaries reported on various legislatures’ and state retirement systems’ Websites, and summaries legislative staff provided NCSL.