Category Archives: Retirement

Making Your Nest Egg Last a Lifetime

Source: Anthony Webb, Center for Retirement Research at Boston College, Issue Brief, IB#9-20, September 2009

From the introduction:
Media attention on retirement security generally focuses on the need to save enough to enjoy a comfortable retirement. However, accumulating a nest egg is no longer the only significant challenge – the other is managing one’s nest egg in retirement. In contrast to previous birth cohorts who often received a lifetime income from a defined benefit pension plan, in today’s 401(k) world retirees must choose how to convert their accumulated savings into a monthly paycheck.

One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream. However, for various reasons, such annuities have not proven broadly popular. Therefore, this brief examines several alternatives. All such strategies involve a trade-off between maximizing consumption and minimizing the risk of running out of money. Calculating the optimal strategy is really hard – maybe impossible. But, despite the complexity of the problem, some strategies are clearly superior to others…

Prefunding Other Post Employment Benefits (OPEB) in State and Local Governments: Options and Early Evidence

Source: Jerrell D. Coggburn and Jamie McCall, Center for State and Local Government Excellence, Issue Brief, September 2009

From the summary:
This new issue brief takes a hard look at the options state and local governments are pursuing to reduce their unfunded liabilities for retiree health care.

The brief cites examples of how governments are addressing their OPEB obligations:

* West Virginia, which has established a trust fund, also made changes in its health care benefit plan for retirees, and most recently, eliminated retiree health care subsidies for all employees hired after July 1, 2010.
* Montgomery County, Maryland, which developed a multi-year plan to arrive at full funding, including the establishment of a Section 115 trust and an independent board to manage the trust and its investment policies.
* Oakland County, Michigan, which began prefunding retiree health care liabilities in 1987 and more recently has issued OPEB bonds to help fund the County’s Section 501(c)(9) Voluntary Employees’ Beneficiary Association (VEBA).
* Gainesville, Florida, a city with a consistent history of paying in excess of its annual required contribution and that may be the first local government to complete its prefunding obligations through the sale of OPEB bonds in 2005.

Governments know that their retirement benefits have helped them attract and retain the talent they need. Most governments continue to fund their retiree health benefits on a “pay-as-you-go” basis even as they assess strategies to deal with escalating costs.

Labor Day by the numbers

Source: Anna Turner, Economic Policy Institute, EPI Fact Sheet, September 4, 2009

Highlights include:
• Total Jobs Lost During The Recession: 6.9 Million
• Unemployment Rate: 9.7%
• States With Double-Digit Unemployment In July, 2009: 16; When This Last Happened: 1983
• Increase In Average U.S. Worker’s Productivity, 2000-07: 19.2%
• Expected New Spending (12-Months) From The New $7.25 Minimum Wage: $5.5 Billion
• Americans Uninsured In 2007: 45 Million
• Share Of People Near Retirement Age With A 401(K) Balance Under $40,000 In 2007: 50%
• Workplaces With No Contract More Than Three Years After Election Is Won: 25%
• Annualized Rate Of Economic Contraction, 2nd Quarter, 2009: 1%

Private Pensions: Alternative Approaches Could Address Retirement Risks Faced by Workers but Pose Trade-offs

Source: United States Government Accountability Office, GAO-09-642, July 24, 2009

U.S. workers face a number of risks in both accumulating and preserving pension benefits. Specifically, workers may not accumulate sufficient retirement income because they are not covered by a defined benefit (DB) or defined contribution (DC) pension plan. For example, according to national survey data, about half of the workforce was not covered by a pension plan in 2008. Furthermore, workers covered by DC plans, in particular, risk making inadequate contributions or earning poor investment returns, while workers with traditional DB plans risk future benefit losses due to a lack of portability if they change jobs. Preretirement benefit withdrawals (leakage), high fees, and the inappropriate drawdown of benefits in retirement also introduce risks related to preserving benefits, especially for workers with DC plans.
See also:
Guaranteed Retirement Accounts: Toward Retirement Income Security
Source: Teresa Ghilarducci, Economic Policy Institute, 2007

At a Crossroads: The Financing and Future of Health Benefits for State and Local Government Retirees

Source: Richard C. Kearney, Robert L. Clark, Jerrell D. Coggburn, Dennis M. Daley, Christina Robinson, Center for State and Local Government Excellence, July 2009

From the summary:
First systematic (entire workforce) assessment of OPEB (other post-employment benefits) liabilities of US states and a sample of localities.

Key findings of the report include:

* States have unfunded liabilities for retiree health care of about $558 billion.
* State plans differ substantially in their generosity, coverage, and outstanding liabilities.
* Unfunded actuarial accrued liabilities (UAAL) for many governments are large in absolute value and relative to total state expenditures, debt, and per capita income of the state. For others they are not.
* Actuarial statements reveal substantial differences in total unfunded retiree health care liabilities. This is a function of work force size, plan generosity, and the portion of health care costs paid by the employer.
* Most state and local governments, however, have adopted various cost containment, cost shedding, and cost sharing policies, including retiree premium contributions, higher deductibles, and higher co-payments. Some have curtailed benefits for future retirees.
* Preventive medicine and wellness programs are catching on in the states, but most to date are limited in scope.
* State and local governments report they are more willing to consider changes in age and/or years of service requirements for retiree health care eligibility.

Retirees at Risk: The Precarious Promise of Post-Employment Health Benefits

Source: Richard L. Kaplan, Nicholas J. Powers, Jordan Zucker, Yale Journal of Health Policy, Law, and Ethics, Vol. 9, No. 2, 2009

From the abstract:
This article examines the increasingly troubled state of employer-provided health benefits for retirees. The availability of such benefits is a major determinant of both the timing of retirement and the financial security of those who retire. Despite the signal importance of these benefits to current and prospective retirees, employers have been steadily eroding their value and in many cases, eliminating these benefits outright. Such actions are often catastrophic for the retirees affected, especially if they are not yet eligible for Medicare.

The Long Road to Retirement Recovery

Source: Ilana Boivie, National Institute on Retirement Security, June 29, 2009

The Federal Reserve released welcome data its June 2009 Flow of Funds report indicating that the economic situation may be stabilizing. Disposable personal income rose by $142 billion in the first quarter 2009 and by $358 billion since the first quarter of 2008.

But even so, the road to recovery will be a long one. Fed data also indicate that household net worth plummeted 16% in the last year. The massive financial losses will present significant challenges for retirees and near-retirees. Many will not have time to recover losses to their retirement savings accounts and housing values.

Cost Containment May Have a Price, But Is It a Crime? Analyzing the Basis for Criminalizing Managed Care Conduct

Source: Courtney Lyons Snyder, University of Pittsburgh Law Review, Vol. 70 no. 2, Winter 2008

A recent transplant case raises an interesting question: Should a managed care organization (“MCO”) face criminal prosecution when a patient dies after the MCO’s decision to deny payment for treatment? Is providing such a legal cause of action the solution, or does doing so just put money into the pockets of attorneys rather than into the hands of the injured health care consumer? As a recent case suggests, bad publicity could be as effective a deterrent as any criminal prosecution in changing an MCO’s behavior.

The public outcry from this case and the public bias against “greedy” insurers may be what is prompting the criminal liability threat. Managed care has become the new lead paint, tobacco, and gun manufacturer–it is a completely legal industry that is increasingly unpopular with the public. Unlike those industries, however, civil suits against MCOs face an additional hurdle: ERISA preemption. As a consequence, a plaintiff’s damages have been limited to reimbursement for expenses, which has been unsatisfactory for many, especially those who have lost loved ones due to treatment denial. Though criminal sanctions would not solve the remedies issue, it could provide the punitive and deterrent aspects for which there seems to have been so much public outcry.

This Note explores the logic behind healthcare insurers’ seemingly criminal exempt status, including situations when treatment delay and denial is almost certain to result in death for the insured, and why criminal prosecution is not the answer to the current healthcare debate. The events surrounding Nataline Sarkisyan’s death are outlined above for purposes of showing the sensitive nature of such cases and the strong public reaction against the insurer. This paper does not purport to determine whether criminal charges would be warranted in CIGNA’s case since many of the facts are in dispute. Part I will explore why a move toward criminal prosecutions seems almost inevitable in light of ERISA’s limitations on damages and the public
response to the healthcare crisis. Part II will look at why criminal homicide charges against a healthcare insurer seem unlikely to succeed, and Part III will examine why such prosecutions are not the solution to the current healthcare debate. Finally, Part IV will postulate why and how Congress should step in to fill ERISA’s gaping holes.

In-Home and Community-Based Long-term Care Costs in California

Source: UCLA Center for Health Policy Research, June 2009

From the press release:
In Los Angeles County, being disabled can cost a year’s income. That’s because the annual cost of in-home care services for seniors living alone is now $319 more than this group’s median income of $17,029.

Combine long-term care expenses with other basic expenses, such as food and rent, and a Los Angeles senior living alone will need twice the median income to survive, according to new data released today by the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development.