Data & Research May 26, 2016

Workers Envisioning a Working Retirement

Employees globally are looking for more flexible retirement arrangements from employers and for governments to shore up Social Security programs.
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The very concept of a retirement in which people stop working altogether could soon become a thing of the past.

Research from Transamerica Center for Retirement Studies (TCRS) in collaboration with Aegon Center for Longevity and Retirement (ACLR) titled “A Retirement Wake-Up Call: The Aegon Retirement Readiness Survey 2016”, shows that people expect to live for 20 years in full retirement, but the reality is that retirement may often be much longer. Increases in longevity may dictate individuals needing to work longer in order to adequately fund their retirement. For some, retirement may involve shifting from full-time to part-time work. For others, it may involve working in a different capacity or pursuing an encore career.

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The average age at which workers expect to retire in the survey’s original nine countries has declined slightly from age 65.7 years to age 65.0 years since 2012, and is highly correlated with public policy relating to the age at which government retirement benefits are available. Many workers are flexible about staying in work beyond normal retirement age. Of those not fully retired who envision working in retirement, 57% want to do so to keep active/keep their brain alert, 37% want to do so because they enjoy their work, and 32% are doing so due to general concerns about retirement income and savings.

However, employers are falling short in accommodating workers in extending their working lives and transitioning into retirement. Fifty-eight percent of workers find phased retirement to be a very or extremely important occupational benefit, yet only 28% say that it is offered to them.

More than half (52%) of survey respondents remain optimistic about their health in retirement. Just 20% are pessimistic.

Globally, people expect almost half of their retirement income (46%) will come from Social Security or other government retirement benefits programs; 43% of those in the U.S. do. The research report notes that this is in spite of many governments’ efforts to limit the value of future benefits.

The survey asked respondents in all countries except India what steps governments should take to address the cost of Social Security: 31% responded that the government should increase overall funding for Social Security through raising taxes, without having to reduce the value of individual payments; 15% felt the government should reduce the overall cost by reducing benefits, without having to increase taxes, and 27% felt the government should take a balanced approach.

The survey found a major disconnect regarding the possibility of raising the retirement age to offset the costs of people living longer. Thirty-nine percent of respondents say that the retirement age should remain unchanged, nearly double the proportion who think it should increase in line with life expectancy (20%).

The full research report is available here.

Compliance May 26, 2016

‘Unfair’ ESOP Valuations Drive $7M Settlement with EBSA

The recent judgement against AIT Laboratories adds nearly $3.5 million to previous collections, now totaling more than $7 million. 
Reported by

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has reached a settlement restoring an additional $3.47 million directly to AIT Laboratories Employee Stock Ownership Plan (ESOP), “for losses associated with the plan’s 2009 purchase of overpriced company stock.”

A federal order and judgement from the U.S. District Court for the Southern District of Indiana, Indianapolis, resolves the EBSA lawsuit alleging that the plan’s trustee, PBI Bank Inc., and AIT’s chief executive officer, Michael Evans, violated the Employee Retirement Income Security Act by knowingly overpaying for company stock with ESOP assets.

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The alleged violations occurred when PBI authorized the plan’s purchase of AIT Holding Company Inc., stock from Evans and other AIT executives. EBSA says the purchase amount was “far higher than the stock’s fair market value.” 

Combined with two other previous settlements of suits filed by the department, EBSA and its attorneys have recovered approximately $7.1 million in direct monetary relief for the AIT ESOP’s participants and beneficiaries. 

“These settlements restore to workers the stake they have in the company’s success,” says Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis Borzi. “Too often, we see purchase price manipulation and other schemes that benefit corporate leadership at the expense of employees. This is unjust and unlawful under regulations which protect these investments for employees’ long-term future.”

In addition to direct monetary relief to the plan, the recent order with Evans and PBI directs AIT to issue additional AIT stock to the ESOP, worth approximately $300,000; grants the ESOP a $5.9 million interest in certain properties controlled by Evans; and requires Evans to forgive a portion of his loans to AIT, worth approximately $2.5 million to the ESOP, and to share with the ESOP a portion of any future sale of his AIT stock.

Investigators with the EBSA’s Cincinnati Regional Office conducted the probe that led to the suit. The department’s Office of the Solicitor in Chicago and Washington, D.C. litigated the case.

Additional information can be found at www.dol.gov/ebsa.  

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