Compliance October 7, 2010

DC to DB Transfer Elimination Upheld

A federal appellate court has agreed with a lower court judge that an employer was allowed to drop an option allowing participants to move defined contribution plan assets to a defined benefit program.
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The 1st U.S. Circuit Court of Appeals says that shipper DHL Holdings did not violate the Employee Retirement Income Security Act (ERISA) anti-cutback mandate with its late-2004 change in plan options, and upheld the lower court ruling on grounds that the change was permitted under Treasury Department regulations, even if it diminished an accrued benefit.

The 1st Circuit decision came in a case filed by plaintiff Jeffrey R. Tasker who, according to the court, sued DHL after discovering the rule change when he tried to exercise the asset transfer option in 2008. The DC to DB transfer option had been in place when Tasker retired in March 2004 when he was 57, according to the court.

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Circuit Judge Bruce M. Selya said the appellate panel was not ignoring Tasker’s plight, considering the annuity on which he sought to collect was worth about half what he anticipated because of the rule change governing the inter-plan transfer.

“This is a hard case — hard in the sense that it requires us to deny relief to a plaintiff for whom we have considerable sympathy. After all, the plaintiff worked for many years, planned for his retirement, and now finds that the annuity he can collect is roughly half the size that he had anticipated,” Selya wrote in the appellate ruling. “On general notions of fairness, the plaintiff deserves better. But this case — like most hard cases — cannot be decided on generalized notions of fairness. ERISA is a creature of statute, fleshed out by regulations. Subject to constitutional concerns not present here, courts must follow the path demarcated by Congress and the Executive Branch.”

Selya concluded: “Where, as here, the statute and the implementing regulations are clear, an inquiring court must follow their lead. No judge is free to disregard the law simply because he or she thinks that it would be fairer to do so in a given case.”

The case is Tasker v. DHL Retirement Savings Plan, 1st Cir., No. 09-2661.

Data & Research October 7, 2010

Working Retirees ‘The New Normal’

A new study finds one in five workers age 50 or above has retired from his old employment and moved into a new paying position, which researchers dub a “retirement job.”
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The study, “Working In Retirement: A 21st Century Phenomenon,“ contends the notion of retirees staying in the workforce is becoming the “new normal.” In the future, before entirely withdrawing from work, having a retirement job “is a bridge that tends to emphasize working by choice and for enjoyment,” the report said.

The research from the Families and Work Institute and the Sloan Center on Aging & Work found 75% of workers age 50 and older anticipate having retirement jobs.

According to the study, generating income isn’t the only reason for the working-in-retirement trend: 31% report that they are working to stay active, and 18% say they want to contribute and be productive. Less than one in five report working because of insufficient income; the typical median yearly income among those working in retirement is $21,000 less than those who have never retired.

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Not only that, according to the research, most working retirees like what they do and are engaged with their employer.  They more positively rate their workplaces for work-life fit, supervisor task support, and climate of respect and trust, and are most likely to be engaged in their jobs when their jobs are challenging and provide learning opportunities.

The majority of working retirees report working full time and wanting to work the same or more hours, and more than half say they have no plans to leave their current employment situation for at least another five years. Nearly 10% of those working in retirement state that they will continue doing the same work until they die.

“Traditionally, we have conceived of the life cycle as a ladder where we move from education to employment to retirement,” said Ellen Galinsky, president of Families and Work Institute, in a news release about the research. “That is not the reality today. We need to understand that the employees of today and tomorrow will cycle in and out of education, employment, and retirement. The better we understand this new paradigm, the better we will be able to plan for and manage it.”

The study used data from Families and Work Institute’s 2008 nationally representative study of the U.S. workforce, the National Study of the Changing Workforce.

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