Products April 16, 2018

Pershing Reveals New DC Plan Oversight Tool

The solution is aimed at helping advisers and home offices realize better efficiencies and increase transparency in retirement plan management.

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BNY Mellon’s Pershing announced the launch of a new solution to help home offices and plan advisers achieve greater consistency and efficiency in how they service retirement plans.

As the firm explains, the Retirement Plan Oversight Tool underscores Pershing’s continued focus on bolstering its retirement plan offerings.

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“The future of the DOL fiduciary rule expansion may be in limbo, but firms had been looking to improve oversight of ERISA plans well before the DOL tried to expand the definition of fiduciary,” observes Robert Cirrotti, managing director and head of retirement and investment solutions at BNY Mellon’s Pershing. “Our oversight tool creates greater transparency for firms to manage where and when they act in a fiduciary capacity, leading to improved business controls and governance practices.”

The Retirement Plan Oversight Tool is implemented as part of Pershing’s existing Retirement Plan Network. The solution is billed as “an integrated compliance and oversight tool that allows home offices to create up to four sets of best practices and protocols for their plan advisers to follow when servicing retirement business.”

Once a firm establishes a set of requirements, plan advisers utilize the tool to guide how they service their individual retirement plan business and document their adherence to their firm’s requirements. An easy-to-understand dashboard can be viewed in real-time by both plan advisers and home office employees for seamless management of retirement plan business.

“The goal was to develop a solution that helps create consistency in how retirement plans are serviced and enhances the compliance experience for both plan advisors and executives,” Cirrotti adds.

Additional information is available on http://www.pershing.com/.

Data & Research April 16, 2018

Determining Health Cost Needs in Retirement Is Complex

Although some retirees face catastrophic health care cost in retirement, EBRI found that most don't.

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An analysis from the Employee Benefits Research Institute (EBRI) has it questioning whether people are inefficiently self-insuring against catastrophic health care expenses that are unlikely to be incurred. 

If worrying about high costs of living wasn’t enough, American retirees are also battling through the thought of high health care costs in retirement. However, the latest report from EBRI says these expectations are likely flawed.

Data from the Health and Retirement Study (HRS) finds out-of-pocket health care expenses are typically miscalculated, as the median cumulative for long-lived elderly people (those who pass away at 95-years-old or older) rounded out at $27,000. Yet, this doesn’t signify low health care costs, either. Ten percent of this group reported spending $172,000 in health care expenses, and 5% said they paid $269,000 in out-of-pocket medical costs. Services included hospital stays, nursing home stays, outpatient surgery, doctor’s visits, prescriptions drugs, dental services, home health care and hospice care, according to EBRI. Additionally, all participants surveyed were at least 70 years of age.

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Of the services listed, nursing home amenities resulted in higher costs. Of those in the 10% and 5% group, out-of-pocket medical costs declined to $96,000 and $154,000, respectively, without the nursing home services.  

Aside from those in the top 10%, the median out-of-pocket nursing home expense is zero, says EBRI’s report. While these costs can be shattering, the common misconception of high medical fees during retirement has caused retirees to reserve assets as a safety net, should they need to insure it in the future.

The report points to nursing home expenses as the reason for increased medical costs. Without nursing services, average annual out-of-pocket medical costs declines from $2,012 to $1,607. For those in the top 10%, the median goes down from $11,047 to $7,357.

Besides age, gender plays a role in whether or not a retiree will utilize nursing home services throughout retirement. Women already pay high health care costs, and the survey shows no sign of this ending once they retire. On average, women pay $2,187 in out-of-pocket medical expenses. Men, however, pay $1,807. The cost only heightens with age, as women in the top 10% must afford an annual out-of-pocket medical expense of $12,285, and those in the top 5% pay an annual cost of $20,808. For men, these sums are $8,887 and $16,129, respectively.

Without nursing home expenses, these numbers drastically reduce. On average, an annual out-of-pocket health care bills is $1,671 for women, and $1,496 for men. For women in the top 10%, the number declines to $7,700 and $13,058 for women in the top 5%. Men in the top 10% would pay $6,936 annually, for those in the top 5%—$10,995.

More information on the report can be found here.

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