Products March 24, 2017

Choice of Social Security Calculator Matters

The same tool that is reliable for providing quick and simple Social Security estimates won’t be as helpful when subtler situations arise—and so picking the right benefit calculator is crucial.  
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A new analysis published by Corporate Insight compares a number of Social Security benefit calculators available today, with the aim of helping investors and advisers make better choices about which might fit their particular purposes.

“While employer-sponsored plans and personal individual retirement accounts play a critical role in determining an individual’s level of retirement preparedness, Social Security benefits are a paramount consideration,” the firm says. “People across the political spectrum have strong and varying opinions on Social Security, particularly concerning its stability and permanence. Regardless of one’s beliefs about the future of the program, it is important to understand what can reasonably be expected from Social Security benefits in order to gain a holistic understanding of one’s level of retirement readiness.”

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To this end, the firm says it examined the Social Security benefit estimators offered by 13 institutions. Most of tools are free and publicly available and are provided by “financial institutions and recognized organizations.” Two of the tools examined are “popular paid tools,” and the Social Security Administration’s own Retirement Estimator is also examined.   

The underlying analysis involved considering two theoretical personas, “one of a 28-year-old and another of a 57-year-old, to understand if the consistency of the results varies depending on a user’s time until retirement.”

“Contrary to our findings in [a previous, similar] study, we found that the free, publicly available Social Security benefit estimators provide relatively consistent results across the board,” the firm concludes. “The average estimated benefit at full retirement age for the 57-year-old is $2,712, with a standard deviation of $163 and a relative standard deviation of 6%. The results were even more consistent for the 28-year-old, with an average estimate of $2,534, a SD of $144 and a RSD of just 5.7%.”

Corporate Insight reports this is a far more consistent picture than it found in its previous analysis; however there are still important differences among the tools to consider.

“Most notably, we found that it is imperative for tools to provide multiple benefit metrics within the results to accommodate the different manners in which people conceptualize their finances,” the analysis contends. “Calculators that provide visual aids within the results, such as interactive charts and graphs, were found to be particularly helpful. We also found that the best tools provide context to the results that help users understand how the benefits will factor into their retirement.”

The full analysis, including a closer look at the 13 tools analyzed, is available for download here. 

Compliance March 24, 2017

Bill Would Reduce Retirement Plan Costs for Small Employers

A bill introduced to lawmakers directs the DOL and the Treasury Department to allow employers and sole-proprietors participating in retirement plans administered in the same way to file a single aggregated Form 5500.
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Bipartisan legislation to reduce duplicative filing costs for small businesses looking to offer retirement plans to their employees was introduced in the Senate and the House of Representatives.

The bill directs the Department of Labor (DOL) and the Treasury Department to allow employers and sole-proprietors participating in retirement plans administered in the same way to file a single aggregated Form 5500, a required annual return that provides compliance information to the DOL and Treasury.

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Under current law, despite sharing a common administrative framework, each individual plan is still required to file a separate Form 5500 to satisfy reporting requirements under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. The proposed bill would eliminate duplicative reporting by plan administrators, which will reduce costs for small businesses that maintain retirement plans. To file an aggregated Form 5500, the retirement plans would need to have the same trustee, fiduciary, plan administrator, plan year and investment menu.

“As the nature of work continues to change, increasing access to workplace retirement plans is a crucial step in providing a secure retirement to millions of Americans,” says Senator Mark Warner. “For smaller employers, offering a retirement plan can be expensive and complex, so we should make it easier and reduce duplicative filing costs for them to offer retirement plans and promote retirement security for all workers.”

The legislation was introduced in the Senate by U.S. Senators Mark R. Warner (D-Virginia), a member of the Senate Finance Committee, and Susan Collins (R-Maine), the chairman of the Senate Aging Committee. In the House, the legislation was sponsored by Congresswoman Linda Sánchez (D-California), a member of the House Committee on Ways and Means, and Congressman Phil Roe (R-Tennessee), a member of the House Committee on Education and the Workforce.

To provide the DOL and Treasury time to implement this change, the proposal has an effective date of no later than January 1, 2021. A copy of the legislative text is available here.

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