Compliance April 23, 2015

Demographics Prompting Focus on Retirement Income

Changing workforce demographics are driving retirement plan policy and law, says Fred Reish, chair of the financial services ERISA team at Drinker, Biddle & Reath LLP.
Reported by

Speaking to attendees at the 44th Annual Retirement & Benefits Management Seminar, hosted by the Darla Moore School of Business at the University of South Carolina and co-sponsored by PLANSPONSOR, Reish noted there is a focus on retirement income within the Department of Labor’s (DOL) regulatory agenda. For example, the new fiduciary investment adviser proposed rule from the DOL—he says the rulemaking is less about 401(k)s or other retirement plans and more about the 65-year-old who retires today and lives to 85. What are they going to do when not protected by the Employee Retirement Income Security Act (ERISA) bubble? Are they going to have any money left at age 85?

The Employee Benefit Research Institute (EBRI) recently issued a report about a survey in which it found for those who died at age 85 or above, 20.6% had no non-housing assets and 12.2% had no assets. Among singles who died at or above age 85, 24.6% had no non-housing assets left and 16.7% had no assets left. Those who died at earlier ages were generally worse off financially.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“Changing demographics are changing the focus on sustainability of retirement income,” Reish told seminar attendees.

The DOL is also working on a requirement that retirement benefits statements participants receive include a projection of how much monthly income their balance will purchase in retirement. Reish cited a September 2014 Towers Watson survey which found more than half of participants didn’t know how much they need to have a comfortable retirement or how much they can expect from their retirement plan.

He noted that some fear showing participants this information will discourage them, and they may give up. But, last year’s EBRI Retirement Confidence Survey (RCS) showed participants were not surprised by monthly income projections.

Reish said quarterly statements are the only ERISA mandated reporting that participants may actually read. The DOL is proposing to include a projection of the annuitized monthly value of current account balances for the participant and surviving spouse, and the same values projected forward to retirement—something Reish believes is a good idea to show. He said once the mandate is final, the retirement industry will step in with benchmarks (how much will participants need), gap analyses (how off-track are participants) and advice on deferrals. “While the government is the genesis of change, private companies will make sure it works,” Reish stated.

The DOL is also working on regulations to help plan fiduciaries with the selection of annuity providers because it wants to make sure plan sponsors are comfortable offering annuities to participants. According to Reish, the safe harbor the agency is working on is primarily focused on the plan sponsor determining whether the annuity provider is able to make good on promised future payments under annuity contracts.

Reish thinks retirement education will be the next big movement in the industry—not just retirement plan information or savings and investment education. The changing workforce demographics will lead the industry to focus on educating participants 50 and older about all retirement income options.

Products April 23, 2015

Help for Clients Who Take Financial Caregiver Role

A new guidebook for advisers and clients aids in managing the money of a loved one with dementia.
Reported by

With over 5 million Americans suffering from Alzheimer’s disease—a number that is anticipated to triple by mid-century—an adviser is almost sure to have clients whose lives are affected. Transamerica, in partnership with Massachusetts Institute of Technology AgeLab has just published a free book to help those who handle the finances of someone with dementia.

 In “The Caregiver’s Guide to Financial Planning in the Shadow of Dementia,” the team explains what actions to take during the three stages of decline, including how to create an initial financial plan; confronting the leading symptoms of caregiver stress, and how to manage them; and the important topics to discuss when creating and managing a loved one’s financial plan, including sections on how to ask the right questions of financial advisers.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“The guide explains financial concepts that caregivers should understand, and it helps prepare them for the critical conversations they must have with their loved one’s financial adviser,” says Dave Paulsen, president, Transamerica Distributors.

A companion book, “The Advisor’s Guide to Financial Planning in the Shadow of Dementia,” was published last fall. It instructs advisers on how to work with dementia caregivers, but also the client who exhibits signs of the disease. The book suggests advisers have a unique opportunity to recognize the signs of dementia in their clients earlier than many others in that person’s life. Also provided is guidance on how to work with a client who is suffering from the disease, including how to address difficult liability questions.

The Transamerica companies are providers of life insurance, savings and retirement and investment solutions, serving customers throughout the United States. The MIT AgeLab is a multidisciplinary research program that works with business, government, and nongovernmental organizations to improve the quality of life of older people and those who care for them.

“The Caregiver’s Guide to Financial Planning in the Shadow of Dementia” can be found here. The companion guide for financial advisers is also available at newageofadvice.com.

«