Data & Research December 1, 2006

Gay Boomers More Concerned about Long-Term Care

A recent study has found that lesbian, gay, bisexual and transgender (LGBT) baby boomers have more concerns about long-term care in retirement than the general population.
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Seventy-four percent of those surveyed in the MetLife study of LGBT baby boomers said they are afraid of not being able to care for themselves and 56% said they are concerned with being dependent on others. The survey also revealed that three-quarters of respondents expect to act as caregivers for someone else, but one in five respondents said they do not know who will take of them.

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Men surveyed were more likely than women to be concerned with being alone (43% versus 36%), becoming sick or disabled (59% versus 50%) and losing the ability to care for themselves (76% versus 68%).

Another great concern particular to the LGBT group is that slightly more than a quarter (27%) said they believe they will face discrimination as they age. Less than half said they think health care professionals will treat them with “dignity and respect,” according to the study, which was also conducted by the Lesbian and Gay Aging Issues Network for the American Society on Aging. These fears of insensitive and discriminatory treatment are particularly strong among lesbians, with 12% saying they have absolutely no confidence they will be treated respectfully as they age.

Fifty-one percent of all LGBT boomers, and women in particular, have yet to complete their will, living will or other similar legal directive, an implication further pronounced by the fact that LGBT couples and families currently lack legal protection, according to the authors of the study.

A 2005 survey by MetLife found that LGBT Americans in the same generation groups are particularly likely to worry about their later years (41%), compared to 33% in the heterosexual population.

Other findings of the study included:

  • Sixty-percent of women and 55% of men surveyed are worried about outliving their income in retirement;

  • Gay and bisexual men reported managing finances slightly more often than the women (50% vs. 45%);

  • Lesbian women are more concerned than gay men about their financial stability as they age and report being less financially prepared for retirement than gay men;

  • Lesbian women are notably less likely to have purchased long-term care insurance;

The online survey of 1,000 self-identified LGBT individuals, ages 40 to 61 was conducted by polling firm Zogby International in 2006.

The full copy of the study is here.

Compliance November 30, 2006

Recent Pension Laws Sheds Light on Non-Qualified Plan Issues

A white paper released by National Retirement Partners, LLC and The Baker Companies discusses how the American Jobs Creation Act of 2004 (AJCA) and the Pension Protection Act of 2006 (PPA) have clarified administration and funding questions for sponsors of non-qualified benefit plans.
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According to the white paper, “As a result of these legislative changes, companies now have specific direction under the law to administer their non-qualified plans as well as to use life insurance as a funding mechanism.” Corporate-owned life insurance (COLI) is often used to fund certain corporate liabilities, including non-qualified benefits.

While most reports have focused on the impacts of the PPA to qualified plans, the white paper points out significant changes were made by the legislation to how companies may utilize life insurance in the funding of their liabilities. The law includes a section that has been referred to as “COLI Best Practices.” Specific requirements for companies that utilize

COLI codified by the legislation include:

  • Only the top 35% of employees by compensation may be insured.

  • Employees must be informed that the company intends to insure their lives and the amount of insurance that will be in place at the time the policy is issued. Employees must sign a consent allowing the employer to purchase the insurance on their life.

  • The company must report to the IRS the following items: the number of employees at year end, the number of employees insured under the COLI policies, the total amount of COLI in force, the employer’s name, address and type of business, and confirmation that the employer has a valid consent from each insured employee (or the number of insured employees for whom insurance was not obtained).

The white paper also explains that the AJCA puts a new section of the tax code, 409A, in place, which impacts all deferred compensation plans and deferrals made in 2005 or later. Key provisions of Section 409A include:

  • The “Haircut” provision, which allows participants to take their money out early with a deduction of some type (often 10%), is no longer permitted.

  • The acceleration of retirement distribution elections will no longer be permitted.

  • Distributions to “key employees’ must be made six months from the date of termination or retirement.

  • The re-deferral of In-Service Distribution elections are permitted but must be received at a minimum of five years from the date of the original distribution election.

  • Disabled Participants can elect to begin receiving retirement payments or continue to defer.

  • The legislation allows companies to “grandfather’ their existing deferred compensation plan (deferrals through 2004). All deferrals made after December 31, 2004, are not eligible to become “grandfathered’ and are therefore subject to 409A legislation.

  • Any change to an existing plan that is deemed a material modification will subject all deferrals (both pre- and post- 2005 deferrals) to the new regulations.

While confusion as to the details of administering and funding non-qualified plans has resulted in companies choosing not to implement new plans, modify existing plans or examine their funding until there was clarification, the recently passed legislation provides the opportunity for sponsors to implement or modify plans under new guidance.

More information can be found at www.n-r-p.com.

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