Data & Research January 17, 2008

Women over 50 Can Lag in Annuity, Pensions

As a result of a difference in their length of time in the workforce, women who were older than 50 in 2006 were much less likely to have an annuity and/or an employment-based pension than men, according to a new study.
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The Employee Benefit Research Institute (EBRI) reported that if female workers over 50 in 2006 received an annuity or employer pension, they were likely to end up with a smaller amount. However, EBRI was quick to add, women currently in the workforce are in better shape than their older counterparts since they are more likely to spend more time in the workforce.

The EBRI study evaluated the impact of gender, age, education, marital status, and other demographics in the likelihood of a worker receiving annuity and/or pension income in retirement.

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According to the EBRI data, in 2006, 44.6% of men age 65 and older received annuity and/or pension income, with a mean amount of $17,200 per year while only 28.4% of women age 65 and older received annuity and/or pension income in 2006, with a mean amount of $11,142 annually.

Although fewer individuals age 50 and older received pension income from a public-sector plan (7.5%) than from a private-sector plan (12.6%) in 2006, the median amount an individual received from a public-sector plan ($17,974) was considerably larger than that received from a private-sector program ($8,146).

In 2006, some 27.5% of men age 50 and older with a graduate-level education received annuity and/or pension income, compared with 21.7% of men without a high school diploma.

A woman age 65 or older in 2006 was only about two-thirds (63.7%) as likely to receive an annuity and/or pension payment as her male counterpart, and her mean benefit was likely to be about 65% of that received by a man of he same age.

In fact, the likelihood of receiving annuity and/or pension income increases with age, until the oldest age group (80 and older), for whom the data shows a lower percentage receiving such income. However, the percentage of those 80 and older receiving annuity and/or pension income increased from 17.7% in 1975 to 39.7% in 2006.

EBRI pointed out that the women who were born in 1956 at the latest are part of a group who, on average, spent fewer years in the labor force than their younger counterparts. However, on average, today’s younger women tend to spend more time in the workforce than did women who were 50 and older in 2006, so the number of younger women who will receive annuity and/or pension income and the amounts they will receive are likely to increase over time.

Men age 50 and older in 2006 who were married or widowed were more likely to receive annuity and/or pension income than men of the same age who were never married. Women age 50 and older in 2006 who were never married were more likely to receive annuity and/or pension income than married women, but widowed women were much more likely to receive annuity/pension income than either married women or women who were never married.

The research is available here.

Compliance January 17, 2008

IRS Releases Revised Application for Plan Qualification

The Internal Revenue Service (IRS) announced that a new version of Form 4461-A, “Application for Approval of Master or Prototype or Volume Submitter Defined Benefit Plan,″ has been released and is now available online.
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The IRS said the revised version of the form is preferred, but it will continue to accept the prior version for opinion or advisory letters on plans that reflect changes under EGTRRA or other changes from the 2006 Cumulative List of Changes in Plan Qualification Requirements put forth in Notice 2007-3 (See IRS Adds EGTRRA and PPA Provisions to Qualification Requirements). The agency said it will also continue to accept VS defined benefit plan submissions on a cover letter, as described in Rev. Proc. 2005-16, sections 17 and/or 18.

In a special edition of the agency’s employee plans news newsletter, the IRS reminds plan sponsors that the end of the Cycle B submission period of applications for determination letters for individually designed defined benefit and defined contribution plans is January 31, 2008. Cycle B submitters are those plans sponsored by an employer with an EIN ending in “2” and “7,’ as well as multiple employer plans.

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As of February 1, 2008, the IRS will begin accepting determination letter applications for individually designed defined benefit and defined contribution plans in Cycle C – plans sponsored by an employer with an EIN ending in “3’ and “8’ and governmental plans, including governmental multiemployer and multiple employer plans.

The IRS also announced the updated Form 5558, “Application for Extension of Time To File Certain Employee Plan Returns,’ is now available online. According to the newsletter, notices regarding the approval/denial of extension requests for Form 5330 filers will be automatic beginning in January 2008, so all sections below the signature and date lines have been eliminated.

Form 5330, “Return of Excise Taxes Related to Employee Benefit Plans,’ is being revised. The newsletter said the redesigned form, grouping the various excise taxes by due date, will streamline processing and add excise taxes brought about by the Pension Protection Act. The revised version will be available online on or about January 18, 2008.

IRS forms and their instructions are available at www.irs.gov on the Retirement Plans Community web page by clicking on EP Forms/Pubs/Products in the left pane. Paper copies can be ordered by calling (800) TAX-FORM (829-3676).

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