Data & Research August 30, 2012

Working to Age 70 Still Not Enough for Many

Working to age 70 will not guarantee adequate income in retirement for many, according to research from the Employee Benefit Research Institute (EBRI).
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For approximately one-third of the households between the ages of 30 and 59 in 2007, working to age 70 will not be enough. Previous EBRI research indicated delaying retirement past age 65 does not ensure having adequate retirement savings. (See “Delaying Retirement No Guarantee of Being Able to Afford Retirement.”)  

The current research, using results from EBRI’s Retirement Security Projection Model, shows that nearly two-thirds (64%) of households ages 50 to 59 in 2007 would be considered “ready” for retirement at age 70, compared with 52% of those same households if they were to retire at age 65.   

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Moreover, the research indicates that a worker’s participation status in a defined contribution (DC) retirement plan at age 65 will be extremely important due to the multiyear consequences for additional employee and employer contributions to the plan. Workers who remain DC participants at age 65 versus those not in one have a substantially improved retirement readiness rating even at age 65 (64% vs. 44%) because those households with members in participant status at age 65 would likely have already been in DC plans for a number of years with their current employers.  

“While workers need to make their own decisions on the correct trade-offs of saving today versus deferring retirement, they should be able to expect that those presenting alternatives be as accurate and complete as possible, avoiding simplistic ‘rules of thumb’ that may result in future retirees, through no fault of their own, coming up short,” Jack VanDerhei, EBRI research director and author of the report, observed.

The full report, “Is Working to Age 70 Really the Answer for Retirement Income Adequacy?” is in the August 2012 EBRI Notes online at www.ebri.org.

 

Products August 30, 2012

CEFEX Offers Service Provider Disclosure Review

The Center for Fiduciary Excellence (CEFEX) has rolled out a service to help plan sponsors mitigate the risk associated with the selection of service providers.
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The risk arises partially in connection with the disclosures plan fiduciaries receive from their service providers under Department of Labor (DOL) regulations for Employee Retirement Income Security Act (ERISA) 408(b)(2), which became effective July 1. Now that plan sponsors are receiving the disclosures, they must ensure that they have the right disclosures and then must evaluate them, CEFEX noted.  

The new assessment service from CEFEX, called the “Service Provider Disclosure Review” and offered in consultation with the firm Drinker Biddle & Reath LLP (DBR), is designed to address both of these requirements. The assessment uses a detailed checklist to determine whether the plan sponsor has arrangements with service providers, such as advisers and recordkeepers, which are fair and reasonable. The assessment is performed by an independent CEFEX Analyst and can result in the issuance of a legal opinion letter from the law firm.  

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“Failure by the plan sponsor to take the actions prescribed by the regulation if the disclosure requirements are not satisfied will result in a prohibited transaction and possibly a fiduciary breach,” stated Fred Reish, a partner at DBR. “Plan zponsors must be prepared to deal with the complexity of these requirements and should seek the assistance of independent experts who can help them with the evaluation process.”  

More information is here.

 

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