Category Archives: retirement

High Anxiety for Plan Sponsors

It’s still unclear whether the incoming Trump administration will take aim at the Department of Labor’s new fiduciary rules, which are slated to go into effect on April 10.  As Joseph Urwitz, a partner in McDermott Will & Emery’s Boston office, told us late last month: “While it’s not possible to predict the future, the new Congress and president may overhaul, eliminate or at the very least delay implementation of the fiduciary rule. Time will tell whether or not any of these moves will come to pass.”

thinkstockphotos-468426388But what we do know is that litigation continues to be very much on the minds of plan sponsors.

This fact received further support earlier this week, when Cerulli Associates, a global research and consulting firm, released the findings of a study—titled “The Cerulli Report: U.S. Retirement Markets 2016”—that found more than half (57 percent) of more than 800 401(k) plan sponsors questioned are concerned about potential litigation.

While much of the litigation has targeted large plans with deeper pockets, the research found that smaller plan sponsors are also paying attention to today’s litigious environment.  Nearly one-quarter of small plan sponsors—those less than $100 million in 401(k) assets—describe themselves as “very concerned” about potential litigation.

As most of you know (and the Cerulli report points out), fee-related lawsuits, in particular, have been something of a theme in 2016, putting added pressure on plan sponsors to find ways to reduce fees. “Plan-sponsor-survey results show that the top two reasons for which 401(k) plan sponsors choose to offer passive (indexed) options on the plan menu are because of ‘an advisor or consultant recommendation’ or because they ‘believe cost is the most important factor,’ ” according to the Cerulli press release. But there is also no denying that lowering the risk of litigation factors into the decision making as well.

The Cerulli report suggests that the rash of litigation that has occurred in recent times is stifling innovation. Jessica Sclafani, associate director at Cerulli, notes that “plan sponsors feel they have little to gain by appearing ‘different’ from their peers due to the risk of being sued. This mindset can make plan sponsors reluctant to adopt new products … .”

Now THAT’s Honest Feedback

There’s a saying that people want the truth until they get it.

Consider the leadership team at the Pennsylvania Turnpike Commission, who might regret asking interchange manager Michael Stuban to fill out an exit survey on his last day before heading into retirement.

Stuban, who spent 35 years with the organization, offered his two cents and then some.

In a recent interview with The Philadelphia Daily News, Stuban described the “brutal” frankness with which he approached the online questionnaire.

“When they asked for an honest exit interview, I gave them one,” Stuban told the paper, with a bit of a laugh. “I sent it minutes before I officially retired.”

For what it’s worth, the 58-year-old Stuban wrote that he didn’t really want to retire just yet, and that he actually liked his job.

He may have enjoyed his work, but it seems he wasn’t so crazy about the people he worked for.

The “out of touch” executive-level managers at the helm of the “rudderless” agency, for instance, are “only looking out for themselves,” according to Stuban. He characterized the past five years at the commission as “terrible,” with “no morale” among employees.

These same co-workers were asked to take part in classes “where we were told we are not political,” wrote Stuban, who opined that the commission frequently hires incompetent employees “based on political connections,” according to the Daily News.

Stuban didn’t mince words when it came to the idea that corporate politics were not at work within the organization.

“That’s bulls—,” he wrote. “Jobs/promotions are filled by the politicians … it’s who you know, not what you know. Positions [are] created for people who are not qualified.”

And, Stuban apparently felt so strongly about the thoughts he was sharing that he had to disseminate them throughout the organization. Stuban emailed his completed exit survey not just to the HR department from which it came, but to more than 2,000 colleagues as well, according to the Daily News.

At least one of them found some levity in Stuban’s sentiments.

“Want to get away? Southwest is offering great fares … ” replied the employee, in a reference to the airline’s well-known commercial tagline.

Turnpike Commission Chairman Sean Logan didn’t find Stuban’s candor quite so funny.

Logan, a former Pennsylvania State Senator, was equally blunt in his reply, which went out to those same 2,000-plus turnpike employees, the Daily News notes.

“Mr. Stuban … I don’t believe we ever met, and after reading your exit questionnaire, I am grateful that we didn’t.”

According to the paper, Stuban was made aware of Logan’s brusque response, and, perhaps not surprisingly, felt the chairman failed to see the point of his missive.

“If it was an effective company and someone told you there are problems and no morale, you don’t have to believe me, but maybe someone should check into it.”

No one outside this particular organization can really say how accurate Stuban’s depiction of its culture may or may not be. And who knows how the commission has responded, or plans to respond, to the issues that Stuban alleges exist within the agency.

But if morale really is a problem there, then Logan’s reaction to Stuban’s candid, albeit harsh, feedback probably won’t encourage other workers to offer their honest (and invaluable) opinions to those above them. And that’s the organization’s loss.

Setting Their Sights on Retirement

thinkstockphotos-498426671If you think millennials aren’t concerned about retirement, think again.

On Tuesday, Willis Towers Watson released a survey that found six in 10 millennials are willing to sacrifice pay for more secure retirement benefits. (This compares to roughly four in 10 in 2009.)

“Employees of all generations, including millennials, are feeling vulnerable about their long-term security,” says Steve Nyce, senior economist at Willis Towers Watson. “Employees young and old actually have a strong desire for more retirement security and are willing to give up pay to get more guarantees or a larger retirement benefit. Interestingly, employees seem to be saying they have enough health coverage now and are reluctant to pay more.”

As far as healthcare is concerned, only one-third of millennials (32 percent) surveyed said they are willing to pay a higher amount for lower or more predictable health costs, a decline from 43 percent in 2009.

When asked how they would spend money if their employer provided them with an allowance to spend on a variety of benefits, millennials said they would allocate more than half to healthcare and retirement-plan benefits (27 percent each). Not surprisingly, nearly half of millennials (48 percent) ranked pay and bonuses over all other benefits if given a choice, a clear indication of the financial issues they face and the need for more financial flexibility today.

Slowly but surely, employers are beginning to accept the fact that employees, be they millennials, Gen X or baby boomers, are hungry for support as they strive to tuck more money away for the future.

So I guess it’s no surprise then that we’re beginning to see robo advisers such as Betterment gain some traction in the workplace.

At the 2016 Benefits Forum and Expo in Nashville, Tenn., this week, Betterment General Manager Cynthia Loh shared the value her organization is bringing to the business community. (Loh spoke during a general session on Wednesday.)

Many of you probably will recall Betterment’s announcement last fall of a new 401(k) platform that uses technology to offer personalized investment advice for all participants, along with administrative and fiduciary support for plan sponsors. (It began rolling out the platform earlier this year.)

Betterment CEO and Founder Jon Stein said at the time, “Current 401(k) offerings—and we have examined them all—have poor user experiences, high costs and a clear lack of advice. Not anymore.”

In late July, the company announced that it had signed on more than 200 plan sponsors since the beginning of the year—and, according to Loh, the company is continuing to sign up new clients at a fast clip.

So far, Betterment hasn’t signed up any Fortune 1000-size organizations. The largest plan sponsor to sign on is MVP Anesthesia Associates, a physician group. But down the road, the company certainly hopes to make inroads into even larger employers.

Retirement Planning: The Gender Gap Persists

A quick search of our website, using the terms “women” and “retirement,” brings back an article from August 2008 that describes retirement planning as “a nightmare for many women.”

In said piece, former HRE freelancer Marlene Prost shed light on female employees’ well-founded worries about outliving their retirement savings, and urged HR leaders to “step in with help” for women workers, who live longer than men on average while typically earning less.

As I sat this morning reading a press release summarizing new Aon Hewitt research, it felt like Prost’s article could have just as easily been written in 2016.

In other words, the story remains largely the same.

In examining the retirement saving and investing behaviors of roughly 3.5 million defined contribution participants from more than 125 employers, the Lincolnshire, Ill.-based Aon Hewitt found that 83 percent of women aren’t saving enough to meet their needs in retirement, compared to 74 percent of men who feel they aren’t putting enough away to live comfortably after leaving the workforce.

Aon Hewitt projects that women will need 11.5 times their final pay to meet their financial needs in retirement, but finds “a gap of 3.3 times pay between what women need and what they’re actually on track to have saved in order to retire at age 65.” Meanwhile, the disparity between needs and resources is just 2.0 times pay for men.

This shortfall, according to Aon Hewitt, means women, on average, will need to work until age 69—one year longer than men—in order to meet 100 percent of their needs in retirement.

“Women face significant stumbling blocks when it comes to saving enough for retirement, including longer lifespans, lower salaries and a greater likelihood of taking hardship withdrawals from their 401(k)s,” says Virginia Maguire, director of retirement products and solutions at Aon Hewitt, in the aforementioned press release. “Making retirement and financial well-being a priority is paramount for overcoming those challenges.”

The study also finds women and men participating in employer 401(k) plans at the same rate (79 percent), but lower savings rates pair with salary incongruities to further broaden the savings gap. For example, women are, on average, contributing 7.5 percent of their salaries to 401(k)s, which lags more than a full percentage point behind male employees (8.7 percent). In 2015, women had an average plan balance of $71,060, while the average amount for men was $119,150 last year, according to the report.

Naturally, Aon Hewitt suggests ways in which employers can help chip away at the difference, including offering tools such as healthcare and financial market education to improve overall financial well-being, providing professional investment help and adding plan features designed to increase savings rates.

And, even minor tweaks can have a major impact.

“When employers take an active role in helping all workers improve their financial well-being and save more for retirement, women will benefit,” according to Maguire. “Small changes to plan design and an improved focus on day-to-day finances can go a long way to closing the savings gap.”

Millennials Running a Career Marathon

There’s been a lot of talk—an awful lot—about how millennials see work differently than the generations that preceded them.

When it comes to their post-employment prospects, though, Gen Y workers apparently share the view of many of their more experienced colleagues.

In other words, millennials aren’t sure they’ll ever get to retire either.

ManpowerGroup’s Millennial Careers: 2020 Vision report finds American millennials “preparing to run career ultramarathons,” with 66 percent of 1,000 employees between the ages of 20 and 34 saying they expect to work past the age of 65. Thirty-two percent anticipate staying on the job beyond age 70, and 12 percent of these incurable optimists foresee keeling over in a cubicle, essentially working “until the day they die.”

But, however long they wind up working, millennials will be taking a breather here and there. Indeed, 76 percent of those polled by ManpowerGroup said they are likely to take career breaks longer than four weeks. The reasons for these breaks “are revealing,” according to the report, which notes that women intend to take more time out to care for others—children, older relatives and partners as well as doing volunteer work.

More specifically, 66 percent of female millennials indicated that they plan to take leave after the birth of their children, while 32 percent of men said the same. Thirty-two percent of women anticipate taking time off to care for parents or aging relatives, compared to 19 percent of men who expect to put their careers on hold at some point for the same reason.

Gen Y still hopes to squeeze in some fun, however. The report points out that both genders aim to prioritize “me-me-me time” and leisure-related breaks, with 29 percent of American millennials planning to take significant breaks for relaxation, travel or vacations.

Still, the occasional hiatus aside, it seems millennials are looking down a long road, unsure of when or if they’ll get to enjoy their golden years. They’re not the only ones, of course, and a new Willis Towers Watson survey is just the latest to reinforce this fact.

The consultancy’s 2015/2016 Global Benefits Attitudes Survey polled 5,083 U.S. workers, 23 percent of whom believe they won’t be able to retire before they turn 70, if at all.

Naturally, fretting over their retirement savings, or lack thereof, is taking a toll on these workers, with 40 percent of those who anticipate working past age 70 saying they have high or above-average stress levels. (Just 30 percent of employees expecting to retire at age 65 report feeling that frazzled.) Forty-seven percent of these employees said they are in very good health, compared to 63 percent of those expressing confidence that they’ll be able to walk away at age 65.

The connection between employees’ uncertainty about retirement and their stress levels—regardless of age—is a logical one. But, with the vast majority of workers counting on their employer’s retirement plan as their primary savings tool, organizations “have plenty of motivation to act,” said Shane Bartling, senior retirement consultant at Willis Towers Watson, in a statement.

“In addition to saving for retirement, employees are dealing with other, competing financial priorities such as housing and debt,” said Bartling, urging employers to “personalize their real-time decision-making support and recalibrate default enrollment to close the gaps in employee understanding about the savings amount required and costs in retirement.”

No On-Ramp to Retirement for Many Workers

In a troubling bit of news for anyone who plans on stopping work someday: more than 40 percent of full-time private-sector employees in the United States say they lack access to either a pension or an employer-based retirement savings plan such as a 401(k), according to a new study by The Pew Charitable Trust.

According to the report, the data show that even within the same state, retirement plan access can vary widely:

“For example, in South Carolina, 50 percent of workers in Charleston reported having access to a retirement plan—18 points lower than the 68 percent in Columbia. This variation probably comes from the mix of industry and worker characteristics in each urban area.”

Some of the metropolitan areas with relatively high retirement plan access rates also face broad economic challenges, factors that are likely tied to the industries prominent there and their financial circumstances. For example, over 70 percent of workers in Scranton report having access to a workplace retirement plan, but the area also has higher unemployment and lower average wages than the United States as a whole.

Other key findings of the report include:

•• Retirement plan access varies more among the nation’s metropolitan areas than across states as a whole. The access rate among workers in the metropolitan areas ranges from 71 percent in Grand Rapids, Michigan, to 23 percent in McAllen, Texas. Nationwide, 58 percent have access to a plan.

•• Metropolitan areas with low access rates are heavily concentrated in certain large states. Nearly three-fourths of the metropolitan areas  in the bottom 25 percent are in Florida, Texas or California.

•• Employer and worker characteristics appear to play a large part in the disparate levels of access. For example, metropolitan areas with relatively low rates of access generally have more people working for small employers.

Many areas with higher percentages of Hispanic or low-income workers also tend to have lower access rates.

Methodology: The figures come from a pooled version of the 2010-14 Minnesota Population Center’s Integrated Public Use Microdata Series Current Population Survey (CPS), Annual Social and Economic Supplement.

Unless otherwise noted, “worker” means a full-time, full-year, private sector wage and salary worker age 18 to 64. The term “metropolitan area” refers to a metropolitan statistical area, as defined by the federal Office of Management and Budget.

The DOL’s New Fiduciary Rule

The new fiduciary rule issued yesterday by the Dept. of Labor, which is designed to address conflicts of interest among financial advisers, will require HR departments to review their arrangements with vendors that provide retirement-plan services, say experts.

“The definition of ‘fiduciary’ is being expanded, and HR will need to determine if they have vendors that will now fall under this category,” says Robert Kaplan, associate attorney in Ballard Spahr’s employee benefits and executive compensation group.

The rule is designed to protect the best interests of retirement-plan participants and sponsors by applying the “fiduciary standard” to all those who provide investment advice in order to prevent conflicts-of-interest, which the White House Council of Economic Advisers says costs retirement savers $17 billion a year.

In many cases, vendors that provide services for employer-sponsored retirement plans that hadn’t been fiduciaries before the new rule – such as broker-dealers, mutual-fund representatives, etc. – will be considered fiduciaries once the new rule takes effect (it goes into final effect on April 1, 2018, with a “transition period” starting April 1, 2017). HR will need to carefully evaluate all advisers that provide services to their organization’s retirement plans to determine whether they’ll now be considered fiduciaries, says Kaplan.

For example, many 401(k) record-keepers offer “reach out” campaigns targeted at plan participants (including former employees who still have accounts in the company plan) who may be considering whether to rollover funds from a 401(k) plan into an individual retirement account. Today these services only need to meet a “suitability” standard, says Kaplan; under the new rule, they must meet the fiduciary standard.

Much of the compliance duties for the new rule will be handled by vendors and record keepers, says Kaplan. However, in a few instances HR may encounter vendors that refuse to recognize that they will now be considered fiduciaries – in such cases, HR will need to terminate the relationship, he says.

“There are some less-than-reputable vendors that don’t want to be held to the fiduciary standard, and they will probably be driven out of the business,” says Kaplan.

Helping Older Workers Find the Work they Want

OK, this baby boomer officially feels old now. I was just informed by Paul Magnus — vice president of workforce development for Akron, 474168522 -- older workerOhio-based Mature Services — that “mature” actually refers to 40 and older.

I was asking him to elaborate on his organization’s 26th Annual Mature Workers’ Job & Career Fair, coming up on Tuesday, April 12, at the Akron Fairlawn Hilton, designed “to help the 40-and-older population find employment,” as its release states.

Shocked as I was by that clause, Magnus pointed out that the oldest of the “Gen Xers [those born from the early 1960s to the early 1980s] started turning 52 in February 2016.” (Stop the world, I want to get off!)

But whether they’re 40 or 52 or on up into baby-boomer territory, he says, “we advocate for all older workers” and the extensive experience, skills and work ethic they bring to the workplace.

If you consider baby boomers alone, he adds, they possess the “highest level of intelligence and institutional knowledge, highest motivation factor and highest skill set of any demographic that has come through the workforce to date.”

Though many are staying in the full-time workforce out of necessity, a growing share are just heading into retirement age and are trying to “reinvent their lives,” be it through a mentor or tutor role or a part-time consultant’s role, says Magnus, whose agency helps those people achieve their desired situations as well.

In all work situations, says Don Zirkle, Mature Services’ training and placement supervisor, “[o]lder workers bring to the job commitment, experience and the ability to work as part of a team.” Older workers, he adds, have “adapted to technology as well.”

“These are traits that all employers are looking for in a new hire,” Zirkle says.

Unfortunately, far too many employers are still disregarding senior job candidates, especially those who have been long-term unemployed — a problem we’ve certainly written about on this site and on HREOnline.com.

“Many older workers have gotten trapped in that long-term-unemployment racket,” Magnus says. “We’re seeing that individuals who are not working aren’t getting the calls back. The longer they’re unemployed, the longer they’ll remain unemployed.”

Also on the unfortunate side, many baby boomers, when they started working, “didn’t necessarily need a degree for all the positions that were open to them,” he says. “Now, students are coming out of college with certificates and degrees for those same jobs,” and older workers trying to compete find themselves way behind the eight ball.

Through numerous programs run by his organization, including the U.S. Department of Labor-funded Senior Community Service Employment Program, which most other states also run, seniors are getting pointers and guidance in educational opportunities, job-hunting and skills training, and even tips on best ways to use social media, which many — surprisingly — aren’t that well-versed in, he says.

Times have changed, he adds, and seniors need to change with them.

I asked Magnus to describe the challenges and changes he’s seen in his 31 years with Mature Services.

The biggest difference he’s noticed over time, he said, is that everyone now has a different idea about what retirement means, from semi-corporate retirement to at-home part-time consultancies, and his agency is there to adjust to the changes, and guide and advocate for all older workers in his corner of the world — i.e., the Akron and surrounding areas.

“I remember starting this job when I was 28 years old,” Magnus says. “I remember walking up to a senior group of men and asking them if they would be interested in the recruiting help my agency had to offer, and they just laughed at me and said, ‘Why would I want to work when I’m retired?’ ” So at least that’s changed.

Second to that, he says, is that a growing number of employers are starting to see the value older workers, in any capacity, can bring to the workforce.

Though many still “do get bogged down in the older-worker perceptions that aren’t based on reality [like they can’t perform or produce like they once could, or they simply don’t want to be there], many others aren’t getting that hung up on age anymore.”

So there’s some progress at least.

U.S. Employees Feeling Glum on Retirement

Many working Americans aren’t exactly chomping at the bit to get their retirements started, according to a new survey, and it’s easy to see why.

Seventy-six percent of  5,083 U.S. employees surveyed  believe they will be worse off in retirement than their parents, according to the 2015 Global Benefits Attitudes Survey by Willis Towers Watson. Additionally, the survey revealed employees’ concern over their finances is having a negative effect on their daily lives, job performance and productivity.

“While the financial situation is improving for many employees, long-term financial worries linger, leaving them feeling vulnerable,” said Steve Nyce, senior economist at Willis Towers Watson. “Many employees still wonder how long they will have to work and how much they will have to build up in savings until they are able to retire.”

The research revealed that financial worries, which are strongly linked to stress, ultimately have an impact on people’s ability to perform their best work. In fact, 28% of people who are struggling with their finances admitted that it prevents them doing their best at work.

In addition, higher levels of absenteeism can occur in employees with financial concerns. The survey found that people who are not worried about their finances reported they took an average of 1.9 absence days from work per year, whereas employees who are struggling financially are absent for an average of 3.5 days per year. Further, those who are struggling financially report being highly distracted on the job 12.4 days per year on average, compared to 8.6 days for those not worried about their finances.

“Financial security is a top-of-mind issue for employees,” said Shane Bartling, senior retirement consultant at Willis Towers Watson. “Financial worries can have a negative impact on an employee’s personal and work life, and inevitably affect productivity, employee engagement and satisfaction. Employers are in an excellent position to help employees achieve both retirement and financial security in the short and long term as well as reinforce good personal financial habits by providing tools, resources, and benefit and total rewards programs that best meet their employees’ needs.”

Interestingly, the survey found that more than six in 10 employees (61%) believe their employers should actively encourage them to save for retirement. However, employees are less comfortable with their employers becoming involved in their personal financial issues and are particularly uncomfortable with targeted messages. Only four in 10 (41%) are open to having their employers encourage them to better manage their personal finances. Even fewer — 30% — feel comfortable with their employers sending targeted messages to employees with financial issues.

“Employers have a long-established track record around retirement messaging and more recently have been pushing healthy lifestyles through their health and well-being programs. Employers that think they have permission to charge ahead in a similar fashion on personal finance issues could end up disappointed or, worse yet, upset employees, which would be counterproductive to their goals. Employers have to be mindful of their approach if they are including personal finance education,” said Nyce.

 

Is the Tide Turning on Retirement-Readiness?

There appears to be a shift away from what, heretofore, have been dismal findings on Americans’ retirement preparations. You’ve heard them. You’ve read them. And we’ve certainly written about 505511380 -- retirementthem, all the stories positing the harsh reality that many people nearing retirement in today’s workforce can’t see themselves ever affording it.

Enter a recent piece in USA Today suggesting “Americans are finally doing something right when it comes to saving for retirement.” It cites a report from Fidelity, based on a poll of 4,650 people, showing more households are on track to cover essential expenses in retirement today than in 2013.

To conduct its research, Fidelity issued each household a score based on how well they’ll be able to cover basic expenses — food, shelter, healthcare — in retirement. The number of households that scored an 81 or above, meaning they can cover at least the basics, increased to 45 percent, up from 38 percent in 2013, the last year Fidelity conducted the study.

At the same time, the number of households that need to make adjustments to retirement plans in order to have enough money saved decreased to 32 percent from 43 percent in 2013.

As John Sweeney, executive vice president of retirement and investment strategies at Fidelity, says in the story, “[p]eople are becoming more aware of the fact that they need to take control of their own retirement, and they need to save more.”

Bert Doerhoff, CPA and founder of Jefferson City, MO-based Aura Wealth Advisors, cautions in this more recent piece about the study that we shouldn’t overlook the fact that one-third of Americans are still failing to prepare for retirement. So don’t start throwing confetti just yet.

As that piece states:

“Many factors contribute to the increased savings rates for retirement, including an improved economy and Americans becoming more aware of the importance of saving for retirement. Many investors are becoming increasingly educated about the individual nature of saving; it is up to each individual to secure their future.

“Doerhoff notes that getting started early is one of the keys of careful retirement planning: ‘Starting too late in life means you have to do most of the saving rather than letting your money have time to work for you and grow while you work.’ Doerhoff also mentions another reason why it is critical to save money early in a career: [A]n unexpected health problem could move an investor into retirement long before planned.

“Doerhoff adds that even during times of market fluctuations, [investors should be encouraged] to observe the basic tenets of successful retirement planning, such as starting early and investing for the long term. ‘A market downturn, like the one in early January 2016, can spook investors and cause them to move money that really should be left alone to recover from the volatility,’ he says.”