Benefits February 16, 2011

A Third of Boomers Overwhelmed by Retirement Issues

February 16, 2011 (PLANSPONSOR.com) – Thirty-two percent of Baby Boomers and Mature Americans recently polled are worried they won’t be able to afford the retirement lifestyle they want and they’re not sure how to improve their prospects.
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The research by Allianz Life Insurance Company of North America labels that group as being “Overwhelmed” when it comes to retirement planning in its Reclaiming the Future study, according to an Allianz news release.

Based on its survey of more than 3,200 Americans ages 44 – 75, Allianz Life identified five Boomer financial personalities, each with different needs as they approach retirement, the news release said.

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“These personalities can be extremely useful for Boomers, helping them to identify with peers and letting them know they are not alone,” said Katie Libbe, vice president of Consumer Marketing and Solutions for Allianz Life, in the news release. “Realizing that there are others who share the same concerns is an important step for boomers in their retirement planning process – whether that leads them to reevaluate their current strategy or connect with a financial professional for the first time.”

According to the news release, the five groups Allianz identified include:

  • Overwhelmed(32% of respondents): The largest segment, “Overwhelmeds” feel unprepared for retirement and lack confidence in their ability to put together a strategy for their financial needs in retirement. They have the highest level of credit card debt and low asset levels. They are depending heavily on Social Security for their retirement.
  • Resilient (27%): Pragmatic and grounded, this group was hit hard psychologically during the recession. “Resilients” have finally woken up and now recognize the need for better planning while also restoring their battered portfolios. They are most concerned with outliving their income and realize they may have to work longer than expected to achieve retirement goals.
  • Iconic (20%): “Iconics” can be thought of as “role models” – “true blue” retired Americans who’ve worked hard and lived within their means. They’re middle class, live mostly on a pension, and are extremely disciplined and traditional in their viewpoints and values. “Iconics” may have reduced some of their spending recently, but they have a clear understanding of their retirement expenses.
  • Savvy (14%): Those in the “Savvy” category are financially sophisticated, affluent boomers who pride themselves on having prepared well for retirement and being informed about most financial concepts. This group is living comfortably in retirement and appears to be the best-prepared of the five personalities. They are financially independent and comfortable taking risks.
  • Distracteds (7%): the youngest of the segments, are caught up in the complexity of modern life and tend not to focus on planning for retirement. They have the highest income of any segment and tend to spend freely – with family and home expenditures taking priority over saving for retirement. Although they have substantial assets, they may still be worried that their savings won’t be adequate for retirement and have no real plan for growing those savings.

Allianz Life polled 3,247 Americans, ages 44-75, with a minimum household income of $30,000. Via a statistical technique called cluster analysis, consumer segments were identified based on attitudinal, behavioral, psychographic and demographic characteristics.

More information is at https://www.allianzlife.com/MediaCenter/ReclaimingTheFuture.aspx.

Administration February 16, 2011

Derivatives Rules Could Hurt Pensions

February 16, 2011 (PLANSPONSOR.com) - The American Benefits Council and the Committee on Investment of Employee Benefit Assets (CIEBA) contend the Dodd-Frank financial reform process is moving too quickly and pension plans could be adversely affected.
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Testifying before the House of Representatives Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management, Bella Sanevich, general counsel of NISA Investment Advisors, L.L.C., said the derivatives title of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is of particular concern for employer sponsors of pension plans, which use swaps to manage risk and reduce the volatility of the plan funding obligations. “If plans’ ability to hedge effectively with swaps is curtailed by the new rules, funding obligations will become more volatile. This will, in turn, force many employers to reserve large amounts of cash to cover possible funding obligations, diverting cash from critical job retention, business growth projects and future pension benefits,” Sanevich told the panel, according to a press release.  

The groups noted the U.S. Department of Labor, Securities and Exchange Commission, and Commodity Futures Trading Commission (CFTC) have been working feverishly to issue new rules and guidance pursuant to the Dodd-Frank Act. To create a more deliberate regulatory process, Sanevich suggested: “The agencies need more time to develop proposed rules, the retirement plan community needs more time to review those proposed rules and to provide comments to the agencies, the agencies need more time to consider the comments and provide final rules and the retirement plan community needs more time to prepare to comply with a whole new system.”  

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Her testimony also covered technical topics including: 

  • Business conduct standards: Under the regulations, a swap dealer entering into a swap with a plan is required to provide counsel and assistance to the plan. These rules would actually have devastating effects on pension plans by requiring actions that would make swaps impossible and permitting dealers to veto plan advisors. The CFTC and the DOL must jointly announce that the business conduct rules will not be interpreted in a manner that will result in an inadvertently illegal act. 
  • Required clearing: Business end-users, such as operating companies, have the right to decide whether to clear a swap, but the plans sponsored by such companies do not have that right. Fiduciaries, acting pursuant to the highest standard of conduct under the law, should have the right to decide whether to clear a swap. 
  • Real-time reporting. The CFTC has issued rules regarding the real-time public reporting of swaps. The purpose of such reporting is to enhance price transparency, with the ultimate goal of reducing prices. But the CFTC issued rules that the organizations believe would likely have exactly the opposite effect. In fact, we believe that if the CFTC rules were finalized in their current form, swap prices would increase dramatically, perhaps by as much as 100% in some cases. 

 

Sanevich’s written testimony is here.

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