Benefits November 19, 2003

A "Reality Check" for the Allstate Reality Check

November 19, 2003 (PLANSPONSOR.com) - The old adage, "if it looks too good to be true it probably is," can apparently also apply to retirement savings projections.
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On November 12, 2003 , a report on the findings of Allstate’s Retirement Reality Check study (see Gen X Women Confident About Retirement ) indicated that the women of Generation X – those between the ages of 24 and 37 – have “earmarked” an average of $410,000 for retirement, a total Allstate said included pensions and other company-sponsored savings plans. By comparison Baby Boomer females – those between the ages of 38 and 57 – have an average nest egg of $451,000, even with an entire decade’s head start on their younger peers.

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Both numbers were high relative to “common wisdom” – consider, by way of comparison, September 2003 data from the Employee Benefits Research Institute (EBRI) that said the average 401(k) account balance was only $57,668 across all segments of the investing population (see EBRI: Bears Merely Scratched 401(k) Balances ), but Allstate stood by the numbers as reported.

In follow-up calls to Allstate, spokeswomanRebecca Hirsch affirmed the numbers, and suggested we contact Harris Interactive, who conducted the poll for Allstate for a more specific breakdown of the survey demographics.

According to Nancy Wong, Public Relations Manager with Harris Interactive, the question posed to poll respondents was, “approximately how much do you have in accounts specifically for retirement including IRAs, 401ks, other types of defined contribution plans, such as 403(b)s and investments in taxable accounts.” The data given by the respondents in this case would have been closer to an aggregate retirement savings picture, rather than the narrower employer sponsored retirement plan picture painted by the Allstate release (see Not your mother’s retirement savings ).

Even then, however, the numbers trended higher than most industry estimates. Wong acknowledged that the Generation X women sample might not have been representative of the whole generation. “The sample for this group is about 100 people, of which there were a number that responded their savings were in the over $500,000 – and even over $1,000,000 range,” Wong told PLANSPONSOR.com.

To get a more accurate picture of the total savings for both Generation X women and Baby Boomer women, Wong said retirement fund watchers should turn their attention to the median numbers. In which case, Wong said Harris’ data shows total retirement savings – a number that includes savings in Individual Retirement Accounts (IRA), 401(k), 403(b), other defined contribution plans and taxable savings accounts – comes in at approximately $50,000 for the women of Generation X and $96,000 for female baby boomers. Numbers which, while still somewhat higher than the average balances typically bandied about (this appears to be a higher wage demographic, after all), are nonetheless well within sight of “normal.”

However, Allstate’s Hirsh says the median number should not take away from the overarching theme of the Allstate survey. “The overall essence of the release is that Generation X women are saving at a higher rate than the Baby Boomer women,” said Hirsch. “If I were a Baby Boomer woman, I would look at the generation below me and be taking notes.”

Compliance November 18, 2003

EBSA Rakes in $1.4 Billion in FY 2003

November 18, 2003 (PLANSPONSOR.com) - The Employee Benefits Security Administration (EBSA) has cracked its enforcement whip to the tune of $1.4 billion in fiscal year 2003.
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>EBSA’s 2003 haul represented a 60% increase over the previous year’s results and came from a variety of different enforcement actions.   This included civil investigations, criminal investigations and voluntary fiduciary correction program (VFCP) applications, according to a news release.

>While the number of civil investigations closed may have dropped 13.64% during the past year, the percentage of civil investigations closed with results was up 18.28%.   EBSA attributes this trend to “improved targeting and more resource-intensive investigations.”    Not seeing a drop was the number of criminal investigations closed, up 13.64% from FY 2002, and the number of those investigations closed with guilty pleas or convictions, up 16.33%.

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>Additionally, EBSA’s VFCP, which encourages self-correction of benefit violations, saw a 336% increase in applications in FY 2003 and more than $8.7 million in restored assets to employee plans, an increase of 348%.

>The record windfall for the Department of Labor (DoL) division comes through its enforcement of the Employee Retirement Income Security Act (ERISA).   EBSA’s oversight authority extends to approximately 730,000 pension plans and another 6 million health and welfare plans that cover approximately 150 million workers and their dependents and include assets of nearly $4 trillion.

>Further, the increased enforcement activities reaped rewards for other DoL divisions.   Total back wages including overtime that were collected by the Department’s Wage and Hour division for workers in FY 2003 increased by 21% over the previous year, representing an 11-year high.   The number of workers receiving back wages jumped from 263,593 workers to 342,358 – nearly a 30% increase in one year.

Also recording an increase were the enforcements of the Occupational Safety and Health Administration (OSHA).   OSHA cited employers for 83,760 violations in FY 2003, a nearly 8% increase with nearly 60,000 of those violations were considered serious, an 11% increase over FY 2002.   In all, the enforcement appears to have paid off as the most recent data available show the rates of workplace injuries and fatalities fell to the lowest point ever in 2002.

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