Comment Period Ends for IRS Proposal on Remote Notarization
Thursday was the final day to submit comments on the December 2022 IRS proposal to allow remote notarization for many retirement plan changes and actions.
Industry groups raised questions about and expressed support for an IRS proposal that would allow retirement plan participants to notarize certain procedures electronically, rather than in-person. This would make permanent rules introduced during the pandemic.
The AARP has expressed concern, however, about spousal consent. They note that when a pension plan participant dies, their surviving spouse might be eligible for a qualified lifetime survivor benefit. Opting for this benefit can reduce the regular benefits the participant receives, so some participants may opt out. This opting out requires the spouse’s consent, which must be witnessed by a notary and a plan representative.
Given the high stakes of waiving such a benefit, the AARP believes this process should “require maximum safeguards against misunderstanding, outright deception, coercion, or other improper behavior,” which would be better served in person, rather than remotely.
The U.S. Chamber of Commerce expressed support for the proposal, but also stated concern about one element which would require plans to record and retain witnessings that require a plan representative. Specifically, they are concerned this requirement could force plans to violate state recording laws.
Likewise, the ERISA Industry Committee expressed the same support and concern as the Chamber of Commerce. They said, “We do have some concern that this new recording requirement will raise complications for plan representatives under state laws. For example, states have varying laws regarding whether one or both parties are required to consent to recordings.”
Women Working With Financial Pros Show Higher Retirement Readiness
According to a LIMRA study, women who work with a financial professional are more than twice as likely to have a formal written retirement plan as those who are unadvised.
Women who work with a financial professional are more confident and more prepared for retirement, new LIMRA data shows, creating a wider opening for retirement plans to respond to plan participants’ rising interest in and requests for professional advice on saving and investing.
Women who work with a financial professional are also more likely to complete tasks to plan for retirement and report significantly increased interest in guaranteed lifetime income options, according to the LIMRA study, Impact of Financial Professionals on Retirement Security.
The data showed that 40% of women who work with a financial professional report they feel very prepared for retirement, compared to 27% of women who don’t work with one.
“Prior LIMRA research shows having a formal written retirement plan—involving a comprehensive discussion about goals, asset management and risk mitigation—often leads to higher confidence levels and an increased likelihood of purchasing an annuity,” the research stated.
Women working with a financial professional are more likely to have a formal written retirement plan than those who are unadvised, 25% to 10%, the LIMRA data showed.
For women who work with a financial professional, there is an associated greater likelihood these individuals will complete several retirement planning tasks that are recommended to bolster retirement readiness, the data showed.
For women who work with a financial professional:
53% have calculated the amount of assets and investments available in retirement, compared with 44% of women who have not worked with a financial professional;
48% have determined what their expenses will be in retirement, compared with 43%;
50% have estimated how many years their assets and investments will last in retirement, compared with 36%; and
37% have developed a specific plan or strategy for generating income from retirement savings, versus 22%.
In a two categories, the LIMRA data showed smaller average differences between women who work with a financial professional and women without one. Women who work with a financial professional are less likely to have projected what their Social Security benefits are expected to be at different retirement ages, by a margin of 50% for those working with a professional have, while 54% without a professional have done so. The data showed similar results for women estimating their health care coverage including Medicare options and/or private insurance in retirement, where 41% of women working with a professional have, versus 46% who have not worked with a financial professional, LIMRA found.
The LIMRA research did support separate research data that showed an expansion of expected retirement plan benefit features and attendant expected shift toward greater holistic financial wellness programs. Both plan sponsors and financial professionals expect a retirement transformation is ahead by 2030, research published by Principal Financial Group found.
More than three-quarters of each group, 78% of plan sponsors and 77% of financial professionals, anticipate the shift will be from focusing on the enrollment process to improving the retirement process —including adding new participant features—and to creating retirement income, the Principal data showed.
Workers’ retirement readiness may also be improved, the report noted, as a result of plan sponsors urging every plan participant to complete retirement preparation tasks before their actual retirement.
In 2021, Charles Schwab Retirement Plan Services launched an online dashboard designed to walk participants through a financial health assessment in response to data that showed workers wanted more help saving, planning and with advice for retirement.
Charles Schwab’s 2021 401(k) Participant Study found 61% of participants want professional advice, an increase from 50% in 2020.
Bureau of Labor Statistics data showed that, as of 2016, women earned 21% less lifetime income than men.
A recent Goldman Sachs report, published in December 2022, cited Government Accountability Office data showing that women’s lifetime retirement contributions, on average, are 30% less than men’s.
While women in the U.S. should expect to live, on average, three years longer than men—according to a January 2021 Social Security Administration factsheet—they can be expected to need more savings for a comfortable retirement, yet among retired women, 58% report they collect 50% or less of their pre-retirement income, including Social Security, compared to 44% of men, Goldman found.
Women’s longer average lifespans, lower lifetime earnings and their resultant need for more savings has led to recordkeepers adding in-plan annuities for guaranteed lifetime income options.
“Overall, women’s interest in guaranteed lifetime income increased 63% over the past five years, with a significant jump over the past year as inflation and economic uncertainty grew,” the LIMRA study stated. “LIMRA research [also] shows women who work with a financial professional are more likely to be interested in purchasing an annuity [and] more than half of women who work with a financial professional (52%) said they were interested in converting a portion of their assets into a lifetime-guaranteed annuity in retirement, compared with 44% of women who don’t work with a financial professional.”
Despite increased interest among women in guaranteed lifetime income options like annuities and despite federal legislation to facilitate plan sponsors adding annuities, many employers have not embraced in-plan annuities. Plan sponsors cite as reasons for their reluctance: fiduciary concerns; wanting to see how the market evolves; difficulty with participant communication; operational or administrative concerns; and potential participant use, data published this year by Alight Solutions showed.
LIMRA is a trade association representing the insurance industry, operating under the umbrella organization LL Global.
LIMRA surveyed Americans ages 40 to 85 with at least $100,000 in household investable assets to explore their perceptions of working with financial professionals to help make financial and investment-related decisions in August 2022. LIMRA gathered the data through an online survey of 2,053 women, according to a spokesperson.
