Benefits October 9, 2007

EBRI Reports DC Plan Growth Topped Out

October 9, 2007 (PLANSPONSOR.com) - Individual account retirement plans, such as 401(k) plans and individual retirement accounts (IRAs), have continued to increase their share of retirement assets and that share is projected to grow further, according to the Employee Benefit Research Institute (EBRI).
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However, the October 2007 EBRI Notes article also reports that the growth of defined contribution (DC) plans has topped out, according to an EBRI news release. There was a sharp increase in the number of DC plans and the number of participants in those plans during the 1990s, but the numbers had leveled off by 2004.

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The number of DC plans hit almost 687,000 in 2000, and was down to less than 636,000 in 2004, while the number of DC participants reached 52.9 million in 2002 and was down to 52.2 million in 2004, the news release said.

As for assets, the most recent data show that as of 2006, about $7.5 trillion in assets were held in IRAs and private-sector defined contribution plans, up from about $4.8 trillion in 2000. Additionally, the percentage of workers owning a 401(k)-type plan or an IRA has risen significantly. Just over 40% of workers ages 21 – 64 owned a 401(k)-type plan or an IRA in 2004, up from 34% in 1996.

The October 2007 EBRI Notes report also indicates:

  • In 2004, about 38% of IRA owners contributed the maximum amount allowed by law, almost half the rate in 1996.
  • Most new IRA contributions are going to nondeductible Roth IRAs, not traditional IRAs.
  • The major source of IRA growth continues to be rollovers from other tax-qualified retirement plans, not from new contributions.
  • Contributions to individual account retirement plans are strongly influenced by demographic factors – chiefly income, education, and race.

Despite this growth in individual account plans, a majority of Americans still do not have a retirement plan, the article says.

The full article can be found at www.ebri.org .

Benefits October 8, 2007

AK Steel Announces Retiree Health Care Lawsuit Settlement

October 8, 2007 (PLANSPONSOR.com) - AK Steel has announced it has reached an agreement with a group of retirees from its Middletown (Ohio) Works to settle a lawsuit stemming from the company's initiatives in 2006 to reduce its retiree health care costs.
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According to a company Web statement , under terms of the agreement, AK Steel will transfer all of its health care (other post employment benefit or OPEB) obligations for the covered retirees to a Voluntary Employees Beneficiary Association (VEBA) trust, which will be managed solely by the retirees’ designees and will be used to fund the retirees’ covered benefits. AK Steel agreed to initially fund the VEBA trust with a contribution of $468 million and provide three subsequent annual contributions of $65 million each, for a total of $663 million.

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In exchange for the funding, AK Steel will have no further liability related to the Middletown Works retirees covered by the agreement, according to the Web statement. The company said the settlement agreement covers about 4,600 current Middletown Works retirees.

The company said it expects the initial trust contribution to occur in the first quarter of 2008. As of June 30, 2007, AK Steel’s total OPEB liability was approximately $2.1 billion, of which approximately one-half was related to the Middletown Works retirees covered by the settlement, the announcement said.

The retirees filed the lawsuit in July 2006 asking the U.S. District Court for the Southern District of Ohio to bar the company from making them pay monthly health insurance premiums, eliminating vision and dental coverage, eliminating Medicare subsidy benefits, and reducing life insurance coverage (See AK Steel Retirees Ask Court to Bar New Health Care Plan ).

AK Steel said the settlement agreement is subject to approval by the court.

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