Data and Research July 7, 2023

Gen Xers Profess Low Retirement Confidence, Concerns About Guaranteed Income

As many in the generation worry they cannot rely on Social Security or a pension for lifetime income, Gen Xers fear their savings will be insufficient in retirement, according to IRI research.

Reported by

Generation X employees, more than those of any other generation, are worried about their retirement savings lasting throughout their lifetime and worry they cannot rely on Social Security according to research from the Insured Retirement Institute.  

Gen Xers, between the ages of 41 and 56, are significantly less likely to expect retirement income from a public or private pension than Baby Boomers or current retirees, IRI found, and many believe they will need more income than Boomers or current retirees to maintain their desired lifestyles in retirement.  

Get more!  Sign up for PLANSPONSOR newsletters.

After interviewing 2,241 adult Americans aged 40 to 80, the IRI found that 68% of those in Gen X expect Social Security will provide a guaranteed source of income, as opposed to 88% of Boomers and 93% of retirees.  

In addition, many Gen Xers believe they will need more income than Boomers or current retirees and therefore need to save aggressively to sufficiently compensate for the income they believe will not come from Social Security or pensions. 

According to the IRI’s report, 58% of Gen Xers said they expect to cover basic expenses and travel/leisure during retirement, but only 15% said they feel very confident in their ability to live comfortably.  

“Given lack of confidence in Social Security, the declining prevalence of pensions, lower savings, and higher expectations for income needs, it is unsurprising to see Gen X convey the lowest confidence in the sustainability of their savings,” the report stated. “Current retirees have the highest confidence, in part due to the higher likelihood of having sources of guaranteed lifetime income other than Social Security but also due to the experience of living in retirement and making lifestyle adjustments.”  

Boomers have the highest average savings of $652,780, according to IRI’s research, both because they have had longer to save than Gen X and because those who were sampled have not retired yet. Unsurprisingly, Gen Xers have the lowest savings, compared to Boomers and retirees, of $404,068, which the IRI argued will not support lofty income expectations. 

Focus on Retirement Saving  

Perhaps partly because of this heightened fear of outliving their savings in retirement, Gen X has higher contribution and 401(k) enrollment rates, as compared with other generations. 

According to the Transamerica Center for Retirement Studies’ new report, “Post-Pandemic Realities: The Retirement Outlook of the Multigenerational Workforce,” 81% of Gen X workers are saving for retirement in a 401(k) or similar plan and/or outside the workplace. On average, they began saving at age 30, and those participating in a 401(k) or similar plan contribute a median of 10% of their annual pay. 

Transamerica also found that Gen X workers have saved an average of $82,000 in total household retirement accounts and only $5,000 in emergency savings. However, 19% have dipped into their retirement savings by taking a hardship withdrawal or early withdrawal.  

Bank of America’s 2023 Financial Life Benefits Impact Report concluded that Gen X males participate in their 401(k)s at the highest rate, with 70% contributing to their 401(k). At the same time, Gen X men and women take out more loans and carry larger loan balances than other generations, according to Bank of America. 

Investment Preferences 

Later-stage workers and retirees overwhelmingly want their income sources to be guaranteed for life, according to the IRI. In terms of investment preferences, Gen Xers, in particular, are very interested in investment options that provide downside protection, lifetime income or both.  

While consumers are largely reluctant to explore annuities as a retirement income option, 17% of Gen Xers indicated a desire to purchase an annuity for lifetime income, which the IRI argued could be the start of growing awareness among workers that sufficient and secure retirement income will continue to move in the direction of becoming a personal responsibility, especially with Social Security increasingly viewed as a supplemental source of income.  

That’s not to mention that the Social Security Board of Trustees projected that the Old-Age and Survivors Insurance Trust Fund is expected to become depleted in 2033.  

The majority of Gen Xers (73%) said they prefer target-date funds as investments in their defined contribution plan, but variable annuities with lifetime withdrawal benefits, registered-index-linked annuities and fixed-index annuities fell close behind.  

The IRI labeled these as “encouraging findings,” as the SECURE 2.0 Act of 2022 increases opportunities for annuities to be included in workplace plans to help American workers save for retirement and use their savings for income they cannot outlive.  

“The time is now to hone education and marketing efforts toward Gen Xers and apply lessons learned to the next generation approaching their peak earning years, which also happens to be the largest generation in history: Millennials,” said Frank O’Connor, vice president of research at IRI, in a statement.  

Benefits July 6, 2023

DOL Sues West Virginia Company for Fiduciary Breaches

MSES Consultants Inc. failed to fund its health plan for much of 2016, leaving participants and beneficiaries on the hook for health care costs.

 

Reported by

The Department of Labor, led by Acting Secretary Julie Su, on June 29 targeted MSES Consultants Inc., company president Lawrence Rine and the MSES Employee Benefit Health Plan, alleging the fiduciaries for the health plan burdened participants and beneficiaries with unpaid health claims for medical services when the plan was shuttered in 2016.  

The complaint alleges two counts of fiduciary breach—for prohibited transactions relating to the plan and co-fiduciary liability relating to the plans—under the Employee Retirement Income Security Act.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“MSES and Rine failed to pay properly adjudicated health claims and (for employees with dependents) continued to withhold employee contributions from participant’s pay,” the complaint says. “During this time, they failed to notify participants that Health Plan claims were not paid, and that these might continue to go unfunded and unpaid. As a result, participants and beneficiaries reasonably believed they continued to be covered under the terms of the Health Plan when they were not.”

MSES Consultants is a professional services firm providing consultation in several areas, according to the company website. In 2015, the company filed for bankruptcy, but the case was dismissed from U.S. Bankruptcy Court’s Northern District of West Virginia in 2017, the complaint says.

The DOL filed the complaint in U.S. District Court for the Northern District of West Virginia. The MSES Inc. Employee Health Plan was administered in Clarksburg, West Virginia.  

Although the health plan year was to run from January 1, 2016, to December 31, 2016, MSES ultimately terminated the health plan on October 31, 2016, the DOL alleges in the complaint.

In the complaint, the DOL requests that the court direct that the plaintiffs are entitled to a surcharge remedy against Rine and MSES Consultants to compensate the participants and beneficiaries for a loss of health care coverage and related expenses; establish that Rine and MSES each participated knowingly in or knowingly undertook to conceal acts or omissions by the other that they knew to be violations of ERISA; and instruct Rine and MSES Consultants that each are liable for the other’s breaches of fiduciary responsibility.

Requests for comment to MSES Consultants were not returned. A working company website was found but would not accept a submitted message seeking comment on the litigation.

Requests for comment on the lawsuit to the DOL were not returned.  

The DOL brought a lawsuit against the trustees of a different health plan and its third-party administrator, alleging fiduciary breach, earlier in the month.

Health Plan Details

MSES and Rine did not notify participants that their health coverage was terminated or in danger of being terminated until September 27, 2016, when MSES held a staff meeting in which it informed employees that the health plan would be terminated effective October 31, 2016, says the complaint. MSES and Rine subsequently sent a letter to employees on September 30, 2016, notifying them that as of October 31, 2016, the health plan would terminate and that employees should seek coverage through other means, DOL adds.

The health plan was established as a partially self-funded health and welfare plan offered to all eligible employees, beginning January 1, 2016, the complaint shows. The health plan provided medical benefits to full-time company employees and their eligible dependents.

“Because of MSES and Rine’s failure to notify participants and beneficiaries of their failure to fund adjudicated health claims during the period of April 20, 2016, through October 31, 2016, participants and beneficiaries continued to seek covered benefits under the mistaken belief that health plan coverage remained in place,” says the complaint. “The participants and beneficiaries were billed at least $153,939.42 for medical services that were not paid due to the fact that they lacked insurance coverage as a result of the fiduciaries’ failure to fund the health plan and defendant’s misrepresentations.”

For single employees, the coverage was paid through employer contributions; for employees with dependents, coverage was partially paid by employer contributions and partially funded through employee contributions paid through payroll deductions, according to the complaint.

In May 2016, Benefit Assistance Corp., the health plan’s third-party administrator, sent MSES Consultants and Rine an email that they were $115,397.25 past due for claims dating back to April 20. BAC sent MSES and Rine another email on June 17 notifying them of additional unpaid claims, for a total of $124,248 in unpaid claims, but MSES and Rine again did not respond to either message, the complaint alleges.

BAC processed claims, drafted plan documents and handled the day-to-day customer service for the health plan, according to the complaint.

“Internal emails from the company acknowledge that MSES and Rine knew about the unpaid claims and their amounts, despite their lack of response to BAC and taking no steps to inform plan participants,” the complaint states.

Relief Sought

The DOL is seeking a judgement holding Rine and MSES liable. The complaint requests the following relief:

  • Removing the company and Rine as fiduciaries of the health plan and of any employee benefit plan for which they are fiduciaries;
  • Imposing a surcharge on Rine and MSES to compensate the health plan participants and beneficiaries for all incurred medical expenses, health care claims and other losses, including interest, which were caused by the defendants’ fiduciary misconduct; and
  • Appointing an independent fiduciary with plenary authority and control over the management and administration of the plan, including the authority to marshal assets on behalf of the plans, to pursue claims on behalf of the plans and to take all appropriate action for the distribution of benefits to the plan’s participants and beneficiaries, with all costs and fees of the independent fiduciary to be borne by the defendants.

The West Virginia Secretary of State’s website, with details on businesses organizations registered in the state, explains MSES’ registration was revoked in 2021 for failure to file an annual report; according to the website, the company filed annual reports through 2018.

Emailed messages sent to 10 business addresses listed on the MSES Consultants website were returned as undeliverable.

«