Benefits October 29, 2010

More Saving, a Recession Silver Lining

October 29, 2010 (PLANSPONSOR.com) – Nearly half of individuals surveyed by The Hartford said retirement benefits are more important now than before the start of the recession.
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A news release about the survey said it found a sharp, upward spike in the levels of understanding and participation in defined contribution retirement plans. Overall, 76% of respondents said they “completely” or “mostly” understood their retirement benefits in 2010, compared to 65% in 2009.

The biggest increase in the understanding of retirement benefits came from women, with 69% saying they completely or mostly understood their retirement benefits compared to 56% last year, according to the news release.  Men’s understanding improved to 83% from 75% a year ago.

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“Greater awareness of the importance of retirement savings is one of the few positive outcomes of the recession,” said Sharon Ritchey, executive vice president and director of The Hartford’s Retirement Plans Group, in the news release.  “We’ve known for a long time that consumers need to save more for retirement and pay closer attention to their retirement savings.  With economic issues staring us in the face every day, it appears that consumers are, at least for now, focusing more on preparing for retirement.”

The study showed that consumers value their retirement plans more now than at the start of the recession.  Forty-three percent said they now view their retirement plan as more important, and 49% said they view it as just as important as before the economic crisis.

In another positive sign, consumers are more likely to participate in an employer-sponsored retirement plan today than they were a year ago.  The percentage of those saving in a 401(k) or other defined contribution plan when offered by their employer rose to 84% in 2010 from 80% in 2009.  Again, women showed the biggest jump, with 70% participating in 2010 compared to 61% in 2009.  Men’s participation rate jumped to 71%, up five points from last year.

Twenty-two percent of respondents said poor economic conditions forced them to reduce or eliminate contributions to their retirement plan.  Women were twice as likely to have been affected (22% in 2010 vs. 11% in 2009), and men felt some pain as well (21% in 2010 vs. 15% in 2009).

Matching contributions from employers were reduced or eliminated for one in five consumers in 2010, an increase from 2009 (16%).  Women saw a bigger impact year-over-year, with contributions being altered for 19% in 2010 compared with 14% in 2009.  The impact on men was fairly stable with contributions changing for 21% in 2010 compared to 19% in 2009.

The Hartford’s study was conducted online this spring by Zeldis Research, which polled 1,000 adults ages 18-65.

Compliance October 29, 2010

NH Supreme Court Finds Sudan Divestment Act Constitutional

October 29, 2010 (PLANSPONSOR.com) – The New Hampshire Supreme Court has ruled that a state law requiring public funds to divest holdings from companies doing business with Sudan does not violate the state constitution.
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The New Hampshire Judicial Retirement Plan and the New Hampshire Retirement System (NHRS) argued that Article 36-a of the state constitution created a constitutional trust and the Sudan Divestment Act forces them to divest from investments in scrutinized companies, which they claim conflicts with their constitutional obligations.  

In its opinion, the high court said that relying upon the plain meaning of the language used in the Article as well as statements made in conference when the Article was debated and the clear language of the ballot question presented to voters, it concludes that the amendment requires only that retirement system funds be used for the sole object of providing retirement benefits. The court said the Sudan Divestment Act does not require that the systems’ funds be used for any purpose other than providing retirement benefits, but simply prohibits one possible investment option.   

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However, the court found an absence of a definitive trial court ruling on whether the Act impermissibly interferes with the trustees’ statutory or common law fiduciary duties, so it remanded the case to the trial court to make this determination.  

In January 2008, President Bush signed into law the Sudan Accountability and Divestment Act of 2007 giving State and local governments authorization to divest assets in companies that conduct business operations in Sudan (see Bush Signs Sudan Divestment Bill into Law). In the same year, New Hampshire enacted the Sudan Divestment Act. 

Later that year, the retirement systems sought rulings on whether the law was constitutional (see NH Pension Board Opts for Divestment Law Constitutional Challenge and NH Pension Plan for Judges Sues over Divestment Law).  

A trial court granted the NHRS’ motion for an injunction on the implementation of the Act, finding that the System had demonstrated a substantial likelihood of success on its argument that Article 36-a rendered the Act unconstitutional.   

The high court’s opinion is here.

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