Compliance December 20, 2017

PBGC Amends Regulation on Allocation of Assets in Single-Employer Plans

A final rule provides a new table for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2018.

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The Pension Benefit Guaranty Corporation (PBGC) has issued a rule amending its regulation on Allocation of Assets in Single-Employer Plans by substituting a new table for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2018.

The table is needed to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

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The agency explains that under Section 4044.51(b) of the asset-allocation regulation, early retirement benefits are valued based on the annuity starting date, if a retirement date has been selected, or the expected retirement age, if the annuity starting date is not known on the valuation date. Sections 4044.55 through 4044.57 set forth rules for determining the expected retirement ages for plan participants entitled to early retirement benefits.

Appendix D of part 4044 contains tables to be used in determining the expected early retirement ages. Table I in appendix D (Selection of Retirement Rate Category) is used to determine whether a participant has a low, medium, or high probability of retiring early.

The new rule amends appendix D to replace Table I–17 with Table I–18 to provide an updated correlation, appropriate for calendar year 2018, between the amount of a participant’s benefit and the probability that the participant will elect early retirement. The rule is effective January 1.
Benefits December 20, 2017

Mid-Career Employees Most Likely to Be HSA Spenders

Even among employees who invest their HSA assets, only 17.7% indicate they will save and grow their assets for future health care needs in retirement.

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Employers are increasingly seeing health savings accounts (HSAs) as part of a retirement benefits strategy and are encouraging employees to use them as savings vehicles.

However, a survey from ConnectYourCare shows mid-career employees are more likely spending their HSA assets.

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Overall, 81.8% of respondent to the survey say they regularly use their HSA funds throughout the year to pay for out-of-pocket health costs, while 18.2% say they try to save/invest their HSA funds as much as possible for retirement or large future expenses. But, employees younger than 25 (25.6%) and older than 65 (22.1%) are more likely to say they try to save/invest their HSA funds. The survey found employees ages 35 to 44 (84.9%) and 45 to 54 (84.3%) were more likely to be HSA spenders.

When asked what prevents them from investing their HSA assets, some survey respondents said: “An HSA is not an investment vehicle; it is a health care cost vehicle;” “I can’t afford to contribute to my HSA because I can’t afford to bring home less pay;” and “I currently use all my HSA funds to cover health care expenses. There is no balance left to invest.” Thirty-six percent say the amount of funds in their account prevents them from investing, and 26.9% indicate they were not aware of investment options.

Even among those who do invest their HSA assets, 62.9% report they expect they will withdraw from their account from time to time for major medical expenses, while only 17.7% indicate they will save and grow their assets for future health care needs in retirement.

A report of full survey results may be downloaded free from here.

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