Benefits October 16, 2013

Retirement No Longer An Exit from Work Force

October 16, 2013 (PLANSPONSOR.com) – Older Americans’ views on retirement are changing, with fewer people seeing it as a complete exit from the world of work, according to a new survey.
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The survey, conducted by the Chicago-based Associated Press-NORC Center for Public Affairs Research, found the line between working and retirement is shifting. Eighty-two percent of people aged 50 or older, who are currently working and not yet retired, said it is likely or very likely that they will do some work for pay during their retirement. One-third of retired Americans said they did not have a choice in the matter. That figure increased to 54% for retirees younger than 65.

The recession has affected retirement planning. Before the recession, most people planned to retire at age 57, while the average age now is 62. Forty-seven percent of current workers now plan to retire at a later age than they expected to when they were 40. Financial need, health and the need for benefits were cited as the most important factors in their retirement decisions.

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Thirty-nine percent of workers aged 50 or older said they had $100,000 or less saved for retirement, not including pensions or homes. Twenty-four percent said they have less than $10,000 saved.

“The survey illuminates an important shift in Americans’ attitudes toward work, aging and retirement,” said Trevor Tompson, director of the center. “Retirement is not only coming later in life, it no longer represents a complete exit from the work force. The data in this survey reveal strikingly different views of retirement among older workers today than those held by the prior generation.”

According to research by the center, the portion of the U.S. population aged 50 or older is not only growing, but becoming healthier. Projections show those ages 65 and older will increase to 19% of the population by 2030, up from 13% in 2010. At the same, those ages 55 and older make up the quickest growing segment of the work force; by 2020, about one-fourth of American workers will be aged 55 or older.

The survey also found:

  • With older workers, 61% favor raising the cap on income subject to Social Security taxes, and 41% favor reducing Social Security benefits for those with higher incomes. In contrast, 29% favor gradually raising the minimum Social Security age, and 21% favor changing the way benefits are calculated so cost-of-living increases are smaller;
  • Twenty percent of working Americans aged 50 or older said they have experienced age discrimination in the job market or at work since turning 50. Forty-four percent of those who experienced such discrimination have looked for a job in the past five years, compared with 16% who did not experience such discrimination;
  • The nature of a person’s work shapes his view of whether age is an asset or liability. Twenty-eight percent who work in professional services see age as an asset, while only 3% of those in manufacturing agree; and
  • About half of workers aged 50 or older said their boss is younger than they. Those with bosses older than they are less likely to cut back on hours than those with younger bosses (9% vs. 23%). Those with older bosses are more likely to consider age an asset to their career (39% vs. 20%).

Research for the survey was conducted nationally by phone with 1,024 adults aged 50 or older. The phone interviews were conducted between August 8 and September 10.

More information, including the survey results, can be found here.

Administration October 16, 2013

California Mayors Propose Public Pension Reforms

October 16, 2013 (PLANSPONSOR.com) – A law being proposed in California would amend the state’s constitution and give government agencies authority to negotiate changes to existing employees’ pension or retiree health care benefits going forward.
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The proposed Pension Reform Act of 2014 is being sponsored by the Coalition for Fair and Sustainable Pensions, a group of California elected officials and other parties with concerns about the rising cost of retirement benefits. It says it is seeking to protect vital services and improve retirement security.

A group of California mayors have filed a statewide ballot initiative to provide state and local governments with the coalition terms as “the tools needed to fix California’s unsustainable public employee retirement plans.” According to the coalition, the proposed act would protect retirement benefits that California state government employees have already earned, while allowing benefits to be modified for future years of service.

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“Many of California’s public employee retirement plans are simply unsustainable and it’s in everyone’s interest to provide the tools to fix the problem now before even tougher actions are necessary,” said Mayor Chuck Reed of San Jose. “During tough economic times, we believe employees would much rather adjust their future expectations than risk seeing their accrued benefits slashed in bankruptcy. We’ve already seen that tragic situation play out in cities like Stockton and Central Falls, Rhode Island. Our teachers, police officers, firefighters and other dedicated public servants deserve to know that the pensions they’ve earned will be there when they need it.”

The proposed act includes provisions to:

  • Prevent the state of California, pension plan administrators and other government boards from interfering with elected leaders’ or voters’ ability to amend their public employee retirement benefits for employees’ future years of service;
  • Protect existing collective bargaining agreements by requiring government employers to wait until current labor contracts expire before negotiating changes to retirement benefits; and
  • Require any government agency with a pension plan that is less than 80% funded to prepare and publish a public report outlining how it can achieve full funding in 15 years.

The proposed act also calls for amending California’s state constitution and any relevant state laws. In addition, the act would supersede portions of the California Supreme Court decisions, such as Kerry v. City of Long Beach and Miller v. California, which “have been construed as limiting the ability to prospectively modify pension and retiree health care benefits for work not yet performed by government employees.”

In response to the proposed act, the California Public Employees’ Retirement System (CalPERS) said: “Public employee pensions are deferred compensation, a key part of the compensation of public employees, and a valuable tool for those employers who choose to use them. Public employees work hard during their careers to serve their fellow Californians and virtually all contribute toward their retirement each month. Secure and reliable pensions benefit the California and local economies, aid in recruiting and retaining employees, improve work force stability and ensure the quality of life for retirees in our communities.

“The retirement benefits promised to employees, and guaranteed by the federal and state constitutions, are determined by the employers and the employees, not by CalPERS. The courts have clearly established that California public employees have a vested right to the level of benefits promised to them when they are first employed. This prevents not only a reduction in the benefits that have already been earned, but it also prevents a reduction in the benefits that an employee has been promised for their future service. CalPERS is bound by fiduciary duty to deliver the promised pension benefits according to the U.S. and California constitutions, statutory law and case law. The California voters placed these protections and duties in our constitution to ensure that employees’ pensions would be protected by CalPERS as their fiduciary and trustee. CalPERS will continue to support and defend our members’ vested rights, in accordance with the laws of the land and our obligations under the federal and state constitutions.

“All Californians deserve a secure retirement. A better solution would be to help those without pensions find ways to save for retirement, not to reduce the pensions of those who already have them. Changes to pension benefit levels should be determined by the employer and the employees, and not at the ballot box. If this initiative were to pass, then all contractual rights in California could be in jeopardy. Fairness and the rule of law are the foundations of a society that honors and respects the promises made by that society to its public servants.”

A copy of the proposed act can be downloaded here, and additional information about it can be found here.

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