Benefits August 8, 2013

Sponsors See Many Employees Delaying Retirement

August 8, 2013 (PLANSPONSOR.com) – Nearly two-thirds of plan sponsors surveyed said many of their employees are delaying retirement.
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According to the results of the Fourth Plan Sponsor Attitudes Survey from Fidelity Investments, retirement plan sponsors have concerns about their employees’ retirement readiness, as well as their own fiduciary responsibilities.

The survey found:

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  • Nearly two-thirds (66%) of plan sponsors reported that “some, quite a few or all employees” are delaying retirement because they are unprepared;
  • More than half (57%) of plan sponsors say they do not believe their participants are saving enough for retirement; and
  • Plan sponsors are not confident they fully understand their fiduciary responsibilities, with 42% believing they need help in this area.

In addition, plan sponsors felt as if they may not only be creating a greater reliance on retirement plan advisers but also increasing their expectations of them. In terms of expectations for adviser services, the survey findings show:

  • While 84% of plan sponsors use an adviser and satisfaction is increasing, a little more than one-third (38%) of plan sponsors are unsatisfied with such services, and 10% are actively looking to switch advisers; and
  • Plan sponsors expect a wide range of investment and retirement expertise from their advisers and desire a “more knowledgeable adviser”—i.e., one providing seven key areas of expertise in which he would score above 30%.

The Fidelity survey polled 937 sponsors of plans ranging in size from 25 to 10,000 participants. The plans used a wide variety of recordkeepers, including Fidelity and other firms.

Administration August 8, 2013

Contributions Will Determine How Pension Funding Swings

August 8, 2013 (PLANSPONSOR.com) – The funded status of pension plans continued its climb in July, continuing the upward trend seen in much of 2013, according to Russell Investments.
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An analysis by Russell found that its representative plan was 84.2% funded and its representative mature plan was 79.4% funded. July’s incremental improvement was found to be fueled by solid equity market performance, with no significant change in the discount rate used to value liabilities.

Despite these gains, September 15 is a date looming large for many pension plan managers. The Russell representative plans assume that contributions are equal to benefit accruals and have no net effect on funded status. However, that assumption does not apply to many real plans, Russell said. Contributions can have a big impact, especially as the latest possible date—viz., September 15—approaches for plan contributions that can still count toward the 2012 funded status calculation for calendar-year plans (that is, those plans whose annual valuation is carried out on December 31).

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Russell noted in the analysis that it expects to see marked differences in the ways corporations choose to make their contributions, given the flexibility offered by MAP-21 [the Moving Ahead for Progress in the 21st Century Act]. In many cases, Russell expects plan sponsors to find it in their best interests to contribute more than the required minimum.

In some cases, said Russell, these contributions will push plans past trigger points in their glide paths, causing a change in asset allocation policy. According to the analysis, this will result in such new money landing in fixed income or LDI strategies.

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