Benefits January 23, 2006

Wealth Is No Buffer to Health Care Costs Concerns

January 23, 2006 (PLANSPONSOR.com) - According to a survey release by The PNC Financial Services Group, Inc., 52% of wealthy adults rated "providing for my health and wellness" as their number one financial concern.
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According to the release, “affording health care costs for my family” was rated the number one financial concern for 38% of survey respondents.

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“What’s unfortunate is that many successful people spend a lifetime working to build their wealth, sometimes working so hard that they jeopardize their own health. Then they spend a majority of their wealth to restore their health,” said Thomas Melcher, managing director and chief investment officer of PNC’s wealth management unit for ultra high net worth clients, in a news release.

Other key findings of the survey included:

  • Future of Medicare: 42% of respondents perceive the potential insolvency of the Medicare system as a threat or huge threat to their family’s wealth. 49% of those between the ages of 45-64 think its demise would be a threat or huge threat to their family’s wealth. Among those with children, 51% agree their children will not benefit from Medicare in the future.
  • Long-term care costs and medical treatment also posed a risk for 36% of those questioned, with 26% of younger Americans, ages 18-44, with children under 18 expressing fear that their children would eventually have to pay for their long-term health care costs. Close to one-quarter (24%) of those with living parents worried about their parents’ lack of long-term care insurance.
  • The top five financial concerns of those surveyed were: “providing for my health and wellness” (52%), “sustaining and increasing my wealth” (47%), “providing for my family’s security” (41%), “having enough money to support my lifestyle” (41%), and “affording health care costs for my family” (38%).

In spite of their financial concerns, the survey found that many wealthy Americans are not taking steps to protect their assets. Sixty-nine percent of respondents said they do not have a comprehensive financial plan.

As far as health care in their financial planning, 39% of survey respondents have no health care proxy, which establishes treatment desires for when the individual is unable to express them, and 69% have not purchased long-term care insurance for themselves or a spouse. Reasons for not purchasing the insurance included feeling it was unwise to spend money on a premium for something they would never use (36%), the insurance is cost-prohibitive (22%), and they never thought about it (21%).

The survey was conducted online by Harris Interactive in October and November 2005 among a nationwide cross section of 1,485 adults (age 18 or over) with annual incomes of $150,000 or above (if employed), at least $500,000 of investable assets (if employed) or at least $1 million of investable assets (if retired).

Benefits January 20, 2006

Two More Companies Join DB Plan Freezing List

January 20, 2005 (PLANSPONSOR.com) - Add two more US companies to the growing list of firms freezing their defined benefit pension in favor of a 401(k) program.
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Atlanta-based athletic clothing and equipment maker Russell Corp. and communications giant Sprint Nextel Corp. have joined other employers across the country in migrating away from their DB plans.

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In Russell’s case, the company made the announcement about its retirement benefit changes as part of a wide-ranging series of cost-cutting moves including cutting 2,300 jobs, which it said were aimed at saving as much as $40 million on a pretax, annualized basis.

Russell CEO Jack Ward offered no details of the retirement plan changes, except to say that the firm’s DB plan would be frozen that and Russell planned to “significantly improve” its existing K plan.

In the case of Sprint Nextel, the January 1, 2006 changes affected Sprint employees who had been with the company before the completion of its merger with Nextel Communications Inc. in August, David Gunasegaram, a Sprint spokesman, told the Kansas City Star. Nextel did not have a pension program.

“After considering the needs of the business, we made changes to the retirement program that places emphasis on the 401(k) program,” Gunasegaram told the newspaper. “It provides our associates with increased flexibility in managing their retirement and it positions our company for success in the marketplace.”

The changes mean that Sprint employees hired before the merger was completed on August 12 who were fully vested in the program will not earn additional pension benefits, Gunasegaram said. Employees hired before that date but are not yet vested in the program will be allowed to continue earning the needed five years or more of employment credit to become vested.

The company offers a dollar-for-dollar match for employee 401(k) plan contributions of up to 5%, Gunasegaram said, as well as a discounted stock purchase program for employees.

Part of a Trend

Earlier this week, Alcoa Corporation revealed that new hires after March 1, 2006 would only be offered a 401(k) plan (See Alcoa Drops DB Plan for New Hires ).

Other companies recently announcing changes in their DB plans have included:

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