News

"[A] federal judge certified a class of more than 1,700 participants and beneficiaries in two of CITGO Petroleum Corporation's pension plans.... The lawsuit against CITGO alleges that the Houston-based gas and energy giant violated [ERISA] by failing to properly calculate joint and survivor annuity ('JSA') benefits for retired employees and imposing a 'marriage penalty' that reduced their monthly pension payments." [ Urlaub v. Citgo Petroleum Corp. , No. 21-4133 (N.D. Ill. May 16, 2024)]

12 pages. "Commonwealth conducted focus groups with 20 workers earning [low and moderate incomes] ... Respondents reacted positively to both the $1,000 withdrawal option and the $2,500 [PLESA], but expressed a preference for the $2,500 option when asked to choose.... Employers and retirement plan providers who choose to use automatic enrollment within the PLESA must be clear and thoughtful about how they communicate it to employees to minimize concerns.... While participants don't expect to withdraw frequently from the account, they still prefer minimal restrictions on withdrawals and quick access to funds through direct deposit."

"In some cases, you could buy life insurance instead and get a better deal in protecting your spouse. There are some things to keep in mind, though."

"Alaska lawmakers are considering Senate Bill 88 legislation to reinstate pensions for the state’s public workers.... [T]he bill’s 30-year cost could exceed $9 billion, but there is little evidence to conclude that it would counteract national and state-level trends in increased employee turnover."

"Retirees can safely spend down retirement account assets at a rate higher than 4% without depleting their savings in old age by monitoring account balances regularly and making tradeoffs like converting some savings into guaranteed income ... [PGIM's] conservative, moderate and enhanced guided spending rates are approximately 4.0%, 5.0%, and 5.5%, respectively, on average.... TIAA has marketed converting portions of retirement savings into an annuity as one way retirees can boost their safe withdrawal rates[.]"

34 pages. "This policy paper discusses retirement inequities and how current retirement plan design elements and policies may inadvertently disadvantage certain cohorts of individuals.... [It] offers potential changes and actions for consideration by policymakers, think tanks, actuaries, and employers/plan sponsors to improve retirement outcomes for groups facing inadequate retirement security under common designs [and] concludes with considerations for further effort, research, and studies."

10 pages. Topics: [1] Required minimum distribution provisions: Increased required minimum distribution (RMD) age; Reduced penalties for a missed RMD; Spousal beneficiaries treated as participants; Roth accounts no longer required in RMD. [2] Early withdrawal penalty relief provisions: Emergency expense withdrawals; Domestic abuse withdrawals; Terminal illness 10% tax penalty relief; Withdrawal relief for disasters; Long-term care contracts purchase. [3] Other distribution and withdrawal provisions: Mandatory cash-out limit; Self-certification of hardship and unforeseeable emergency distributions; Amendment deadlines.

"To ensure participants are using their retirement benefits -- or at least being taxed on them -- the RMD process has been around since the passage of ERISA. A simple concept has increasingly become an operational nightmare.... Everyone knows about force-out provisions for terminated participants with a balance of less than $7,000. That same process can also apply to terminated participants who reach normal retirement age.... [P]articipant consent is only required for any distribution before the participant attains the plan's normal retirement age (or age 62, if later)."

"With 95% of Americans older than age 60 having at least one chronic condition, the report shows average actuarial life expectancy for those with common health conditions is significantly lower. For the 30% of retirees who live with diabetes, the probability of reaching age 95 is less than 1%. Moreover, even the healthiest 5% of retirees only have a one-in-five chance of reaching this age."

"The vast majority of Americans (77 percent) agree that state-facilitated retirement savings programs are a good idea.... More than three-quarters of Americans (82 percent) say they would participate in state-facilitated retirement programs, up from 75 percent in 2020.... Americans view many key features of state-facilitated retirement programs as highly favorable, especially that the programs would provide higher returns than other safe investments in today's market (87 percent) and have low fees (86 percent)."

"A look back at the policy landscape that led to state-facilitated retirement plans, and a look ahead to the opportunities as these programs continue to gain steam."

"A 2020 study ... found that a major reason that 74 percent of millennials pursued their role in the public sector was because the employer offered a pension and that 84 percent cited this benefit as a major reason for remaining in their current positions.... 71 percent of millennials would be more likely to leave their jobs in the public sector if their pensions were cut."

"After surveying U.S. adults about when they expect to retire, the TIAA Institute found that those who suffered a decline in their health were 8.9% less likely to keep working past age 62, and 14.1% less likely to work past age 65.... A new diagnosis of cancer ... reduced the chances of working past age 62 by 16.4%. Lung disease reduced those chances by 26.4%, and arthritis lowered them by 10.2%."

"Relative to our 2023 estimates, [a] hypothetical couple retiring in 2024 will need to save approximately $7,000 more if they have Original Medicare plus Medigap and Part D coverage, and $8,000 less if they have Medicare Advantage plus Part D coverage, all else being equal."

"[C]ourts that allow actuarial equivalence claims are rewriting ERISA and private contracts -- something that should be left to the legislature to change.... Actuarial equivalence cases are dangerous because they present a very sympathetic fact pattern.... ERISA's safeguards were to ensure that plan sponsors meet their benefit obligations. ERISA's safeguards were never designed to allow participants to use litigation to improve their plan benefits." [ Reichert vs. Bakery, Confectionary, Tobacco Workers and Grain Millers Pension Committee , No. 23-12343 (E.D. Mich. Apr. 17, 2024); Urlaub v. Citgo Petroleum Corp. , No. 21-4133 (N.D. Ill. May 6, 2024)]

"Plaintiffs in these suits have attempted to recast the decision how to apply forfeitures as a fiduciary determination, and claim that it is a prohibited transaction not to apply the forfeitures for the benefit of participants.... These cases may end up revolving on whether the plan language clearly permitted the use of forfeitures to reduce contributions. All plan sponsors should review their plan language to make sure their use of forfeitures is permitted by the plan text. It is preferable to list all three permissible uses in the plan text."

48 pages. "This article analyzes the potential impact of the 2022 SECURE 2.0 Act reform which permits employers to match contributions for student loan repayments, in 401(k) plans. [A] calibrated lifecycle model measures the impact of this reform on heterogeneous households' financial behavior and welfare.... [P]ost-reform, employees will repay more loan debt but reduce own retirement plan contributions, offset by higher employer-matching contributions that take loan repayments into account."

" SB 135 provides that an employer that does not offer a qualified retirement plan would be required to facilitate participation of its employees in the program. Eligible employees would be automatically enrolled in the program and make payroll deductions to an individual retirement savings account. They could opt out ... [A]ny person who earns compensation in Alaska would be eligible to voluntarily enroll in the program."

"[The] reformers have long been an advocate on behalf of retirees who have been angry over reduced and sometimes eliminated cost-of-living adjustments following the passage of a 2012 state law eliminating a 3% COLA and giving the board the authority to set them. Reformers have blamed investment management costs among other administrative costs and have promoted the idea of gutting investment staff and moving to all index funds."

"With a split among the five circuit courts that have weighed in, a vigorous dissent in the Second Circuit's decision, and another circuit court decision expected soon, we may see the issue make its way to the Supreme Court in the not-too-distant future." [ Cedeno v. Sasson , No. 21-2891 (2d Cir. May 1, 2024)]

"Key clarifications in [ Fact Sheet 2024-19 ] include ... [1] Distributions and loans are available only to individual participants or IRA account owners who have experienced an economic loss due to a qualified disaster and whose principal residence is in the disaster area. Dependent and beneficiary residences do not count.... [2] The $22,000 distribution limit is per person, per disaster. It is not per plan or per IRA, nor is it an annual limit. [3] A plan sponsor can choose to permit disaster distributions, expanded disaster loans, or delayed loan repayments. Plan sponsors can also choose to permit some or all these options."

"Among the top concerns facing retired Americans are: Inflation lessening the value of assets (89%); Higher than expected healthcare costs (85%); A major market downturn significantly reducing assets (76%); Not knowing how to best generate income and/or draw down assets (69%); Outliving assets (68%)."

"[A]lmost two-thirds (65.1%) of states have vesting requirements that would violate the minimum vesting rules of ERISA for private sector plans.... Longer vesting means nearly half of workers who choose to work for public-sector employees will only be paid about 87% of their total compensation package. They will forfeit the rest.... Individual account plan designs, including defined contribution and cash balance plans, avoid the fundamental problems of traditional DB plans by allowing full portability of benefits, protection against inflation, and more uniform benefit accruals."

"International Pension Plans (IPPs) and International Savings Plans (ISPs) are used by multinational employers to provide retirement or savings benefits.... 142 IPPs and ISPs were established over the last five years, with the highest concentration in banking and finance accounting for some 15% of these plans. Other sectors attracting significant interest include oil and gas (12%), non-profit organizations (11%) and engineering and power (11%). Most are described as global (Figure 1), accommodating members from diverse geographies and nationalities"

"Determining whether a worker is an employee or independent contractor particularly for retirement plan coverage purposes can be tricky. The DOL has a new FLSA employee standard. There's also the IRS definition of employee for tax purposes and Supreme Court rulings. All three of these standards may impact whether a worker is an employee that should be covered under an employer-sponsored retirement plan."