FYI: Retirement

Some snippets and studies that bring insight to the retirement issue.

Monday, March 1, 2010
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Knowledge Drain Back to Forefront

Despite high levels of unemployment and the recent trend of older workers delaying retirement, employers today remain deeply anxious and concerned about the impact of knowledge drain on their organizations, according to MetLife's Emerging Retirement Model Study.

When asked which of two retirement-related issues -- delayed retirement or knowledge drain -- are of greatest concern today, 74 percent cited the latter.

Employers' concerns are virtually the same when asked to look ahead three to five years: 70 percent selected knowledge drain, while 30 percent cited delayed retirement.

"We were surprised to find the extent to which the knowledge drain is both a 'today' and 'tomorrow' issue for employers, even while conventional wisdom might suggest that the effect of workers now delaying retirement -- primarily out of financial necessity -- could lessen immediate concerns about the knowledge drain," says Cynthia Mallett, a vice president with New York-based MetLife.

Lehman Retirees Out of Luck

A lawsuit by participants in the Lehman Brothers employee-retirement-savings program was dismissed in early February.

The plaintiffs claimed that board members knew about the firm's weakening state (which led to its eventual collapse) and failed to protect the retirement plan. U.S. District Judge Lewis Kaplan, however, ruled there was no evidence that Wendy Uvino, the chairwoman of the retirement plan and the defendant in the case, was aware of any negative information that should have been disclosed.

"There are also no factual allegations suggesting that Ms. Uvino knew or had inside information suggesting that any company financial reports were false or misleading," Kaplan wrote in the opinion.

The retirement account allowed Lehman employees to invest in the Lehman Stock Fund, among other options.

A Year Later: Plan Sponsors Still Challenged by Regulations

Many retirement-plan sponsors admit to not fully understanding new compliance requirements, according to a survey by TIAA-CREF Institute in New York.

Most of the new regulations for 403(b) plans were issued in July 2007 by the Internal Revenue Service and took effect Jan. 1, 2009. The new regulations require changes in both plan design and administration.

Nearly half (45 percent) of plan sponsors acknowledge they have difficulty understanding the regulations. The confusion is most pronounced around two issues: The new standards of compliance and evolving fiduciary responsibilities; and the expanded annual reporting requirement to the federal government.

Only about half (54 percent) indicate they are familiar with the reporting requirement.

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"It was not written on the layman's level. It was written for those with law degrees," says one respondent.

Paul J. Gallagher, managing director of product management for TIAA-CREF and a co-author of the report, says sponsors that are confused shouldn't delay in getting help.

"We urge plan administrators to take advantage of existing programs and services to ensure they fully understand their obligations under the new regulations and to help ensure their plans are in compliance," he says.


Workers Ready for 'Auto-Pilot' Retirement

In light of the recent financial crisis, most Americans (84 percent) would eagerly embrace a fresh approach to the structure of their workplace-retirement plans -- especially if they included "auto-pilot" features, according to Prudential's sixth Workplace Report on Retirement Planning.

Just 25 percent of the 1,010 American employees surveyed said they are very confident of their ability to make good decisions about their workplace retirement-savings plan, while more than half (65 percent) recognize the value of an automatic approach.

The survey by the Newark, N.J.-based firm also suggests that decision complexity may be a driver of poor retirement preparedness. Roughly three-quarters of the respondents (77 percent) who felt they were "behind schedule" in their retirement-savings goals described investment decisions as "complicated."

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