Posts Tagged "retirement system"
June 8, 2021
$4 Billion in Pension Payments Returned
It’s the employer’s responsibility to find former employees and keep them apprised of any retirement benefits they left behind.
But that hasn’t always worked out. Some employers don’t have former workers’ current contact information, and others don’t bother to track them down. Worst-case scenarios are often fallout from a merger: the company being acquired has kept shoddy pension plan records and the acquirer doesn’t update them. Some companies have even deleted a participant’s name from the records.
Tyler Compton, an attorney with the Pension Action Center, which connects workers with lost pensions and 401(k) savings plans, said people frequently contact a former employer because they think they might have a plan. But if the worker is told he’s not in the records, he might drop the matter, she said.
The U.S. Department of Labor decided several years ago that employers’ efforts weren’t good enough. The department’s Employee Benefits Security Administration (EBSA) began investigating the problem and pushing companies to improve their methods for finding workers who had quit or been laid off but were owed pension benefits or had savings sitting in an old 401(k).
EBSA has gotten results. Since 2017, more than $4 billion in past due defined benefit pension payments have been returned to millions of plan participants.
By making clear what is expected of employers, regulators “put a lot of pressure, in a good sense, on plan administrators to really up their games,” Jeffrey Holdvogt, a legal partner with McDermott Will & Emery, said in a recent webinar hosted by the Pension Action Center at the University of Massachusetts, Boston. …Learn More
October 27, 2020
Retirement System Urgently Needs Fixing
The state of our retirement preparedness is captured in this fact: about half of U.S. private sector workers at any given time are not enrolled in an employer retirement plan.
To be clear, they are not currently enrolled. Some of them have participated in a plan in the past or will in the future. But this inconsistency is the problem, largely because so many employers still don’t offer 401(k) savings plans to their employees.
The financial toll of not saving consistently is modest retirement account balances. Yet saving has become increasingly urgent as traditional pensions have virtually disappeared from the private sector and Social Security is replacing less of workers’ incomes over time.
In 2019 – after several years of economic growth and a surging stock market – the typical working household, ages 55 to 64, that saves in a 401(k) had only $144,000 in its 401(k)s and IRAs combined, the Center for Retirement Research found in an analysis of the Federal Reserve’s 2019 Survey of Consumer Finances.
That’s just $9,000 more than they had in the 2016 survey, and $144,000 won’t go very far.
A $144,000 account would yield $570 per month for retirement if a couple purchases an annuity that pays a guaranteed income for the rest of their lives. For most retirees, the annuity payments – totaling just under $7,000 per year – would be their only source of income outside of Social Security.
There are also enormous differences between high- and low-income households’ savings, which reflect the nation’s economic disparities and uneven employer coverage. The highest-income older households in the study had $805,500 in their combined 401(k) and IRA accounts, compared with just $32,200 for low-income households. …Learn More