Tip of the Day: Submit your ideas for fixing the retirement system

Do you have an idea of what a universal, secure, and adequate retirement system should look like? Retirement USA wants to hear from you!

The organization is accepting proposals from us regular folks on how to revamp retirement to make sure everyone has happy and secure golden years. There are a few caveats -- proposals have to align with Retirement USA's principles, but they're things I think we all can agree on for the most part: plans that are universal, secure, portable and provide adequate retirement income.

So put your ideas out there!

Tip of the Day: With annuities, it's all about how you say it

We've all heard the saying, "It's not what you say, it's how you say it." Benefits communications experts certainly know this to be the case, but it appears that it's also true of consumers and annuities.

New research from TIAA-CREF Institute finds that that "framing" -- using certain methods and media to present annuities to consumers -- can significantly affect consumers' preferences.

Tip of the Day: Help cure 'Mattressitis'

A rarely talked about but common condition, "mattressitis" is the "urge to withdraw assets intended for retirement and hide them under one's mattress."

As the economy has worsended, so has the condition among U.S. workers. To help employers combat mattressitis, Mercer has launched a new website, FeelBetterAboutRetirement.com.

“Planning for retirement in a volatile and rapidly changing economic environment can be a major challenge, which is why we are proactively addressing our participants’ anxieties with this interactive educational program,” says Suzanne Nolan, director of marketing and communications for Mercer’s outsourcing business. “By candidly addressing the challenges that participants can particularly relate to in this economy, we feel that we can improve employee engagement and empower employees to make decisions that are consistent with their financial goals.”

The initiative is based on key findings from the 2008 Mercer Workplace Survey, which found 43% of participants lack confidence in their ability to calculate and plan for how much money they may need in retirement.

“While plan sponsors can feel encouraged by the fact that employees still consider saving for retirement a priority, our findings emphasize the need to increase communication to participants about the benefits of maintaining a long-term investment strategy," Nolan says. "Employees consistently report that they rely on employers and their plan administrators more than any other source for information about investing for retirement, and we will continue to support plan sponsors in fulfilling that critical role.”

News You Can Use: Retirement confidence at record low

EBRI's annual barometer of Americans' retirement confidence shows the recession has worn away workers' assuredness that their golden years will be happy, healthy and financially secure.

Released today, the 19th annual Retirement Confidence Survey posts a record-low 13% of respondents who say they are very confident of having enough money to live comfortably in retirement, down from 18% in 2008 and 27% in 2007. Also, in addition to more employees expecting to work full-time longer (89%), more respondents also are including part-time work into their retirement plans (72%).

“Our survey first picked up the drop in retirement confidence last year,” says EBRI's Jack VanDerhei. “Given the uncertainties that exist about economy, it is no surprise the downward trend has continued. By any measure, the two-year results amount to a very significant drop in workers’ and retirees’ confidence in their retirement prospects.”

To help shore up retirement savings, employees say they are:
* Reducing expenses 81%.
* Changing investments 43%.
* Working more hours or a second job 38%.
* Saving more 25%.
* Seeking financial advice 25%.

Have you noticed that the recession has depressed employees' retirement confidence and/or contributions? What are you doing to help them better prepare? Comment and let me know.

Tip of the Day: Stable-value funds may not be so stable

Remember the days when employees sat down with their HR/benefits representative to decide which of the available investment funds you wanted to include in your 401(k) retirement portfolio?

EBN contributor Gary Mink does, waxing nostalgic in this month's issue about "one fund [that] looked like a sure thing — conservative and boring, but safe," aka stable-value funds.

However, as Mink observes, the current recession means that all bets are off about "sure things" — stable-value funds included. Read his tips for employers on performing due diligence to determine stable-value funds' risk.

News You Can Use: Boehner unveils retirement plan legislation

House Minority Leader John Boehner (R-Ohio) last week unveiled a plan to prop up the nation's struggling defined benefit and defined contribution retirement plan systems, and offer help to Americans in boosting retirement savings.

The 411 on the plan:
* Doubles the allowable smoothing of DB assets (from 10% to 20%) for two years.
* Raises catch-up contribution limints for 401(k)s and IRAs.
* Extends the suspension of minimum required distributions (currently through 2009) through 2012.
* Requires interest payments only for two years on 2008 DB plan losses and extends amortization of those losses from seven to nine years.
* Doubles the amount of income older workers may earn -- from $14,160 to $28,320 -- before having Social Security benefits reduced.

What do you think? Both the DC and DB systems have been on bleeding since last fall (and for DB plans, even before that). Will this plan help bandage up some of the wounds? Comment and let me know.

Wish You Were Here: Principal to honor best companies for employee financial security

To put it mildly, helping employees feel financially secure in this economic environment is challenging. The Principal Financial Group® believes companies meeting the challenge deserve to be recognized, and thus have opened the eighth annual search for The Principal® 10 Best Companies for Employee Financial Security. The program recognizes 10 growing companies (with five to 1,000 employees) that excel at helping employees ensure their financial futures even in the face of the current recession.

“The Principal 10 Best judges recognize the turbulent economy is putting pressure on benefit programs like never before. They understand some companies are making thoughtful adjustments in their programs as a result,” says Principal VP Renee Schaaf. “Judges are looking for companies who are responding to business conditions in ways that least impact the long-term financial security of their work force.”

Nomination and entry forms are available here; nominees need not be Principal clients. Deadline for entries is May 1.

Good luck, and for inspiration, stay tuned for EBN's June 1 issue, for a profile of the 2008 honorees.

News You Can Use: Obama budget also would mandate auto enrollment, expand saver's credit

Among the proposals in President Barack Obama's budget, unveiled this morning, is a measure to expand retirement plans by requiring employers that do not have such a plan to auto-enroll workers into an IRA, and modifying the existing Saver’s Credit to provide a 50% match on the first $1,000 of retirement savings for families that earn less than $65,000. The credit would be fully refundable to ensure that savings incentives are fair to all workers.

What is your opinion of these proposals and their potential effect on both retirement plans and retirement savings? Ready, set, comment!

News You Can Use: Workers fear losing retirement savings

Employees aren't immune to the news reports of millions of Americans losing trillions of dollars in collective retirement income, and the news that increasing numbers of organizations are freezing their retirement plans, suspending matching contributions or both is heightening anxiety about their futures.

A new survey by Workplace Options finds that 59% of employees are concerned that money from their pensions and 401(k)s won't be there when they need it.

Dean Debnam, Workplace Options CEO says the worry causes a vicious cycle, as layoffs beget financial worries that decrease job performance and put employees in the line of fire for layoffs. "This, coupled with financial worries, can spell disaster for a worker's emotional and physical wellbeing, as well as overall productivity."

Even if your company is suspended its matching contributions -- which I strongly advise against -- or otherwise making retirement plan cutbacks, be sure to communicate with employees in a way that doesn't send them into a tailspin. Click here to listen to our podcast with communications expert Dennis Ackley and read the accompanying article, “Softening the blow of bad benefits news,” in the February EBN.

Majority of employees sacrifice retirement for health care benefits

Sunlife Financial Inc., a Toronto based financial services organization, released a retirement poll today finding that 64% of employees would continue working past 67 in order to retain health benefits -- a motivator that rose from the sixth most popular reason in August to the third in December when the poll was conducted.

Forty to 49 year-olds are most likely to continue working into their golden years, with 77% of them planning to work past the traditional age of retirement for health care benefits, a 60% spike in the last 90 days.

Despite the plethora of employees working for health benefits, they continue to sacrifice their health as approximately one third (34%) of employees delayed a routine or elective medical procedure.

Investments savings from 401(k)s, IRAs, or annuities were left untouched by 90% of respondents, suggesting that health comes second to supporting a financially stable lifestyle.

Tip of the Day

Add this number to your speedial: 888-657-0440.

That's the toll-free retirement plan helpline recently launched by Bukaty Companies Retirement Plan Services to help plan sponsors understand their fiduciary responsibilities in light of the recession.

"Anyone who has responsibility for managing a qualified retirement plan should be seeking professional advice. The uninformed are at real risk if they are not carefully managing fiduciary obligations," said division Vice President Vince Morris.

Sponsors can call Monday through Friday from 8:00 a.m. to 5:00 p.m., CST, or e-mail questions to RetirementHelp@bukaty.com.

News You Can Use: Retirement plan sponsors consider new strategies

In response to the recession, employers are considering changes to their retirement plan strategies, according to a new Mercer survey, "Leading Through Unprecedented Times."

Among the possible shifts, 17% of retirement plan sponsors are considering doing suspending their 401(k) match, 77% plan to review investment and administrative fees, 85% will likely enhance employee education and communication and 75% will revisit fund lineups.

On the defined benefit side, 46% of respondents plan to change investment strategies to reduce risk, although 31% expect to change their funding policies and 24% may reduce or halt accruals.

Tip of the Day

Keep an eye on your retirement plan fees.

"It’s easy these days to forget about fees when your fund might have lost 40% or more in the past year,” writes the Baltimore Sun. “But fees matter over the long run, and you can end up with a lot less money, even if you’re paying what seems to be only slightly more for a fund.”

As higher fund fees can siphon even more money from employee-investors who have seen their assets battered by the downturned economy and stock market, such fee increases are something for plan sponsors to watch.

Lipper senior analyst Jeff Tjornehoj told EBN sister publication Money Management Executive that fund fees could rise 10% next year. Added to that, he warned, service providers are likely to increase their fees as well.

News You Can Use: House approves bill to change 401(k) distribution rules

The House last night passed legislation that would temporarily suspend the tax on seniors who fail to take a required minimum distribution from their retirement accounts at age 70 1/2. Under the bill, seniors would not have to tap retirement assets during 2009.

Under current law, seniors must annually withdraw a minimum amount from their retirement accounts, based on their life expectancy and retirement balance from the previous year. Not taking the distribution subjects seniors to a tax penalties.

Among the bill's other provisions are relief for cash-strapped employers who need to make high contributions to pension plans to meet Pension Protection Act requirements, which state that plans must be 92% funded for 2008 and 94% for 2009. Failing to meet that funding mark would force plan sponsors to fully fund plans immediately. The House bill would only force companies to meet the 92% funding level.

Overheard At/Tip of the Day: Eight great tips to save for retirement

Dean Kohmann, vice president of 401(k)s for Charles Schwab, chatted with us last week to share details about a new survey about retirement habits. He offered eight tips to help employees get on track with their savings regimen. Tune in to the podcast, and find the tips written below in this exclusive "print for your employees" section.

1. Contribute to your company’s retirement plan up to the maximum employer match.

Even if money is tight, Schwab recommends that people contribute at least enough to their 401(k) or similar plan in order to get the full company match. “You are getting paid to save,” asserts Catherine Miller, vice president of investor development for Schwab. “Don’t leave money on the table.” Most 401(k) contributions are deducted from pre-tax income, so people keep more of their earnings each paycheck and savings grow tax-deferred until retirement.

2. Pay off nondeductible, high-interest-rate debt like credit cards.

Eliminating debt will make it much easier to reach your savings goals. To maximize savings, create a budget and look for ways to cut back on non-essential expenses. Use that extra money to make more than the minimum monthly payment on high interest credit cards or loans. You can also try negotiating with credit card companies for a lower interest rate.

3. Create an emergency fund to cover at least three months of essential living expenses.

Without an emergency fund, Americans are at risk of dipping into retirement savings or taking on more debt if they need quick access to cash. You should save enough to cover at least three months of essential living expenses like rent or mortgage, utilities, food and transportation. Keep your emergency fund in an account that’s easy to access like a checking or savings account.

4. Contribute the maximum allowed to tax-advantaged retirement accounts.

Now more than ever, you are responsible for ensuring your own financial security during retirement. The more money you set aside early, the more comfortable your retirement may be. Try to contribute up to the IRS maximum in your 401(k) plan at work (the new maximum will be $16,500 in 2009) and also contribute to a traditional or Roth Individual Retirement Account (IRA), if available to help supplement these savings.

5. Save for a child’s education.

As a general rule, Schwab recommends saving for retirement before your children’s college education. “Your child may be able to get a loan for college, but you can’t get one for retirement,” added Miller. A 529 college savings plan or a Coverdell Education Savings Account can help you take advantage of tax-deferred growth on your investment.

6. Save for the down payment on a home.

Start by estimating how much house you can afford. Typically, your mortgage payment, including principal, interest, taxes and insurance should not be more than 28 percent of your gross income. Make sure you keep your risk tolerance and timing needs in mind when deciding how to save for your down payment. Avoid using tax-deferred retirement accounts to fund this purchase.

7. Pay down tax-deductible, high-interest-rate debt like mortgages.

Reducing high-interest-rate debt from a tax-deductible mortgage, home equity or student loan can significantly enhance your ability to save in other areas over time. After taking care of other savings priorities, Schwab recommends you consider refinancing this kind of debt if interest rates have dropped. You may lower monthly payments in the near term and help save money over time, but make sure to factor in any transaction or closing costs before making a decision.

8. Keep investing.

If you’ve accomplished your other savings priorities, investing for the long term may be a good way to stay ahead of inflation and earn more than traditional savings accounts pay. Start by creating a realistic investing plan and put it into action to begin earning right away. Stay diversified with an asset allocation that matches your risk tolerance and keep long-term goals in mind to stay on track.

News You Can Use: Does where you live affect your retirement plan participation?

Employees in Midwestern and Northeastern states are more likely to participate in retirement plans than their Southern and Western counterparts, states new data from the nonpartisan Employee Benefit Research Institute.

According to 2007 data, wage and salary workers in Florida have the lowest probability (36.4%) of participating in a retirement plan, while those living in Iowa are the most likely to participate, at 58.3%.

Among salaried workers, Wisconsin took top place (54.4% among private wage and salary workers; 67.7% amongst full-year wage and salary workers). Again, Florida came in last, with 32.3% of all workers participating.

New Jersey residents are most likely to participate from the public sector employer group, with 82.1%, followed closely by Idaho and Ohio, at 81.9% and 81.7%, respectively. Louisiana residents in the public sector were lease likely to participate, with 68.8%.

If you're searching for ways to increase worker participation, why don't you take a listen to the helpful suggestions on our recent podcast with Dean Kohmann of Charles Schwab.

Tip of the Day

Take stock (no pun intended) of your retirement plan(s).

Whether you offer a DB, DC, ESOP, NQDC retirement plan or all of the above, the market downturn no doubt has done a number on your returns. Principal Financial Group offers a guide to help you regroup and recoup. Read it here.

News You Can Use: Miller fights back

Rep. George Miller (D-Calif.), fighting back against what he calls "an active campaign that is blatantly misrepresenting Democratic efforts to preserve and strengthen Americans’ retirement security," on Friday issued a press release to tell his side of the story.

Despite news reports to the contrary, "I do not support ‘abolishing’ 401(k)s, moving these plans, or changing their tax status, plain and simple,” Miller said. Rather, he outlined five points to make 401(k)s more accessible and profitable for workers.

The December EBN outlines the controversial proposal that emerged at a hearing Miller last month, and the January will explore who proposed what when, and where the issue stands now.

Tip of the Day

Be a matchmaker. New survey results from Charles Schwab reveals a link between how a company offers its 401(k) match and employee saving levels. From 2004 to 2007, employees were most likely to choose the plan’s “match ceiling” as their deferral level in order to maximize the employer contributions they can receive. Benefit managers can leverage such tendencies to maximize their employer matching plan as well as juice employee deferrals.

For example, Schwab explains:
* Company A offers a 100% match, up to 3% of employee pay.
* Company B offers a 50% match, up to 6%percent of pay.

In both these cases, an employee could receive a 3% match, but, according to Schwab's findings, employees in Company B's plan would be more likely to defer the extra 3% into the plan to receive the maximum employer match. The maximum cost of the match to the employer remains the same.

Tip of the Day

Make your list and check it twice. Now is the time to begin pulling together your year-end checklist for any must-dos regarding your retirement plan. Tips from Morgan Lewis can help get you started.