iLoveBenefits: Industry News Blog

Defined Benefit Pensions Have Disappeared; Now an Attack on 401k Savings

Possible Cutbacks in Retirement Savings – Recently released proposals on retirement policy from policymakers in Washington, DC have a few troubling trends in common: new approaches to contribution limits, mandates for employers, and new complicated sets of rules for retirement savings.

 

Representative Camp (R-MI), Chairman of the Ways and Means Committee, released a “discussion draft” for a major overhaul of the tax code. New lower limits would be imposed on individuals saving for retirement through 401(k) plans and large companies would be required to offer a Roth 401(k).

April 15, 2014 | Categories: 401(k),Benefits,Pension | Tags: , , | Comments (0)

IRS Announces Changes in Retirement, Health Plan Limits for 2013

Each year, various dollar limits applicable to health and retirement plan contributions and benefits are adjusted for inflation.

 

On October 18, the Internal Revenue Service (IRS) released Revenue Procedure 2012-41, outlining the 2013 calendar year limits for high-deductible health plans (HDHPs) used in conjunction with Medical Savings Accounts (MSAs), as well as eligible long-term care premiums and transportation fringe benefits.

 

In News Release 2012-77, the IRS announced a series of retirement plan limits for Tax Year 2013. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.

 

Annual   Limit [Applicable Tax Code Section]

2012

2013

Maximum   elective deferral [401(k) and 403(b)]

$17,000

$17,500

Maximum annual pension benefit [415(b)] (The limit applied is actually the lesser of the dollar limit or 100 percent of the participant’s average compensation (generally the high three consecutive years of service))

$200,000

$205,000

Defined   contribution maximum deferral [415(c)]

$50,000

$51,000

Maximum   catch-up contribution for those age 50 and over [414(v)]

$5,500

$5,500

Qualified   plan compensation limit [401(a)(17)]

$250,000

$255,000

Highly   compensated threshold [414(q)]

$115,000

$115,000

Key employee   definition [416]

$165,000

$165,000

Deductible amount for individual making   qualified retirement contributions to an IRA [219(b)(5)(A)]

$5,000

$5,500

 

In related regulatory news, the Social Security Administration has announced that the Social Security wage base – also known as the “contribution and benefit base” – which is the amount of earnings subject to taxation for a given year, based on the average wage index – will increase from $110,100 to $113,700 in 2013.

Survey: Workers’ confidence in Social Security

  • Seventy percent of workers are not too or not at all confident that Social Security will continue to provide benefits of at least equal value to the benefits retirees receive today.
  • Three-quarters of workers express concern that the age at which they become eligible for Social Security retirement benefits will increase before they retire.
  • Today’s workers are less likely to expect Social Security income in retirement (77 percent total major and minor source of income, down from 88 percent in 1991) than today’s retirees are to report having Social Security income (91 percent total).
  • Workers closer to retirement are more likely to expect Social Security to be a source of income in retirement than are younger workers (92 percent of workers age 55 and older vs. 63 percent ages 25–34)

Source: Employee Benefits Research Institute. EBRI’s 2011 Retirement Confidence Survey: Workers’ Attitudes About the Future of Social Security and Medicare. EBRI Fast Facts. March 29, 2011. www.ebri.org.

March 30, 2011 | Categories: 401(k),Cost,retirement | Tags: , , | Comments (0)

Workers’ Pessimism About Retirement Deepens, Reflecting “the New Normal”

This from Dick Quinn’s post on retirement:

WASHINGTON—In a sign that Americans are recognizing the realities they face about their chances for a comfortable retirement, the 2011 Retirement Confidence Survey (RCS) finds workers are more pessimistic than at any time in the two decades the RCS has been conducted: More than a quarter (27 percent) of workers now say they are “not at all confident” about retirement, up 5 percentage points from the level measured just one year ago.

Read more here: http://quinnscommentary.com/2011/03/15/workers%e2%80%99-pessimism-about-retirement-deepens-reflecting-%e2%80%9cthe-new-normal%e2%80%9d/

March 15, 2011 | Categories: 401(k),Cost,Pension,retirement | Tags: , , , | Comments (0)

Here is an article from my friend Dick Quinn. Dick has been retired for about a year. In this article he relates real life experience about saving for retirement.

Saving for your future retirement is no joke, but many people treat it is a low priority and are not prepared…big mistake

Read his column here: http://quinnscommentary.com/2011/02/21/saving-for-your-future-retirement-is-no-joke-but-many-people-treat-it-is-a-low-priority-and-not-not-prepared-big-mistake/#comment-1284

February 21, 2011 | Categories: 401(k),healthcare,retirement | Tags: , , , , | Comments (0)

IRS Announces 2011 Benefit Limits

According to the tax agency’s annual announcement on pension-related limits, the limitation for defined contribution plans under Section 415(c)(1)(A) remains unchanged for 2011 at $49,000.

The limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) also remains unchanged at $195,000. For a participant who separated from service before January 1, 2010, the participant’s limitation under a defined benefit plan under section 415(b)(1)(B) is unchanged.

The catch-up contribution limit for those aged 50 and over remains at $5,500 for 2011.

Read more here: http://www.plansponsor.com/IRS_Announces_2011_Benefit_Limits.aspx

October 28, 2010 | Categories: 401(k),Benefits,Cost,tax | Tags: , , , | Comments (0)

Annuity Products and Inflation Fears

Editor’s note: One additional consideration is the impact and timing of any inflationary cycle. With the a huge deficit and relatively low inflation rate, will the Fed move to raise inflation to attack the debt issue?

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April 12, 2010 (PLANSPONSOR.com) – Back in February, the Department of Labor and the U.S. Treasury turned to the retirement plan community for some input.

Specifically, they issued a request for information (see Feds Call for Lifetime Income Product Public Comment) on how to “enhance retirement security for workers in employer-sponsored retirement plans through lifetime annuities or other arrangements that provide a stream of income after retiring.” 

Now, part of what the DoL is trying to figure out is why the take-up rate on those offerings is so dismal—not just because many see them as a superior way to ensure that “stream of income,” but because some are hoping that, if it can be made more available as a distribution option (perhaps even a default distribution option), more participants will take advantage of it.  

http://www.plansponsor.com/IMHO_Safety_First.aspx

What Has Happened to DC Plan Balances?

Defined Contribution Participant Balances

According to findings from Mercer, as of year-end 2009, nearly 70 percent of defined contribution participant balances have returned to levels prior to the stock market declines of 2008 and early 2009.  However, 16 percent of participants below age 30 and 36 percent of those ages 55 and older have yet to return their account balances to 2007 levels. Mercer’s data comes from a survey of the 1.2 million participants for whom it administers defined contribution retirement savings plans.

Percentage of participants with balances below 2007 levels

  12/31/2007 vs 12/31/2008 12/31/2007 vs 12/31/2009
All participants 64% 31%
Under age 30 41% 16%
Age 55 and older 70% 36%

 

Source: Mercer company release. March 3, 2010. http://www.mercer.com/summary.htm?idContent=1374560

March 25, 2010 | Categories: 401(k),Benefits,Pension | Tags: , , | Comments (0)