LIMRA: 49 percent of Americans not saving for retirement

Nearly half of Americans are not contributing to a retirement plan, and those under age 34 are more likely to be among the people who aren’t saving, according to a new LIMRA survey.

The survey, which included 2,697 Americans who are either primary financial decision-makers or share responsibility for making financial decisions, also found that a quarter of all Americans and less than a third of Americans over age 50 worked with a financial professional to plan for retirement.

Those who sought the help of a professional were more likely to contribute to a defined contribution plan or IRA. Seventy percent reported that their financial professionals recommended how much they should save for retirement, which shows that financial professionals can have a positive influence on their clients’ saving behavior, according to LIMRA.

“The findings from this survey were disturbing, given that people will increasingly need to rely on their personal savings to make ends meet in retirement,” said Matthew Drinkwater, associate managing director of LIMRA Retirement Research.  “It was especially troubling to see that a larger portion of younger Americans – who are less likely to have a defined benefit plan – are not saving for retirement in IRAs or defined contribution plans.  In order to have the adequate savings necessary to meet their financial needs in retirement, which could last 20 or more years, it is critical that these individuals begin saving systematically early in their working years.”

Younger and higher-income consumers are more likely to consider contributing to an IRA in the next year, but nearly half of all consumers said they are not planning to contribute to an IRA because they can’t afford to do so.

“In the long run, these individuals would benefit if they made even modest contributions to a pre-tax savings plan that could accumulate until retirement,” Drinkwater said.

The survey also revealed consumers’ lack of knowledge about IRAs. On average, consumers answered almost half the questions posed about IRAs incorrectly; those consumers who currently contribute to IRAs answered only slightly better than non-IRA-owners.

“Despite the extensive news coverage on the need to save for retirement, a large number of Americans are not heeding the warnings and preparing financially,” Drinkwater said. “Our survey shows that consumers often lack understanding of the savings vehicles that could help them attain their financial goals for retirement.”

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.

The HR guide to Summary of Benefits and Coverage

Enrollment season this year will bring an added compliance requirement for employers, which is intended to help plan enrollees know exactly what they’re getting out of their policy.

Beginning on Sept. 23, 180 million Americans with private health insurance will need to be provided with two pieces of information. One is a Summary of Benefits and Coverage, or SBC, that clearly explains their health plan and allows them to compare different coverage options.

The other document will be a uniform glossary of terms commonly used in health insurance coverage.

“The [SBC] rules put special obligations on health insurance issuers and group health plans with respect to the presentation of these summaries and the glossary of terms that was required under the [Patient Protection and Affordable Care Act]. And these are intended to help plans and individuals better understand not only their health insurance coverage but also other coverage options that they might have available to them,” said James McElligott, a Richmond, Va., partner with law firm McGuireWoods, at a recent informational webinar assembled by Bloomberg BNA.

Experts agree the SBC mandate is unlikely to be struck down when the Supreme Court reaches a final decision on health reform in June. Unless, of course, the entire law is repealed.

Non-compliance with regulations could result in a civil penalty of up to $100 per day per affected individual; an excise tax of $100 per day per affected individual; and fines of up to $1,000 per affected individual for willful violations.

Luckily, notes McElligott, the law is not hard to understand.  “I found in working with the PPACA regulations that it’s often easiest just to use the electronic Code of Federal Regulations, which you can get online,” he said. “The actual regulations on the SBCs are not very long and they constitute about four pages, so they’re fairly readable.”

Still, as with any new regulation, there are certain details employers should review in order to ensure full compliance. The next few pages will guide you through the new SBC requirements, as well as provide additional details on the laws >

Or, you can jump to:

Fed court reverses order for VA system overhaul

SAN FRANCISCO (AP) — A federal appeals court on Monday reversed its demand that the Veterans Affairs Department dramatically overhaul its mental health care system.

A special 11-judge panel of the 9th U.S. Circuit Court of Appeals said that any such changes need to be ordered by Congress or the president.

The 10-1 ruling reversed an earlier decision by a three-judge panel of the same court.

The May 2011 ruling had ordered the VA to ensure that suicidal vets are seen immediately, among other changes. It found the VA’s “unchecked incompetence” in handling the flood of post-traumatic stress disorder and other mental health claims was unconstitutional.

The new decision said courts are powerless to implement the fixes sought by two veterans groups that filed the lawsuit against the VA in 2007. The lawsuits alleged that hundreds of thousands of veterans had to wait an average of four years to fully receive the mental health benefits owed them.

“There can be no doubt that securing exemplary care for our nation’s veterans is a moral imperative,” Judge Jay Bybee wrote for the majority. “But Congress and the president are in far better position” to decide whether and what changes need to be done.

The court said veterans are free to file individual legal claims, but courts had no business ordering systemic overhauls.

Judge Mary Schroeder dissented, writing that the ruling put veterans into a classic Catch-22 conundrum. Schroeder says the ruling essentially leaves the vets without recourse to force the VA to change a system they view to be fatally flawed, and condemns “veterans to suffer intolerable delays inherent in the VA system.”

The veterans lawyer Gordon P. Erspamer said he will ask the U.S. Supreme Court to review the case.

“If the courts don’t have jurisdiction, then the veteran is left without a remedy,” Erspamer said.

Veterans for Common Sense and Veterans United for Truth filed the lawsuit at the heart of the ruling in San Francisco federal court in 2007.

During the two-week trial without a jury in April 2008, lawyers for the groups showed the judge emails between high-ranking VA officials that the attorneys said confirmed high suicide rates among veterans and a desire to keep quiet the number of vets under VA care who attempt suicide.

“Shhh!” began a Feb. 13, 2008, email from Dr. Ira Katz, a VA deputy chief. “Our suicide prevention coordinators are identifying about 1,000 suicide attempts per month among the veterans we see in our medical facilities. Is this something we should (carefully) address ourselves in some sort of release before someone stumbles on it?”

Katz wrote in another email that 18 veterans kill themselves daily, on average.

After the trial another email surfaced that was written by VA psychologist Norma Perez suggesting that counselors in Texas make a point to diagnose fewer post-traumatic stress disorder cases. The veterans’ lawyers argued that email showed the VA’s unwillingness to properly treat mental health issues.

More recently, federal investigators reported last month that nearly half of the veterans who seek mental health care for the first time waited about 50 days before receiving a full evaluation, far short of the 14 days that the VA said 95 percent of new patients seeking mental health treatment get a full evaluation.

Since 2007, the VA has experienced a 35 percent increase in the number of veterans receiving mental health services. The department says it’s made strides in part by developing a more extensive suicide prevention program and by increasing the number of counseling centers.

VA officials told a Senate Veterans Affairs committee that they’ve invested heavily in mental health care over the past few years.

The VA said last week it was increasing its mental health staff by about 1,900 workers to existing mental health staff of roughly 20,590.

Social Security starts providing online statements

WASHINGTON (AP) — The Social Security Administration is now providing workers with online statements of the estimated benefits they will get when they retire, replacing the paper ones the agency used to mail out.

Until last year, the agency mailed out yearly statements that told you how much your benefits would be if you retired at age 62, 66 or 70. Social Security stopped mailing the paper statements to save an estimated $70 million a year.

This year, the agency resumed mailing them to people once they reach 60, but younger workers were left out.

The agency announced Tuesday that workers can now go online, to

US spends most on health care, gets less

US spends most on health care, gets less


May 3, 2012 • Reprints

Though America spends more on health care than 12 other industrialized countries, the quality isn’t  better, a new study from The Commonwealth Fund finds.

The U.S. spent nearly $8,000 per person for health care services in 2009 while Norway and Switzerland were a distant second and third on medical spending, respectively, at a little more than $5,000 per person.

U.S. health care spending amounted to more than 17 percent of gross domestic product in 2009, compared with 12 percent or less in other study countries. Japan was the lowest spender at less than 9 percent of GDP.

What’s causing the high cost? The study points to higher prices and greater use of technology as the main factors driving the high rates of U.S. spending, rather than greater use of physician and hospital services.

Relative to the other countries in the study, the U.S had few hospital beds, short lengths of stay for acute care and few hospital discharges, study author David Squires found, who is a senior research associate at The Commonwealth Fund.

But U.S. hospital stays were far more expensive than those in other countries at more than $18,000 per discharge. By comparison, the cost per discharge in Canada was about $13,000, while in Sweden, Australia, New Zealand, France, and Germany it was less than $10,000.

“It is a common assumption that Americans get more health care services than people in other countries, but in fact we do not go to the doctor or the hospital as often,” Squires said in a news release. “The higher prices we pay for health care and perhaps our greater use of expensive technology are the more likely explanations for high health spending in the U.S. Unfortunately, we do not seem to get better quality for this higher spending.”

Prescription drug costs were also significantly higher comparatively, as well as the prices of MRI and CT scans.

Additionally, despite their country’s spending, Americans can expect poorer access to physicians than people in other industrialized nations, with just 2.4 doctors for every 100,000 citizens. On that score, only Japan fared worse, according to the report.

The U.S. did have some good No. 1 rankings: survival rates among breast cancer patients and colorectal cancer patients (the latter shared with Norway). But still, it has among the highest rates of potentially preventable deaths from asthma and amputations due to diabetes, and rates that are no better than average for in-hospital deaths from heart attack and stroke.

Squires also said the high spending in the U.S. might be explained, in part, by the nation’s high rates of obesity and the associated medical costs.

Released on Thursday, the report analyzed health spending in the U.S., Sweden, Australia, New Zealand, France, Canada, Germany, Norway, Japan, Switzerland, Denmark, the Netherlands and the United Kingdom.


What to do with an old 401(k)

The jury is still out on whether it’s best for people to keep a string of old 401(k) accounts from previous jobs or roll them into a new company plan or personal IRA. There are pros and cons to leaving your money where it is or taking it out and putting it somewhere else that is more actively managed.

Aaron Grey, managing partner at Denver Money Manager, says people should consider rolling those accounts over into an IRA because IRAs are cheaper to maintain and have more investment options.

“Every 401(k) has a fixed menu of options, 20 to 40 funds to choose from, not that they are necessarily terrible menus, but they are limited,” he said. “Rolling over to a rollover IRA opens up a universe of investment options.”

Grey, a registered investment advisor since 2003, said that “just because each 401(k) plan is its own operating entity, it is not cheap to provide a 401(k) plan as an employer. Some of those expenses are shared by plan participants through increased internal expense ratios. In most cases, even if you love the lineup of funds in your 401(k) and see no need for an increased [investment] universe, by rolling it into an IRA you can [invest in the same options] at a lower cost than owning them in a 401(k).”

David Wray, president of the Plan Sponsor Council of America, disagrees that IRAs are cheaper to operate than defined contribution plans, when you compare the services that are available to 401(k) plan participants, like access to a financial advisor. He does agree that rolling over old accounts into a new retirement account makes sense, at least from the perspective of small plan sponsors.

“Very small companies are required to have a plan audit if they have 100 or more participants. Participants are defined as anyone with an account balance, which includes terminated vested employees,” Wray said. “Smaller employers would prefer that terminated vested employees roll [their accounts] into IRAs because a 40-employee company doesn’t want to have to pay $25,000 for an audit.”

According to Wray, employers in the United States are dealing with millions of dollars in terminated vested accounts. Under the law, if accounts are over $5,000, the money can stay until a person is 65 or chooses to take it out, he said.

For smaller companies, this can be a burden. For large plans, with more than 1,000 employees, it is in their best interest to keep those terminated vested accounts because their institutional pricing is based on their assets.

What to do with an old 401(k)


May 3, 2012 • Reprints

“People are better off leaving their money in a 401(k) plan than rolling it to an IRA because the plan sponsor is picking funds or has hired expertise to pick funds. It’s like hiring a personal investment manager,” Wray said.

According to Charles Schwab, there are four things people can do with their 401(k) plans when they leave a job: take the cash, do nothing, rollover their 401(k) to their new employer’s plan or roll that money into a personal IRA.

Experts agree that cashing out is a bad idea because it permanently decreases future retirement savings. The money a worker saves early on, when he is in his 20s or 30s, is worth much more than the same amount saved at an older age.

Doing nothing means a participant’s money will sit and accrue interest on what was there when they left their job. Nothing will be added to the account except investment returns. This can be good if your account is invested in the right balance of assets, or bad if a participant never looks at that plan’s holdings again after they leave the company.

Rolling accounts over to a new employer plan is a great option because it can be done without penalty and workers are more likely to keep track of funds they are actively paying into. The one downside to this plan is you are limited by the retirement plan choices your new employer has made. Experts agree that you should research your options before making a decision.

Rolling over to an IRA gives account holders more flexibility, but most do come with annual fees.

One reason Grey encourages his clients to rollover their old plans is that “it is really difficult to plan and have a full understanding of your financial picture if your money is spread all over the place, $50,000 over here; $30,000 over there. It is difficult to put your arms around where you stand financially.”

He added that Denver Money Manager advocates consolidating funds and bringing them under one roof because it gives a clear picture of where people stand. Are they on target to achieve their retirement objectives or do they need to play catch-up? “It is hard to make quantifiable judgments without it being under one house,” Grey said.

One thing to watch out for when leaving a job with a retirement plan is that each one has its own rules, policies and procedures and the “beneficiary protocol can be specific to that plan,” Grey said. “You don’t want any surprises with your beneficiaries.”

Don’t assume your money will go to your spouse or your children when you pass away. Read the fine print, he said.