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Milliman’s top 10 publications of 2013

December 26th, 2013 No comments

In 2013, Milliman again published a wide variety of articles and videos, including timely analysis related to issues such as sinkhole peril, improving claims analytics through text mining, predictive modeling and analytics, and Solvency II developments. In addition, we published extensively on ongoing challenges related to managing healthcare costs, healthcare reform, retirement planning, and insurance and risk management issues.

Here are this year’s ten most viewed articles and reports:

10. Fees: What everyone is NOT talking about!
By Douglas A. Conkel

How do plan sponsors ensure that actual fees paid by each participant are fair and reasonable when compared to other participants within the plan?

9. Planning for NAIC ORSA
By Chris Suchar, Joy A. Schwartzman, Matthew G. Killough, Wayne E. Blackburn

Sophisticated risk assessment will be key to complying with U.S. ORSA requirements.

8. Operational risk modelling framework
By Joshua Corrigan, Paola Luraschi

Current methods and emerging practices in operational risk across the world.

7. ACA: An act of unknown consequences for workers compensation
By Derek A. Jones

How will healthcare reform mandates for preexisting condition coverage and broader healthcare access affect workers’ compensation claims and costs?

6. President Obama’s transitional policy for canceled plans
By Hans K. Leida

The November 14, 2013 announcement that health insurance issuers would be permitted to renew certain canceled health insurance policies has raised new questions for the individual and small group marketplaces in 2014.

Read more…

Retirement savings: Don’t confuse past performance and future expectations

November 26th, 2013 No comments

Regli-JinnieThe Wall Street Journal recently published an article (subscription required) that indicated individual investors are returning to investing in stocks, but that this could have negative implications for Ma and Pa’s retirement savings accounts.

Optimistic figures about the stock market, such as a 29.32% increase (as of November 26, 2013) of broad market indexes and potential for the Dow Jones to hit 20,000 this year, have been tossed around like rice at a wedding. While these numbers have encouraged the average investor to return to stock investment it’s important for retirement plan participants to keep a few things in mind.


Source: Carl Richards, The Behavior Gap.

While the short-term returns on stocks may have looked incredible on your third-quarter statements, you absolutely cannot invest based solely on short-term returns. Investors in 2008 likely saw the same incredibly high returns right before the market took a downward turn. All too often I overhear people saying, “Wow, did you see returns are up to 20% on Fund XXX, I need to sell out of Fund YYY and buy in.” Because the prices are being driven up, your hard-earned money actually buys fewer shares than if the prices were lower.

I’m not saying that our economy is building up for a fall but it’s important to keep in mind that, even while the market is doing well, you need to protect the nest egg that you’ve worked so hard to build.

Regardless of the market, the key to investing your retirement assets is diversification. Financial advisors tell us that, by spreading the investments in a retirement account across different asset categories, investment risk can be greatly reduced. By investing in a mix of stocks and bonds you are creating your own small “cushion” of protection against losses in case of market fluctuation. It’s important to remember that you’re investing for the long term, and more than likely those incredible returns will only last for a short period of time.

Google+ Hangout: PlanAhead for Retirement®

October 22nd, 2013 No comments

Milliman’s retirement planning tool PlanAhead for Retirement can help defined contribution plan participants better understand how their account balances translate to retirement income. The tool helps individuals learn what they need to do on their own to adequately prepare for retirement.

In this Google+ Hangout, Jinnie Regli demonstrates how PlanAhead functions.

To learn more about PlanAhead, click here.

Tips for promoting a defined contribution plan to employees

September 19th, 2013 No comments

Employers who actively promote and communicate their retirement plans can demonstrate its importance to employees. In Jinnie Regli’s new article, she provides 10 ideas that plan sponsors may use to help employees get the most from their defined contribution (DC) plans. Here is an excerpt:

Get your employees in the plan.
Allow employees to enter the plan on day one. New employees are excited about the new opportunity so get them enrolled from the very start. Hook them in while it’s fresh on their minds so they will be used to seeing the deduction in pay right from their first check. Delayed entry dates tend to lead to employee inertia.

Consider adding an automatic contribution arrangement.
The most effective way for plan sponsors to encourage participation in their retirement plans is through plan design. An automatic contribution arrangement (ACA), more commonly known as automatic enrollment, is a feature that can be added to existing 401(k), 403(b), 457, SIMPLE IRAs, and SARSEP plans. This arrangement allows the employer to automatically enroll a newly eligible participant unless the participant makes an affirmative election not to participate.

When the arrangement is adopted, the plan sponsor selects a default contribution percentage, which is automatically reduced from employee’s wages upon meeting the eligibility and entry requirements of the plan. Participants may “opt out” of this automatic contribution. Studies show most employees will leave their contribution rate at the plan default or even increase their elections. There are alternative methods of automatic contribution arrangements; refer to your plan consultant for more information.

Offer an employer-matching contribution.
Would you walk past a $100 bill on the sidewalk? Would you turn down a work bonus? Most would answer no to these questions. Retirement in this day and age is largely going to be self-funded; offering an employer-matching contribution is like offering your employees a bonus. If your employees take saving for their retirement seriously and contribute, you’ll add free money to their accounts. As an employee it’s next to impossible to turn that down. A recent Wells Fargo survey indicated that 85% of those with a 401(k) offering a company match contributed enough to receive the maximum match. Matching is an effective way to work hand in hand with employees to fund their retirement. If high turnover/low employee retention has deterred you from implementing a match in the past, why not implement a vesting schedule?

Google+ Hangout: What is InvestMap™?

June 28th, 2013 No comments

Milliman’s retirement glide path technology InvestMap™ enables plan sponsors to deploy an age- and risk-based asset allocation strategy for the core funds held within a defined contribution (DC) plan. By creating a custom target date glide path overlay, plan sponsors and participants are able to personalize their investment approaches while taking advantage of the automated account management features.

In this Google Plus Hangout, Milliman’s Mira Copeland and Jinnie Regli discuss InvestMap’s features.

To learn more about InvestMap read Jinnie’s blog “What is InvestMap?

What is InvestMap?

May 1st, 2013 No comments

As we wrap up the first quarter of 2013, we are receiving several inquiries from plan sponsors regarding InvestMapTM, Milliman’s retirement glide path technology.

Let me start with some background. Model portfolios offer risk-based options to participants consisting of asset allocations comprising many of the core funds already in the plan. Target date funds are portfolios designed to achieve returns based on a participant’s target retirement date; those closer to retirement will typically have less exposure to equities and commensurate expectations of lower investment returns, while those further from retirement will be exposed to more risk and a higher potential investment return.

InvestMap is a great solution for participants and employers alike because it brings together the benefits of both target date funds and model portfolios. Conceptually, target date funds are a good idea, but product orientation and lack of customization have underscored their limitations. Specifically, target date funds take somewhat of a “catchall” approach at the plan level.

InvestMap is designed to work at the participant level, incorporating the best aspect of target date funds (the automated glide path for which equity exposure is reduced over a period of several years). However, personal risk attributes of individual participants are incorporated as well. This sophisticated “marriage” between risk-based models and an age-based target date glide path, coupled with an open architecture investment platform, provides the best of both worlds for plan sponsors and participants.

The core funds are still available for participants to select their own asset allocations if they choose not to participate in InvestMap.

Advantages to the plan sponsor:

• InvestMap offers fiduciary protection for the construction of the models
• Can be used as the plan’s qualified default investment alternative (QDIA)
• Investment management fee transparency and no additional costs

Advantages for participants:

• Investment education that is easily understood
• Personalized strategies for each participant’s individual risk tolerance
• Hands-off management from initial enrollment to retirement

Please contact your Milliman representative for more information on how InvestMap could benefit your plan.

Are Millennials lax about their retirement future?

April 24th, 2013 No comments

Unlike many prior generations, Millennials will have to bear the brunt of risk associated with their retirement futures. In this USA Today article, Jinnie Regli discusses the general mindset Millennials have towards retirement savings.

Here is an excerpt:

Even if the smart, tech-savvy generation of Millennials are told about the benefits of the stock market, they still may have no appetite for risk.

…retirement savings does not create much top-of-mind awareness among Gen Y. “With Millennials that I talk to, retirement is so far off that it doesn’t seem to be something that needs to be talked about now,” says Jinnie Regli, a Millennial who is a client service administrator at Milliman, a consulting and actuarial firm.

…For Millennials life is a balancing act between saving money and paying down debt. Regli advises them to contribute whatever they can to their retirement account. “Never think that anything you contribute is too small,” she says. “And if your plan offers a match, remember that not contributing to the plan is like throwing away free money.”

Read Jinnie’s article, “Retirement planning: 12 practical tips for Millennials”, where she offers retirement planning suggestions for twentysomethings.

Calculate your retirement

February 19th, 2013 No comments

Are you on track to meet your retirement goals? If you’re unable to answer or would rather avoid thinking about it, you’re not alone.

In a 2012 retirement confidence survey conducted by the Employee Benefit Research Institute, 56% said they determined their retirement savings needs by guessing. The fact is this percentage is much higher than it needs to be. Recordkeepers and administrators have made enormous strides in creating tools and calculators, such as Milliman’s PlanAhead For Retirement®, which work to align retirement saving strategies to estimated required retirement savings needs. Of those surveyed who have utilized a calculator to estimate required retirement savings, 59% reported saving or investing more as a result.

A retirement calculator’s primary objectives is to take the information provided about current retirement plans, offer a rough assessment of retirement readiness, explore possible changes in current investment or savings strategies, and project how those changes could affect retirement outcomes. Contrary to popular belief, these calculators have not been created to scare plan participants into contributing more but rather to educate and bring an awareness of how that lump of money sitting in your 401(k) account will translate to income at retirement. No matter what your age or profession, it’s important to take the time to utilize a retirement calculator to estimate required retirement savings in order to avoid finding oneself unprepared when nearing retirement.

Here are a few quick retirement calculator dos and don’ts:

• Do:

o Be realistic about your retirement age and life expectancy
o Be honest about retirement expenses; it’s OK to plan to travel or buy a sports car after retirement but make sure to factor those costs into the expenses
o Periodically review your investment strategy and consider speaking with an investment professional to make sure it matches with your retirement strategy
o Continue to check back and update your information even if retirement calculators project that you are on track to meet your retirement goals

• Don’t:

o Change your inputs just to get a successful projection; changing life expectancy to age 50 just to attain an “on track” projection, for example, does not do any good, nor is it realistic
o Panic if the projection says you’re not on track; most calculators will offer suggestions and even allow adjustments to variables to see how each change could affect retirement savings
o Rely on these calculators as a sole basis for your retirement planning decisions—they are for educational purposes only


What your 401(k) wants you to know about it

January 30th, 2013 No comments

There are some things about your 401(k) you should know. In her new article, Jinnie Regli provides 10 items that can help you maximize your 401(k) retirement plan. Here is an excerpt:

1. Average 401(k) account balances are up but that average account still won’t support the average person’s retirement. During November, Fidelity Investments published research that said that the average account balance as of the end of the third quarter of 2012 was the highest they’ve seen since they began tracking account data in 2000, at $75,900. Although this is a significant increase from 2009, when the average account balance was $46,200, the fact is that $75,900 may not be enough to support the average American’s retirement.

2. You should utilize tools to calculate your retirement readiness and adjust your savings strategy. In a 2011 retirement confidence survey conducted by the Employee Benefit Research Institute, 42% said they determined their retirement savings needs by guessing. The fact is this percentage is much higher than it needs to be. Recordkeepers and administrators have made enormous strides in creating calculators that work to align your retirement saving strategy to your estimated required retirement savings need. Of those surveyed who have utilized a calculator to estimate required retirement savings, 59% reported saving or investing more as a result. Please take the time now to utilize these calculators so you won’t find yourself unprepared when nearing retirement.

3. It’s important that you understand the fees you pay to participate in your 401(k) plan. Fee transparency is important on a participant level because the fees assessed to your account will impact your account growth.

Your employer is required to deliver fee information to you in two ways. Your quarterly statement must include an itemized listing of fees, if any, that were assessed to your account over the quarter. The second requirement is an annual notice that discloses fund performance, fund expense ratios, benchmarks, information about designated investment managers, the use of revenue sharing to offset plan expenses (if applicable), and any fees that you may incur if you initiate transactions from your account. Even if you’re not currently contributing to your employer’s 401(k plan, you should expect to receive a copy of this notice every year. This document is full of useful information and shouldn’t be discarded.

While these disclosures are important to you as a participant, it’s also vital to note that an individual retirement account (IRA) may sometimes be more costly to maintain than a 401(k) plan through your employer. Fees for investment advisors or administration are often split between all of the active participant accounts in a 401(k) plan while with an IRA you may be standing alone in funding those fees. Please take the time to stay informed about the fees associated with your accounts.

To read the entire article and see all ten considerations, click here.

DOL issues Announcement 2012-44: Hurricane Sandy relief

November 28th, 2012 No comments

On Friday, November 16, the U.S. Department of Labor issued Announcement 2012-44 to coincide with IRS IR-2012-83 clarifying relief for those affected by Hurricane Sandy.

Relief has been provided for qualified plans that grant loan or hardship distributions due to damage to principal residences located in the areas affected by Hurricane Sandy on October 26, 2012. Plans that do not currently allow for hardship distributions may immediately allow for them as a result of Sandy but these plans must be amended to provide for hardship distributions by the end of the first plan year beginning after December 31, 2012. For example, if your plan year begins January 1, 2013, the deadline to file the amendment is December 31, 2013.

Recordkeepers, for distribution purposes, will rely on participants to provide proof of hardship from “unforeseeable emergency,” and the allowable amount for hardship is limited to the maximum available. While these hardships will not require the participant to be held to the six-month suspension period following a hardship distribution, any that are intended to fall under this relief period must be distributed on or after October 26, 2012, and no later than February 1, 2013.

For more information on eligible localities and other relief provided, please visit this IRS website.

Also, for Milliman’s perspective on the insurance implications of Sandy, read this article. Also, for relief guidance from the Department of Labor and the Pension Benefit Guaranty Corporation, click here.