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Retirement plan enrollment considerations

July 31st, 2015 No comments

Employers are constantly seeking new ways to get employees enrolled in their retirement plans. This Plan Adviser article quotes Milliman’s Gerald Erickson and Jinnie Olson discussing how automatic plan designs and targeted communication strategies can affect the enrollment of participants especially Millennials.

Here is an excerpt:

When it comes to automatic plan design, says Gerald Erickson, a principal at Milliman Inc. in Minneapolis, the adviser community obviously supports these features. Still, it is important to acknowledge that while popular opinion claims auto plans are the next logical step in improving participant outcomes, “from a plan sponsor and an administrator/recordkeeper perspective, automatic plans are not easy to administrate.”

There’s a lot that goes on behind the scenes, he says, and that may include some mistakes. “I think it’s important for people to understand that it’s not as easy as just getting people to automatically go in the plan and think that’s the end of it. It does require a lot of work from the plan sponsor side, and it does require a lot of work from the recordkeeping/administrator side.”

Plan advisers should be wary of potential complications when designing their automatic features. Most retirement plan advisers are “looking at what makes the biggest impact in getting people in the plan,” Erickson says, which for Millennials may lead them to look at Roth options. “If you add a Roth feature to the plan,” he points out, Millennials that are in a lower tax bracket now can essentially “marginalize their tax hit by taking advantage of the tax-free distribution on the back end.”

Speaking for Millennials, Olson says, “We’re really the first generation that’s going to have to fund our own retirement, rather than relying on the typical defined benefit [DB] plan that’s losing popularity, and it can be really intimidating for people to hang onto enrollment packets for a year while you try to meet the eligibility requirements.”

…Advisers can help make an overwhelming amount of information more accessible for all participants, Olson says. “You want to be able to give that information to everybody but in a way that everyone has the opportunity to get through it and understand what it is,” she says. “Rather than a 15-page enrollment packet, maybe you pare it down to two pages, summarizing everything, but then give them the opportunity to look into it more later.”

What changes will you make to help your employees’ retirement confidence increase?

July 15th, 2015 No comments

Regli-JinnieThe 2015 Retirement Confidence Survey, published by the Employee Benefit Research Institute, continues to highlight the rise of retirement confidence in American workers. An increase in retirement plan participation (14% in 2013 to 28% in 2015 for those with a retirement plan) seems to closely correlate with the rise in the percentage of workers who are confident about having enough money in retirement (13% in 2013 to 22% in 2015).

The survey findings seem to indicate that more American workers are taking retirement planning into account and they are feeling very confident about having enough money in retirement, both of which may be related to the increase in availability and accessibility of online retirement calculators and a growing confidence in the overall economy. Yet at the same time, the percentage of American workers who report having saved for retirement has stayed fairly consistent at 63%, indicating that more may need to be done in order to assist workers in saving. Here are a few standout figures from the 2015 survey results:

• 80% of current workers believe personal savings will play a large role in their retirement incomes
• 71% of employed workers report their employers offer an employer-sponsored retirement savings plan
• 12% of those without a retirement plan reported feeling very confident
• 50% of those asked what they would do if they were automatically enrolled at 3% said they would raise their contribution rate; only 2% said they would stop it altogether

It seems that, as the economy strengthens, many American workers are comfortable making retirement savings a priority, so what better time to encourage them to make the most of it?

As plan sponsors, what can be done to help keep retirement confidence on the rise for years to come? Here are some ideas.

• If you don’t offer an employer-sponsored plan, consider offering one. Behavioral finance has found that inertia makes humans their own worst enemies when it comes to retirement savings, making it all that more difficult for the 29% of employed workers without an employer-sponsored retirement plan to save for their retirement. Open the door for them to begin saving today!
• If you already offer an employer-sponsored plan, think about offering additional employer-sponsored plans. Employee stock ownership plans (ESOPs), nonqualified retirement plans, cash balance plans—there are a variety of options available that could be used to supplement your current 401(k) plan.
• Or continue to drive participation by considering plan design changes that will promote additional plan participation. Speak with your consultant about the best options for your company.
• Educate participants. Make sure your employees have sufficient information and tools to assist in their retirement planning.

What changes will you make to help your employees’ retirement confidence increase?

New Year’s resolutions for retirement plan sponsors

January 8th, 2015 No comments

For many, a new year usually means a fresh start. With that thought in mind, Milliman’s Jinnie Olson provides 401(k) plan sponsors 10 ideas that can help them administer their plans more effectively in 2015. Below are her 10 ideas.

1. Create administrative procedures and internal controls—and follow them.
2. Make sure changes to your operating procedures are well documented.
3. Audit your data.
4. Transmit contributions in a timely manner.
5. Establish a retirement committee.
6. Understand plan fees.
7. Audit your service providers.
8. Conduct an annual plan review.
9. Establish success measures.
10. Establish a strategy for the upcoming year.

Read Jinnie’s article “Top 10 New Year’s resolutions for plan sponsors of retirement plans” for more perspective.

Google+ Hangout: What is InvestMap™?

October 6th, 2014 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 automated account management features.

In this Google+ Hangout, Jinnie Olson discusses InvestMap with Brittney Hagenbart.

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

Milliman infographic: The boomerang generation’s retirement planning

September 30th, 2014 No comments

The Millennial generation has gotten a bad rap concerning their retirement planning habits—or lack thereof. Fortunately, there are several steps Millennials can take to secure a better retirement. The infographic below features 12 tips Millennials should consider when developing their retirement strategies. The tips are taken from Jinnie Olson’s article Retirement planning: 12 practical tips for Millennials. The infographic also highlights some of the generation’s retirement planning behaviors.

Millennials boomerang infographic_Milliman Inc_09-29-14

What steps can Millennials take to enhance their retirement security?

June 25th, 2014 No comments

The millennial generation has developed a reputation for not placing an emphasis on retirement, preferring to live for the moment. In the most recent issue of Benefits Quarterly, Milliman’s Jinnie Olson discusses several actions Millennials should consider to help them accumulate retirement savings. Here is an excerpt:

Taking retirement mobile
Millennials’ lives are fast-paced, hopping from an early morning yoga workout to nine hours of work, straight to a book club meeting, down the street to a softball doubleheader and then on to a late-night fraternity reunion happy hour. Retirement accounts are finally catching up with our mobile world. Recordkeepers and administrators have started to create mobile apps for smartphones and tablets to help keep up with busy lifestyles. For some, choosing to defer or increasing your deferrals is as easy as one quick touch of the screen or scanning a quick response (QR) code. When you have time to play with apps that shoot cartoon birds dressed like Darth Vader across the sky, then the excuse “I just don’t have time to save for retirement” simply won’t fly anymore.

Let your interest compound
You hear over and over again that the longer your contributions are invested in a retirement plan, the more time they’ll have to take advantage of compounding interest. But what does that really mean? Let’s look at three different savings approaches. For purposes of this example, let’s assume I make $30,000 every year until I retire:

• Strategy 1: I decide to save 6% of my compensation, or $1,800, in a jar every year from the ages of 25 to 65.
• Strategy 2: I don’t want all of the space in my basement taken up by jars and instead enroll in my company’s 401(k) plan, contributing 6% from the ages of 25 to 45. I receive 5% interest compounded annually.
• Strategy 3: I want a new car and can’t afford to contribute now. Twenty years later, I turn 45 and realize retirement is right around the corner and decide to contribute 6% until the age of 65. I receive 5% interest compounded annually.

Which strategy will result in higher retirement savings at the age of 65?

My initial investment ($36,000) is the same in each strategy. While Strategy 1 will guarantee my contributions will not suffer any market gains or losses, it may not be the most secure retirement savings strategy. Strategy 2 more than doubles my final account balance when compared with Strategy 3 just by giving my money an extra 20 years in the market to accumulate that compounded interest. (See the figure)

Compounding interest

To read the entire article, click here.

Reproduced from the Second Quarter issue of Benefits Quarterly, published by the International Society of Certified Employee Benefits Specialists.

Give your nest egg some TLC!

May 9th, 2014 No comments

Regli-JinnieAll around us, there are signs that spring is hatching. Snow piles are melting, potholes are mounting, insulated jackets have been shed, green grass is peeking through, and bird nests are popping up in the trees.

It’s important to remember that, just as a mother bird continues to nurture her unhatched eggs, your retirement accounts need a little nurturing until they’ve reached their maturity. Perhaps it’s time for a little retirement account spring cleaning!

According to this New York Times article, statistics show that, on average, people in their 20s will go through seven jobs in their lifetimes. It’s not uncommon to get wrapped up in the new and forget about the old—more specifically, your retirement account—as you move forward to new opportunities.

If you’re not sure how to access old accounts anymore, your prior employer will be able to point you in the right direction. It would be unfortunate to leave a nest egg behind only to have it eaten up by plan fees!

Here are a few things to keep in mind:

  • It’s helpful to update your contact information if you move, get a new phone number, or change your name. Some of these changes may require that you provide proof of change and it’s easier to stay on top of the changes as you go.
  • Remember to review and update your beneficiaries as you go through life changes to make sure your retirement accounts are inherited by the appropriate parties if an unfortunate incident occurs.
  • Every few years, you may want to re-evaluate your personal investment selection. The fund or portfolio you picked when you started that first job at age 22 may no longer fit your investment strategy.
  • How much do your retirement accounts cost you? Even in employer-sponsored retirement plans, participants often are responsible for paying portions of plan fees. If you have five separate accounts and each of the plans deduct $25 from your accounts each year ($125 in total) it might be wise to consolidate your accounts and only pay one $25 fee.
  • If you have a small balance, typically under $5,000, you may be automatically rolled out of the plan and into an IRA, without your consent. If your account balance is less than $1,000, your account may be automatically paid directly to you, less taxes owed. Make the first move after leaving so that finding your account doesn’t make you feel like you’re chasing your tail.
  • If nothing else, check in on your accounts at least annually. Even if you are no longer working at the company, plan design changes, fund changes, and many other decisions the company makes for its plan still affect your account and could affect your account balance.
  • While it’s still fresh on your mind, consider combining all of your prior qualified accounts into your current plan or IRA. One of the major benefits of qualified 401(k) plans is that they are portable and most retirement plans make rolling balances in or out a fairly easy process.

Just think. You work hard for your money and if you contributed to a retirement plan, that money was withheld from your take-away pay. Consolidation increases the likelihood you’ll be able to devote the attention you need to grow your retirement nest egg.

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.

RearViewMirror

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 Olson demonstrates how PlanAhead functions.

To learn more about PlanAhead, click here.