OPM Can’t Do It

For more than two decades, the U.S. Office of Personnel Management has been trying to modernize retirement planning for federal employees. But despite some serious efforts, "the agency's retirement modernization initiative remains at risk of failure," according to a report from the Government Accountability Office (GAO). GAO blames bad management.

The GAO documents a series of problems with the OPM's attempt to move away from a paper-and-pencil system to one that uses today's technology to improve the retirement process and customer service. Currently, there are 2.5 million federal retirees, and 600,000 more are expected by 2016. A new system is needed because the paper-based one has a high number of errors, which could lead to mistakes in benefit payments, according to the report.

The GAO report can be found at www.gao.gov/new.items/d09529.pdf.

Increasing Retirement Plan Value without Increasing Costs

Many employers, in order to survive this economic downtown, have had to reduce the benefits they offer to employees. Some of the changes include discontinuing matching contributions or suspending profit sharing contributions to employee retirement plans, according to Robert L. Book, executive vice president of Strategic Financial Partners. Book has also noted that “there are many things an employer can do to add significant value to their retirement plan participants and to themselves -- without increasing costs."

Options include increasing the investment choices available to participants; making sure the fees within the plan are as competitive as possible; adding provisions to the plan, such as the Roth IRA provision, automatic rebalancing and automatic step-up contributions; having in-service withdrawal options available; and providing education to employees so they can make the best decisions about their retirement plans and their futures.

Book insists that the cost of having a retirement plan evaluated and optimized often can be recouped in the savings to employers of offering provisions that are cost effective for the company and beneficial to employees.

Impact of the Economic Downturn on 401(k) Confidence

Barclays Global Investors has released the results of a survey showing how the ongoing economic downturn is eroding the retirement confidence of 401(k) participants. The survey also indicates that participants give equal importance to guaranteed retirement income and to covering their health care costs when it comes to improving retirement confidence. The rapid decline in the global economy has cast a cloud over investors with the majority of retirement plan participants (63%) saying their confidence in reaching their retirement goals has declined in the past twelve months. In fact, 80% of respondents say they have lost assets over the past year.

Of those who lost assets:

·        15% are worried they might never be able to retire

·        41% plan to delay their retirement

·        58% plan to work for the rest of their lives

One of the ways participants claim confidence could be recovered is with guaranteed retirement income.

Misperceptions About The Retirement Plan Industry

The SPARK Institute recently completed a series of white papers entitled "The Case for Employer- Sponsored Retirement Plans" analyzing certain aspects of the retirement plan industry. These reports identify some important facts and dispel many myths about employer-sponsored retirement plans, particularly 401(k) plans.

Some common misconceptions are:

·        401(k) plans are not a "good value" for workers trying to save for retirement, and that the fees for plan and investment services do little more than erode workers' retirement savings. In fact, the data shows that plan participants receive more services and support and have more flexibility when investing through their 401(k) plans than they would if saving through retail IRAs. In addition, 401(k) plan participants may also benefit from sponsor-paid services, matching and profit-sharing contributions, and group pricing. And finally, recent studies show that on average, expenses for 401(k) participants are lower than the expenses paid by retail mutual fund investors.

·        Service providers make too much money at the expense of American workers.

Retirement Savings in the City

For the second year, Nationwide Retirement Solutions (NRS) and the U.S. Conference of Mayors (USCM) are asking mayors across the country to support the Save for Retirement Initiative and encourage city workers to participate in their deferred compensation program.

As part of the 2009 Save for Retirement Initiative, NRS and USCM are asking mayors to:

1. Sign the Pledge, which is their commitment to actively promote Save for Retirement in their city (Mayors can sign the pledge at www.usmayors.org/saveforretirement)

2. Reach out to employees to promote the importance and benefits of saving for retirement through a deferred compensation program tailored for public employees

3. Promote city-sanctioned informational workshops for employees that are conducted by their city's deferred compensation provider

Last year, 153 mayors from 39 states pledged their support for the campaign.

Retiring Sooner Rather Than Later

In an effort to save money and streamline its workforce, Onslow County, North Carolina, is offering a retirement incentive plan to eligible employees to encourage them to retire sooner rather than later. The plan, open only to employees who are already eligible for retirement under the local government employee retirement system, offers each eligible employee $10,000 plus 10 hours for every year of service to the county multiplied by their hourly wage, as well as retirement benefits provided by the government. Of the county's 1,100 employees, 127 are currently eligible for the incentive plan.

Retirements on the Down in Milwaukee

Milwaukee County, Wisconsin, employee retirements have slowed significantly, a likely result of workers hanging onto jobs longer because of the uncertain economy and downsized workforce, county officials say.

County figures show there were twenty-seven county employee retirements during the first quarter this year, down 50% from the same period in 2008. The 246 retirements for all of 2008 were down 17% from '07. County retirements have averaged 320 a year over the past eight years.

National Guard and Reserve Retired Pay Equity Act

U.S. Senator Blanche Lincoln (D-Ark.) is seeking to expand retirement benefits to National Guard and Reserve members. She is pushing legislation that would make a necessary improvement to early retirement requirements for Guardsmen and reservists and allow them to collect retirement pay before age sixty.

Current law allows members of the National Guard and Reserve to reduce the age of retirement (sixty) by three months for every ninety days of active duty served in support of a contingency operation, including the wars in Iraq and Afghanistan. However, only assignments after January 28, 2008, currently qualify. The Lincoln-backed measure, the National Guard and Reserve Retired Pay Equity Act, would amend current law to include any duty performed after September 11, 2001, as qualifying service.

National Guard and Reserve members are the only federal retirees who must wait until age sixty to collect retirement pay.

As the Screws Tighten

Regulatory screws are tightening on retirement advice given by financial professionals, according to one Los Angeles law firm. Partners at Reish Luftman Reicher & Cohen note that the Federal Government is targeting so-called prohibited transactions, such as financial advisers recommending funds or service providers that pay advisers higher fees than funds or providers that might be less expensive and more appropriate.