The Republican lawsuit targets reinsurance that helps insurance companies provide universal coverage without accounting for pre-existing conditions.
By Cyril Tuohy
An analysis of the 2014 Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) found that employees are unlikely to make big changes to their retirement savings habits even when they know how much retirement income they are likely to receive based on current account retirement balances.
If the income projections aren’t likely to change savings behavior, workers said they would still find such information useful, the EBRI analysis found.
The analysis found that 36 percent of respondents thought that knowing how much to expect from their plans was very useful, and 49 percent thought such information was somewhat useful, EBRI said.
EBRI’s analysis found that 58 percent of respondents thought the estimated monthly income was “in line” with their expectations.
Jack VanDerhei, EBRI research director and author of the report, said that it was possible that current participation in employment-based plans had already provided respondents with an estimate of what retirement savings balance would provide.
Only 17 percent of respondents said they would increase their retirement savings contributions as a result of their monthly income estimate.
Of those responding that their values were “much less or somewhat less” than expected, 35 percent said they would increase their contributions.
EBRI’s findings provide one of the first in-depth looks at how workers would react knowing how much – or how little – their current employer-based retirement assets would provide them in the form of future income.
One way for retirees to generate monthly regular income would be to convert their 401(k) balances into an annuity.
More employer-based retirement plans are offering annuities among their investment choices to help retirees prepare with the payout phase of their retirement assets.
VanDerhei said in a statement that while few retirees convert their entire 401(k) account or individual retirement account (IRA) balances into annuities, giving retirees and pre-retirees an idea of how much monthly income they would be able to buy is a convenient way of illustrating the approximate amounts that their account balances could generate.
The Department of Labor’s Employee Benefits Security Administration is preparing rules requiring retirement plan statements to provide estimates of monthly income derived from current account retirement balances.
Life and annuities carriers favor including lifetime income illustrations in retirement statements because more people are likely to select annuity-based products.
The mutual fund industry has raised concerns about unfairly favoring the life and annuity industry, and pointed out that providing accurate projections about how much an annuity could generate so far into the future is difficult.
Retirees could easily be misled by how much to realistically expect so far into the future, according to the fund industry.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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