Compliance October 20, 2011

IRS Announces Pension Plan Limitations for 2012

The Internal Revenue Service (IRS) announced cost of living adjustments (COLAs) affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2012.
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In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged. 

Highlights of the COLAs included:

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  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.
  • The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.

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  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

For full details on the pension plan limitations for 2012, visit http://www.irs.gov/newsroom/article/0,,id=248482,00.html.

Products October 20, 2011

Lockton Offers Help to Employers with Older Workforce

Lockton Retirement Services is launching its Retirement Readiness Practice and proprietary suite of consulting services.  
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The suite was developed to help employers mitigate increased costs associated with an aging employee population that is oftentimes deferring retirement past age 65.  

“Dealing with an aging, financially unprepared workforce is a reality that should concern employers,” explains Rick Unser, Vice President of Lockton Retirement Services. “Employers face serious financial implications if they do not take steps now to help their older employees leave the workforce and successfully transition to retirement.”

Unser cites a recent EBRI study which found 41% of workers 55 and older expect to retire beyond age 65 (see “Many Employees Still Working after Age 65”). An aging employee population that feels it must remain in the workforce results in higher employer expenditures for health benefits, work-related accidents with more severe outcomes, and productivity losses, according to Unser.

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Lockton’s client experience has shown that health care costs for employees over the age of 65 are more than double that of employees aged 45-55. In addition, workers’ compensation data has shown that while the statistical rate of work-related accidents does not increase dramatically for employees over age 65, when incidents do occur they are more severe and involve more paid time away from work.  A NCCI study shows the average costs per claim for older workers were more than twice as high on lost-time claims (more than $27,000 vs. slightly more than $12,000 for younger workers). 

Lockton employs a strategic, multidisciplinary approach to address the complete needs of aging employees where retirement readiness is only one successful byproduct of a comprehensive program. The set of workforce interventions and risk management strategies include:

  • Assessment of current income replacement ratios of employees with Lockton's interactive proprietary "Retirement Readiness Dashboard”
  • Plan design to encourage employee retirement readiness and maximize the impact and effectiveness of employer fixed or discretionary contributions.
  • Investment consulting services to secure cost efficient and appropriate investment choices based on the needs of employee demographics
  • Customized targeted education campaigns to modify employee savings behavior
  • Evaluation and engagement of independent service providers to deliver the desired level of investment advice and one-on-one support

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