Data & Research January 11, 2013

Retirement Concerns Plague Nonprofit Employees

About 45% of all employees in the nonprofit sector are not confident with their ability to prepare financially for retirement, a survey shows.
Reported by

TIAA-CREF Institute and Independent Sector found 42% of employees feel they are not accumulating sufficient financial resources to ensure their long-term financial security, even though most employees are covered by a retirement plan at work. Thirty percent of survey respondents have access to a defined benefit (DB) plan and 69% have access to a defined contribution (DC) plan. More than three-quarters of those with access to a DC plan make contributions.  

Only one-third of nonprofit sector employees have received retirement planning advice within the past three years. Two-thirds have not tried to determine how much money they will need to accumulate so that they can live comfortably in retirement. Even among savers who are confident they are saving the right amount, one-third have not attempted such a calculation.  

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Household debt is likely a factor contributing to a lack of confidence regarding saving for retirement; 70% of early-career stage employees and 60% of mid-career employees consider their level of household debt to be a problem.

And while 59% of nonprofit sector employees are very or extremely satisfied with their current employment, the survey found nearly one-half have considered leaving the sector to receive greater compensation elsewhere.   

“The survey indicates that while nonprofit employees are satisfied overall with their jobs, they have concerns about their ability to retire comfortably,” said Paul Yakoboski, senior economist at the TIAA-CREF Institute. “The results demonstrate the need for financial planning and advice to help these employees combine the best of both worlds: a fulfilling job and a secure financial future.”  

TIAA-CREF Institute and Independent Sector polled 1,000 full-time employees (ages 21 and older) in the nonprofit and philanthropic sector about their motivations and satisfaction in the workplace, including their plans, preparation and readiness for retirement.  

The full report is here.  

Compliance January 10, 2013

Pension Lump Sums Must Account for COLAs

Calculations of lump sum pension benefits consider cost of living adjustments (COLA) participants would have received if they had taken an annuity at retirement.
Reported by

The U.S. District Court for the Northern District of Oklahoma noted that the Employee Retirement Income Security Act (ERISA) defines a defined benefit plan participant’s accrued benefit as “the individual’s accrued benefit determined under the plan and, …expressed in the form of an annual benefit commencing at normal retirement age.” U.S. District Court Judge Gregory K. Frizzell determined that for the plan in the present case, any annuitant at normal retirement age will receive a set payment that will increase according to a COLA throughout the annuitant’s lifetime, and that is the accrued benefit.  

Frizzell relied on the 7th Circuit’s opinion in Williams v. Rohm and Haas Pension Plan (see “High Court Lets Stand Decision on COLAs in Lump-sum Calculations”), in which the court said: “If a defined benefit pension plan entitles an annuitant to a COLA, it must also provide the COLA’s actuarial equivalent to a participant who chooses instead to receive his pension in the form of a one-time lump sum distribution.”  

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A class of participants of the Williams Companies Inc. pension plan sued the company for providing COLAs to annuitants but not to those who took a lump sum payment in lieu of their annuity. Frizzell ruled the company is liable to the class, but the amount will be determined at a separate time.  

The opinion in Pikas v. Williams Companies Inc. is here.

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