Data & Research October 20, 2016

Employers Identify Retirement Plan Concerns for Election Outcome

Topping the list is the tax-favored status of employer-provided retirement savings for workers.
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With the 2016 election right around the corner, employers are gearing up for proposed changes and taking a stance on different policy platforms.

The International Foundation of Employee Benefit Plans’ 2016 Election: Employee Benefit Issues survey report examines campaign issues greatly impacting U.S. workplaces. 

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“Several important employee benefit issues have emerged as key issues during this year’s election,” says Julie Stich, associate vice president of content at the International Foundation. “Our survey results show employers support a varied mix of benefit issues being debated.”

For retirement plan benefits, the top issues employers support are:
  • Tax-favored status of employer-provided retirement savings for workers (91%);
  • Tax-favored status of employer-provided retirement savings for employers (88%); and
  • Consolidation of different types of retirement savings vehicles (60%).

Past budget and tax reform initiatives have proposed to limit the benefits of tax deferral on retirement plan contributions or cap the amount Americans can save in their 401(k)s, individual retirement accounts, and pensions—a big concern for the retirement plan industry.

“The world of benefits is constantly changing. Regardless of the election’s outcome, employee benefits will evolve,” says Stich. “To protect the financial future and health of their employees, employers will need to understand and accommodate changes to benefits. Fortunately, over the past many years, benefit professionals have shown they’re up to the task.”

Survey responses for the 2016 Election: Employee Benefit Issues report were received from 486 human resources and benefits professionals representing all sectors: public employers, corporate/single employers and multiemployer plans. The surveyed organizations represent a wide base of U.S. employers from nearly 20 different industries and range in size from fewer than 50 to more than 10,000 employees. Respondents answered survey questions from the perspective of their role as a plan sponsor/fiduciary.

View the full 2016 Election: Employee Benefit Issues survey report at www.ifebp.org/2016election.

Client Service October 20, 2016

New Mortality Improvement Scale Could Reduce Pension Obligations

Based on the Society of Actuaries' preliminary estimates, the new scale may reduce pension plan clients' current liabilities by 1.5% to 2%, depending on the individual characteristics of the plan.
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The Society of Actuaries (SOA) released its annually-updated  mortality improvement scale for pension plans, MP-2016, incorporating three additional years of Social Security Administration (SSA) data on U.S. population mortality.

The updated improvement scale suggests U.S. mortality continues to improve, but at a slower average rate of improvement than previous years, which may decrease pension plan obligations slightly.

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MP-2016 incorporates SSA mortality data from 2012 to 2014 and a slight modification of two input values designed to improve the model’s year-over-year stability. The updated improvement scale indicates a slight decline in life expectancy as a result of the slower average rate of mortality improvement. For example, the life expectancy for a 65-year-old male declined to 85.8 years under the MP-2016 scale, compared to 86.2 years using the MP-2015 scale. Additionally, the life expectancy for a 65-year-old female is now 87.8 years under MP-2016, compared to 88.2 years based on the previous MP-2015 scale.

The updated scale can be used by pension plans to assist in making forward mortality assumptions in the valuation of pension payment obligations. Based on the SOA’s preliminary estimates, MP-2016 may reduce a pension plan’s current liabilities by 1.5% to 2%, depending on the individual characteristics of the plan.

“By releasing MP-2016, we are building on our commitment to regularly update the mortality improvement scale as new data becomes available,” says Dale Hall, managing director of research for the SOA. “The updated scale provides the latest information to help accurately measure pension obligations. However, it is up to pension plan sponsors, working with their plan actuaries, to determine how to incorporate emerging mortality improvement data into their plan valuations.”

The SOA conducted its analysis in full cooperation with the SSA, the Centers for Disease Control and Prevention (CDC) and the Centers for Medicare & Medicaid Services (CMS), and is releasing the 2014 mortality data publicly for the first time with the MP-2016 update.

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