Compliance May 18, 2016

Government Contractor Accused of Missing 401(k) Payments

The DOL is seeking nearly $250,000 in unremitted employer 401(k) contributions required by government contracts.  
Reported by

The U.S. Department of Labor (DOL) filed a complaint alleging that Tarry Bratton, B.C. Inc. and the B.C. Inc. 401(k) Profit Sharing Plan violated the Employee Retirement Income Security Act (ERISA) by not collecting employer contributions required by government contracts to the company’s plan.

According to the complaint, Tarry Bratton, president and sole owner of the company, was the plan’s trustee and a plan fiduciary. The company established the plan in October 2004, and it required that the company make contributions equal to the amount of fringe benefits paid under various prevailing-wage contracts, pursuant to the Davis-Bacon Act.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

However, from January 2009 to July 2012, Bratton and the company failed to remit mandatory employer contributions to the plan. The complaint says Bratton and the company could have successfully collected the contributions at the time they were due because the funds were available and the financial health of the company was good at the time.

The complaint also accuses Bratton and the company of causing each other to commit fiduciary breaches and knowingly not taking reasonable efforts to remedy each other’s breaches.

The DOL is seeking restoration of the unremitted employer contributions, with lost earnings, totaling approximately $249,989 as of June 5, 2015.

Data & Research May 18, 2016

80% Income Replacement Insufficient to Cover Retiree Health Costs

A study finds a 55-year-old man who has met his 80% income replacement goal will need an additional $25,679 investment growing at 6% annually to pay for all health costs in retirement.
Reported by

HealthView Services’ new 2016 Retirement Health Care Costs Data Report shows the average healthy 65-year-old couple retiring this year is projected to spend $288,400 in today’s dollars on lifetime Medicare Parts B, D and supplemental insurance (Plan F) premiums. 

When dental, hearing, vision and all other out-of-pocket expenses are included, the total retirement health care bill rises to $377,412.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

For retirees counting on Social Security income, HealthView Services’ Retirement Health Care Cost Index shows a 66-year-old couple retiring this year will need 57% of their Social Security to cover total health care costs. A 55-year-old couple retiring in 10 years will require 88%, and a 45-year-old couple, 116%.  These calculations are based on Social Security Trustees’ projections of a 3.1% cost-of-living adjustment (COLA) in 2017 and 2.7% thereafter.     

The paper addresses savings shortfalls for retirees who rely on income replacement ratios (IRR). The data indicates that using an IRR-based savings approach will only cover a portion of retirement medical expenses. A 55-year-old man who has met his 80% IRR goal will, for example, need an additional $25,679 investment growing at 6% annually to close this gap.

A key cost driver is health care inflation in retirement. Overall retirement health care costs are projected to have increased by 7.3% between 2015 and 2016, driven in part by a 16.1% increase in Medicare Part B premiums over the same period. Over the next 20 years, HealthView projects a more modest average annual inflation rate of 5.1% for retirement health care expenses. This is consistent with forecasts from the Centers for Medicare and Medicaid, which expects at least eight years of health care inflation between 5% and 7%.

Other findings include the cost disparity between genders, driven by a greater average life expectancy for women. A 30-year-old female retiring at 65 can expect to pay $548,098 (in today’s dollars) in total lifetime retirement health care expenses—$118,632 more than a male of the same age (based on life expectancies of 91 and 87, respectively).

Similarly, healthy Americans can expect to pay significantly more for retirement medical services than those suffering from a chronic disease that may impact their lifespans. A healthy male or female can expect to pay almost twice as much for lifetime health care in retirement than someone who is diabetic.

“Few Americans have taken steps toward addressing medical expenses in retirement, and most do not understand Medicare costs,” says Ron Mastrogiovanni, founder and CEO of HealthView Services. “Our data shows the significant impact of rising health care costs and the importance of planning for them.”

The report is here.

«