Data & Research July 20, 2017

Phased Retirement Can Preserve Boomers’ Knowledge: GAO

Today, however, only 15% of workers between the ages of 61 to 66 are semi-retired.
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In a report to the U.S. Senate Special Committee on Aging, the Government Accountability Office (GAO) recommends that employers adopt phased retirement programs, so that they won’t negatively affect the knowledge and experience of Baby Boomers. However, only 15% of workers between the ages of 61 and 66 are semi-retired, according to the GAO.

The GAO also reviewed a 2016 Society for Human Resource Management (SHRM) survey, that found only 5% of its membership base offered a formal phased retirement program. However, 11% offered an informal phased retirement program. Among large employers, those with 2,500 to 9,999 workers, 16% offered a formal phased retirement program.

“Nine of 16 experts GAO interviewed explained that industries with skilled workers or labor shortages are motivated to offer phased retirement because their workers are hard to replace,” GAO says. Consulting, education, government, utilities and high-tech are among the industries most likely to offer phased retirement, according to the GAO. “While not all researchers agree, it has been suggested by some that as the population ages and the number of Baby Boomers leaving the labor force increases, there could be a loss of economic productivity. The availability of phased retirement, by extending the labor force participation, has the potential to provide options that would be beneficial both to the older workers and the overall economy.”

Reasons why employers do not offer phased retirement programs include the belief that older workers are less productive and have more expensive health care costs, according to the GAO. Other employers are concerned about regulatory complexities involving federal tax and age discrimination laws.

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Among those that do offer phased retirement said they did so to enable knowledge transfer and to manage their workforce more capably.

Compliance July 20, 2017

Plan Sponsor Admits to Stealing from 401(k)

Statements from the retirement plan provider notified participants of their missing contributions.
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The owner of PCI, a commercial janitorial company that contracted with area school districts, and CDM, a company that performed construction and property management services in a metro area in Kansas, has pleaded guilty to theft from an employee benefit plan.

According to the plea agreement, in November 2010, the owner signed a trust agreement with Nationwide to establish the PCI Building Services 401(k) plan. CDM employees could also participate in the plan, which provided for a matching contribution on employee deferrals. She provided her bookkeeper with a list of employees who wanted to participate in the plan and their deferral amounts. Deferrals were withheld form employee paychecks as of February 1, 2011.

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On December 31, 2011, Nationwide sent quarterly statements to retirement plan participants, which showed no contributions deposited to their accounts. The bookkeeper provided the owner with a reconciliation showing that contributions were missing from the 401(k) plan. Several participants confronted the owner about missing 401(k) contributions. The owner assured employees their funds were being held in escrow with Nationwide, although she was using the contributions for her own benefit.

She went so far as to blame her accountant for embezzling as much as $1.2 million from the company and filed a police report. She also filed a complaint with the Office of Disciplinary Administrator against a former employee, saying that employee was responsible for administration of the plan.

However, in May 2013, the owner met with a Department of Labor (DOL) civil investigator and admitted she was the responsible party and agreed to set up payments to reimburse funds she embezzled from the 401(k) plan.

The plea agreement orders the owner to restore at least $50,000 to the plan. The U.S. District Court for the District of Kansas must still accept the plea agreement.

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