Participants Need More Than Savings Plan for Retirement Success

Workers surveyed said help with student loan debt and more financial education would help them achieve their financial goals.

More than three-fourths (78%) of American workers say retirement security will be more challenging for younger generations—more so than any other financial achievement, according to the American Workers Survey, commissioned by Prudential and conducted by Morning Consult in February.

But survey results suggest it is not just having a retirement savings plan that is important. American workers say making higher education more affordable (87%) and increasing access to retirement plans (86%) are important priorities for the government in the next year. The cost of higher education was cited as the biggest barrier (59%) to progress for young adults (ages 18 to 22).

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Even when asked about the biggest barriers to financial progress faced by their own generation, the top answer for Millennials (46%) was the cost of higher education, while 42% of Generation X cited the same thing. More than one-third (36%) of Baby Boomers cited credit card debt.

Eighty-seven percent of respondents say it would be helpful for employers to provide access to financial products (including retirement savings plans) that help workers grow and build wealth. Other offerings they say would be helpful for their success include:

When American workers were asked how helpful further education would be to achieve their goals, a large majority expressed the need for additional financial education—specifically, in the following areas:

  • Retirement savings/retirement planning (86%);
  • Establishing emergency savings (83%);
  • Creating/managing a budget (78%); and
  • Identity protection (78%).
In addition, American workers were asked what they would do if given a cash windfall of $100, $1,000, $5,000, $10,000, $25,000 and $50,000. The “inflection point,” where American workers shift to saving/investing, occurs between $1,000 and $5,000. This personal financial behavior is consistent across nearly all demographics.

PBGC Proposes Certain Amendments to Rules for Terminated DB Plans

The amendments to regulations on guaranteed benefits and asset allocation would incorporate statutory changes to the rules for participants with certain ownership interests in a plan sponsor.

The Pension Benefit Guaranty Corporation (PBGC) proposes to amend its regulations on guaranteed benefits and asset allocation. These amendments would incorporate statutory changes to the rules for participants with certain ownership interests in a plan sponsor.

The amendments in the proposed rule would be applicable to single-employer defined benefit (DB) plan terminations under section 4041(c) of the Employee Retirement Income Security Act (ERISA) with respect to which notices of intent to terminate are provided under section 4041(a)(2) of ERISA after December 31, 2005; and under section 4042 of ERISA with respect to which notices of determination are provided under that section after December 31, 2005.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

The agency says the proposed rule is necessary to conform the regulations of the PBGC to current law and practice. It proposes to incorporate statutory changes affecting guaranteed benefits and asset allocation when a plan has one or more participants with certain ownership interests in the plan sponsor.

The proposed rule would amend PBGC’s benefit payment regulation by replacing the guarantee limitations applicable to substantial owners with a new limitation applicable to majority owners.

Additionally, the proposed rule would amend PBGC’s asset allocation regulation by prioritizing funding of all other benefits in priority category 4 ahead of those benefits that would be guaranteed but for the new, owner-participant limitation. The proposed rule also clarifies that plan administrators may continue to use the simplified calculation in the existing rule to estimate benefits funded by plan assets. Finally, it provides new examples to aid in implementation.

PBGC seeks public comment on its proposal. Text of the proposed rule is here.

«