Deals & People October 26, 2010

AP Proposes Switching to DC Plans

The Associated Press is proposing a new contract with union employees under which its defined benefit pension plan would be frozen.
Reported by

In a letter to AP staff, CEO Tom Curley said under the proposal, any future company contributions to employees’ retirement would be directed toward a defined contribution plan.   

“Since I came to AP I have strived to do everything possible to keep your pension plan intact. Unfortunately, industry and economic pressures mean this is no longer possible,” Curley said.  

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Curley noted that many media companies have already frozen their defined benefit plans.  

Earlier in the month, Journal Communications Inc., which publishes the Milwaukee Journal Sentinel and owns and operates 33 radio stations and 13 television stations in 12 states, announced that on January 1 it will permanently freeze benefit accruals in its current pension plan and supplemental benefit plan, and instead offer enhanced 401(k) matching contributions to its employees (see Media Firm Makes DB to DC Switch).
Data & Research October 26, 2010

Report Examines Non-Annuitized Retirement Income

The percentage of households at risk for not meeting their retirement goals jumps from 51% to 60% when they live off of the interest from their assets instead of purchasing an inflation-indexed annuity, according to a report by the Center for Retirement Research at Boston College. 
Reported by

A news release said that was a key conclusion of an analysis of the National Retirement Risk Index (NRRI) by the Center for Retirement Research at Boston College, and sponsored by Nationwide Mutual Insurance Company, an annuity provider. The project examined what would happen if households did not purchase an annuity to provide lifelong income.

The study examined two alternative scenarios to annuitization. The first alternative was that households drew down their assets at an annual rate of 4%. The percent at risk increased from 51% to 53% for those that drew down their assets at 4% a year.

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The second scenario examined what would happen if households lived off the interest on their accumulated wealth (estimated at 1.9% annually).

The study also found that, when examining households by income level, individuals with a high-net worth were most impacted by not annuitizing their assets. The percent ‘at risk’ increased from 42% to 47% for those who drew down their assets at 4% a year and increased from 42% to 57% for those who lived off the interest of their assets (estimated at 1.9% annually).

The NRRI measures the share of American households at risk of being unable to maintain their pre-retirement standard of living in retirement. The Index uses the conservative assumptions that people work to age 65, receive income from reverse mortgages on their homes, and annuitize all of their financial assets.

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