Compliance January 2, 2014

PBGC Moves Premium Date for Large Plans

The Pension Benefit Guaranty Corporation (PBGC) is moving the flat-rate premium due date for large plans to later in the premium payment year.
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As a result of Executive Order 13563 (Improving Regulation and Regulatory Review), the PBGC is moving the flat-rate premium due date for large plans to the same date as the variable-rate premium due date for such plans, starting with the 2014 plan year. Large calendar-year plans’ 2014 flat-rate premiums will be due October 15, 2014.

This action is part of a larger project to make PBGC premium rules more effective and less burdensome by simplifying due dates, coordinating the due date for terminating plans with the termination process, making conforming and clarifying changes to the variable-rate premium rules, and providing for relief from penalties, according to the PBGC. The rest of the project will be implemented by a separate final rule.

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In recent years, premium due dates have depended on size of plan and type of premium. Large plans have paid the flat-rate premium early in the premium payment year and the variable-rate premium later in the year. Midsize plans have paid both the flat- and variable-rate premiums by that same later due date. Small plans have paid the flat- and variable-rate premiums in the following year.

In July 2013, the PBGC proposed to simplify the due-date rules by providing that all annual premiums for plans of all sizes will be due on the same day in the premium payment year, which is the historical variable-rate premium due date (see “PBGC Proposes Premium Changes”). As part of that simplification process, the new rule eliminates the separate due date for the flat-rate premiums of large plans beginning with the 2014 plan year.

The first large-plan flat-rate filing deadline for 2014 is February 28, according to a PBGC announcement about the new rule. Thus the provision of the proposed rule setting the flat-rate premium due date for large plans later in the year, is the most time-sensitive aspect of the proposal. For that reason, says the announcement, the PBGC is finalizing this one change separately and ahead of the other changes in the proposal.

The PBGC expects to deal with all other aspects of the July 2013 proposal in a separate final rule to be issued in time to provide all plans with adequate advance guidance for timely compliance with the new procedures in 2014.

The full text of the PBGC announcement can be downloaded here.

Data & Research January 2, 2014

Millennial Debt, Savings Trend Down

Those in their early 20s carry just half the debt of those in their upper 20s, new analysis shows, but savings rates for both groups are decreasing.
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Overall, Millennial debt started trending down in 2011, according to PNC’s most recent Financial Independence Survey, which studies the financial patterns and mindsets of workers age 20 to 29.

Key findings in the survey show investors between the ages of 20 and 24 who have debt carry an average of $17,100, while their older peers carry $35,600. Even with the disparity, Millennials across the two age groups carry 30% less than in 2011.

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The news isn’t all positive for young workers, though, as savings rates are also trending down.

Carrying Debt Differently

Nearly one third of the younger Millennials reported carrying no debt whatsoever, compared with about 20% for the older set. Among respondents with some level of college education, average reported debt came in at $31,800, a 30% drop from $45,400 in 2011.

“Financial maturity in this generation has noticeably shifted,” says Cary Guffey, a financial adviser at PNC Wealth Management. “Younger Millennials just entered adulthood when the economy shifted downward and as a result, it’s clear they’ve become more cautious by avoiding debt.”

Categories of debt also highly varied between the two groups, PNC’s analysis shows.

In the older set, debt amounts were reported at double, triple and quadruple that of their younger peers when it came to car loans, credit cards and mortgages, respectively. One category where both age groups fall in line with one another is education; about 40% of respondents, regardless of age, claim to hold debt from student loans.

Varied Saving Patterns

While debt numbers are trending down, so is the number of Millennials claiming to save, dropping 6% since 2011. Younger respondents, results show, are more likely to save (90%) than their older peers (83%).

Younger workers also save more of their annual income for short and long-term savings (59% combined) than the older set (52% combined).

Even as savings rates decrease, Millennials continue to hold ambitious goals when it comes to major life events that require financing in their future. Regardless of age, three-quarters (74%) think they’ll own a home before age 35, two-thirds think they will retire before or in their early to mid-60s, and more than three in five (62%) claim to have considered starting a business.

Researchers warn that reported saving patterns do not currently reflect these aspirations. Just 11% of Millennial respondents claimed to save for buying a home, 4% percent for starting a business, 9% percent for starting a family and just 6% for retirement. The top savings category regardless of age is emergency funds.

Millennial goals are ambitious, but not un-attainable, when it comes to owned assets, careers and retirement, PNC experts argue. Based on survey results, credit scores and saving continue to stand out as categories where young adults are generally not taking action.

PNC experts also stress that 20-somethings should start saving more for retirement—especially when contribution matching is available through a workplace qualified retirement plan.

More on the survey results is available here.

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