Client Service August 8, 2018

Retirement Planning Needs to Include Discussions About Health Care Costs

Nearly two-thirds of advisers say their clients expect advice on health care costs in retirement, and 34% say their clients would likely leave them if they didn't help them estimate and plan for out of pocket health care costs in retirement.

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While advisers say their clients display confidence about future health care costs, a recent Nationwide Retirement Institute survey finds they also say it is a top fear for many.

 

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Conducted via The Harris Poll with 1,007 adults over age 50 and a household income of $150,000, the online study found 76% of advisers say their clients are confident in their plan to pay beyond what Medicare covers for health care during retirement. However, more than one in three (35%) clients do not share similar sentiments. Even though the remaining 65% of clients have a plan in place to cover these costs, 72% of advisers say clients do frequently express concerns about health care costs in retirement.

Nearly two-thirds (63%) of advisers say their clients expect advice on health care costs in retirement. In addition, 34% of advisers say their clients would likely leave them if they didn’t help them estimate and plan for out of pocket health care costs in retirement.

 

In addition, according to the survey, 73% of client respondents list out-of-control health care costs as one of their top fears throughout their retirement years. And, 35% of wealthy older Americans working with an adviser indicate that they are not confident in their plan to cover health care costs beyond what Medicare pays.

 

“Our survey reveals a gap between what advisers think and what many of their clients think when it comes to health care costs in retirement,” says Ron Ransom, senior vice president of integrated relationship strategies for Nationwide. “The rising costs of health care impacts everyone and many clients are worried. Advisers can build their confidence by having more conversations about their plan to cover those health care costs.” 

Impediments to discussing health costs in retirement

 

Dialogues on health care considerations between advisers and clients face challenges as certain participants feel uncomfortable reviewing the matter. The survey found 52% of clients have yet to openly discuss health care costs with their adviser; 37% say this is because they believe it is a personal issue.

 

Though the study reports advisers consider the topic “at least somewhat important” (98%) or “very important” (71%) to discuss with clients, 75% admit it is challenging.

“While often considered personal, you can’t adequately plan for health care costs without discussing the topic,” Ransom says. “Balancing health care costs with a lifestyle goals conversation may make it easier for the adviser to best address their client’s anticipated or unanticipated needs in retirement.”

Compliance August 8, 2018

Citigroup, 401(k) Participants Agree to Settle ERISA Lawsuit

The lawsuit alleged that Citigroup violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by offering and keeping affiliated funds in its 401(k) plans when better-performing, lower-cost funds were available.

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Without any admissions of liability as to any claims, or as to the weakness or strength of either party’s respective claims or defenses, the parties in a lawsuit alleging Citigroup violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by offering and keeping affiliated funds in its 401(k) plans when better-performing, lower-cost funds were available have reached a settlement agreement.

According to the document submitted to U.S. District Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York, Citigroup will pay $6,900,000 to settle the lawsuit. The settlement amount includes all attorneys’ fees, incentive awards, litigation expenses, administration costs, taxes and costs of any kind associated with the resolution of the suit.

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Specifically, no later than the fifth business day after Stein enters an order approving the motion for preliminary approval of the settlement, Citigroup will be responsible to pay $350,000 to an escrow account whose terms and agent the parties will jointly select. This first settlement payment will be used by class counsel to cover settlement administration and notice costs. No later than the fifth business day after Stein gives final approval of the settlement agreement, Citigroup will wire a $6,550,000 payment to the escrow account.

The original lawsuit, filed in 2007, said fiduciaries to Citigroup’s 401(k) plan failed to act prudently and solely in the interest of the plan and its participants and beneficiaries when selecting investment products and services, but instead “put Citigroup’s interests ahead of the 401(k) Plan’s interests by choosing investment products and pension plan services offered and managed by Citigroup subsidiaries and affiliates, which generated substantial revenues for Citigroup at great cost to the 401(k) plan.”

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