Archives for August 2011

Social Security and Your Employees

Social Security is important for your employees’ retirement. If you’d like to learn more, check out Fast Facts & Figures About Social Security, 2011, a publication of the Social Security Administration. It’s a handy reference guide. It also raises some concerns about Social Security’s long-term survival.

More than 80% of the 65+ set collects Social Security

Based on the experience of past generations, you’re likely to receive benefits after you retire. Many Americans aged 65 or older rely on Social Security for more than half of their income. Here are the details from Fast Facts:

In 2009, 88% of married couples and 86% of nonmarried persons aged 65 or older received Social Security benefits. Social Security was the major source of income (providing at least 50% of total income) for 54% of aged beneficiary couples and 73% of aged nonmarried beneficiaries.

The average person receives a modest monthly average payment. It averaged $1,323 for retired men and $1,023 for retired women as of December 2010.

You may not be aware that the age at which you’re eligible for full Social Security benefits is rising. It’s age 65 only for persons born in 1937 or earlier (see page 2). It rises to age 67 for those born in 1960 and later.

Worker/retiree ratio falling

Social Security does face a challenge. The ratio of workers to retirees is falling. This means there will be fewer people paying Social Security taxes for each retiree. In fact, the ratio is expected “to fall from 2.9 to 1 in 2010 to 2.1 to 1 in 2029,” according to Fast Facts. Starting in 2010, Social Security paid more in benefits and expenses than it collected in taxes.

This is a good reason for you and your employees to pay more attention to your retirement plans.

If you’d like to learn more, contact us at 916-435-2100.

Law Firm Fears 401(k) Plan Fee Lawsuits

Respected law firms are worried about your getting sued if your 401(k) plan participants pay hidden or excessive fees.

 

“Participants want to sue you! Yep, that’s right.” This is an important point made by Keith McMurdy, an attorney with the 100-year-old, 500-member law firm of Fox Rothschild. Why? Because you’re failing in your fiduciary duty if you do not ensure that your plan participants pay only reasonable fees. He opined in “To fee or not to fee, that is the question,” in the Employee Benefit Advisor.

Smart Investor agrees with McMurdy. If you don’t take your fiduciary duty seriously, you’re putting yourself at risk. This is a theme we’ve discussed in many other blog posts, including “Lawsuit Target: 401(k) Plans Operated by Insurance Companies” and “Fiduciary Court Cases Raise Stakes for 401(k) Plan Sponsors Who Buy Retail.”

But there’s good news, too. You can start to protect yourself by analyzing plan fees and documenting your analysis. Following McMurdy’s suggestions to make a chart of all fees and costs associated with your employee benefit plans is a good starting point.

As McMurdy says, “Once you know how much and who pays, you can then start evaluating whether the fees are too high and¬†whether you can take steps to minimize the impact on participants.”

If you’d like help assessing the fees paid by your 401(k) plan’s participants, contact us at 916-435-2100.