WINTER 2015
THE ONE PAGE MAGAZINE
myRA Launching JanuaryMarch
The President’s myRA retirement savings program
(a Roth IRA) is being launched with savings
bonds available in the program. These bonds are
designed to protect the principal contributed while
earning interest at a rate previously available only
to federal employees invested in the Government
Securities Investment Fund (G Fund) of the Thrift
Savings Plan. The initial investment can be as low
as $25 which will increase the accessibility of this
program. One limit imposed on the program is
once contributions and growth accumulate to
$15,000 the balance will be shifted to a privatesector Roth IRA. There are no tax consequences
if you take the money out of the plan. Which
some say it may be a good investment vehicle
for those saving up to put a down payment on
a house. — myRA.treasury.gov
Study Suggests Cost of
Defined Benefit Plans
are Half as Expensive as
Defined Contribution Plans
National Institute on Retirement Security’s study
“Still a Better Bang for the Buck: An Update on
the Economic Efficiencies of Defined Benefit
Pensions,” shows Defined Benefit (DB) plans are
cheaper than Defined Contribution (DC) plans
by as much as 48 percent. DB plans are able to use
longevity risk pooling, the ability to maintain a
well-diversified portfolio over a long investment
horizon, low fees, and professional management
to reduce overall costs. For employees looking for
a pension type payout of their retirement assets,
they can annuitize their DC account balance, but
this does not erase the DB pension cost advantage.
The employee would have to buy this through an
insurance company which charges higher fees
than a DB plan. Annuities purchased at historical
average interest rates only modestly decrease
costs, while annuities purchased at 2014 rates
would increase costs. Shifting from a DB pension
to a DC plan reduces the investment risk borne
by employers and taxpayers, but comes with an
unavoidable tradeoff —either increased costs
or, more likely, significant retirement benefit
cuts that are larger than the savings realized by
the employer.
—National Institute on Retirement Security,
December 2014.
6 | WINTER 2015
Retirement Plan Landscape Stabilizing
A study by Towers Watson showed that fewer U.S. companies last year moved from defined benefit
(DB) plans to offering only a defined contribution (DC) plan to new salaried employees. The study
also showed that insurance and utility industries are bucking the trend from DB to DC plans. More
than half the companies in these sectors still offer DB and DC retirement plans to new salaried
employees. The Study found that only 118 Fortune 500 companies offered any type of DB plan to
new hires at the end of 2013, down from 299 companies 15 years ago. Half of the employers that
sponsored a DB plan maintained a hybrid plan (typically a cash balance plan). With DC plans
steadily becoming the primary retirement vehicle, more responsibility and risk is being shifted to
employees. —Towers Watson, 9/4/14
New Years Resolutioners
Prioritize Health/Wellness
Over Financial Stability
49% of respondents to the 6th annual New Year’s
Resolution Survey from Allianz Life Insurance say
health/wellness is the most important focus area
for the upcoming year, compared to 30% focusing
on financial stability. However nearly one-quarter
(23%) of respondents said they are more likely
to seek the advice of a financial professional in
2015, up from 19% in 2013. When asked about
the one thing they could do to improve their
finances in 201