Welcome to this edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Here are our top stories:
401(k) savers will see a ‘wake-up call’ in their next statement, says law professor. Here’s what to look for by Greg Iarucci. A new regulation is rolling out that will make retirement planning more transparent for Americans by implementing “lifetime income illustration” calculations in 401(k) statements. These efforts may bring a big shock to many people who currently contribute to a defined-contribution retirement plan, as this statement will show the estimated monthly income a worker will get once they retire. This new information will inform those close to retirement about what they can afford in their post-work years. Considering this year’s bear market has effectively erased almost $3 trillion in defined-contribution retirement savings, older workers who rely on defined-contribution retirement plans may not be as prepared as they once thought. While younger workers will have time to adjust their retirement savings, current inflation may make it difficult to put more dollars towards those accounts. However, those who have access to a defined-benefit pension have peace of mind knowing that they can look forward to guaranteed monthly income for life, regardless of market fluctuations
Major Florida legislation improves the state’s default defined contribution plan by Pension Integrity Project. Governor Ron DeSantis signed into law this week HB 5007, granting a 3% benefit increase to the 180,000 public employees–about 28% of Florida’s public workforce–who participate in the Florida Retirement System Investment Plan, effective July 2022. Currently, public employees in Florida can choose between a defined-benefit pension plan or a defined-contribution investment plan. Armed in large part with problematic reports from Reason Foundation’s Pension Integrity Project, the DeSantis administration is attempting to address its unfunded liabilities by drawing employees out of the defined-benefit system, with employees defaulting into the defined-contribution plan if they do not make a choice. Without proper education, plan choice is risky and undermines retirement security. Florida has unsuccessfully tried closing the pension system entirely in the past.
Be sure to check back next Friday for the latest news in the fight for a secure retirement!