GRS Consultants Present at PAPERS Spring Forum

Events​

May 25, 2022

GRS Consultants Present at the PAPERS Spring Forum

James Anderson and Derek Henning presented the topic “Risk Management in the Face of a Changing Economic Environment” during the 2022 Pennsylvania Association of Public Employee Retirement Systems (PAPERS) Spring Forum.

Session Summary: The session covered key provisions of ASOP 51, sources and measurement of risk, and how retirement systems have managed risk in the past and are currently.  The presenters discussed how funding policy and benefit changes can be addressed in the context of a larger risk management framework, given improved funded status, rising inflation, and the trend towards lower investment assumptions.

NIRS Releases Report on Retirement Savings Tax Incentives

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NIRS Releases Report on Retirement Savings Tax Incentives

On May 26, 2022, the National Institute on Retirement Security (NIRS) released its report, The Missing Middle: How Tax Incentives For Retirement Savings Leave Middle Class Families Behind. The report focuses on current tax incentives and the effects on retirement security. NIRS examined the impact of various factors including marginal tax rates, retirement plan participation, and income distribution on retirement savings levels.

According to the report, the “level of income replacement from Social Security falls off far more quickly than private savings function to provide adequate retirement income for middle class workers…. The value of tax incentives for saving is much greater for those at higher income levels, who face higher marginal tax rates. These incentives are quite weak for much of the middle class.” It adds, “Solutions to these inequities should focus on increasing participation in the retirement savings system and ensuring working families also receive adequate incentives to save for retirement.”  

NIRS urges that policy changes may help to ensure that working Americans will have sufficient income to maintain their standard of living in retirement. Policymakers are encouraged to strengthen Social Security, increase access and participation in retirement plans, reform the deduction-based tax system, and ensure that tax breaks are directed at generating retirement income.

The report is available here.

CRR Studies Retiree Financial Wealth Behavior

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CRR Studies Retiree Financial Wealth Behavior

On May 24, 2022, the Center for Retirement Research at Boston College (CRR) released its report, Can We Predict Boomers’ Drawdown Behavior from Earlier Cohorts? CRR examined the trends of past generations of retirees that have slowly used their financial wealth based on data from the Health and Retirement Study (HRS).

Generally, these retirees had Defined Benefit (DB) pension plans that paid retirement benefits for life. However, the same behavior may not continue for new retirees that may rely on Defined Contribution (DC) plans such as 401(k)s rather than DB plans. CRR cautions that, “The analysis suggests that many new retirees could deplete their 401(k) assets by age 85, meaning that they face a greater risk of outliving their savings.”

The brief concludes, “past generations’ access to a DB pension was associated with slower drawdown of their financial assets. Thus, forecasts for the Baby Boomer generation based on the drawdown of past generations likely underestimate their drawdown speed. The results suggest that Baby Boomers without DB plans may be drawing down their assets faster, leaving them with more risk that they will outlive their savings.”

The brief is available here.

CRS Publishes Report on Social Security’s COLAs and Projected Financial Shortfall

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CRS Publishes Report on Social Security’s COLAs and Projected Financial Shortfall

On May 17, 2022, the Congressional Research Service (CRS) published its report, Social Security: Cost-of-Living Adjustments (COLAs) and the System’s Projected Financial Shortfall. The report provides an overview of the Social Security program, its projected financial shortfall, and annual COLAs. It also describes financing the COLAs and the impact of COLAs on the projected financial health of the Social Security programs.

According to the report, “Recent news articles have suggested that the historically large 5.9% cost-of-living adjustment (COLA) payable in January 2022 will have a negative impact on the projected financial shortfall of the Social Security programs. If inflation persists, another large COLA may be payable in January 2023.”

The report is available here.

IRS Announces 2023 Limits for HSAs, HDHPs and Excepted Benefit HRAs

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IRS Announces 2023 Limits for HSAs, HDHPs and Excepted Benefit HRAs

Recently, the Internal Revenue Service (IRS) issued Revenue Procedure 2022-24: 2023 Inflation-Adjusted Amounts for HSAs, High-Deductible Health Plans, and Excepted Benefit Health Reimbursement Arrangements. The IRS announced cost-of-living adjustments to the applicable dollar limits for Health Savings Accounts (HSAs), High Deductible Health Plans (HDHPs) and the maximum amount that may be made newly available for certain Health Reimbursement Arrangements (HRAs) for 2023. 

For calendar year 2023, the annual limitation on deductions under IRC § 223(b)(2)(A) for an individual with self-only coverage under a HDHP is $3,850. For calendar year 2023, the annual limitation on deductions under IRC § 223(b)(2)(B) for an individual with family coverage under a HDHP is $7,750.

For calendar year 2023, the IRS defines a HDHP under IRC § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,500 for self-only coverage or $3,000 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,500 for self-only coverage or $15,000 for family coverage.

For plan years beginning in 2023, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA (under Regs. Sec. 54.9831-1(c)(3)(viii)) is $1,950. Employers use excepted benefit HRAs to help cover the cost of employees’ vision, dental, or short-term, limited-duration insurance plan premiums. 

Rev. Proc. 2022-24 is available here.

EBRI Publishes 2022 Retirement Confidence Survey Summary Report

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EBRI Publishes 2022 Retirement Confidence Survey Summary Report

Recently, the Employee Benefit Research Institute (EBRI) published its report, 2022 Retirement Confidence Survey Summary Report. The 32nd annual survey found that the overall confidence of workers and retirees in retirement security remains optimistic despite the impact of the COVID-19 pandemic.

However, about 33% of workers and 24% of retirees report being less confident with 33% of workers and 50% of retirees citing inflation and cost of living as the primary reasons for the decline in confidence.   

According to the survey, 80% of retirees are confident in their ability to live comfortably throughout retirement. In addition, about 70% of workers are confident in their ability to retire comfortably.

Overall, most workers are satisfied with their workplace retirement savings plans and the tools and resources available. However, about 40% of workers and 20% of retirees reported a lack of resources for financial and retirement planning advice.

About 40% of workers expect to gradually transition into retirement and work for pay in retirement. However, only 17% of retirees reported having a gradual transition while 73% reported their retirement was a full-time stop.

The survey found that about 75% of retirees and 67% of workers feel confident they will have enough money to pay medical expenses in retirement. In addition, it found that confidence for Social Security continuing to offer benefits of at least equal value to those received today remains constant for both retirees (69%) and workers (52%).

The summary report is available here.

James Anderson Participates on Speaker Panel at PAPERS Spring Forum

Events​

May 24, 2022

James Anderson Participates on Speaker Panel at the PAPERS Spring Forum

James Anderson serves as a panel speaker for the session “How Inflation Impacts Public Pension Plan Design, Options & Fixed Income” at the Pennsylvania Association of Public Employee Retirement Systems’ (PAPERS) Spring Forum.

Session Summary:
The high inflation environment is one of the more challenging current trends which has raised uncertainty for investment markets, as well as pension plan design. The discussion will cover various aspects of public pension plan design, operations, and investments that may be affected by elevated inflation. Mr. Anderson will cover plan design and operations, with a focus on the actuarial impact of an inflationary environment.

GRS Presents at Spring MAPERS Conference

Events​

May 23, 2022

GRS Presents at Spring MAPERS Conference

Jamal Adora and Casey Ahlbrandt-Rains will present the session “The Big Question: Where is Social Security, And Where is it Going?” at the 2022 Michigan Association of Public Employee Retirement Systems’ (MAPERS) spring conference. 

The presenters will discuss the underlying design principles of social security, its funding mechanism, the challenges the program faces, and potential changes to the program.  The session will focus on public sector participation and history alongside the law, including a comparison of defined benefit pensions and social security and legislation such as the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). 

Joseph Newton Participates on ASOP 4 Speaker Panel

Events​

May 4, 2022

Joseph Newton Participates on ASOP 4 Speaker Panel

Joseph Newton participated on a speaker panel at the 2022 Conference of Consulting Actuaries (CCA) Enrolled Actuaries Meeting for the session “Impact of Recent Changes in ASOP 4 for Public Plans.”

ASOP No. 4 provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit plan and determining periodic costs or actuarially determined contributions for such plans.