Announcements

THE SOCIAL INSURANCE RESEARCH NETWORK (SIRN), sponsored by the National Academy of Social Insurance (NASI) The Social Insurance Research Network (SIRN), directed by Larry Atkins, President, National Academy of Social Insurance, is an online venue providing access to scholarly research and professional announcements in the Social Insurance community. Social Insurance includes the systems for insuring workers and their families against economic insecurity caused by the loss of income from work and the cost of health care, such as Social Security, Medicare, Workers' Compensation, unemployment insurance, related social assistance and private employee benefits. NASI is a nonprofit, nonpartisan organization made up of the nation's leading experts on social insurance. Its mission is to promote understanding and informed policymaking on social insurance and related programs through research, public education, training, and the open exchange of ideas. SIRN is dedicated to increasing communication among social insurance scholars, practitioners, and policy makers throughout the world.


Table of Contents

How Much Needs to be Saved for Retirement After Factoring in Post-Retirement Risks: Evidence from the EBRI Retirement Security Projection Model®

Jack VanDerhei, Employee Benefit Research Institute (EBRI)

Financial Literacy and Retirement Planning in Canada

David Boisclair, University of Quebec at Montreal (UQAM)
Annamaria Lusardi, George Washington University - Department of Accountancy, National Bureau of Economic Research (NBER)
Pierre-Carl Michaud, University of Quebec at Montreal (UQAM) - Department of Economics, Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE), RAND Corporation, Labor and Population, Institute for the Study of Labor (IZA), Netspar

Tax Avoidance in Response to a Decline in the Funding Status of Defined Benefit Pension Plans

Neeru Chaudhry, Monash University - Department of Banking and Finance
Hue Hwa Au Yong, Monash University - Department of Banking and Finance, Financial Research Network (FIRN)
Chris Veld, Monash University

When May an Agent Act on Behalf of an ERISA Plan Participant or Beneficiary?

Albert Feuer, Law Offices of Albert Feuer

Demographic and Financial Determinants of Housing Choice in Retirement and the Rise of Senior Living

Calvin Schnure, National Association of Real Estate Investment Trusts®
Shruthi Venkatesh, National Association of Real Estate Investment Trusts®


SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"How Much Needs to be Saved for Retirement After Factoring in Post-Retirement Risks: Evidence from the EBRI Retirement Security Projection Model®" Free Download
EBRI Notes, Vol. 36, No. 3 (March 2015)

JACK VANDERHEI, Employee Benefit Research Institute (EBRI)
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This paper helps answer one of the most important questions that many defined contribution participants face before retirement: How much do I need to save each year for a “successful? retirement? It begins with a brief description of EBRI’s Retirement Security Projection Model,® followed by the specific methodology utilized in this analysis. Results are provided first for the required contribution rates for those starting to save at ages 25, 40, or 55. The analysis includes three of the major post-retirement risks (longevity, investment, and long-term care) while allowing the participant to also choose the probability of “success? that is best suited for their circumstances. Given the assumptions used in this paper, a single male age 25 earning $40,000 with no previous savings would need a total contribution rate (employee and employer combined) of less than 3 percent per year until retirement (age 65) for a 50 percent chance of success. A 6.4 percent contribution rate would achieve a 75 percent success rate, and a 14 percent contribution rate would achieve a 90 percent success rate. But if a male earning $40,000 were to wait until age 40 to begin saving, he would need a 6.5 percent total contribution rate for just a 50 percent chance of success and a 16.5 percent total contribution rate for a 75 percent chance of success; a 90 percent probability of success would be impossible even with a 25 percent contribution rate. The next section is an analysis of the account balances required by ages 40 and 55 for those who have already been saving for retirement, showing how large a participant’s current account balance needs to be, by contribution rate, to be “on-track? for a particular level of retirement success. The final section summarizes the results for both analyses.

"Financial Literacy and Retirement Planning in Canada" Free Download
Global Financial Literacy Excellence Center Working Paper No. 2014-2

DAVID BOISCLAIR, University of Quebec at Montreal (UQAM)
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ANNAMARIA LUSARDI, George Washington University - Department of Accountancy, National Bureau of Economic Research (NBER)
Email:
PIERRE-CARL MICHAUD, University of Quebec at Montreal (UQAM) - Department of Economics, Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE), RAND Corporation, Labor and Population, Institute for the Study of Labor (IZA), Netspar
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Financial literacy and Canadians’ capacity to plan for retirement is of primary importance for the policy debate over pension system reform in Canada. In this paper, we draw on internationally comparable survey evidence on financial literacy and retirement planning in Canada to investigate how financially literate Canadians are and who does plan for retirement. We find that 42 percent of respondents are able to correctly answer three simple questions measuring knowledge of interest compounding, inflation, and risk diversification. This is consistent with evidence from other countries, and Canadians perform relatively well in comparison to Americans but worse than individuals in other countries, such as Germany. Among Canadian respondents, the young and the old, women, minorities, and those with lower educational attainment do worse, a pattern that has been consistently found in other countries as well. Retirement planning is strongly associated with financial literacy; those who responded correctly to all three financial literacy questions are 10 percentage points more likely to have retirement savings.

"Tax Avoidance in Response to a Decline in the Funding Status of Defined Benefit Pension Plans" Free Download

NEERU CHAUDHRY, Monash University - Department of Banking and Finance
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HUE HWA AU YONG, Monash University - Department of Banking and Finance, Financial Research Network (FIRN)
Email:
CHRIS VELD, Monash University
Email:

We examine the effect of the funding status of defined benefit pension plans on company tax avoidance behavior. Our results reveal that firms engage more in tax avoidance when the pension deficit, defined as pension liabilities minus pension assets scaled by total assets, increases. For 2013 we find that, on the aggregate level, a one standard deviation increase in pension deficit is associated with annual tax savings of more than five billion dollars. Firms with underfunded pension plans use less aggressive forms of tax avoidance and avoid tax shelters. Our results hold after controlling for factors such as board characteristics and CEO equity risk incentives.

"When May an Agent Act on Behalf of an ERISA Plan Participant or Beneficiary?" Free Download
41 J. Pension. Plan. & Compliance 1 (Spring 2015)

ALBERT FEUER, Law Offices of Albert Feuer
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This article discusses when a pension or welfare plan governed by the Employee Retirement Income Security Act of 1974, as amended ("ERISA") may, and when it must, comply with directions of an attorney in fact under a state-law power of attorney or court-appointed guardians. ERISA and the regulations thereunder do not explicitly address the appointment of agents with respect to the exercise of any rights on behalf of an individual participant or beneficiary other than the ability of an agent to pursue benefit claims on behalf of the agent’s principal.

This article argues that an ERISA plan must defer to any agent acting on behalf of a participant or beneficiary under a state-law power of attorney or guardianship to the extent the individual is unable to exercise those ERISA benefit rights so that the individual is not deprived of those rights. This is the case whether the disability is a result of the individual being a minor, being an illiterate, being physically disabled, or lacking mental capacity. Moreover, the applicable state relief laws to encourage the acceptance of such powers would also probably be applicable to ERISA plans because such provisions are needed for the effective administration of power of attorney state laws for a disabled participant that ERISA does not otherwise preempt.

State law may authorize an individual to be the agent of an ERISA plan participant or beneficiary. This article discusses when ERISA permits such an individual, on behalf of the agent's principal, to: (1) pursue a benefit claim; (2) obtain plan or benefit information; (3) determine the time and form of benefit payment; (4) determine to whom the plan makes a benefit payment; (5) make beneficiary designations; (6) consent to the waiver of the principal’s right to a spousal survivor benefit; (7) assign benefit rights and thereby create a beneficiary; (8) determine the amount, if any, of the principal’s employee contributions to the plan; (9) obtain information about the principal’s investment options; or (10) determine how to invest the principal’s plan assets. The article also discusses when ERISA and the Health Insurance Portability and Accountability Act ("HIPAA") permit a state-law agent to (1) make healthcare decisions for the agent’s principal in ERISA healthcare plans, or (2) obtain information from a healthcare plan, or a healthcare reimbursement plan.

"Demographic and Financial Determinants of Housing Choice in Retirement and the Rise of Senior Living" Free Download

CALVIN SCHNURE, National Association of Real Estate Investment Trusts®
Email:
SHRUTHI VENKATESH, National Association of Real Estate Investment Trusts®
Email:

This study examines the demographic and financial determinants of housing choices of older Americans, and how they have changed over the past several decades. Using logistic regressions with the Panel Study of Income Dynamics (PSID), a nationally representative longitudinal survey from 1968 to 2011, we find that in earlier periods, greater wealth was associated with “aging in place? and a lower likelihood of living in senior housing. More recently, the relationship between wealth and senior housing has changed, and higher wealth has become associated with increased senior living. Underlying this change is a shift in the mix of senior facilities, from predominantly those focused on medical needs and skilled nursing to newer retirement communities with a higher level of non-medical services, activities and amenities. The move to senior housing has become, for many older Americans, a choice of lifestyle rather than a move based on medical or nursing needs.

These trends suggest that the aging Baby Boom generation’s effects on senior living communities may extend beyond those merely related to its size. With a large number of high-wealth individuals in the Baby Boom generation, demand for high-end retirement communities may experience a particular rise in the years ahead. The age at which older Americans move into a senior facility has shifted forward over the past two generations, and the front edge of the Baby Boom generation will soon be approaching the age range when moving to a senior community becomes a realistic consideration.

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About this eJournal

This eJournal distributes working and accepted paper abstracts on all topics related to old age pensions and retirement. This includes papers on social security, employment based pensions and other publicly provided or tax-favored mechanisms for retirement income. The journal welcomes submissions from any discipline and a broad range of topic areas, including benefit adequacy, pension finance, the design and reform of social security and pension systems, retirement policy, and comparative analyses of U.S. pension and retirement issues with those of other countries.

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Directors

SIRN SUBJECT MATTER EJOURNALS

LARRY ATKINS
National Academy of Social Insurance (NASI)
Email: latkins@nasi.org

Please contact us at the above addresses with your comments, questions or suggestions for SIRN-Sub.

Advisory Board

Social Security, Pensions & Retirement Income eJournal

HENRY J. AARON
Bruce and Virginia MacLaury Senior Fellow, Brookings Institution - Economic Studies Program

KENNETH S. APFEL
Director, Management, Finance and Leadership Program - University of Maryland

MERTON C. BERNSTEIN
Walter Coles Professor of Law Emeritus, Washington University in Saint Louis - School of Law

BING YUNG-PING CHEN
Frank J. Manning Eminent Scholar's Chair in Gerontology, University of Massachusetts Boston - Gerontology Institute

ERIC R. KINGSON
Professor of Social Work and Public Administration, Syracuse University - School of Social Work

OLIVIA S. MITCHELL
Professor of Business Economics and Public Policy, Professor of Insurance and Risk Management, Executive Director, Pension Research Council, University of Pennsylvania - The Wharton School, National Bureau of Economic Research (NBER)

ALICIA MUNNELL
Peter F. Drucker Professor in Management Sciences, Boston College - Center for Retirement Research

JOHN L. PALMER
University Professor, Syracuse University - Maxwell School of Citizenship and Public Affairs

STANFORD G. ROSS
Attorney and Consultant, Arnold & Porter, Chair, Social Security Advisory Board

C. EUGENE STEUERLE
Senior Fellow, Urban Institute

LAWRENCE H. THOMPSON
Senior Fellow, Urban Institute

JACK VANDERHEI
Research Director, Employee Benefit Research Institute (EBRI)

JOHN B. WILLIAMSON
Professor of Sociology, Boston College - Department of Sociology