Employees spend more time choosing a TV than planning for retirement

Although the golden years may last a long time, Americans often devote more time to choosing a restaurant or a gadget than to planning their retirement investments.

According to a 2014 survey by TIAA-CREF, only 15% of respondents spend two hours or more planning an investment for their individual retirement account (IRA). Yet 25% of Americans spend the same amount of time picking a restaurant for a special occasion, 21% devote the same amount to buying a flat-screen TV, and 16% spend two hours or more purchasing a tablet. More than half (55%) spend just an hour or less planning an IRA investment.

The study also shows that the number of Americans who would consider an IRA as part of their retirement strategy has declined to 47% today from 57% last year.

A possible reason for low IRA contribution levels is lack of understanding about IRAs, according to TIAA-CREF. More than one-third (35%) of respondents don’t understand what an IRA is or how it differs from an employer-sponsored plan, and this percentage is even higher among millennials (45%). Sixty percent of those who are contributing to an IRA also have an employer-sponsored plan. Among those with both plans, more than half (53%) contribute to their IRA regardless of whether they have reached the contribution or matching limit of their employer-sponsored plan—meaning that they could be leaving money on the table if they are diverting money to their IRA before contributing enough to get the employer match. The survey polled 1,008 adults in the U.S.

Meet an Advisory Board Member

Jackie Patel, director, marketing and sales support, Desjardins Insurance

What attracted you to a career in the pension industry?

It all happened by fluke. I started my career educating plan participants. When I realized how disconnected people were with concepts that were basic to me, it became a passion. For a brief period in my career, I tried to switch to insurance, but death and disability was depressing (although it’s a reality of life). Retirement is a dream, and we all want to get there. Finding creative ways to help people reach that destination is a challenge, which keeps me driven.

What is the biggest challenge facing the pension industry today?

Despite our creative attempts as an industry, it’s education and communication. Participants still don’t take full advantage of their plan. We need a culture change, and that will take time. Over the next decade, it will be extremely interesting to see how things unfold with emerging technologies and the new generation of employees.

Which historical person would you want to have dinner with?

Nelson Mandela—what an honour that would be! Hearing his perspective on life and his courageous journey would be life-altering. It would definitely change the outlook on my day-to-day challenges.

Market Watch

NexgenRx, an independent health benefits plan administrator, has launched a shared extended healthcare provider portal called theclaimsXchange.com. This platform allows extended healthcare providers to submit claims on behalf of their patients at the point of service. It features a database of more than 100,000 accredited providers, as well as technology that is compatible with all carriers and third-party administrators’ claim payment systems. nexgenrx.com

Desjardins Insurance has launched Health PACT (Prevention, Assistance and Counselling by Telephone), a new service for employees of companies that offer Desjardins group health insurance. To access the service, insured employees first answer a short online questionnaire in order to get an assessment of their risk for certain illnesses. They can then choose to receive personalized phone support from a nurse who follows up with them. The nurse offers them a realistic action plan that is customized to their personal situation. desjardins.com

BenefitsRX recently introduced a home-delivery pharmacy program. Its goal is to increase compliance, the use of generics and adherence to formulary structures—which, in turn, can improve patient care and help plan sponsors to control plan costs. benefitsrx.ca

How can pension investors use ETFs effectively?

Exchange-traded funds (ETFs) are growing in popularity among institutional investors, but how can pension investors incorporate them into their portfolios? An expert panel at Canadian Investment Review’s annual ETF Summit discussed different approaches to ETFs and the range of options that institutional investors can explore.

What ETF instruments can pension investors use, and what are the advantages and drawbacks? Read the full article here.

This month in numbers

3.21 million U.K. employees joined pension plans through auto-enrollment between 2012 and 2014 — U.K. Pensions Regulator

We asked…Does your company plan to freeze its DB plan this year?

Here’s what BenefitsCanada.com readers had to say:

  • 7%: Yes
  • 36%: No
  • 57%: We don’t have a DB plan

Prescription drug spending slows

Last year, Canada spent $29.3 billion on prescription drugs, but the annual growth rate was the second lowest in more than 20 years, according to a new report by the Canadian Institute for Health Information.

The report notes that this slower growth in spending—2.3% in 2013—was caused by greater use of less expensive generic drugs.

In 2013, Canadians spent an estimated $34.5 billion on drugs, the majority (85%) of which was dedicated to prescription drugs.

The study also reveals that an estimated 41.6% of prescription drug spending was financed by the public sector last year, with the remainder covered by private insurers (34.5%) and out of pocket by households and individuals (23.9%). The proportion of prescription drugs financed by the public sector varied across provinces, from 29.3% in New Brunswick to 47.6% in Saskatchewan.

Additionally, the report finds that the number of Canadians who are taking more than $10,000 worth of prescription drugs every year is on the rise because public drug programs are spending more on high-cost drugs.

The study is based on data from eight provinces—Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia— and one federal program administered by the First Nations and Inuit Health Branch.

2014 Benefits & Pension Summit
April 28 & 29, 2014
Marriott Eaton Centre, Toronto

This annual Benefits Canada event brings together plan sponsors, consultants, service providers and other key stakeholders to learn about industry trends and share ideas.

The conference features three tracks— group benefits, DC and DB—allowing participants to customize their educational experience. Sessions range from mental health in the workplace to reaching DC plan members and the future of pension reform. And don’t miss our engaging keynote speaker presentations! There’s also an optional biologics track on April 29.

View the full agenda and register online at benefitscanada.com/bps2014

We’ll also be hosting a Vancouver Benefits & Pension Summit on Sept. 17 at the Fairmont Waterfront Hotel. Stay tuned for more info!

Legal Briefs

❱ The Supreme Court of Canada recently upheld a lower court ruling that the pension surplus of $43.3 million from employee contributions that existed when Manitoba Telephone Services was privatized in 1997 belongs to the workers and retirees, and must be repaid. The court also ruled that all legal costs incurred by the unions must be repaid.

❱ An Alberta Court of Queen’s Bench decision found that, to establish a credible case against discrimination based on disability, an employee must prove that his or her employer knew about the disability, confirming that a company cannot be subject to an accommodation duty if it is unaware that an employee has a condition that requires accommodation.

❱ Ontario is currently considering Bill 146, the Stronger Workplaces for a Stronger Economy Act, 2013, which calls for major changes to workplace legislation. For example, companies using temporary workers assigned by an agency must be responsible for Workplace Safety and Insurance Board (WSIB) accident costs if these workers suffer injuries on the job, and the definition of “worker” will now encompass those not receiving income, including unpaid co-op students, meaning that the provisions of the Occupational Health and Safety Act apply to interns as well.

❱ Ontario pension plans are now able to hold unlimited amounts of U.S. Treasuries and other securities issued by the U.S. government. Until now, pension plans in the province were not allowed to directly or indirectly invest or lend more than 10% of the book value of their assets to any one, two or more associated persons, or to two or more affiliated corporations.

Sources: Unifor, Norton Rose Fulbright, Legislative Assembly of Ontario, Borden Ladner Gervais LLP

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