Research, News,
NIH Devotes Only 11% of Budget to Elderly Studies
Despite the rising number of elderly in the U.S., the National Institutes of Health devotes only about 11% of its $31 billion budget ($3.46 billion) to research at the National Institute on Aging, which focuses directly on health concerns of the elderly, The New York Times reported.
Most of the funds for research related to concerns of the elderly, including some involving Alzheimer’s disease, Parkinson’s disease and osteoporosis, came through other N.I.H. institutes.
Although there has been moderate growth in spending at all 27 N.I.H. research centers, the growth is slower at the National Institute on Aging. The Obama administration has proposed adding $1 billion, or 3.2 percent, to the N.I.H. in the 2011 fiscal year; the aging institute’s share would rise 2.9 percent.
Last year, 17.5 percent of aging institute grants were approved, compared with 20 percent approved for N.I.H. as a whole, she said. Aging research approvals are expected to drop even more, to 13 to 14 percent, when the 2010 numbers are announced, said Nancy E. Lundebjerg, chief operating officer of the American Geriatrics Society, an advocacy group.
© 2010 RIJ Publishing LLC. All rights reserved.
People in Motion, News,
Orszag to Depart OMB Director Post
Peter R. Orszag, who brought a strong retirement perspective to his job as budget director in the Obama administration, will leave the White House later this summer, several news organizations reported last week.
“Basically, the OMB Director is a brutal job and subject to quick burnout. I wouldn’t read any more into this than that,” wrote David Dayen on the newsblog, firedoglake, by way of explanation. Orszag’s impending departure was first rumored last April.
According to the Washington Post, likely candidates for appointment to the post of director of the Office of Management and Budget include (in order of probability):
Laura D. Tyson, former chair of the Council of Economic Advisers in the Clinton administration who currently teaches at Berkeley's Haas School of Business.
John Berry, head of the Office of Personnel Management.
Rob Nabors, who served as Orszag's deputy before joining White House chief of staff Rahm Emanuel's office to focus on special projects.
Gene Sperling, a senior adviser to Treasury Secretary Tim Geithner and a top economic official in the Clinton administration.
Robert Greenstein, director of the Center for Budget and Policy Priorities. He served on the Bipartisan Commission on Entitlement and Tax Reform during the Clinton administration.
Byron Dorgan, North Dakota's retiring Democratic senator.
Jeffrey Liebman, an economist with expertise on poverty, pensions and Social Security.
Jeffrey Zients, an official who has orchestrated high-profile cost savings initiatives in recent months, including planned federal hiring reforms and plans to cut $8 billion in federal building costs.
© 2010 RIJ Publishing LLC. All rights reserved.
Research, Regulations/Legal , News,
Towers Watson Explains New Pension Relief Law
On June 25, the President signed the "Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010" into law. Among other measures, the new law makes available relief for pension plan funding for years through 2011 and certain benefit restrictions for 2010.
“Those considering using the relief for 2009 will need to move quickly as any contribution adjustments must be made by September 15,” said the consulting firm of Towers Watson in a Client Advisory on the topic. The firm described the single-employer relief provisions of the law as follows:
Plan sponsors could elect to extend the shortfall amortization period from the 7 years required under the Pension Protection Act (PPA) to either 9 years (with interest-only payments for the first two years) or 15 years for shortfall amortization bases created during the years for which relief is elected.
This election could be made for any two plan years during the period 2008-2011, although most plans will not have the option of choosing relief for 2008.
Many sponsors will find it useful to elect relief for either 2009 or 2010, depending on their circumstances, and then again for 2011, when the expiration of certain PPA transition provisions will tend to create a large amortization base. If relief is elected for two years, the same option (i.e., 9 years or 15 years) must be used for both. Sponsors would have to notify plan participants and the PBGC of such elections.
The benefit restriction that prohibits future benefit accruals if a plan is funded below 60% would apply for plan years beginning on or after October 1, 2008 and before October 1, 2010 based on the greater of the funded status for the current plan year or the funded status for the plan year beginning on or after October 1, 2007 and before October 1, 2008. This will avoid the elimination of benefit accruals for 2010 for most plans and applies whether or not funding relief is elected.
The same provision would apply to the restriction on Social Security Level Income Options, meaning that such options will be permitted for most plans for 2010.
Plan sponsors that elect the extension of the amortization periods would be subject to a limitation called the cash flow rule. For a period of 3 years (for the 9-year amortization period) or 5 years (for the 15-year amortization period) the sponsor would be required to make additional "matching" contributions to the pension plan if certain payments are made.
These contributions equal compensation to any employee in excess of $1 million plus the excess of dividends and stock redemptions over the greater of EBITDA or the historical dividend amount.
The cash flow rule would not increase contributions to amounts greater than those that would have been required if no relief had been elected. Although its mechanics are unclear, the cashflow rule applies on a controlled group basis. It appears as if credit balances may be used to satisfy the obligation to make these matching contributions under the cash flow rule.
This brief description summarizes the cash flow rule; however there are many complexities involved in understanding, evaluating and administering it. For some plan sponsors it could result in substantial and unplanned contributions and thus should be evaluated carefully before funding relief is elected.
During the legislative process, several other provisions had been debated but ultimately were not included in the Act. Among the most prominent of these were:
A requirement to maintain a plan with ongoing benefit accruals in order to use the 15- year alternative amortization, Stricter nondiscrimination rules relative to cross testing,
Enhanced fee disclosures for 401(k) plans, Expanding requirements for reporting financial information to the PBGC, and Easing of credit balance rules to permit use if 80% funded in 2008.
In many situations, the funding relief provided will be substantial. However, the implications of the cash flow rule can also be significant and burdensome. Sponsors will want to evaluate their options and develop a strategy regarding the relief provisions.
© 2010 RIJ Publishing LLC. All rights reserved.
Company/Trade Group News, Annuities, News,
The Guardian Offers New SPIA
The Guardian Insurance & Annuity Company, Inc., a unit of Guardian Life, has introduced a single premium fixed immediate annuity (SPIA) to its suite of retirement annuity products.
The Guardian Guaranteed Income Annuity (GGIA) is available in select states through GIAC agents and third-party distributors. As an inflation hedge, the product’s Annuity Payment Increase Benefit option increases the annuity payment each year by a fixed dollar amount, starting from a lower base than a level payment.
Its Payment Acceleration rider allows individuals to make a one-time withdrawal to meet short-term needs on certain policies provided certain eligibility requirements are satisfied. Several GGIA payment options offer joint life and survivor benefits.
Guardian also offers individual deferred fixed and variable annuities as well as 401(k) funding vehicles for small businesses.
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America offers life, long-term care, disability income, group medical and dental insurance products, and 401(k), annuities and other financial products. The company has more than 5,400 employees in the U.S. and over 3,000 financial representatives in more than 80 agencies.
© 2010 RIJ Publishing LLC. All rights reserved.
Research, News, International,
The Global Distribution of Millionaires
Less than one percent of all households worldwide were classified as millionaires, but they owned about 38% of the world’s wealth, up from about 36% percent in 2008, according to the Boston Consulting Group. BCG also found that:
Households with more than $5 million in wealth represented 0.1 percent of households but owned about 21%, or $23 trillion, of the world’s wealth, up from 19% in 2008.
The number of millionaire households rose by about 14% in 2009, to 11.2 million—about where it stood at the end of 2007.
The United States had by far the most millionaire households (4.7 million) followed by Japan, China, the United Kingdom, and Germany.
Singapore saw the highest growth in millionaire households, up 35%, followed by 33% for Malaysia, 32% for Slovakia, and 31% for China.
Smaller markets had the highest concentrations of millionaire households. In Singapore and Hong Kong, millionaire households accounted for 11.4% and 8.8%, respectively, of all households.
Switzerland had the highest concentration of millionaire households in Europe and the third-highest overall at 8.4%.
Three of the six densest millionaire populations were in the Middle East—in Kuwait, Qatar, and the United Arab Emirates.
Despite its large population, the U.S. had the seventh-highest density of millionaire households at 4.1%.
Industry Views,
Annuity Issuers Embracing Social Media One Tweet At A Time
In October, our column titled “Should Annuity Firms Care About Social Media” reviewed two recent customer-focused social media projects and debated the importance of annuity issuers establishing a social media presence going forward. In the end, we concluded that given the rising popularity of established social media networks like Facebook among older individuals, it was only a matter of time before annuity issuers became more visible on this medium.
Since then, numerous firms have established Facebook pages and some have even ventured onto LinkedIn. Interestingly, however, the social media network most popular among our firms of late has been Twitter. Four firms we cover—AXA Equitable, Fidelity, Nationwide and TIAA-CREF—created Twitter accounts in the last seven months and have been actively Tweeting since.
Fidelity and TIAA-CREF were the first two firms on Twitter, joining in late October 2009 followed by Nationwide in February. AXA Equitable posted its first Tweet this May. The Twitter pages are similar in that they serve primarily to promote the firm's brand and actively interact with followers. However, the tone and approach the firms use to communicate this information vary greatly.
Although they are newest to Twitter, AXA Equitable has been the most visible and innovative firm thus far. A large promotional image on the AXA public homepage featuring the firm's signature 800 lb. Gorilla mascot announces the firm's arrival on Twitter and links to the firm's profile page. Of the four annuity providers to recently engage Twitter, AXA Equitable is the only one that has publicly advertised its Twitter page with focused promotional imagery.
AXA Equitable Public Homepage Twitter Promotion
The 800lb. Gorilla serves as the face and voice of AXA's Twitter page. The Gorilla's Tweets cover the firm's investment products, retirement solutions and online resources. AXA is also the lone firm to currently offer audio tweets, posts that link to short audio messages from the Gorilla himself.
AXA Equitable Twitter Page
Nationwide also uses a character for its Twitter page—The World's Great Spokesperson in the World. A promotional image on the public homepage links to the Spokesperson's Twitter, Facebook and YouTube pages. Nationwide clearly takes the most light-hearted approach among the firms, posting funny, off-beat commentary befitting of the cocksure Spokesperson's character. Interestingly, the Tweets do not directly promote any of the firm's products or services. Rather, they serve primarily to solidify the connection between the firm and Spokesperson marketing campaign.
Nationwide Twitter Page
Fidelity and TIAA-CREF use more straightforward tones on their Twitter pages. Tweets are almost entirely about the firms' products, services and online content while all commentary focuses on retirement or investment topics or company news.
Surprisingly, there presently seems to be little correlation between entertainment value and popularity. As of this writing, Fidelity has the most followers on Twitter, with over 2,600, followed by TIAA-CREF at roughly 1,100. AXA Equitable has picked up over 300 followers since joining Twitter in May; Nationwide remains under 400 followers.
Rather, it seems a number of other factors influence the number of followers a firm acquires—usefulness of information, promotion on the firm's site itself and frequency of updates are all factors that can affect a firm's popularity on Twitter.
© 2010 Corporate Insight, Inc. All rights reserved.
Industry Views are special reports that are sponsored and independent from RIJ's editorial content.