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QBS 19 (B)
Risks faced by workers when accumulating assets
Risks faced…
QBS 19 (B)
Risks faced by workers when accumulating assets
Risks faced by retiree when receving their assets
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- 1) Mandate Coverage
- 2) Voluntary system : automatic enrollment every 3 yrs
- 3) Encourage employer and worker partnership
- less likely to terminate/Freeze DB plan
Automatic Enrollment
a) Increases ER costs
b) May be a burden on small ERs
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- 1) Statutory minimum - escalate min with age
- 2) Automatic enrollment with escalating cot rates
- 3) Encourage employer and workers representatives to negociate cot levels - require accelerated ee and/or ER cot to make up DB shortfall
1)Encourage ees and ers to only contribute minum
2) ERs may revert to min if previously paid more
3) Low income hardship
3) Poor investment returns
a) Unwise asset allocation decisions
b) investming too much in company stock
- 1) Restrict investments
- 2) Pooling assets; DB plan with professionnally amanged assets
- 3) Increase ee contribution rates for DB participants
1)Encourage ees and ers to only contribute minum
2) ERs may revert to min if previously paid more
3) Low income hardship
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- 1) Require plans to accept roll-overs - asset used to purchase prior service credit
- 2) Require COLA for VTs if provided to retirees
- 3) Only allow career avg designs
- 4) Facilitate programs sponsored by industries
1) Higher administration costs
2) counters retention goals
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- 1) Prohibit loans and hardship withdrawal
- 2) Require the roll-over of LS cash-outs
1) Reduces participation in voluntary system
2) workers may not contribute more than minimum
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- 1) Require transparency
- 2) Provide benchmark of plan fees against industry avg
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- 1) Require annuity (in all or in part) paid by
- ER
- Insurance
- 2) COLA
- DC: Purchase as part of annuity
- DB : provide if funded status exceedes threshld
- DB: Allow partial COLA if exceed funded threshold and commit to meeting specified level
- 3) traditional annuity passes on invest risk
- 4) Guarantee return
- 1) Guaranteed return
- may be difficult to insure
- encourage less risky invest policy
- 2) Annuitization
- admin cost too hgh for the minims benefit
- have a fewer assets
- conversion assumptions may not be realistic