Good news for Americans: You are living longer.
The bad news: The longer life span doesn’t bode well for the corporate pension plans that are supposed to support workers into old age.
New mortality estimates released Monday by the nonprofit Society of Actuaries show the average 65-year-old U.S. woman is expected to live 88.8 years, up from 86.4 in 2000. Men age 65 are expected to live 86.6 years, up from 84.6 in 2000.
Longer lives for retirees may add to a squeeze at many pension funds already struggling to plug funding gaps and force companies to contribute more to cover future obligations.
The estimates also are expected to accelerate a shift away from defined-benefit pension plans that offer guaranteed payouts, said Rick Jones, senior partner at consultant AonHewitt.
More companies are moving workers into defined-contribution plans, such as a 401(k), where employees are largely responsible for saving and investment choices.
The new estimates released Monday—based on data from corporate pension plans—could eventually increase retirement liabilities by roughly 7% for most corporate plans, according to Aon Hewitt.
The Society of Actuaries predicts the increases could range from 4% to 8%.
Corporations have roughly $3 trillion in current retirement liabilities.
“Plan costs could rise simply because people are living longer,” said Dale Hall, managing director of research for Society of Actuaries.
Companies being hit with rising insurance premiums and longer-living retirees also are expected to unload the risks of running a pension plan by offering workers lump-sum pension buyouts or selling those liabilities to insurance companies.
One such deal came in September, when Motorola Solutions Inc. agreed to transfer about $3.1 billion in pension obligations and their risk to Prudential Financial Inc., and to purchase a group annuity contract from the insurer.Read more...
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