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New research by Cerulli Associates has found that the 403(b) market is just as profitable, if not more so, as other defined contribution businesses. Of the providers surveyed, 43% said that their profit margins on 403(b) plans were greater than those of other DC businesses. The Cerulli research also reveals that more than one-third of plan sponsors are unaware of the administrative costs involved in their plan. In addition, while guaranteed withdrawal benefits have become a popular offering among insurers, Cerulli notes that the benefits “can come at a steep cost, which can significantly impact the account value over time.”

While we’re on the subject, the American Society of Pension Professionals & Actuaries (ASPPA) is asking the IRS to delay implementation of its final rules regarding revisions to 403(b) plans. IRS has said that the effective date of the new regs would be January 1, 2008, but ASPPA wrote in early July that given the fact that August was approaching and the final regs had not been released, the deadline should be moved to January 1, 2009.

As of July 2, a Massachusetts law kicked in requiring all of its residents to obtain health insurance. Under the law, residents with annual incomes below the federal poverty level are eligible for no-cost care. Residents with annual incomes up to three times the poverty level can enroll in state subsidized plans, while those with incomes more than three times the poverty level can choose their own coverage from new, lower-cost private plans if they are not offered coverage through their employers.

In Michigan, the American Council of Life Insurers (ACLI) and American’s Health Insurance Plans (AHIP) are prodding a federal court to block rules issued by the state’s Office of Financial and Insurance Services that the groups say would create a disincentive for Michigan employers to create and fund highly-valued employee benefit plans. The ACLI and AHIP complaint challenges a regulatory ban on “discretionary clauses” in health and disability policies, according to a joint release from the groups.

The personal savings rate continues to dwindle. According to the U.S. Department of Commerce’s Bureau of Economic Analysis, the savings rate as a percentage of disposable personal income has dwindled from 2% in 2004 to -1% in the first quarter of 2007. James Klein, president of the American Benefits Council (ABC), revealed those statistics during a recent ABC conference. The diminishing savings rate “is simply unacceptable for Americans who will need to save more to achieve a secure and healthy retirement,” Klein said. Three years ago, he said, “the Council set forth a long-term strategic plan that included the goal of raising Americans’ retirement savings to 15% of disposable income by 2014.” Since then, however, the savings rate “has gone in the wrong direction,” he said.