Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 16th, 2014
Benefit Briefs
EBRI Presents New DC Approach to Health Benefits
A new approach called “reference pricing” in health insurance may help control health costs, the Employee Benefit Research Institute (EBRI) contends. Examining actual health claims data for more than three million individuals from 2010, EBRI found that if reference pricing was adopted for all individuals with employment-based health benefits for the six health care services it analyzed, spending on employment-based health benefits would fall about 1.6% ($9.4 billion in 2010). Under reference pricing, employers pay a fixed amount or limit their contributions toward the cost of a specific health care service.
The most effective way to increase participation in retirement plans is to provide all workers with access to one and automatically enroll them, a research report suggests. An Issue Brief, “Why Don’t Lower-Income Individuals Have Pensions?,” released by the Center for Retirement Research at Boston College, says about half of U.S. private sector employees do not participate in a retirement plan at their current job, and those not participating are more likely to have lower incomes. The brief indicates the low participation rates of lower-income employees are driven primarily by weak labor force attachment and working for a firm without a pension.
TDF Investors More Confident About Retirement
Employees who invest in target-date funds (TDFs) through their employer-sponsored defined contribution (DC) plan feel more confident about meeting retirement goals, a study finds. According to the “Participant Preferences in Target Date Funds: An Update” study conducted by ING U.S. Investment Management, more than half (56%) of TDF investors feel confident they will meet their retirement goals. In addition, nearly two-thirds (64%) of those with holdings in TDFs feel they will be able to turn their plan savings into a reliable income stream at retirement.
Generation Y, or Millennial, workers are taking responsible actions for their financial future. The results of “Generation Y Workers: The Principal Financial Group Retirement Plan Participant Study” finds saving for retirement is the top financial goal for Millennial workers (63%), followed by paying off student loans (48%) and paying down credit card debt (42%). These younger workers report taking positive action towards making their goals a reality. Eighty percent say they have a monthly budget and two-thirds have established an emergency savings fund.
Buyer's Market
The Retirement Services Division of Massachusetts Mutual Life Insurance Company announced changes to its senior management team. The changes are being made as two senior leaders, Jared Collins, senior vice president of Product, and Hugh O’Toole, senior vice president of Sales and Client Management, announced they are leaving MassMutual. MassMutual tells PLANSPONSOR O’Toole is leaving the firm to start a new business venture.
Firms Offer Pension Risk Transfer Advisory Services
Deloitte and Penbridge Advisors have established a strategic alliance to provide sponsors of U.S. defined benefit pension plans with pension risk transfer (PRT) advisory services. According to Steve Keating, co-founder and principal of Penbridge Advisors, the collaborative adviser offering will deliver highly coordinated advice at each step of the PRT transaction process.
Economic Events
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in March after rising 0.1% in February, according to the Bureau of Labor Statistics. The index for all items less food and energy also rose 0.2% in March after increasing 0.1% in February. Real average hourly earnings fell 0.3% in March, seasonally adjusted. Average hourly earnings remained unchanged and the CPI-U rose 0.2%. Real average weekly earnings rose 0.3% over the month.
Market Mirror
Yesterday, the Dow was up 89.32 points (0.55%) at 16,262.56, the NASDAQ increased 11.47 points (0.29%) to 4,034.16, and the S&P 500 climbed 12.37 points (0.68%) to 1,842.98. The Russell 2000 added 4.18 points (0.37%) to finish at 1,119.53, and the Wilshire 5000 closed 117.71 points (0.61%) higher at 19,572.13. On the NYSE, 3.2 billion shares traded, with 1.6 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares changed hands, with a slight lead for decliners. The price of the 10-year Treasury note was up 7/32, bringing its yield down to 2.625%. The price of the 30-year Treasury bond increased 19/32, decreasing its yield to 3.459%.
Rules & Regulators
ING to Settle Revenue-Sharing Suit
Without admitting any wrongdoing, ING Life Insurance and Annuity Company has agreed to settle a lawsuit claiming it violated prohibited transaction rules of the Employee Retirement Income Security Act (ERISA) by taking revenue-sharing payments. Under the settlement agreement, ING will deposit $14.95 million into a common fund to provide compensation relief to the class of plaintiffs.
Groups Criticize DOL’s Call for Fee Guides
A coalition of advocacy groups representing U.S. retirement plan service providers filed a detailed comment letter with the federal Office of Management and Budget (OMB) leveling technical challenges at the proposal for fee disclosure rule changes. The letter is in response to a March 12 notice issued by the Department of Labor (DOL) regarding proposed rule changes under Section 408(b)(2) of the Employee Retirement Income Security Act (ERISA). The proposed amendments would modify the final 408(b)(2) service provider disclosure regulations to require covered service providers to furnish a “guide” to assist plan fiduciaries in reviewing required disclosure documents. In the letter to the OMB, the service provider advocacy groups claim the DOL has not completed the threshold steps of determining whether such a guide is in fact needed or will be useful to plan sponsors.
Financial Sense
More multiemployer pension plans have a favorable projected funding status for 2014. The preliminary results of the “Survey of Calendar-Year Plans’ 2014 Zone Status,” released by Segal Consulting, indicate the percentage of calendar-year multiemployer pension plans in the “green zone” in 2014 is 65%, an increase of 4 percentage points from 2013.
World at Large
Three in four people in the UK still want to annuitize a portion of their defined contribution pensions in retirement, despite access to cash being made easier, according to research from PwC. PwC’s analysis claims the UK’s annuity market is likely to decline by 75% after the recently announced changes to compulsory annuity purchase come into effect, following last month’s budget.
Small Talk
Small Talk: Certain Personality Traits Can Get You Hired
Employers aren’t just looking for learned skills to perform job functions when scanning resumes, they are looking for clues about certain personality traits. More than two-thirds (77%) of employers surveyed by CareerBuilder said “soft skills,” such as a positive attitude, of a prospective employee are just as vital as “hard skills,” those an employee learned to perform a specific job function and can be measured, such as operating a computer program. Employers shared the top soft skills they look for.
ON THIS DATE:  In 1900, the first book of postage stamps was issued. The two-cent stamps were available in books of 12, 24 and 48 stamps. In 1943, the hallucinogenic effects of LSD were discovered as, in Basel, Switzerland, Albert Hoffman, a Swiss chemist working at the Sandoz pharmaceutical research laboratory, accidentally consumed LSD-25, a synthetic drug he had created in 1938 as part of his research into the medicinal value of lysergic acid compounds. In 1947, multimillionaire and financier Bernard Baruch, in a speech given during the unveiling of his portrait in the South Carolina House of Representatives, first coined the term “Cold War” to describe relations between the United States and the Soviet Union. In 1972, from Cape Canaveral, Florida, Apollo 16, the fifth of six U.S. lunar landing missions, was successfully launched on its 238,000-mile journey to the moon. In 1977, David Soul, of the television series “Starsky & Hutch,” had the  No. 1 song on the U.S. pop charts—“Don’t Give Up On Us Baby.” In 2007, in one of the deadliest shootings in U.S. history, 32 students and teachers died after being gunned down on the campus of Virginia Polytechnic Institute and State University by Seung Hui Cho, a student at the school who later died from a self-inflicted gunshot wound.   WEDNESDAY WISDOM: “The secret of getting ahead is getting started.”—Mark Twain     Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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