Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 18th, 2014
Benefit Briefs
DC Plan Investors Should Focus Less on Risk
A new white paper from investment management firm GMO, “Investing for Retirement: The Defined Contribution Challenge,” argues the ongoing trend of employers moving away from defined benefit (DB) pension plans in favor of defined contribution (DC) arrangements has left American workers far less secure in their retirement income prospects. The paper contends retirement investors must come to a new understanding of investment risk and the importance of asset allocation to ensure better outcomes—one that is less concerned with risk-adjusted returns and more closely reflects the importance of avoiding catastrophic portfolio losses near or during retirement.
Buyer's Market
Great-West Offers Retirement Readiness Report Card
A new customizable report card tool from Great-West Financial helps retirement plan sponsors and advisers evaluate a plan’s overall performance according to a variety of key metrics. The Retirement Readiness Report Card tracks four participant attributes to gauge a plan’s ability to achieve positive retirement outcomes.
Economic Events
In the week ending April 12, the advance figure for seasonally adjusted initial claims for unemployment insurance was 304,000, an increase of 2,000 from the previous week’s revised level, the Labor Department reported. The four-week moving average was 312,000, a decrease of 4,750 from the previous week’s revised average. The average interest rate for a 30-year fixed-rate mortgage is 4.27%, down from 4.34% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.33%, down from 3.38%.
Market Mirror
Yesterday, the Dow slipped 16.31 points (0.10%) to 16,408.54, the NASDAQ increased 9.29 points (0.23%) to 4,095.52, and the S&P 500 inched up 2.54 points (0.14%) to 1,864.45. The Russell 2000 closed 6.13 points (0.54%) higher at 1,137.90, and the Wilshire 5000 closed at 19,832.16, up 39.86 points (0.20%). On the NYSE, 3.2 billion shares changed hands, with 1.4 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares traded, with a 1.7 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note decreased 25/32, increasing its yield to 2.723%. The price of the 30-year Treasury bond fell 1 13/32, bringing its yield up to 3.521%.
Rules & Regulators
SSA Discontinues Letter-Forwarding
The Social Security Administration (SSA) announced it will discontinue its letter-forwarding program. The SSA states that since the Internet now offers numerous locator solutions through free social media websites and for-pay locator service providers, the public can now reliably locate people without the agency’s forwarding service.
A court ordered the fiduciaries of a Columbia, Maryland, 401(k) plan to pay restitution for unremitted employee contributions and loan repayments. According to the judgement, David Nyanjom, Laura Nyanjom, Pulmonary Disease & Critical Care Associates and the Pulmonary Disease & Critical Care Associates 401(k) Plan must pay $66,474.02 for unremitted employee contributions and loan repayments, $66,392.57 in pre-judgment interest, and $9,750 for costs and expenses associated with the appointment of an independent fiduciary.
High Court Ponders “Conflicts” for ESOP Fiduciaries
What is the trustee of a retirement plan that offers employer stock as an investment option supposed to do with inside information that the stock price may be overvalued? While it is a question on which the U.S. Supreme Court declined to rule in its review of Fifth Third Bancorp v. Dudenhoeffer, it was prevalent in the discussion about whether fiduciaries of employee stock ownership plans (ESOPs) have a presumption of prudence that plan participants cannot overcome in a lawsuit unless they plausibly allege plan fiduciaries abused their discretion by remaining invested in employer stock. Justices questioned the existence of such a presumption, with Justice Ruth Bader Ginsburg saying: “… there is no presumption written into this statute… [T]he statutory requirement on loyalty and prudence is undiluted. And so I don’t know where this presumption comes from.”
Plan Financial Audits May Uncover ‘Red Flags’
When performing annual retirement plan financial audits, plan sponsors and their auditors should look for potential ‘red flags’ for regulators. James E. Merklin, partner in charge of Assurance Services for the CPA firm of Bober Markey Fedorovich, tells PLANSPONSOR, “The auditors are looking to see if the statements are in line with generally accepted accounting principles, or GAAP. The auditors are looking to see how many types of transactions are present in the statements and how many they have to sample to reach a reasonable conclusion about the plan’s GAAP compliance.” But this is not the only thing auditors should be looking at, he added.
Financial Sense
The aggregate funded status of the 100 largest U.S. corporate defined benefit (DB) pension plans fell by $5 billion during March, as measured by the Milliman 100 Pension Funding Index. The modest setback caused a 30-basis-point drop in the aggregate funding ratio for these plans, which stood at 84% as of March 31.
R.I. Retirees’ Pension Reform Challenge Moved Forward
A Rhode Island state court has refused to dismiss a challenge to pension reforms filed by state retirees. In its opinion, the court rejected the state’s argument that no contractual relationship existed between it and the plaintiffs at the time the pension reform was enacted. The court conceded that the language of the law does not express a “clear contractual commitment not to change benefit levels or other plan variables by legislation;” however, the context implies an employer-employee relationship and provides support for finding that the language should be considered an offer.
The California Public Employees’ Retirement System (CalPERS) Board of Administration today approved new contribution rates for the state of California and contracting school districts beginning July 1. The state will pay required contributions that are an increase by more than $450 million for state employers and $55 million for school employers over current rates. New demographic assumptions adopted by the CalPERS Board in February had a significant impact on rates for the state retirement system due to public employees living longer on average.
Sponsored message from OppenheimerFunds
Go Where the Growth Is
These days investors must be willing to pursue growth opportunities globally or risk missing them altogether. George Evans, head of Equities at OppenheimerFunds, talks about a strategy that starts with a global core of the best and fastest growing companies, regardless of where they are headquartered.
Small Talk
ON THIS DATE:  In 1775, British troops marched out of Boston on a mission to confiscate the American arsenal at Concord and to capture Patriot leaders Samuel Adams and John Hancock, known to be hiding at Lexington. As the British departed, Boston Patriots Paul Revere and William Dawes set out on horseback from the city to warn Adams and Hancock and rouse the Minutemen. In 1906, at 5:13 a.m., an earthquake estimated at close to 8.0 on the Richter scale struck San Francisco, California, killing hundreds of people as it toppled numerous buildings. The quake was caused by a slip of the San Andreas Fault over a segment about 275 miles long, and shock waves could be felt from southern Oregon down to Los Angeles. In 2012, Dick Clark, the TV personality and producer best known for hosting “American Bandstand,” an influential music-and-dance show that aired nationally from 1957 to 1989 and helped bring rock `n’ roll into the mainstream in the late 1950s, died of a heart attack at age 82 in Santa Monica, California.   And now it’s time for FRIDAY FILES!
Why do we feel emotions in our stomachs?
In Redding, California, police received a call from an auto dealership reporting a stolen vehicle. The 2001 Mitsubishi’s GPS indicated it was parked in front of the Tuolumne County courthouse, the Associated Press reports. When officers found the car there, it already had a different set of license plates on it. A man and his wife told officers they got the car so the husband could drive to his court appearance. The wife claimed they paid $200 for the car, but they were both arrested on suspicion of vehicle theft. In Boynton Beach, Florida, a woman called police after discovering her home had been broken into. She said the burglar broke in through a window, and unlocked several doors in the home. According to the Sun-Sentinel, she also told police lunch meat was taken from the refrigerator and the shower stall was wet.
Another instance when throwing away the trash is tricky.
In Swansea, Wales, the owner Michael Thomas of a VW campervan discovered someone had stolen the sports kit from it. However, the thief didn’t realize the vehicle had a dash camera, and when the owner played back the footage, he saw the thief staring straight back at him. According to The Mail, the owner handed the footage over to police and put it up on Facebook asking for help in identifying the thief. The thief was quickly identified and arrested. He told police he stole the body parts because his friend needed them for his own van. In Bridgeton, New Jersey, a resident received a jury summons for IV Griner. The only one in the house with that name is his dog. The resident tells the local CBS news station the mix up is apparently because he is Barrett Griner, IV. But, he plans to use vet records to show the court the mistake they made.
The logistics went wrong with this Fed Ex delivery?
In New York, New York, a Brooklyn woman took a trip to Florida and her mom came up from Houston to take care of the dog. Her mom was also tasked with moving the woman’s vehicle from a side street so it wouldn’t get towed. When she came home from Florida, the car wasn’t where it was supposed to be. Her mom pointed to a four-door green Honda Civic in another spot, saying that’s where she moved the car. However, it wasn’t the woman’s car. She contacted police, and an officer said he didn’t believe her story, according to the Daily Intelligencer. So, she put up signs saying, “Is this your car or do you know whose it is? Looking for the owner who potentially wears a lot of necklaces and enjoys San Pellegrino sodas. I didn’t steal your car but I think my mom may have. It’s a long story. I’ll explain, but your car is safe and sound.” She never received a call. However, since then, the NYPD said the car had been reported stolen and they picked it up to return to the owners. In Lincoln, Nebraska, Lincoln Police Department received a call about a missing boy. His mother told police he’d slipped out an unlocked door of their apartment while she was in the bathroom. After arriving at the scene, police were told a child matching the boy’s description was at Madsen’s Bowling & Billiards, across the street from where the boy lives. An LPD sergeant went to investigate and saw the three-year-old boy had crawled inside the claw machine at the bowling alley. He was uninjured and playing happily with the stuffed animals in the machine, reports Omaha’s World-Herald. Madsen’s employees, along with a vending machine company, helped remove the child safely. In Edlesborough, England, a man and his wife were gardening when their mischievous dog snatched the cordless house phone and ran off. The wife finally cornered the dog and was able to retrieve the phone, the Mirror reports. However, a few minutes later, police arrived. They said they received a 999 call, and all they could hear at the other end was heavy breathing, so they rushed to the scene. Have a great weekend!
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Data and Research
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Final Fiduciary Rule Expected Soon

Editorial: Alison Cooke Mintzer


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