Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 22nd, 2014
Benefit Briefs
A Vision for National Retirement Reform
The push for establishing mandatory access to workplace retirement savings provides important insights into the path advocacy groups must take to influence national retirement policy. State and federal lawmakers first started kicking around the idea of requiring private employers to offer some type of tax-advantaged retirement savings program nearly a decade ago, but they have made little substantial progress. In recent years, the effort has been channeled largely into so-called “auto-IRA bills” that seek to force employers to offer workers, at a minimum, the chance to fund an individual retirement account (IRA) with pre-tax payroll deductions. Proponents of auto-IRA bills point to plan access as the most important factor in determining whether the typical worker will be able to approach retirement confidently, explains Brian Graff, executive director and CEO of the Association of Pension Professionals and Actuaries (ASPPA). “It has really become a grassroots legislative movement in recent years,” Graff tells PLANSPONSOR.
Many employers are beginning to scale back their medical plan designs in an effort to avoid having to pay the Patient Protection and Affordable Care Act’s (ACA’s) “Cadillac tax,” which takes effect in 2018, according to a study released jointly by HighRoads and Corporate Executive Board (CEB). The study report, “2014 Medical Plan Trends,” also says employees are facing an increased share of upfront costs for health care, as well as an increase in high-deductible plans, a greater number of plans with coinsurance charges, higher out-of-pocket maximums, and increases in emergency room copayments.
Increasing Benefits Limits Does Not Encourage New Plans
Data does not suggest a strong connection between increases in contribution limits and the creation of new retirement plans, according to a U.S. Government Accountability Office (GAO) study. The report, “Private Pensions: Pension Tax Incentives Update,” says despite increases in the statutory contribution limits, new retirement plan growth remained fairly steady between 2009 and 2011. The observed decrease in the number of small defined contribution (DC) plans offset all aggregate plan growth, resulting in the total number of plans falling below levels from 2000, though the number of participants did increase over the same period. Findings also show that factors other than contribution limits, including the recession, may have influenced the amount of new plan formation over the 2009 to 2011 time frame.
The economy’s influence on the adjustments being made to executive reward programs is decreasing this year. The results of Mercer’s Executive Rewards 2013 Year-End Survey indicate the impact of proxy advisory firms is slightly increasing as more organizations try to align programs with advisers’ guidelines. According to the survey results, changes to annual and long-term incentive programs, use of special retention grants, and grant values have increased in 2014 as a result of proxy advisers’ guidelines.
Default Investment Options: TDFs Not the Only Choice
Like bodies in physics, participants in retirement plans do not spontaneously change course in their saving and investing efforts. It takes a push. That is especially true when it comes to ensuring that participants properly diversify their portfolios, says Joel Shapiro, senior vice president for ERISA Compliance at NFP 401K Advisors.
Industry Voices
Industry Voice: De-Risking Corporate DB Plans
Assuming that a pension plan reaches a surplus position, a variety of tools exist that can maintain that surplus into the future, reducing the risk that the plan will go into deficit again. Every plan sponsor should at least consider risk reduction measures as their plans approach a fully funded position.
Market Mirror
Yesterday, the Dow was up 40.71 points (0.25%) at 16,449.25, the NASDAQ increased 26.03 points (0.64%) to 4,121.55, and the S&P 500 closed 7.04 points (0.38%) higher at 1,871.89. The Russell 2000 gained 4.44 points (0.39%) to finish at 1,142.34, and the Wilshire 5000 closed at 19,908.56, up 76.40 points (0.39%). 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 1.5 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note was up 2/32, bringing its yield down to 2.715%. The price of the 30-year Treasury bond was down 1/32, increasing its yield to 3.522%.
Rules & Regulators
Maintaining QDIA Protection Under 404(c)
A qualified default investment alternative (QDIA) must meet five criteria to maintain sponsors’ Employee Retirement Income Security Act (ERISA) Section 404(c) fiduciary protection, per the Department of Labor.
Small Talk
Nearly half of American workers feel stressed about their finances, although worry seems to diminish among those seeking professional advice. The Principal Financial Group’s latest Principal Financial Well-Being Index shows widespread financial concern actually seems to be having a positive impact on financial wellness and savings decisionmaking. For instance, the research suggests more than half of employees (52%) have taken action to monitor their spending levels in the past year, and nearly two in five (39%) created a budget to keep finances in check, up significantly from 28% who created a budget two years ago.
ON THIS DATE:  In 1864, the U.S. Congress passed legislation that allowed the inscription “In God We Trust” to be included on one-cent and two-cent coins. In 1876, the first official National League (NL) baseball game took place. Boston beat Philadelphia 6-5. In 1889, at noon, the Oklahoma land rush officially started as thousands of Americans raced for new, unclaimed land. In 1970, Earth Day, an event to increase public awareness of the world’s environmental problems, was celebrated in the United States for the first time. In 1976, Johnnie Taylor’s “Disco Lady” became the first single to sell more than two million copies. In 1976, Barbara Walters became first female nightly network news anchor. In 1978, the Blues Brothers—the musical creation of Saturday Night Live cast members Dan Aykroyd and John Belushi—made their world premiere on the show. In 1993, the U.S. Holocaust Memorial Museum was dedicated in Washington, DC. In 1994, former President Richard M. Nixon died after suffering a stroke four days earlier.   TUESDAY TRIVIA: Former Senator Gaylord Nelson, concerned that the state of the environment was a “non-issue in the politics of the country,” got his idea for the first Earth Day from the anti-Vietnam War demonstrations, convinced “if we could tap into the environmental concerns of the general public and infuse the student anti-war energy into the environmental cause, we could generate a demonstration that would force this issue onto the political agenda.”
TRIVIAL PURSUITS: What is the origin of the “peace” symbol?
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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