Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 23rd, 2014
Benefit Briefs
Pension Values Brought Down Total CEO Compensation
Total compensation for chief executive officers (CEOs) at the nation’s largest corporations remained relatively unchanged in 2013, Towers Watson finds. The limited size of total pay increases can be attributed to much lower values for executive pensions, driven down by higher interest rates, according to Towers Watson. If the impact of the change in pension values were excluded from the analysis, total summary compensation table (SCT) pay would have increased 4.3% in 2013. The analysis found a 28% decrease in the change-in-pension-value component included in the SCT among S&P 1500 companies.
Incentives to Offer Health Benefits Could Be Improved
Regulations designed to encourage small employers to offer employees health benefits could be improved, research suggests. The Congressional Research Service (CRS) found the Patient Protection and Affordable Care Act’s (ACA’s) employer penalty is structured so it could exempt approximately 96.2% of employer firms simply because they would be too small, and thus fall below the employer penalty threshold of 50 full-time equivalent (FTE) employees. These exempt firms account for approximately 27.6% of all workers. However, after accounting for firms that already provide insurance, less than 1% of employer firms could be subject to the employer penalty. In addition, The CRS found less than 4% of small businesses that could have been eligible for the small business health care tax credit in 2010 actually claimed it.
Human Capital Should Factor into Asset Allocations
Human capital is a key factor in asset allocation, says David Blanchett of Morningstar Investment Management. In the report, “No Portfolio is an Island,” Blanchett, head of retirement research at Morningstar Investment Management, says the key to asset allocation is a holistic approach. For an individual investor, it means factoring in more assets than simply the 401(k) plan—real estate, Social Security benefits, other pensions and assets, and the human capital of the individual. For plan sponsors, since age, health, education, occupation, industry and experience, among other factors, all affect human capital, it is a unique asset, and is a definite, quantifiable asset to use in custom target-date fund allocations and glide paths.
Buyer's Market
Goldman Sachs Asset Management (GSAM) has entered into an agreement to acquire Westpeak Global Advisors, a provider of smart beta solutions. In addition to comprehensive and fully-customizable solutions for smart beta investing, Westpeak also brings strategic alliances with global index providers and asset owners. With the acquisition, GSAM also announced the launch of a new Advanced Beta Strategies platform.
Invesco Responds to Demand for Collective Trust Funds
Invesco National Trust Company (INTC) will now offer an additional 15 collective trust funds (CTFs). The addition of the funds is in response to increased demand in a variety of strategies and share classes within defined contribution (DC) retirement plans, the company says. The new fund lineup has already been added to the platforms of a number of DC recordkeepers and expands the opportunity for retirement plans to invest in strategies that span across all major asset classes and are delivered through a variety of vehicles, according to INTC.
White Oak Advisors has named Rick Bindler as practice leader and lead consultant for its new Chicago office. Bindler has worked with defined contribution plans such as profit sharing, 401(k), 403(b) and 457(b) plans, as well as defined benefit plans.
ABG-IL Offers Financial Fitness Program for Participants
Alliance Benefit Group – Illinois (ABG-IL) is offering a financial fitness program to retirement plan participants. ABG-IL has partnered with BALANCE, a financial counseling and education company, to provide free and confidential financial counseling and education to retirement plan participants. Through the program, participants can get help with managing budgets, getting out of debt, understanding credit reports, buying a home, senior issues, and planning for their financial future.
Beginning May 1, HSA Bank, a provider of health savings accounts (HSAs), will offer more ways for employees to save and pay for health benefits on a pre-tax basis. Working with benefit technology partner Evolution1, HSA Bank will offer health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs).
Economic Events
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, slipped 0.2% to a seasonally adjusted annual rate of 4.59 million in March from 4.60 million in February, and are 7.5% below the 4.96 million-unit pace in March 2013, according to the National Association of Realtors. Last month’s sales volume remained the slowest since July 2012, when it was 4.59 million.
Market Mirror
Tuesday, the Dow increased 65.12 points (0.40%) to 16,514.37, the NASDAQ climbed 39.91 points (0.97%) to 4,161.46, and the S&P 500 was up 7.66 points (0.41%) at 1,879.55. The Russell 2000 gained 13.30 points (1.16%) to finish at 1,155.61, and the Wilshire 5000 closed 112.06 points (0.56%) higher at 20,020.55. On the NYSE, 3.2 billion shares changed hands, with 2.8 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares traded, with a 2.6 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note was unchanged, with its yield at 2.716%. The price of the 30-year Treasury bond increased 19/32, decreasing its yield to 3.493%.
Financial Sense
DB Plans to Increase Allocations to Alternatives
New research indicates defined benefit (DB) plans will turn increasingly to alternative investments during 2014. A recent survey of investment consultants by global analytics firm Cerulli Associates confirms that U.S. institutional investors across client segments have increased their exposure to alternative assets since 2007. Cerulli’s research indicates as institutional investors increasingly take an objective-based approach to portfolio construction, hedging and risk management allocations will grow in importance within institutions’ portfolios.
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Small Talk
How Americans read and how much they read appears to be connected, according to the results of a recent poll. The poll, conducted by Harris Interactive, finds 30% of those who read either more or exclusively in the e-book format are likely to read more than 20 books in an average year. Only 18% of those who read more (or only) in print copy and 21% of those who read equally in both formats are likely to do the same.
ON THIS DATE:  In 1564, according to tradition, the great English dramatist and poet William Shakespeare was born in Stratford-on-Avon. It is not certain the exact day on which he was born, but church records show he was baptized April 26, and three days was a customary amount of time to wait before baptizing a newborn. In 1616, William Shakespeare died. This date is conclusively known. In 1635, the Boston Public Latin School was established—the first public school building in the United States. In 1789, U.S. President George Washington moved into Franklin House, New York—the first executive mansion. In 1791, future President James Buchanan was born in Cove Gap near Mercersburg, Pennsylvania. In 1908, U.S. President Theodore Roosevelt signed an act creating the U.S. Army Reserve. In 1985, the Coca-Cola Company announced it was changing its 99-year-old secret formula. New Coke was not successful, which resulted in the resumption of selling the original version. In 2005, the first video was uploaded to YouTube.com.   WEDNESDAY WISDOM: “Work is the greatest thing in the world, so we should always save some of it for tomorrow.”—Don Herold, American writer and cartoonist     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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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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