| Benefit Briefs | Many Retirement Savers Missed 2013 Gains | For the second year in a row, Putnam’s Lifetime
Income Scores survey shows, when factoring in projected Social Security
payments, U.S. workers are on pace to replace a median 61% of their monthly
income in retirement. Putnam says the 61% replacement rate itself is somewhat
encouraging, but the flat results were a surprise considering the
record-setting pace of stock market gains experienced during 2013. Putnam says
one explanation for this counterintuitive result has to do with asset
allocation. Among workers who contribute to a 401(k) plan and have a balance
greater than $1,000, Putnam finds the allocation to underperforming assets like
bonds and cash (46%) during 2013 strongly outweighed the typical allocation to
equities (39%). | Defined contribution (DC) plan participants seem
committed to keeping their savings in tact as DC accounts make up a growing
percentage of U.S. retirement assets. A report, “Defined Contribution Plan
Participants’ Activities, 2013,” released by the Investment Company Institute
(ICI), says the majority of participants continued contributing to their plans
in 2013, with only 2.7% stopping contributions, compared with 2.6% in 2012. Most
DC participants stayed the course in terms of asset allocations as stock prices
generally increased during 2013. | | Buyer's Market | Marcum Financial Services has launched the
Marcum Benefits Marketplace, a one-stop shopping resource for health insurance
delivery for groups and individuals. The Marcum Benefits Marketplace comprises
multiple private exchange platforms designed to facilitate selection,
enrollment and administration of health insurance, as well as other benefits,
for small to middle-market businesses. | Plan Administrators, Inc. (PAi), headquartered
in Green Bay, Wisconsin, will open its second office in Sioux Falls, South
Dakota, on May 5. The office will house a customer care team providing 401(k)
plan services to business owners and their employees, as well as PAi’s Trust
Company. | | Industry Voices | Industry Voice: Cost Considerations When Using Index Funds | The debate over investing in actively managed
funds versus passive index funds will probably go on forever. Passive investors
like the low costs and broad diversification of index funds. Passive investing
can also assure that the portfolio has the same risk profile as the index. What effect does the
use of index funds in defined contribution plans have on plan and participant
costs? The answer is “it depends.” | | Economic Events | Sales of new single-family houses in March 2014
were at a seasonally adjusted annual rate of 384,000, according to estimates
released jointly by the U.S. Census Bureau and the Department of Housing and
Urban Development. This is 14.5% below
the revised February rate of 449,000 and is 13.3% below the March 2013 estimate
of 443,000. | | Market Mirror | Wednesday, the Dow slipped 12.72 points
(0.08%) to 16,501.65, the NASDAQ fell 34.49 points (0.83%) to 4,126.97, and the
S&P 500 closed 4.16 points (0.22%) lower at 1,875.39. The Russell 2000 lost
8.53 points (0.74%) to finish at 1,147.08, and the Wilshire 5000 decreased
65.40 points (0.33%) to 19,955.15.
On the NYSE, 3.2 billion shares traded,
with a slight lead for decliners. On the NASDAQ, 2.7 billion shares changed
hands, with declining issues outnumbering advancing issues more than 2 to 1.
The price of the 10 year Treasury note was up 2/32,
bringing its yield down to 2.699%. The price of the 30-year Treasury bond was
unchanged, with its yield at 3.485%.
| | Rules & Regulators | Initiative to Examine Retirement Savings Policy | To improve the retirement readiness of
Americans, the Bipartisan Policy Center has launched a Personal Savings
Initiative. The initiative is being co-chaired by former Senate Budget
Committee Chairman Kent Conrad and former Deputy Commissioner of the Social
Security Administration Jim Lockhart. Over the course of the next year, says
Conrad, the initiative will craft a package of realistic policy recommendations
to address the future savings needs of Americans and will model the
recommendations’ impact on retirement security and the federal budget. The
final recommendations are slated to be released in early 2015. | | Financial Sense | More Reasons for De-Risking DB Plans | A report, “Employers Finding More Reasons to
De-Risk Retirement Plans,” from Buck Consultants, observes how improvements in
the funding status of defined benefit (DB) retirement plans are prompting DB
plan sponsors and fiduciaries to take steps that will reduce future volatility
in plan costs. Other reasons for de-risking efforts discussed in the report include
current certainty versus the unknown; increased Pension Benefit Guaranty
Corporation (PBGC) premiums, and avoiding one-time accounting charges. | Some defined benefit (DB) plan sponsors are
reluctant to transfer liabilities to an insurer, saying it is too expensive,
particularly compared with the accounting liability, Mercer says. However,
Mercer points out that accounting liability does not include all costs
associated with maintaining the plan. Since October 2013, the cost of
maintaining a DB plan continues to be approximately the same as the cost of
transferring liabilities to an insurer for the sample plan modeled for Mercer’s
U.S. Pension Buyout Index. The current environment allows plan sponsors who
have evaluated a risk transfer to execute under favorable conditions, the
consultant says. | Deciding When to End a DB Plan in Hibernation | Frozen plans will inevitably be terminated, says
James Gannon of Russell Investments. It’s just a matter of when, not if. A new
paper from Russell Investments, “Hibernation Versus Termination: Evaluating the
Choice for a Frozen Pension Plan,” details the decision-making process for plan
sponsors of frozen plans. A lot of plans are currently frozen, Gannon tells
PLANSPONSOR. “They operate under what we call hibernation,” he says, which he
describes as the act of managing the plan for a period of time while preparing
for termination at a later date. “Part of the paper’s purpose is to alert plan
sponsors that they should have some idea about how to evaluate costs.” | | Small Talk | ON THIS DATE: In 1800,
President John Adams approved legislation to appropriate $5,000 to purchase
“such books as may be necessary for the use of Congress,” thus
establishing the Library of Congress. In 1962,
the Massachusetts Institute of Technology (MIT) sent a TV signal by satellite
for the first time. In 1990, the
space shuttle Discovery blasted off
from Cape Canaveral, Florida. It was carrying the $1.5 billion Hubble Space
Telescope. | SURVEY SAYS: We
recently covered a survey that found those who read books electronically tend
to read more than those who read books in print. This week, I’d like to know
how much you read, books and magazines, and how you prefer to read, in print or
electronically. You may respond to this week’s survey by 6 p.m. Pacific time
today. | Share the good news with a friend! Pass the Dash along – and tell your
friends/associates they can sign up for their own copy. | News from PLANSPONSOR.com
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