Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 28th, 2014
Benefit Briefs
Benefit Adequacy Hottest Retirement Benefits Issue
The hottest issue for those in the retirement benefits industry right now is benefit adequacy, according to Fred Reish. Reish, partner and chair of the Financial Services Employee Retirement Income Security Act (ERISA) team at the law firm of Drinker, Biddle & Reath LLP, noted the focus in the industry has traditionally been savings accumulation, but now the industry is asking, will workers have enough, and how will they withdraw their money so as not to exhaust accounts before they die? “I think the decumulation period will be more difficult [than the accumulation period],”Reish told attendees of the Retirement & Benefits Management Seminar, hosted by the University of South Carolina Darla Moore School of Business, and co-sponsored by PLANSPONSOR. During the decumulation phase, participants will no longer have centralized education and support from their employer-sponsored retirement plan, and the move to retail support means more possible conflicts of interest and higher fees, Reish said. He contended that is what the anticipated regulations redefining the definition of fiduciary are really all about—individual retirement accounts (IRAs).
Employers want to offer employees a good health care plan, but many have concerns about their ability to control key factors impacting the cost and delivery of health benefits, says a new survey. A survey from financial research and benefits consulting firm LIMRA, “Employee Benefits at a Crossroads,” finds that the competing variables of increasing health care costs, the implementation of the ACA, and the desire to offer a competitive benefits package leave many employers unsure of how to proceed with benefit offerings.
Many Draw Down Accounts Without a Strategy
More than half (52%) of retirees say they have withdrawn funds from retirement accounts, usually to cover short-term expenses, without a strategy in place to mitigate longevity risk, according to the most recent release of the Perspectives of Retirement survey from PNC Financial Services Group. Nearly the same percentage of retirees (53%) is concerned about running out of money.
Increasing the Impact of Participant Statements
Retirement plan sponsors can do more to increase the power of participant account statements as a retirement savings communications tool. Amy Reynolds, U.S. Defined Contribution consulting leader for Mercer, and co-author of the paper, “Retirement Income Statements May Help Avert a Looming Crisis,” released jointly by Mercer and the Stanford Center on Longevity, tells PLANSPONSOR, “The concern is that participants have potentially lost track of the statements, and the data contained in them.” Part of the problem, she says, is a lower level of engagement from participants. Reynolds contends when participants were sent paper statements in the past, they had a tangible reminder to review this information. Now that most plans have made statements electronic, it can very much be a case of out of sight, out of mind, she says.
Buyer's Market
The Segal Group is expanding the firm’s defined contribution (DC) retirement plan services staff. Joseph A. LoCicero, president and CEO of the New York-based Segal Group, says the firm is expanding its DC expertise in the areas of plan design, governance, administration consulting, investment solutions and communications. To this end, the firm has formed a dedicated DC team to serve clients across a variety of market segments.
VALIC Adopts LPL Advice Solutions
VALIC, a retirement plan services provider, has integrated LPL Financial’s Worksite Financial Solutions platform into its suite of offerings. Through the partnership, plan participants will be able to receive customized retirement advice through an online service.
Andrew Duren joined UBS Wealth Management Americas as head of institutional consulting and retirement program administration and operations. Duren takes on oversight of the firm’s institutional consulting and retirement benefits programs, which provide retirement-related services to defined contribution plans, defined benefit plans, endowments, foundations, Taft-Hartley plans, hospitals, municipalities and other institutional clients.
Economic Events
THE ECONOMIC WEEK AHEAD: Tomorrow, the Conference Board will release its Consumer Confidence Index for April. Thursday, the Labor Department will issue its initial claims report, and the Census Bureau will report about construction spending for March. Friday, we’ll see a report about nonfarm payrolls and learn the unemployment rate for April from the Bureau of Labor Statistics, and the Census Bureau will report about factory orders for March.
Market Mirror
Friday, the Dow decreased 140.19 points (0.85%) to 16,361.46, the NASDAQ fell 72.78 points (1.75%) to 4,075.56, and the S&P 500 closed 15.21 points (0.81%) lower at 1,863.40. The Russell 2000 lost 21.32 points (1.86%) to finish at 1,123.03, and the Wilshire 5000 was down 206.87 points (1.04%) at 19,763.25. On the NYSE, 3.2 billion shares changed hands, with declining issues outnumbering advancing issues nearly 2 to 1. On the NASDAQ, 2.7 billion shares traded, with a near 5 to 1 lead for decliners. The price of the 10-year Treasury note was up 4/32, bringing its yield down to 2.668%. The price of the 30-year Treasury bond increased 5/32, decreasing its yield to 3.446%. WEEK’S WORTH: For the week ending April 25, the Dow was down 0.29%, the NASDAQ decreased 0.49%, and the S&P 500 slipped 0.06%. The Russell 2000 fell 1.31%, and the Wilshire 5000 finished 0.35% lower.
Rules & Regulators
Ask the Experts – Failure to Amend 403(b) Plan Documents
“Our company did timely adopt a written 403(b) plan, but we recently discovered it has not been amended since that time. Can we use the Internal Revenue Service’s Voluntary Correction Program to address these errors?”
The World at Large
The government has been urged to change the message of its auto enrollment awareness campaign from “We’re in” to “We’re in and we’re building” to emphasize the need to increase contributions over time.
Small Talk
ON THIS DATE:  In 1758, future U.S. Senator and President James Monroe was born. In 1788, Maryland became the seventh state to ratify the U.S. constitution. In 1789, three weeks into a journey from Tahiti to the West Indies, the HMS Bounty was seized in a mutiny led by Fletcher Christian, the master’s mate. Captain William Bligh and 18 of his loyal supporters were set adrift in a small, open boat, and the Bounty set course for Tubuai south of Tahiti. In 1897, the Chickasaw and Choctaw, two of the Five Civilized Tribes, became the first to agree to abolish tribal government and communal ownership of land. The other tribes soon followed, throwing open all of Indian Territory to white settlement. In 1914, W.H. Carrier patented the design of his air conditioner. In 1932, the yellow fever vaccine for humans was announced. In 1967, Muhammad Ali refused induction into the U.S. Army and was stripped of boxing title. He cited religious grounds for his refusal. In 1985, the largest sand castle in the world was completed near St. Petersburg, Florida. It was four stories tall. In 2000, Jay Leno received a star on the Hollywood Walk of Fame. In 2001, a Russian rocket launched from Central Asia with the first space tourist aboard. The crew consisted of California businessman Dennis Tito and two cosmonauts. The destination was the International Space Station.
Last week, I asked NewsDash readers how much they read and how they prefer to read books and magazines. Electronic books and magazines have not surpassed those in print as the preference for responding readers. More than six in ten (63.3%) said they prefer to read books in print, while nearly all (93.4%) of responding readers prefer to read magazines in print. In the past month 62.9% of respondents read one to five books, 13.7% read none, 14.5% read six to 10, 8.1% read more than 10, and 0.8% said they don’t know how many books they read in the past month. Three-quarters of respondents read one to five magazines in the past month, 8.9% read none, 11.3% read six to 10, and 4.8% read more than 10. In verbatim comments, print also came out as the most preferred method of reading. However, many touted the convenience of being able to read electronically, especially when travelling. A few readers are advocates of the public library, and a few touted a method of “reading” the survey didn’t cover—audiobooks. I thought it might be embarrassing to admit that the first thing I do when I get a book or magazine in my hand is smell it, but apparently, I’m not the only one. Editors’ Choice goes to the reader who said: “If they invent an e-reader that can emit the smell of pages bound in leather, I’ll make the switch.” Thanks to everyone who participated in the survey!
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Editorial: Alison Cooke Mintzer


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