Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 3rd, 2014
Benefit Briefs
Men Trump Women in Retirement Savings Rates
Men have a slight edge over women when it comes to saving at the recommended 10% rate for retirement, according to research from Wells Fargo, but both genders still fall short of the goal. Slightly more men than women (49% versus 43%) are enrolled in their workplace retirement plan, the data also shows. According to Wells Fargo’s recommended contribution index, which measures how many people save a minimum target of 10% in their 401(k) plan, including employer match, nearly half of men (43%) contribute at this rate, compared with just 39% of women.
Workers who made changes to their 401(k) accounts last year took a positive step 76% percent of the time, according to a recent analysis. The rate of positive decisionmaking was even higher, at 83%, during the fourth quarter of 2013, according to the latest release of the Bank of America Merrill Lynch 401(k) Wellness Scorecard.
Employees Could Use More Financial Education
Sixty-eight percent of employers offer some kind of financial education for employees, a survey found. Preliminary results of a new survey from the International Foundation of Employee Benefit Plans indicate there is room for improvement in the type of financial education employers offer. Half of all organizations offer benefits literacy education and nearly half offer retirement security education, but only about one-quarter offer financial literacy education. Half of organizations surveyed have experienced an increase in demand from employees/participants for financial education in the last five years.
At year-end 2013, retirement account assets were $16.64 trillion, according to Spectrem Group’s Retirement Market Insights Report 2014. Retirement assets grew from $16.3 trillion at year-end 2012, following a strong equity market. These results were seen across all sectors of the retirement market.
Plan Sponsor of the Year and Finalists: Public DC
Meet Our Plan Sponsor of the Year: Public DC
Imagine a deferred compensation 457 retirement plan that has no automatic enrollment feature, no employer matching funds and little in the way of paid support staff. Now imagine that, despite these challenges, the plan’s participation rate stands at 67% of a little more than 12,000 employees.
The state of Michigan has been transitioning steadily from defined benefit (DB) plans for new employees to hybrid and defined contribution (DC) plans. Because of this, its 401(k) and 457 plans have focused on encouraging participants to contribute enough to get the full match, which varies among employee participants.
Tennessee taxpayers spent $731 million last year to support the state’s public pension system, which, barring changes, could exceed $1 billion annually within a decade, cautioned State Treasurer David Lillard. Lillard, therefore, proposed pension-reform legislation, which quickly was enacted. The law creates a hybrid plan that has defined benefit (DB) and defined contribution (DC) features that will become the retirement benefit for state employees, higher-education employees and K-through-12 teachers who start work July 1 or later.
Buyer's Market
The Segal Group has expanded retiree health services for those organizations seeking a private health care exchange platform for Medicare eligible retirees. Through a process of pre-screening existing retiree health exchanges and establishing new minimum vendor requirements, Segal has pre-qualified three private exchange vendors that have agreed to meet certain minimum requirements.
AIG Benefit Solutions and Scott Captive Solutions have entered into a strategic partnership to offer CAPvantage Select. CAPvantage Select is a national group medical stop-loss captive program designed to meet the growing demand among mid-market employers for self-funded options in the era of health care reform. It is a health-financing solution for companies who want to control health care costs, reduce their risk and manage tax expenses and fees associated with fully insured products.
Economic Events
New orders for manufactured durable goods in February, up following two consecutive monthly decreases, increased $4.9 billion or 2.2% to $229.1 billion, unchanged from the previously published increase, according to the U.S. Census Bureau. This followed a 1.4% January decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, up $4.7 billion or 7.0% to $71.4 billion. New orders for manufactured nondurable goods increased $2.7 billion or 1.0% to $259.7 billion.
Market Mirror
Wednesday, the Dow finished 40.39 points (0.24%) higher at 16,573.00, the NASDAQ was up 8.42 points (0.20%) at 4,276.46, and the S&P 500 increased 5.38 points (0.29%) to 1,890.90. The Russell 2000 gained 4.11 points (0.35%) to finish at 1,192.81, and the Wilshire 5000 closed at 20,222.37, an increase of 52.13 points (0.26%). On the NYSE, 3.2 billion shares traded, and on the NASDAQ, 2.7 billion shares changed hands, with 1.3 advancing issues for every declining issue on both exchanges. The price of the 10-year Treasury note was down 14/32, bringing its yield up to 2.805%. The price of the 30-year Treasury bond decreased 24/32, increasing its yield to 3.649%.
Financial Sense
Pension Plans Using Broad Definition of LDI
Nearly half of defined benefit plan respondents (47%) to a recent survey for Prudential indicate they utilize a liability driven investing (LDI) strategy. However, the inaugural survey, conducted by Clear Path Analysis for the “Pension Plan De-Risking, North America 2014” report, finds duration-matching LDI remains across low across the pension space. “From this statistic one might infer that these pension professionals assume they are hedging risk with a small percentage of fixed income investments, but in actuality may not be implementing a true LDI strategy, as no significant duration matching is occurring,” says Glenn O’Brien, managing director and head of U.S. Distribution for Pension Risk Transfer at Prudential, in the report.
The funded status of the typical U.S. corporate pension plan declined 0.5 percentage points in March to 92.1%, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). The BNY Mellon Institutional Scorecard for March noted liabilities rose 0.7%, outpacing the 0.3% increase in assets during the month. Public defined benefit plans, endowments and foundations also lost ground as they failed to attain their targeted returns, ISSG said.
CalPERS Finds State Employees’ Benefits Boost Economy
More than $30 billion in economic activity was generated by retirement benefits paid to California Public Employees’ Retirement System (CalPERS) members. The CalPERS Economic Impacts in California report for the fiscal year ending June 30, 2012, shows CalPERS benefits (retirees spending their pensions) returned $10.85 in economic activity to California for each taxpayer dollar (public funds) contributed to the system.
The World at Large
The new requirement for UK pension providers to offer defined contribution (DC) plan members guidance at the point of retirement will not mean mandatory regulated advice, according to the Financial Conduct Authority (FCA). In last month’s budget the UK government announced all savers in defined contribution plans were to receive “independent face to face guidance,” supplied by their plan provider, about their financial options when they retire.
Small Talk
Small Talk: Six in Ten Plan to Save/Invest Tax Refund
Nearly half (45%) of individuals surveyed expect to receive a tax refund this year, and among them, 61% plan to save or invest the money. According to a survey of 1,000 investors released by TD Ameritrade Holding Corporation, 21% plan to use their refunds to pay off debt, 19% plan to spend it on discretionary items and 18% expect to spend it on necessities. The majority (62%) of respondents said they file their taxes on time, but not with any rush. Just 27% say they file as soon as they get their W-2s.
ON THIS DATE:  In 1860, the first Pony Express mail, traveling by horse and rider relay teams, simultaneously left St. Joseph, Missouri, and Sacramento, California. In 1882, one of America’s most famous criminals, Jesse James, was shot to death by fellow gang member Bob Ford, who betrayed James for reward money. In 1948, U.S. President Harry S. Truman signed into law the Foreign Assistance Act, commonly known as the Marshall Plan, providing more than $13 billion in aid to Europe following World War II. In 1949, Dean Martin and Jerry Lewis debuted on radio on the “Martin and Lewis Show.” In 1953, “TV Guide” was published for the first time. In 1965, the song “Wooly Bully” by Sam the Sham and the Pharaohs was released. In 1968, Martin Luther King Jr. delivered his “mountaintop” speech just 24 hours before he was assassinated. In 1982, John Chancellor stepped down as anchor of the “The NBC Nightly News.” Roger Mudd and Tom Brokaw became the co-anchors of the show. In 1988, Mario Lemieux won the Art Ross Trophy as the National Hockey League’s top scorer, besting Wayne Gretzky, who had dominated the league as the top scorer for seven seasons. In 1993, the Norman Rockwell Museum opened in Stockbridge, Massachusetts. In 1998, the Dow Jones industrial average climbed above 9,000 for the first time.
SURVEY SAYS: This week, I’d like to know, when do you usually file your tax return, are you expecting a refund, and if so, how will you use it? You may respond to this week’s survey by 6 p.m. Pacific time today.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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