Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 30th, 2014
Webcast Event
Over the coming months, plan sponsors may begin to see a revival of regulatory actions that could affect their qualified retirement plans. The President, Congress and the Department of Labor (DOL) are unveiling initiatives designed to address critical issues facing Americans, and investing for retirement is at or near the top of almost everyone’s list. In this webcast, our speakers will analyze proposed 2014 legislation and regulations affecting plan sponsors, participants and fiduciaries, as well as provide insight into how these policies are being received in Washington. Come prepared to learn about: the impact of proposed budget and tax reform initiatives on retirement plans; myRA and the proposed USA Retirement Act; the evolving definition of a fiduciary; and potential changes in fee disclosure.
Benefit Briefs
Study Offers Insights About Employee Savings Behavior
Plan sponsors in hospitality and leisure businesses may face the biggest challenges to retirement plan participation. The reasons for this are revealed in a study by the ADP Research Institute. On first glance, no surprising facts emerge from the firm’s findings; too few people save, and few save enough, according to “The Retirement Savings Paradigm: Factors Influencing Saving,” a study about how people save for retirement. However, anonymous, aggregated data from nine million employees show some interesting trends about retirement savings behaviors, says Ahu Yildirmaz, vice president and head of the ADP Research Institute. Savings behaviors vary widely based on participant demographics, company size, and industry, Yildirmaz tells PLANSPONSOR.
Today’s workplace is a multigenerational one, challenging retirement plan sponsors to deal with differing retirement readiness needs of employees. Some retirement plan features can address needs of certain generations over others. For example, Bill McClain, a principal with Mercer in Seattle, notes Roth accounts can appeal more to younger, Millennial employees because they offer an opportunity to get taxes out of the way now, while they are at the beginning of their career and potentially at a lower tax bracket than they will be later on in their career. However, he tells PLANSPONSOR generational issues have less to do with plan design and more with employee communications.
Administering Retirement Plan Account Forfeitures
When a participant terminates employment is not the only time defined contribution (DC) retirement plan account balances may be forfeited, and there are several ways to deal with forfeited assets. The most common time a forfeiture occurs is when a plan participant terminates employment and is not 100% vested in the portion of his account attributable to employer contributions. Forfeitures may also occur due to failed nondiscrimination testing, participants exceeding statutory deferral limits, or when a participant with a balance left in the plan cannot be found, Robert Richter, vice president at SunGard Relius in Jacksonville Florida, tells PLANSPONSOR.
Only about one in four (26%) employers automatically enroll employees in their retirement plans, according to an analysis by Fidelity Investments. And even for plans with auto-enrollment features, getting more employees to start contributing isn’t always enough to improve plan outcomes. The numbers suggest employers must also take action to help workers save more, Fidelity says.
States’ Pension Reform Reduced Potential Retirement Income
Public employees hired under new pension rules in many states can expect a lower retirement income compared with that of existing employees, an analysis finds. According to a report from the Center for State and Local Government Excellence and the National Association of State Retirement Administrators, calculations of the projected initial retirement benefit of state and local employees, before and after recent modifications were made to pension design and financing, shows reductions ranging from less than 1% (for new state employees in Colorado) to 20% (Alabama).
Buyer's Market
Consulting firm Mercer appointed Scott Jarboe as the next leader of retirement-related consulting services in the firm’s Baltimore and Washington, D.C., markets. Jarboe, a partner and 20-year veteran at Mercer, specializes in advising clients on integrated financial management strategies that incorporate program design, cash funding and investment policies.
Employee benefits and financial services consulting firm Mercer added four new hires to its senior defined benefit (DB) and defined contribution (DC) consulting teams. Rich Dabrowski, most recently of Strategic Investment Solutions, has rejoined Mercer and will focus on corporate DB and DC consulting. Peter Grant, previously with Towers Watson, will work primarily with corporate DB and DC plans and hospital investment pools and other institutional clients. Mike Paolucci, previously with Segal RogersCasey, takes on responsibility for corporate DB and DC relationship management, and he will also advise health care clients. Jean-Daniel Cȏté, most recently of ACT Actuaries in Montreal, has rejoined Mercer’s Canadian consulting team, with a primary focus on DC consulting relationships.
Economic Events
The Conference Board Consumer Confidence Index, which had increased in March, declined slightly in April. The Index now stands at 82.3 (1985=100), down from 83.9 in March. The Present Situation Index decreased to 78.3 from 82.5, while the Expectations Index was virtually unchanged at 84.9 versus 84.8 in March.
Market Mirror
Tuesday, the Dow was up 86.63 points (0.53%) at 16,535.37, the NASDAQ increased 29.14 points (0.72%) to 4,103.54, and the S&P 500 closed 8.90 points (0.48%) higher at 1,878.33. The Russell 2000 added 3.77 points (0.34%) to finish at 1,120.83, and the Wilshire 5000 gained 107.44 points (0.54%) to finish at 19,892.14. On the NYSE, 3.2 billion shares traded, with 1.5 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares changed hands, with a slight lead for advancers. The price of the 10-year Treasury note increased 3/32, decreasing its yield to 2.694%. The price of the 30-year Treasury bond was unchanged, with its yield at 3.489%.
Rules & Regulators
IRS Announces 2015 HSA Contribution Limits
The Internal Revenue Service (IRS) has released the 2015 inflation-adjusted contribution limits for health savings accounts, or HSAs.
Financial Sense
Retirement Investors Should Diversify Fixed Income
For the past 30 years, investors, including retirement plan sponsors and participants, have found comfort in fixed-income investments. Bond rates have had a more than 30-year bull run, and fixed income has not only protected investors capital, it has made them money, explained Andres Garcia-Amaya, vice president and global market strategist at J.P. Morgan Asset Management. However, he told attendees of the 43nd Annual Retirement & Benefits Management Seminar, hosted by the Darla Moore School of Management at the University of South Carolina, and co-sponsored by PLANSPONSOR, things are set to change, and investors need to diversify their fixed-income holdings.
Insourcing Helps CalPERS Reduce Investment-Related Costs
The California Public Employees’ Retirement System (CalPERS) has been able to significantly reduce the costs for its investment operations over the past two fiscal years. CalPERS recently underwent a CEM Benchmarking Survey, for comparison against peers in the retirement industry, which found that for fiscal year 2011 to 2012 and fiscal year 2012 to 2013, CalPERS reduced its investment-related costs by about $80 million. (CEM is an independent provider of objective benchmarking information.) The findings show the main factors contributing to this reduction were reducing external management fees and the number of external consultants, as well as the insourcing of various management functions.
Sponsored message from PLANSPONSOR
PLANSPONSOR Interview with Charles P. Nelson
Charles P. Nelson, President of Retirement Services for Great-West Financial, discusses the keys to a successful participant experience with Stephen Moylan, SVP of Sales for PLANSPONSOR.
Small Talk
Retirement Could Be the Best Time in Your Life
When asked what stage in life they remember most fondly, both Centenarians and Baby Boomers express the most nostalgia for their 30s (20% and 24%, respectively). Boomers also reflect fondly on their 20s (20%). However, according to a survey by UnitedHealthcare, 9% of Centenarians express the most fondness for ages 70 and up, and 3% say the best time in their life is now. Both Centenarians and Baby Boomers feel younger than their age, the ninth annual UnitedHealthcare 100@100 survey finds.
ON THIS DATE:  In 1789, in New York City, George Washington was inaugurated as the first president of the United States. In 1803, representatives of the United States and Napoleonic France concluded negotiations for the Louisiana Purchase, a massive land sale that doubled the size of the young American republic. In 1927, the Federal Industrial Institution for Women, the first women’s federal prison, opened in Alderson, West Virginia. In 1939, the New York World’s Fair opened in New York City. The opening ceremony, which featured speeches by President Franklin D. Roosevelt and New York Governor Herbert Lehman, ushered in the first day of television broadcasting in New York. In 1945, holed up in a bunker under his headquarters in Berlin, Adolf Hitler committed suicide by swallowing a cyanide capsule and shooting himself in the head. In 1975, South Vietnam surrendered to North Vietnam.   WEDNESDAY WISDOM: “Experience is one thing you can’t get for nothing.”—Oscar Wilde, Irish writer and poet
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Data and Research
Unplanned Financial Challenges Continue to Plague US Workers’ Retirement Savings

Editorial: Alison Cooke Mintzer


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