Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 4th, 2014
Benefit Briefs
Roth 401(k) Is an Option to Consider
Plan sponsors might consider offering Roth accounts to participants, since some may want to contribute after-tax dollars to retirement savings. Citing the unknowns of retirement planning, Adam Levy, a registered representative at JHS Capital Advisors, collars taxes as a specific area of unconcern to some plan participants. “When helping my clients formulate a plan for distributing income in their retirement, as often as possible, I try to create as much flexibility and options when it comes to withdrawing from income,” Levy tells PLANSPONSOR.
Communicating with employees about benefits, including retirement benefits, should not just occur at enrollment. A white paper from Benz Communications, “Creating Results with Benefits Communication,” recommends employers get their materials online, keep talking with employees, and work smart, using free or low-cost resources. “The biggest recommendation we can give about communications is for companies to build a strategy where they have a dialogue with employees, talking to them all year round,” Jennifer Benz, CEO of the San Francisco-based Benz Communications, tells PLANSPONSOR.
Plan Sponsor of the Year and Finalists: 403(b)
Meet Our Plan Sponsor of the Year Winner: 403(b)
When the Internal Revenue Service (IRS) issued regulations revamping 403(b) plans, one result was that more plans underwent plan audits. The Gilman School in Baltimore, recipient of one such audit, found this process eye-opening in regard to its plan design. “When the auditors came, we had two plans with TIAA-CREF and one with another vendor,” says Angela Johnson, vice president of human resources (HR) at the private, independent K-through-12 college preparatory day school for boys. “We had close to 200 investment choices for employees.”
Some defined contribution (DC) plan sponsors are embracing the idea that, by stretching their employer match formulas, they can encourage participants to save more. This trend has been implemented and is showing positive results in Moffitt Cancer Center’s 403(b) plan. Before the plan was changed, the organization’s 403(b) plan auto-enrolled participants at a 4% salary deferral. If participants deferred 1% more, Moffitt matched 25% of that 1%. According to Michele A. Talka, director of human resources (HR) operations at the center, which is located in Tampa, Florida, “This [strategy] had been in place for 25 years and didn’t keep pace with the changes in the retirement landscape.
When Texas Association of School Boards in Austin reviewed the overall retirement readiness of its employees, it was concerned about the rates of participation and deferral of employees ages 40 and younger in its $59 million 403(b) plan, according to Vera Aynesworth, director of human resources (HR). They had always considered participant retirement readiness as a benchmark for plan success but, in 2012, with the help of CAPTRUST, set goals of 90% or more participation and 15% or more total employee and employer savings for participants.
The Washington State Board for Community & Technical Colleges in Olympia, Washington, knows that providing the best service to students means having the best faculty and staff. According to John Boesenberg, deputy executive director of human resources (HR) for the board, the retirement plan is a central part of its compensation program, as well as a way to attract and retain the best employees. With a 100% participation rate and generous match, the plan still had one area that could be improved, the board determined: the plans’ investment lineups.
Buyer's Market
Great-West Acquires J.P. Morgan Retirement Plan Services
Great-West has reached an agreement to acquire the J.P. Morgan Retirement Plan Services large-market recordkeeping business, which has $167 billion in plan assets across 200 plan sponsor clients serving 1.9 million participants. The acquisition was of interest to Great-West because over the years, J.P. Morgan has built a great business in the large-plan market, Robert L. Reynolds, president and chief executive officer of Great-West Lifeco U.S., tells PLANSPONSOR. “This jump starts the whole business, bringing us scale and a client base to truly build a world-class retirement plan service.”
The Principal Financial Group seeks small to medium-sized companies that excel in helping their employees achieve financial security during the 13th annual search for The Principal 10 Best Companies for Employee Financial Security. The program showcases the top 10 growing companies (with five to 1000 employees) for their commitment to their employees’ total financial security. An independent panel of experts selects the winners. A short and simple entry form allows companies to quickly complete the information needed to enter. Financial professionals are encouraged to work with clients to enter as a way to recognize and celebrate their overall employee financial security.
Financial adviser Erik Swenson, president of Retirement Plan Solutions, has affiliated with Pensionmark Retirement Group, creating RPS Pensionmark. “Our goal since the inception of Retirement Plan Solutions ten years ago has been to provide highest quality services to the employers, plan fiduciaries, and employees of the 401(k) and other corporate retirement plans we serve,” says Swenson.
Industry Voices
Industry Voices: The Gen Y Paradox
Gen Y, Millennials, whatever you call the demographic cohort born between the early 1980s and early 2000s, they are the largest and most diverse generation in U.S. history. As such, their financial behavior and attitudes will have a transformational impact on our economy for a long time to come, so it’s important to understand the strengths and weaknesses of Gen Y’s financial picture.
Economic Events
In the week ending March 29, the advance figure for seasonally adjusted initial claims for unemployment insurance was 326,000, an increase of 16,000 from the previous week’s revised figure of 310,000, the Labor Department reported. The four-week moving average was 319,500, an increase of 250 from the previous week’s revised average of 319,250. The average interest rate for a 30-year fixed-rate mortgage is 4.41%, up from 4.40% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.47%, up from 3.42%.
Market Mirror
Thursday, the Dow was virtually unchanged at 16,572.55, the NASDAQ fell 38.72 points (0.915) to 4,237.74, and the S&P 500 slipped 2.13 points (0.11%) to 1,888.77. The Russell 2000 dropped 11.69 points (0.98%) to 1,181.12, and the Wilshire 5000 closed 60.22 points (0.30%) lower at 20,162.15. On the NYSE, 3.2 billion shares changed hands, with 1.4 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares traded, with a more than 2 to 1 lead for decliners. The price of the 10-year Treasury note was up 2/32, bringing its yield down to 2.798%. The price of the 30-year Treasury bond increased 14/32, decreasing its yield to 3.626%.   
Rules & Regulators
IRS Guidance Eases Rollover Processing
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued guidance designed to more easily facilitate the transfer of savings from one retirement plan to another. Revenue Ruling 2014-9 simplifies the rollover process by introducing an easy way for a receiving plan to confirm the sending plan’s tax-qualified status.
The Department of Labor is hosting its free compliance assistance seminar in Memphis, Tennessee, and Madison, Wisconsin. The “Getting It Right – Know Your Fiduciary Responsibilities” seminar will increase awareness and understanding about basic fiduciary responsibilities when operating a retirement plan.
Ask the Experts – Differences in RMDs for 403(b) Plans
“I have traditionally worked with 401(k) plans, but my new employer sponsors a 403(b) plan. I am currently working on my first required minimum distribution (RMD) transaction with a 403(b). I am familiar with the 401(k) rules, but are there any differences for 403(b) plans?”
Financial Sense
The average funding ratios of U.S. pension plans saw a decrease during the first quarter of 2014, says a recent analysis. The Legal & General Investment Management America, Inc. (LGIMA) Pension Fiscal Fitness Monitor (PFFM), a quarterly estimate of the change in health of a typical U.S. defined benefit (DB) pension plan, found the average funding ratio fell from the low to mid-90s to slightly under 90% as of the end of the first quarter.
Sponsored message from OppenheimerFunds
Go Where the Growth Is
These days investors must be willing to pursue growth opportunities globally or risk missing them altogether. George Evans, head of Equities at OppenheimerFunds, talks about a strategy that starts with a global core of the best and fastest growing companies, regardless of where they are headquartered.
Small Talk
The results of the 2014 Financial Literacy Survey by the National Foundation for Credit Counseling, show 61% of U.S. adults, the highest percentage in six years, admit to not having a budget, and most adults have not reviewed their credit score (60%) or their credit report (65%) within the last year. The top concerns noted by survey respondents were evenly divided between insufficient “rainy day” savings for an emergency (16%) and retiring without having enough money set aside (16%).
ON THIS DATE:  In 1812, the territory of Orleans became the 18th U.S. state, later to become known as Louisiana. In 1841, only 31 days after assuming office, William Henry Harrison, the ninth president of the United States, died of pneumonia at the White House. In 1913, blues artist Muddy Waters was born McKinley Morganfield in Clarksdale, Mississippi. In 1949, the United States and 11 other nations established the North Atlantic Treaty Organization (NATO), a mutual defense pact aimed at containing possible Soviet aggression against Western Europe. In 1960, William Wyler’s Technicolor epic Ben-Hur was the behemoth entry at the 32nd annual Academy Awards ceremony, held at the RKO Pantages Theatre in Hollywood. Setting an Oscar record, the film swept 11 of the 12 categories in which it was nominated, including Best Picture, Best Director and Best Actor (Charlton Heston). In 1968, Martin Luther King Jr. was fatally shot while standing on the balcony outside his second-story room at the Lorraine Motel in Memphis, Tennessee. In 2013, one of America’s best-known and most influential movie critics, Roger Ebert, who reviewed movies for The Chicago Sun-Times for 46 years and on TV for 31 years, died at age 70 after battling cancer.   And now it’s time for FRIDAY FILES!
A roller coaster made completely from Legos.
In Richmond, Virginia, passengers at Richmond International Airport experienced delays and cancellations due to—a jet that was stuck in the mud. An aborted U-turn by an American Airlines jet, bound for Dallas with 129 passengers, sent it sliding into a muddy field. The pilot “misjudged the radius of his aircraft,” a regional spokeswoman for the Federal Aviation Administration said. The entire plane was about eight feet off the runway, mired in up to six inches of mud, witnesses told the Richmond Times-Dispatch. The incident affected at least 100 other flights. In Baker Lake, Washington, a black bear has weighed in on the question of which camper’s be.er is best. State Fish and Wildlife agents recently found the bear passed out on the lawn of Baker Lake Resort, with dozens of empty cans of Rainier be.er nearby. The bear got into campers’ coolers and used his claws and teeth to puncture the cans. However, “He drank the Rainier and wouldn’t drink the Busch be.er,” said Lisa Broxson, bookkeeper at the campground and cabins resort east of Mount Baker, according to the Associated Press. The bear tried one can of Busch, but ignored the rest, and consumed about 36 cans of Rainier. Agents finally herded the bear away, but it returned the next morning. They were able to capture it for relocation using a large, humane trap with doughnuts, honey and…two open cans of Rainier.
Why can’t I ever get a flight on which stuff like this happens?
In South Bend, Indiana, a 19-year-old Notre Dame student, apparently with the be.er munchies, damaged three doors of a spa trying to break in, and finally succeeded by throwing a flower pot through a stained glass window, crawling through then using a hammer to beat his way through a wall. He then proceeded to eat half a box of Hot Pockets. He was warming up some macaroni and cheese in an oven, when he fell asleep at a table while eating some drumsticks. Police found him there the next morning, and according to the local NBC news station, he was still very into.xicated, blowing a .106 in a standard breath test. In Brandon, Florida, police responded to a home after a call that a man had just come home and discovered his house was broken into. Deputies found the front door open, the interior of the house appeared to have been ransacked and the front bedroom window and blinds were open. However, there was no sign of forced entry. According to the Tampa Tribune, while talking to neighbors, police learned that the man was seen leaving the residence at 6:30 a.m. and returning home at 7:15 a.m. He was seen walking in the front door and lifting the blinds and opening the front bedroom window. He came back outside his home and stood in the front yard until deputies arrived. Deputies confronted the man, who admitted he staged the burglary to avoid having to go to work. He told them he didn’t think he could go to jail for doing this. They proved him wrong.
Another reason to not text while walking…beeaarrr!
In Fairbanks, Alaska, police spotted a man speeding and weaving his pickup truck on a rural highway. When stopped, the man admitted he was drunk, and when asked for his registration, he handed an officer a receipt. Police found a handg.un and small bag of marij.uana in his pocket. Turns out, the man is a priest at the University of Alaska Fairbanks. In New York City, New York, about 30 Manhattan court cases are in jeopardy, with officials fearing criminals will have the chance to claim on appeal that crucial evidence is missing. The New York Post reports a court stenographer, instead of typing transcripts of court proceedings, either typed gibberish or “I hate my job. I hate my job…” over and over. The stenographer was fired in March 2012 for misconduct. Judges are holding “reconstruction hearings” at which everyone involved in a case has to testify about what they remember. The stenographer denies he botched transcripts, saying he was fired for a substance abuse problem.
I’ll have what this penguin had.
In Essex, England, a couple’s cat went missing and after desperately searching for it, they just hoped it would find its way home. Four days later they learned the cat was discovered by the new owner of a sofa the couple had taken to a charity. According to the UK’s Daily Mail, for four days the cat hid inside the sofa, on the shop floor, without detection despite being surrounded by unsuspecting volunteers and bargain-hunters. The trapped cat was discovered when the new owners noticed meowing sounds coming from inside the three-seater. (Editor’s Note: I had to include this story because I once acquired a donated couch, and a cat crawled out two days later.)   Have a great weekend!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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