Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
August 14th, 2014
Benefit Briefs
Employers Using Multichannel Benefits Communications
Employers are embracing a multichannel approach to convey benefits information to their employees, according to a research brief from The Prudential Insurance Company of America. The brief, “Delivering the Benefits Message,” says employers are doing so to meet the needs and preferences of their employees. Group meetings and seminars are still considered the most successful communication methods, with 74% of employers using them with great to moderate success.  
While nearly half of enrollees in traditional managed care health plans are satisfied with their health coverage, that number is decreasing, according to the Employee Benefit Research Institute (EBRI). In 2013, 44% of traditional-plan participants were extremely or very satisfied with out-of-pocket costs (for health care services other than for prescription drugs), while 20% of high-deductible health plan (HDHP) enrollees and 31% of consumer-drive health plan (CDHP) participants were extremely or very satisfied. However, satisfaction has been trending upward among CDHP enrollees in recent years, according to the EBRI.  
Employers Have Strategy to Stem Health Care Costs
Health care benefit costs at large employers are expected to increase 6.5% in 2015, slightly lower than 2014’s rate of increase, according to a survey from the National Business Group on Health (NBGH). Most employers say they will be able to stem increases even more as a result of changes they are making to their benefit plans. The number of employers offering employees a consumer-directed health plan (CDHP) as the only health benefit option is expected to increase by nearly 50% in 2015. Nearly one-third (32%) of employers surveyed plan to do this in 2015, compared with 22% this year.  
Small 401(k) plans often outperform large ones on a number of key metrics, according to analysis of Form 5500 data by Judy Diamond Associates. Judy Diamond’s proprietary 401(k) plan benchmarking methodology assigns a 0 to 100 score for publicly reported retirement plans based on the most recent Form 5500 plan disclosure documents from the Department of Labor (DOL). Micro 401(k) plans, with 10 or fewer participants, had an average plan score of 68.3 out of 100, while plans with at least 100 participants scored 52.3 over the same period. “There are a few reasons why the smallest plans are really driving ahead, and perhaps the most important factor is the participation rates,” Eric Ryles, managing director of Judy Diamond Associates, tells PLANSPONSOR. “If you have a company that has 10 employees and all 10 are participating, that’s 100% participation and that is fantastic.”  
Buyer's Market
LPL Launches Financial Education Website
LPL Financial LLC has launched its Worksite Financial Solutions website to help employees gain confidence in their financial future. LPL Financial’s main objective in launching the site is to demystify retirement by offering plan participants education about their options through different life stages. “Providing online financial tools to participants—such as calculators, videos, articles and tutorials—is intended to help them make better financial decisions throughout their careers and become more confident about their futures,” Adam Sokolic, senior vice president of LPL Retirement Partners, based in San Diego, explains.  
Checklist for Evaluating Private Health Care Exchanges
Private exchanges have emerged as a potential health benefits delivery option for employers. A private exchange is a health benefits marketplace to which an employer can direct its employees to purchase health coverage from a single or multiple participating organizations, including insurance carriers and provider networks. Human resources consulting firm Findley Davies offers a checklist of issues and questions it addresses when helping employers evaluate private exchanges.  
Economic Events
The U.S. Census Bureau announced that the combined value of distributive trade sales and manufacturers’ shipments for June, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,346.7 billion, up 0.3% from May and up 4.7% from June 2013. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,743.1 billion, up 0.4% from May and up 5.8% from June 2013.   Advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.8 billion, virtually unchanged from the previous month, and 3.7% above July 2013. Total sales for the May through July 2014 period were up 4.2% from the same period a year ago. The May to June 2014 percent change was unrevised from 0.2%. Retail trade sales were virtually unchanged from June, and 3.4% above last year. Health and personal care stores were up 7.3% from July 2013, and auto and other motor vehicle dealers were up 6.4% from last year.
Market Mirror
Yesterday, the Dow closed 91.26 points (0.55%) higher at 16,651.80, the NASDAQ climbed 44.87 points (1.02%) to 4,434.13, and the S&P 500 gained 12.97 points (0.67%) to finish at 1,946.72. The Russell 2000 increased 8.75 points (0.77%) to 1,141.78, and the Wilshire 5000 was up 141.34 points (0.69%) at 20,617.51.   On the NYSE, 3.2 billion shares changed hands, with advancing issues outnumbering declining issues nearly 3 to 1. On the NASDAQ, 2.8 billion shares traded, with a near 2 to 1 lead for advancers.   The price of the 10-year Treasury note was up 9/32, bringing its yield down to 2.418%. The price of the 30-year Treasury bond increased 19/32, decreasing its yield to 3.246%.
Rules & Regulators
Financial Engines Accused of Patent Infringement
GRQ Investment Management alleges in a new lawsuit that Financial Engines Inc. and its subsidiary advisory firm violated two patents related to digital investment advice and managed accounts. GRQ alleges that Financial Engines, in delivering computer-based 401(k) plan advice services, violated U.S. Patents entitled “Systems and Methods for Improving Investment Performance.” GRQ describes itself as a firm “formed to monetize the inventions of the late Brian Tarbox and Mark Greenstein.” Background materials included in the complaint show that, in 1996, Tarbox assisted William Sharpe, the founder of Financial Engines, by providing him with guidance on an initial business model for an independent advisory firm. Tarbox is also said to have explained this business model to at least one third party, so that Sharpe could obtain funding during the initial stages of Financial Engines’ development.  
Fidelity to Settle Excessive Fee Suits
Fidelity Investments has agreed to a settlement of two lawsuits charging it with subjecting its own 401(k) plan participants to high investment fees. Under the settlement agreement, without admitting any wrongdoing, Fidelity will pay up to $12 million to settle the suits, with the first payment being made to an escrow account in the amount of $1.2 million within 10 days of preliminary approval of the settlement by the court. In addition, the settlement calls for several items of affirmative relief, including: The default investment option under the plan shall be the Fidelity Freedom Funds-Class K, and the plan shall allow plan participants access to a large number of Fidelity and non-Fidelity mutual funds.  
Small Talk
ON THIS DATE:  In 1848, the Oregon Territory was established. In 1935, President Franklin D. Roosevelt signed into law the Social Security Act. The act created unemployment insurance and guaranteed retirement income for the elderly. In 1945, it was announced by U.S. President Truman that Japan had surrendered unconditionally. The surrender ended World War II. In 1953, the whiffle ball was invented. In 1980, People for Ethical Treatment of Animals (PETA) was incorporated. In 1995, Shannon Faulkner became the first female cadet in the history of The Citadel, South Carolina’s state military college. She quit the school less than a week later. In 2003, a major outage knocked out power across the eastern United States and parts of Canada. Beginning at 4:10 p.m. ET, 21 power plants shut down in just three minutes. Fifty million people were affected, including residents of New York, Cleveland and Detroit, as well as Toronto and Ottawa, Canada.
SURVEY SAYS: A recent survey found most employees say they can feel successful without earning large paychecks. This week, I’d like to know, are you satisfied with your salary, and what salary would make you feel successful? You may respond to this week’s survey by 6 p.m. Pacific time today.
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