| Benefit Briefs | How the Government Views Retirement Plan Tax Deferrals | A new report from the U.S. Congress’ Joint
Committee on Taxation offers a glimpse into the federal government’s perception
of the tax benefits associated with retirement savings. In a word, the
committee sees the income tax deferrals associated with qualified defined
contribution (DC) retirement plans as expenditures—despite the fact that income
tax will eventually be paid on qualified DC account assets when participants
use them for annual income in retirement. Under current law, payments from
Social Security retirement benefits are also partially excluded or fully
excluded from an individual’s gross income, further adding to the government’s
“expenditures” for retirement tax benefits. It’s not that the joint tax
committee is unaware of the fact that taxes will eventually be paid on
qualified retirement plan assets (at least when it comes to DC accounts), says
Rep. Reid Ribble (R-Wisconsin). The problem is rather how the Congressional
Budget Office (CBO) and other key players in the tax assessment, collection and
expenditure process are forced to account for tax-deferred savings under
current law. | PLANSPONSOR’s 2014 Defined Benefit Administration Survey | Retirement plan sponsors that want to bring
together defined benefit (DB) and/or nonqualified (NQ) plan services with
defined contribution (DC) plan services under one provider have many options. In
the retirement industry, discussions about “bundling plan services” can mean
different things. A defined contribution plan sponsor can bundle its plan
services with payroll services using a payroll provider; a retirement plan
sponsor can bundle all services pertaining to one retirement plan—defined
contribution, defined benefit or nonqualified—with one service provider; or a
plan sponsor can bundle all services for all of its retirement plans at one
provider. The latter is generally referred to as total retirement outsourcing
(TRO). | PLANSPONSOR’s 2014 NQDC Buyer’s Guide | It is not surprising to find a certain nexus
between the administrative underpinnings of today’s deferred comp programs and
that of the most widely utilized deferred compensation arrangement: the 401(k)
plan. In fact, the services offered to participants in deferred compensation
programs are much like those offered to qualified plans. This survey provides a
listing of which plan types, financing vehicles and service channels each
provider offers as well as a survey of plan sponsors’ experiences with deferred
compensation plans. | | Buyer's Market | A new target-date fund series will be co-managed
by Morningstar Associates and AllianceBernstein, and boasts a diverse cast of
managers, including Franklin Templeton and PIMCO. The AllianceBernstein
Multi-Manager Select Retirement Funds offer access to high-quality managers,
based off assessments delivered through Morningstar Associates’ independent
investment selection process. The goal is to deliver a better target-date
design to plan sponsors and participants by working with industry peers,
AllianceBernstein says. | | Industry Voices | Industry Voice: Do PRTs Consider Retiree Concerns? | Retirement industry publications discussing
pension risk transfer (PRT) actions by plan sponsors often fail to mention
those most impacted by de-risking: the retirees. Shouldn’t someone be in the
room representing the retirees being subjected to the de-risking? And,
shouldn’t that someone be chosen by the retirees? | | Economic Events | The Producer
Price Index (PPI) for final demand rose 0.1% in July, according to the Bureau
of Labor Statistics. This increase followed a 0.4% advance in June and a 0.2%
decline in May. In July, index for final demand services rose 0.1% and prices
for final demand goods were unchanged.
THE
ECONOMIC WEEK AHEAD: Tomorrow,
we’ll learn the consumer price index for July from the Bureau of Labor
Statistics, and the Census Bureau will report about housing starts for July. Thursday, the Labor Department will release
its initial claims report, and the National Association of Realtors will report
about existing home sales for July.
| | Market Mirror | Friday, the Dow closed 50.67 points
(0.30%) lower at 16,662.91, the NASDAQ was up 11.93 points (0.27%) at 4,464.93,
and the S&P 500 decreased by 0.12 (0.01%) to 1,955.06. The Russell 2000 decreased
by 1.69 (0.15%) to 1,141.65, and the Wilshire 5000 was virtually unchanged at
20,704.88.
On the NYSE, 3.2 billion shares traded,
with only a slight lead for decliners. On the NASDAQ, 2.7 billion shares
changed hands, with 1.4 declining issues for every advancing issue.
The yields for the 10-year Treasury note
and 30-year Treasury bond were 2.342% and 3.136%, respectively.
WEEK’S
WORTH: For the week ending August 15, the Dow was up
0.66%, the NASDAQ climbed 2.15%, and the S&P 500 increased 1.22%. The
Russell 2000 finished 0.91% higher, and the Wilshire 5000 gained 1.31%.
| | Financial Sense | The funded status of the largest corporate
defined benefit (DB) pension plans decreased by $5 billion during July,
according to data from Milliman, Inc. The Milliman Pension Funding Index (PFI)
tracks the nation’s 100 largest corporate-sponsored defined benefit pension
plans. During the month of July, these plans experienced a $3 billion decrease
in pension liabilities and an $8 billion decrease in asset values. | Do You Need a Transition Manager? | The need for transition management services
depends on the size and liquidity of the assets, as well as investment
strategies of fund managers. Whenever a large institutional investor or asset
owner needs to move assets between investing mandates, they need a transition
manager to do that effectively, says Travis Bagley, director, transition
management-Americas at Russell Investments. “Turning to an experienced
transition manager can minimize the cost and the risk, in order to gain a
better performance outcome,” Bagley says. A transition manager knows strategies
for minimizing the time assets are out of the market and are often able to
perform transactions at a lower cost than the plan sponsors can themselves.
It’s equally relevant to defined contribution (DC) and defined benefit (DB)
plans, he notes: Both plans are sensitive to risk and want to manage investment
risk. But not every single move of assets requires these services, Kevin Byrne,
head of the transition management group at Fidelity, points out. | | The World at Large | While the bad guys in the Star Wars mythology
may be accused of tyranny and megalomania, one point in their favor is they
never practiced age discrimination when recruiting apprentices. While Jedi
master Yoda tells Luke Skywalker he is too old to complete his training,
Emperor Palpatine takes on an aged Count Dooku as his apprentice following the
death of Darth Maul. It seems whichever galaxy you’re in whether it be far, far
away or nearby, age discrimination in recruiting apprentices is a hot button
topic, while growing life expectancy is making people put retirement off
further and further. | Scottish members of the UK’s National Employment
Savings Trust could find themselves “kicked out” of the scheme following a Yes
vote on independence, a pension lawyer has claimed. | | Small Talk | ON THIS DATE: In 1587,
Virginia Dare became the first child to be born on American soil of English
parents in the Roanoke Island colony. In 1590,
John White, the governor of the Roanoke Island colony in present-day North
Carolina, returned from a supply-trip to England to find the settlement
deserted. White and his men found no trace of the 100 or so colonists he left
behind, and there was no sign of violence. In 1894, the Bureau of Immigration was established by the U.S.
Congress. In 1920, the 19th
Amendment to the Constitution, guaranteeing women the right to vote, was
ratified by Tennessee, giving it the two-thirds majority of state ratification
necessary to make it the law of the land. In 1966, the first pictures of earth taken from moon orbit were sent
back to the U.S. In 1979, the group Chic’s
song “Good Times” hit No. 1 on the U.S. pop charts. | SURVEY SAYS: Salary and Career Success | We recently covered a survey that found most
employees say they can feel successful without earning large paychecks. Last
week, I asked NewsDash readers, are you satisfied with your salary, and what
salary would make you feel successful? More than half (55.6%) of responding
readers indicated they are satisfied with their current salaries, while the
rest are not. One-third (33.8%) of respondents said their salary would need to
be $100,000 up to $200,000 in order to feel successful in their careers. Nearly
three in ten (29.6%) reported they need $75,000 up to $100,000 to feel
successful. Nearly two in ten (18.3%) responded that their feeling successful
is not based on salary. Fifty-five percent of responding NewsDash readers said
they have asked for a raise, and among those, 68.3% received a raise by asking
for one, while 31.7% did not. In verbatim comments, some readers shared why
their salaries make them feel successful or not, and some discussed salary
fairness and perceptions in general. Many expounded on what other factors they
think signify (or should make people have a feeling of) success. Editor’s
Choice goes to the reader who shared these words of wisdom: “As far as career
[and salary], I’ve seen the desks of altruists and status seekers cleaned off
with the same disinterest. I’m reminded, then, of a well-known recovery program
axiom, ‘To thy own self be true.’ There is my measuring stick.” Thanks to
everyone who participated in our survey! | Share the good news with a friend! Pass the Dash along – and tell your
friends/associates they can sign up for their own copy. | News from PLANSPONSOR.com
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