| | Benefit Briefs | | Retirement Plan Participants Not Utilizing Help | | Plan participants increasingly realize they are
responsible for generating their own retirement income, but many still pass
over investment advice offerings, a survey from Schwab Retirement Plan Services
finds. Today, many 401(k) plans offer some type of professional, personalized
investment advice, but while many of the participants surveyed believe they
would likely benefit from this type of assistance, relatively few are actually
taking advantage of it. Less than one quarter (23%) of those with access to
professional 401(k) advice say they have used it. According to Steve Anderson,
head of Schwab Retirement Plan Services, the survey didn’t explore why
participants are not using the help offered to them, but Schwab did not find
the results surprising. “It’s similar to behaviors we’ve observed in the
industry for some time,” he tells PLANSPONSOR. “Plan sponsors may create tools
for participants, but if they have to seek them out by going to a website or
making a phone call, rarely do they take advantage.” Anderson believes plan
sponsors need to use what the industry has learned from behavioral finance and
enroll participants in a program that offers help or advice. | | The Social Security Administration has declared
this week “National my Social Security Week.” The administration is asking for
help encouraging Americans to sign-up for their own my Social Security account. It is offering posters, publications,
social media content and other tools to use for promotion. In a recent report,
Mercer and the Stanford Center on Longevity suggest retirement plan
participants make a variety of common and costly mistakes when it comes to
optimizing their retirement readiness. One of the most widespread is not
knowing how to most effectively time the start of Social Security payments. | | Defined contribution (DC) retirement plan
participants across all age groups are taking to social media for financial
information and advice, according to Spectrem Group. A new report from
Spectrem’s DC Participant Insight Series, “Using Social Media and Mobile
Technology in Financial Decisions,” shows more than two-thirds of plan
participants ages 50 and older are on Facebook. Around half are on LinkedIn,
and 12% of participants overall say they regularly research financial
information on social media. | | | Buyer's Market | | Fund Brings Endowment Style Investing to DC Plans | | A new collective investment fund from Alta Trust
Company strives to bring an endowment investment philosophy and liquid
alternative opportunities to defined contribution retirement plans. Alta says
it partnered with ETF Model Solutions LLC to develop and launch the Endowment
Collective Investment Fund. As the firms explain, the Endowment Collective
Investment Fund (CIF) seeks to improve risk-adjusted returns of traditional
portfolios of stocks and bonds by adding alternative investments. The CIF
incorporates asset classes such as private equity, hedge strategies and real
assets to create a “three-dimensional portfolio.” | | Given regulatory guidelines that can be
difficult to follow, many non-profit 403(b) plan sponsors are finding it harder
to maintain a fully compliant non-Employee Retirement Income Security Act
(ERISA) plan, one advisory firm says. Strategic Benefit Services (SBS) notes
that historically, non-ERISA plans were subject to relatively little regulation
and were a popular choice for many non-profit organizations; however, Internal
Revenue Service (IRS) regulations passed in 2007 require more plan oversight.
Inadvertent or unintentional involvement by the employer can make the plan
subject to ERISA, meaning non-profits run the risk of being penalized by the
Department of Labor (DOL) for breach of ERISA requirements, SBS contends. Limited
plan sponsor involvement can also hinder efforts to encourage greater employee
plan participation. | | | Industry Voices | | Industry Voices: Tips to Make Participant Education Meaningful | | “Education is the most powerful weapon which you
can use to change the world.”–
Nelson Mandela. Given the fact that most Americans are underfunded for
retirement, the cold, hard truth is retirement will actually remain a pipe
dream for most people. It’s as if we’re watching a race that will never have a
finish line. The question is: Can you, the plan sponsor, change this scenario? When
planning an employee financial or retirement education event, you may not think
you have the power to change the world. We would argue, however, that a
meaningful education strategy can be the first step in changing your
workforce’s financial future; in turn, changing their world. | | | Economic Events | | On a
seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U)
increased 0.1% in July after rising 0.3% in June, the Bureau of Labor
Statistics reports. The index for all items less food and energy rose 0.1% in
July, the same increase as in June.
Real average
hourly earnings was unchanged in July, seasonally adjusted. Average hourly
earnings was unchanged and the CPI-U rose 0.1%. Real average weekly earnings
was unchanged over the month.
Privately owned housing starts in July were at a
seasonally adjusted annual rate of 1,093,000, according to the Census Bureau.
This is 15.7% above the revised June estimate of 945,000 and 21.7% above the
July 2013 rate of 898,000. Single-family housing starts in July were at a rate
of 656,000; this is 8.3% above the revised June figure of 606,000. The July
rate for units in buildings with five units or more was 423,000.
| | | Market Mirror | | Tuesday, the Dow was up 80.85 points
(0.48%) at 16,919.59, the NASDAQ increased 19.20 points (0.43%) to 4,527.51,
and the S&P 500 closed 9.86 points (0.50%) higher at 1,981.60. The Russell
2000 climbed 4.07 points (0.35%) to 1,162.47, and the Wilshire 5000 closed at
20,989.23, up 96.61 points (0.46%).
On the NYSE, 3.2 billion shares changed
hands, with 1.8 advancing issues for every declining issue. On the NASDAQ, 2.8
billion shares traded, with a slight lead for decliners.
The price of the 10-year Treasury note slipped 2/32,
increasing its yield to 2.402%. The price of the 30-year Treasury bond was down
11/32, bringing its yield up to 3.218%.
| | | Rules & Regulators | | Stakes High for Church Plans, Lawyers Say | | Attorneys representing Catholic Health
Initiatives (CHI) have requested that a federal court hear oral arguments in a
case challenging the “church plan” status of the pension plan it offers
employees, noting that “the stakes in this matter are high,” not only for CHI,
but for sponsors of retirement plans across the country. The motion follows a
recommendation by a U.S. magistrate judge that the U.S. District Court for the
District of Colorado enter a declaratory judgment holding that the CHI
Retirement Plan is not a church plan within the meaning of the Employee
Retirement Income Security Act (ERISA). | | The Internal Revenue Service (IRS) is holding a
repeat of its free webcast, “The Affordable Care Act: How Applicable Large
Employers Should Report Health Care Coverage under IRC Section 6056.” | | | Financial Sense | | Insurance general account assets are trending
towards expanded use of alternative investments, suggests new Cerulli
Associates research, accelerated by an anticipated rise in interest rates. Certain
retirement plan investments, such as annuity contracts and guaranteed
fixed-income investments often are held in insurance company general accounts.
Low interest rates and regulatory constraints are putting pressure on insurers
to achieve adequate returns on invested capital while staying within strict
risk budgets, according to Cerulli. | | LDI May Still Leave Risk on the Table | | Liability-driven investing (LDI) helps a defined
benefit (DB) plan meets its liabilities, but liability benchmarking adds
precision. LDI is a good start, but it may not be enough to reduce exposure in
a DB plan, says Kim Lisella, senior client portfolio manager and assistant head
of distribution at Legal and General Investment Management America (LGIMA).
“We’ve been looking at how assets performed against the liabilities, not their
market benchmarks,” Lisella tells PLANSPONSOR. LGIMA believes hedging a
portfolio against mismatches between assets and liabilities at different points
along the yield curve reduces DB plan risk better than a traditional LDI
strategy. | | Many Americans hold serious reservations about
investing in the stock and bond markets, according to a recent COUNTRY
Financial investor confidence index survey. About 45% of people surveyed by
COUNTRY say they are currently investing in stocks and bonds, and many
individuals do so through a workplace retirement plan. While the stock market
has rebounded significantly following the financial crisis, more than half of
Americans (51%) still say they do not invest in the stock and bond markets in
any way. | | | Sponsored message from Vanguard | How America Saves 2014
Did you know the median account balance rose by 182% among continuous participants with a balance in both December 2008 and December 2013? Click here to learn more. | | | Small Talk | | Children Have Major Effect on Finances | | A baby born in 2013 will cost more than a
quarter-million dollars to raise, and that’s not including college costs. The
U.S. Department of Agriculture’s (USDA) annual report, “Expenditures on
Children by Families, 2013,” shows that a middle-income family with a child
born in 2013 can expect to spend about $245,340 ($304,480 adjusted for
projected inflation) for food, housing, childcare, education, and other
child-rearing expenses up to age 18. A recent survey found that, in addition to
concerns about being able to retire, more than three in five respondents with
children younger than 18 (63%) are worried they will not have enough money for
one or more of their children to go to college. More than one-third of parents
of children of all ages (36%) are worried their children will have to move back
in with them because they will not be able to afford housing. The USDA report
does not include expenses occurred after age 18, including for higher
education. “In today’s economy, it’s important to be prepared with as much
information as possible when planning for the future,” says USDA Food,
Nutrition and Consumer Services Under Secretary Kevin Concannon. | | ON
THIS DATE: In
1833, future President Benjamin
Harrison was born in North Bend, Ohio. In 1911,
a dispatcher in the New York Times office sent the first telegram around the
world via commercial service. In 1920,
seven men, including legendary all-around athlete and football star Jim Thorpe,
met to organize a professional football league at the Jordan and Hupmobile Auto
Showroom in Canton, Ohio. The meeting led to the creation of the American
Professional Football Conference (APFC), the forerunner to the National
Football League. In 1975, Viking 1, an unmanned U.S. planetary
probe, was launched from Cape Canaveral, Florida, on a mission to Mars. In 1977, “Best of My Love,” by the
Emotions, hit the top of the U.S. pop charts. In 1985, the original Xerox 914 copier was presented to the
Smithsonian Institute’s Museum of American History.
WEDNESDAY
WISDOM: “You
are never too old to set another goal or to dream a new dream.”—C. S. Lewis, novelist
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