Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
August 24th, 2017
Benefits & Administration
Health Care Expenses in Retirement to Cost $275,000
A 65-year old couple, retiring this year, will need $275,000 to cover anticipated health care expenses, estimates Fidelity. This 2017 estimate is 6% greater than last year’s figure of $260,000 and represents a 70% increase since Fidelity’s initial retiree health care cost estimate in 2002. Expenses included in this estimate are monthly expenses associated with Medicare premiums, Medicare copayments and deductibles and prescription drug out-of-pocket expenses. It assumes enrollment in Medicare health coverage but does not include the added expenses of nursing home or long-term care.Read more >
Given a Choice, Public Sector Employees Choose DB Over DC
Public sector employees given a choice of either a defined benefit (DB) or a 401(k) plan overwhelmingly prefer the DB plan, the National Institute on Retirement Security (NIRS) found in a study of eight states that offer employees such a choice. In those states in 2015, the take-up rate for DB plans was 80% or higher in six states. The research also indicates that employees directing their own investments in a DC plan typically tend to earn lower returns than state pension plans. NIRS attributes this to four factors: lower expenses, professional management, an optimal investment allocation used by the DB plan and the benefit of longevity risk pooling.
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EARN Act Clears Senate Finance Committee
Plaintiffs Rebuffed by Appeals Court in Active Management Lawsuit
Data and Research
K-12 Educators Prefer Advisers for Retirement Planning
Market Mirror
Yesterday, the Dow dropped 87.80 points (0.40%) to finish at 21,812.09, the NASDAQ closed 19.07 points (0.30%) lower at 6,278.41, and the S&P 500 decreased 8.47 points (0.35%) to 2,444.04. The Russell 2000 lost 1.80 points (0.13%) to finish at 1,369.73, and the Wilshire 5000 declined 66.81 points (0.26%) to 25,319.63.

The price of the 10-year Treasury note increased 14/32, decreasing its yield to 2.167%. The price of the 30-year Treasury bond increased 25/32, bringing its yield to 2.747%.

ERISA Challenge Targets Minnesota Hospital System
The latest retirement industry class action challenge, filed in the U.S. District Court for the District of Minnesota, names as defendants the Allina Health System and a sizable number of individual retirement plan committee officials in finance and human resources. The allegations concern both the 401(k) and 403(b) plans offered to Allina employees, which at all relevant times had over $1 billion in combined assets, and cite Employee Retirement Income Security Act (ERISA) sections 409 and 502. The wide-ranging complaint argues the defendants “did not try to reduce the plans’ expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plans to ensure it was prudent….”
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Passively Managed Funds Beat Actively Managed Funds
Morningstar’s mid-year 2017 Active/Passive Barometer found that most actively managed funds have failed to survive and beat their benchmarks, especially for funds with longer time horizons. The average dollar in passively managed funds typically outperforms the average dollar invested in actively managed funds, the research firm finds. However, when compared to the trailing 12 months ended June 30, 2016, active funds’ success increased substantially in 10 of 12 categories in the year ended June 30, 2017. Forty-nine percent of active U.S. stock funds beat their composite passive benchmark in the 12-month period ended June 30, 2017, whereas only 26% had done so the year before.
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DOL Fiduciary Rule May Impact Annuity Sales
Annuity sales during the first half of the year fell to a point not seen since the first half of 2001, according to research by the LIMRA Secure Retirement Institute. The organization reports that total annuity sales for the first half of 2017 decreased to $105.8 billion, marking a 10% decline from the first six months of 2016. LIMRA notes that second quarter results for total annuity sales rose slightly from last quarter to $53.9 billion, but they still reflected an 8% decline from this quarter last year. LIMRA says this is also the sixth straight quarter fixed sales have outperformed variable annuity sales, which hasn’t happened in almost 25 years.
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Small Talk
ON THIS DATE: In 79, Mount Vesuvius erupted, killing approximately 20,000 people. The cities of Pompeii, Stabiae and Herculaneum were buried in volcanic ash. In 410, the Visigoths overran Rome. This event symbolized the fall of the Western Roman Empire. In 1456, the printing of the Gutenberg Bible was completed. In 1814, Washington, DC, was invaded by British forces that set fire to the White House and Capitol. In 1869, a patent for the waffle iron was received by Cornelius Swarthout. In 1891, Thomas Edison applied patents for the kinetoscope and kinetograph. In 1932, Amelia Earhart became the first woman to fly across the U.S. non-stop. The trip from Los Angeles, California to Newark, New Jersey, took about 19 hours. In 1949, the North Atlantic Treaty Organization (NATO) went into effect. The agreement was that an attack against on one of the parties would be considered “an attack against them all.” In 1954, the Communist Party was virtually outlawed in the U.S. when the Communist Control Act went into effect. In 1968, France became the 5th thermonuclear power when they exploded a hydrogen bomb in the South Pacific. In 1975, Davey Lopes of the Los Angeles Dodgers set a major league baseball record when he stole his 38th consecutive base. In 1989, Pete Rose, the manager of the Cincinnati Reds, was banned from baseball for life after being accused of gambling on baseball. In 1989, the U.S. space probe, Voyager 2, sent back photographs of Neptune. In 1991, Russian President Mikhail Gorbachev resigned as the head of the Communist Party. In 1992, China and South Korea established diplomatic relations. In 1995, Microsoft’s “Windows 95” went on sale. In 2001, the remains of nine American servicemen killed in the Korean War were returned to the U.S. The bodies were found about 60 miles north of Pyongyang. In 2006, the planet Pluto was reclassified as a “dwarf planet” by the International Astronomical Union (IAU).
SURVEY SAYS: Not this week. 
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Editorial: Alison Cooke Mintzer


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