| Benefit Briefs | Researchers Propose Trusteed Retirement Funds | A new paper published by the Social Science
Research Network recommends a single private defined contribution (DC) pension
system that can cover all working Americans, with a single set of rules. A key
part of the proposal is the creation of broadly diversified Trusteed Retirement
Funds (TRFs), whose sponsors are trustees, with fiduciary responsibilities.
Payroll deduction of every employee’s salary would automatically go into a
broadly diversified TRF unless the employee either opts out or selects a
preferred TRF, or if the employer already sponsors a defined benefit (DB)
pension plan. TRFs will relieve employers from fiduciary responsibility for all
future DC contributions. | Health Benefit Cost Mitigation Receives Increasing Attention | Companies plan to continue subsidizing and
managing health benefits while taking aggressive action to keep costs down, a
Towers Watson study finds. According to the 2014 Towers Watson Health Care
Changes Ahead Survey, two-thirds of CEOs and chief financial officers (CFOs)
are more directly involved in developing their company’s health benefit
strategies. This is because companies are particularly concerned about the
Patient Protection and Affordable Care Act (ACA)’s excise tax, which goes into
effect in 2018. In response to short- and long-term cost concerns, a growing
percentage (81%) of employers plan moderate to significant changes to their
health care plans over the next three years. | Plan sponsors thinking about putting target-date
funds (TDFs) in their investment lineup must determine an implementation
process that will support the plan’s goals, Towers Watson says in a white
paper. “Are You in the Wrong Target-Date Fund? Now Is a Good Time to
Reevaluate,” by Towers Watson, gives an overview of the growth of TDFs, and
touches on guidance from the Department of Labor (DOL) issued in 2013. | Defining Global Best Practices for Retirement Plans | Only with the realization that a long-term
retirement income guarantee won’t be in place at the end of the road will
workers get more engaged in their retirement planning responsibilities, Ernst
& Young says in a new report. Retirement systems where this fact is
acknowledged within relevant policy are therefore more successful at motivating
people to prepare for their own retirement. Countries that have allowed or
mandated automatic enrollment in private-sector defined contribution (DC)
plans, for example, are better positioned to fill the gap left by the widespread
freezing and closure of defined benefit (DB) plans, Ernst & Young contends.
A separate PIMCO report focuses on best asset-allocation practices across
retirement systems. | | Economic Events | Sales of new single-family houses in July were
at a seasonally adjusted annual rate of 412,000, according to estimates
released jointly by the U.S. Census Bureau and the Department of Housing and
Urban Development. This is 2.4% below the revised June rate of 422,000, but is
12.3% above the July 2013 estimate of 367,000. | | Market Mirror | Yesterday, the Dow closed 75.65 points
(0.45%) higher at 17,076.87, the NASDAQ was up 18.80 points (0.41%) at
4,557.35, and the S&P 500 increased 9.52 points (0.48%) to 1,997.92. The
Russell 2000 climbed 4.88 points (0.42%) to 1,165.22, and the Wilshire 5000
finished at 21,153.17, up 98.31 points (0.47%).
On the NYSE, 3.2 billion shares changed
hands, with 1.6 advancing issues for every declining issue. On the NASDAQ, 2.8
billion shares traded, with a 1.3 to 1 ratio of advancers to decliners.
The price of the 10-year Treasury note was up 6/32,
bringing its yield down to 2.386%. The price of the 30-year Treasury bond
increased 14/32, decreasing its yield to 3.134%.
| | Rules & Regulators | Court Finds Verbal Agreement Satisfied COBRA Notice | A verbal exchange between a terminated employee
and her former employer has been found by a federal court to satisfy COBRA
notification requirements. Elisa Madonia, a former employee of S 37 Management
Inc., contends the company never gave her the notice about how to continue
health coverage required by the Consolidated Omnibus Budget Reconciliation Act
(COBRA). At the time Madonia was terminated, she was told she would only
continue to have medical coverage “if a check for the premium was immediately
tendered,” so she gave the company a check. | | Financial Sense | Last week, the California Public Employees
Retirement System (CalPERS) Board added to the definition of pensionable
compensation for the state’s new public employees. The vote adds 99 types of
supplemental pay that will be used in calculations of pension benefits. CalPERS
says it brings much needed clarity to the definition of what is pensionable
compensation under the Public Employees’ Pension Reform Act of 2013 (PEPRA). However,
in a statement, California Governor Jerry Brown said: “This vote undermines the
pension reforms enacted just two years ago.” PEPRA barred one-time or ad-hoc
payments aimed at spiking salaries in order to increase pension benefits. An
article by credit rating agency Fitch Ratings said the “decision expands the
definition of pensionable compensation, in apparent conflict with PEPRA, and
will increase pension costs for public employers if implemented.” | Looking Beyond Past Performance in Manager Selection | A new analysis from Segal Rogerscasey argues
past performance is only one of many factors that should be evaluated when
assessing active investment manager performance. Many retirement plan sponsors
and other institutional investors feel they are being thorough in looking back
as far as five years both in selecting new investment managers and making
termination decisions. However, even five-year performance can be a poor
indicator of future success, according to Segal Rogerscasey, mainly due to a decided
lack of long-term performance persistence within nearly all investment classes. | | The World at Large | A year ago if you were to upload a video of
yourself to Facebook or Twitter intentionally throwing a bucket of ice-cold
water upon yourself, people in your network may be forgiven for thinking you a
tad eccentric. But, over the past couple of weeks, in the UK, the said act in support
of cancer charity Macmillan has become commonplace—one may even call it a
social norm. Last week, the UK government hailed signs indicating saving into a
workplace pension is now becoming a social norm. But, what does the data
actually say? Is this social norm reflected in employers’ experiences? What
work still needs to be done and how can the employer message be improved still
further? | | 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 | ON
THIS DATE: In
1842, the first fiscal year was
established by the U.S. Congress to start on July 1. In 1873, the school board of St. Louis, Missouri, authorized the first
U.S. public kindergarten. In 1920, the
19th Amendment, guaranteeing women the right to vote, was formally adopted into
the U.S. Constitution by proclamation of Secretary of State Bainbridge Colby. In
1939, the first televised Major
League baseball game was broadcast on station W2XBS, the station that was to
become WNBC-TV. Announcer Red Barber called the game between the Cincinnati
Reds and the Brooklyn Dodgers at Ebbets Field in Brooklyn, New York. In 1973, a U.S. Presidential Proclamation
was declared that made August 26 Women’s Equality Day. In 1978, the Grease movie
soundtrack earned its second No. 1 hit when Frankie Valli’s “Grease” reached
the top spot on the Billboard Hot 100.
TUESDAY
TRIVIA: By 1916, Henry Ford’s Model T accounted for more
than 50% of all the cars in the world.
| TRIVIAL PURSUITS:
When were the first car license plates issued? | 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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