| Benefit Briefs | A Retirement Plan Sponsor Uses the Power of Inertia | Retirement plan participant inertia has
previously been viewed as a bad thing, but one plan sponsor sees it in a
different way. “For years, employee engagement was a primary goal of our
retirement plan strategy, but we realized it was hard to engage younger
workers. Then a light bulb went on, and we decided to use inertia as an asset
[for our strategy],” Joseph Huber, managing director and chairman of Credit
Suisse’s pension investment committee, tells PLANSPONSOR. Credit Suisse had a
defined benefit pension plan, and a 401(k) plan that started as a supplemental
retirement savings vehicle for employees. But, it froze its pension plan,
making the 401(k) the primary retirement savings vehicle. Huber says as the
company made this transition, it realized its average employee was 35 or 36 years
old. “But, whenever we had info meetings, hardly anyone under 40 showed up,” he
notes. “It’s hard to engage younger employees.” | Re-enrolling into TDFs Can Put Participants on Right Path | In an effort to combat participant inertia, more
plan sponsors are considering the process of re-enrollment, says a recent brief
from J.P. Morgan Asset Management. The brief, “Understanding Re-Enrollment: Benefits
for Participants and Plan Sponsors,” defines the term re-enrollment as a
process by which retirement plan participants are notified that their existing
assets and future contributions will be invested in the plan’s qualified
default investment alternative (QDIA), which is usually a target-date fund
(TDF), based on the participant’s date of birth. Participants are automatically
moved into the QDIA on a certain date unless they make a new investment
election during a specified time period. Catherine Peterson, head of Retirement
Insights at J. P Morgan Asset Management, tells PLANSPONSOR re-enrollment has
benefits for both plan participants and plan sponsors. “There are a number of
reasons why plan sponsors would want to do a re-enrollment, chief among them is
the opportunity to help improve the outcomes of their plan participants,” she
explains. | College Savings Trumps Retirement Savings for Single Parents | Many single parents prioritize saving for their
children’s college costs over saving for their own retirement, according to an
Allianz study. When asked about their motivation for developing and executing a
long-term financial plan, nearly half (45%) of single-parent respondents
identified “saving for my kids’ education” as the top priority. This is six
points higher than the figure for “traditional families” (39%), which Allianz
identifies as married couples of the opposite gender with at least one child
younger than 21 living at home. Other household structures examined by Allianz,
i.e. “modern families,” prioritized children’s future education costs 26% of
the time. | In a Form 8-K filing with the Securities and
Exchange Commission (SEC), Eastman Kodak Company announced that effective
January 1, 2015, it will implement changes to the Kodak Retirement Income Plan
(KRIP) and the Eastman Kodak Employees’ Savings and Investment Plan (SIP). Kodak
explains that currently, under the KRIP, participants accrue a benefit pursuant
to a traditional pension formula, which is based upon average participating
compensation and years of service, or a cash balance formula, which is
calculated based upon a credit equal to 4% of monthly compensation and
one-twelfth of the annual interest rate on 30-year Treasury securities.
Beginning in 2015, participants in the traditional pension formula will
participate in the cash balance formula and will be eligible for a benefit
equal to the sum of the pre-2015 traditional benefit and the post-2014 cash
balance benefit. | | Buyer's Market | Lockton, a provider of risk management,
insurance and employee benefits consulting services, will add two employee
benefits experts to its Chicago office. Joining Lockton in vice president,
producer roles will be David Cooke and Mark Haye. Both will be responsible for
business development and client strategy at Lockton. “We are so pleased to add
the impressive credentials of David Cooke and Mark Haye to our practice.
Lockton’s prospects and clients will benefit greatly from their expertise in
group medical benefits strategy, design, funding and administration. Mark and
David have both developed effective benefits strategies for employers of every
shape and size during their careers,” says Tom Schaffler, president of
Lockton’s Chicago office. | | Market Mirror | Yesterday, the Dow was up 75.91 points
(0.46%) at 16,569.28, the NASDAQ climbed 31.25 points (0.72%) to 4,383.89, and
the S&P 500 gained 13.84 points (0.72%) to finish at 1,938.99. The Russell
2000 increased 9.96 points (0.89%) to 1,124.82, and the Wilshire 5000 closed
155.19 points (0.76%) higher at 20,501.20.
On the NYSE, 3.2 billion shares traded,
and on the NASDAQ, 2.8 billion shares changed hands, with 1.7 advancing issues
for every declining issue on both exchanges.
The price of the 10-year Treasury note was up 2/32,
bringing its yield down to 2.487%. The price of the 30-year Treasury bond was
down, increasing its yield to 3.294%.
| | Rules & Regulators | IRS to Discuss Employer Reporting Under ACA | The Internal Revenue service is hosting a free webcast
about employer reporting requirements under the Patient Protection and
Affordable Care Act (ACA). The webcast will cover Internal Revenue Code Section
6056; who is required to report; what elements are required to be reported; when
Applicable Large Employers must report; and how do government entities
designate reporting. | | Financial Sense | The funded status of U.S. corporate pension
plans declined in July to 90.8%, according to BNY Mellon’s Investment Strategy
and Solutions Group (ISSG). The BNY Mellon Institutional Scorecard for July
notes assets for the typical corporate plan fell 1% during the month while
liabilities rose 0.3%, leading to the net decline in funded status. The slight
increase in liabilities for corporate plans in July was mainly due to the Aa
corporate discount rate remaining at 4.32%. | Are Active Managers ‘Evil’? | One of the talking points that is emerging from
the ongoing critique of 401(k) plan fees is that “good enough” investment management
can be delivered for around 20 to 25 basis points (BPS). Obviously, you only
get fees down to 25 basis points by using index funds. So, part of what is
going on here is an attack by the random-walk people—those who believe it’s
impossible to outperform the market without assuming additional risk—against
the active management people. There’s a lot to what these critics are saying. | | Small Talk | ON
THIS DATE: In
1858, the first telegraph line across
the Atlantic Ocean was completed. Unfortunately, the cable proved weak and the
current insufficient and by the beginning of September had ceased functioning. In
1861, Lincoln imposed the first
federal income tax by signing the Revenue Act. Strapped for cash with which to
pursue the Civil War, Lincoln and Congress agreed to impose a 3% tax on annual
incomes over $800. In 1914, the
world’s first electric traffic signal was put into place on the corner of
Euclid Avenue and East 105th Street in Cleveland, Ohio. In 1924, the New York Daily News debuted the comic strip “Little
Orphan Annie,” by Harold Gray. In 1957,
the iconic TV show American Bandstand began broadcasting nationally. In 1962, movie actress Marilyn Monroe was
found dead in her home in Los Angeles. It was determined she committed
sui.cide. In 1981, President Ronald
Reagan began firing 11,359 air-traffic controllers striking in violation of his
order for them to return to work. The executive action, regarded as extreme by
many, significantly slowed air travel for months. In 2002, the U.S.S. Monitor was
raised from the floor of the Atlantic, where it had rested since it went down
in a storm off Cape Hatteras, North Carolina, during the Civil War.
TUESDAY
TRIVIA: The first official telegram to pass between two
continents was a letter of congratulation from Queen Victoria of the United
Kingdom to the President of the United States James Buchanan on August 16,
1858.
| TRIVIAL PURSUITS: Last
Wednesday marked the 49th anniversary of Medicare. Do you know which
famous America was the first Medicare enrollee? | 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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