Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
August 6th, 2014
Benefit Briefs
Baby Boomers Stuck in the Middle
Unprepared Baby Boomers face a bleak decision as they enter their mid-60s—work beyond the traditional retirement age or risk running out of money down the line. Orlando Ashford, president of the Talent business at Mercer, says it’s becoming increasingly common to see retirees attempt to rejoin the work force due to the prospect of depleting previously accumulated assets. In a recent analysis from Mercer on the “four generations at work,” Ashford suggests the United States’ economy-wide shift in career and retirement savings arrangements is having the greatest impact on the generation of workers born between 1946 and 1964, widely known as the Baby Boomers. Put simply, many Boomers are stuck between the fading defined benefit-dominated retirement system and the still-developing defined contribution system.
Many TPAs Charge Full Document Fees for Restatements
Many retirement plan third-party administrators (TPAs) responding to a recent survey indicated they most often charge a full document fee for Pension Protection Act (PPA) document restatements. Volume submitter documents are the most often used plan document (84%) followed by prototype documents (60%) and custom documents (21%), according to the survey from TPA Resources LLC. Among those TPAs using volume submitter documents, nearly half (48%) are most often charging a full plan document fee for the upcoming required restatement.
Industry Voices
Industry Voice: What’s In Your DB Plan Toolbox?
In the first decade of the millennium, we saw market crashes that wiped billions of dollars from the collective funding levels of defined benefit (DB) pension plans across the country. At the end of 2007, the average pension plan was in surplus, but the credit crisis again left plan sponsors concerned with the challenges of running a DB plan. The real question for plan sponsors now is how to best manage their DB plans, given their specific goals and objectives. Nick Davies, area president at Gallagher Fiduciary Advisors, LLC, the institutional investment and fiduciary services practice of Arthur J. Gallagher, takes a look at some of the options within the toolbox.
Economic Events
New orders for manufactured durable goods in June, up four of the last five months, increased $4.0 billion or 1.7% to $242.4 billion, revised from the previously published 0.7% increase, the Census Bureau reported. This followed a 0.9% May decrease. Machinery, up following two consecutive monthly decreases, led the increase, $1.1 billion or 2.9% to $37.6 billion. New orders for manufactured nondurable goods increased $1.7 billion or 0.6% to $260.9 billion.
Market Mirror
Major U.S. stock indices were back down again Tuesday, with the Dow dropping 139.81 points (0.84%) to 16,429.47. The NASDAQ was down 31.05 points (0.71%) at 4,352.84, and the S&P 500 fell 18.78 points (0.97%) to 1,920.21. The Russell 2000 decreased 3.26 points (0.29%) to 1,121.56, and the Wilshire 5000 closed 180.73 points (0.88%) lower at 20,320.47.   On the NYSE, 3.2 billion shares changed hands, with 2.5 declining issues for every advancing issue. On the NASDAQ, 2.8 billion shares traded, with a 1.4 to 1 ratio of decliners to advancers.   The price of the 10-year Treasury note was down 1/32, bringing its yield up to 2.487%. The price of the 30-year Treasury bond increased 1/32, decreasing its yield to 3.290%.
Rules & Regulators
A Chicago college refused to hire an adjunct professor for a full-time position because of her age, the U.S. Equal Employment Opportunity Commission (EEOC) alleges. Harold Washington College, part of the City Colleges of Chicago system, violated federal law when it denied Nancy Sullivan the full-time position because she was 66 years old, according to an EEOC lawsuit. Sullivan was found to have appropriate credentials for the job, had compiled an excellent record during her tenure as an adjunct, and had recommendations from several full-time members of the faculty; however, the college passed over Sullivan for someone younger and less experienced.
Managing Form 5500 Filing for Multiple Plans
“I work for a large nonprofit hospital, and through a series of acquisitions we have ended up administrating a variety of 401(a), 401(k) and 403(b) plans (more than 10), some of which are a) frozen, b) have very few participants, or c) both. It has created an overwhelming amount of Form 5500 filings (readily apparent to me this time of year as I am making certain that extensions have been filed for each plan as I write this), in addition to other reporting and disclosure requirements, as well as other administrative work. Is there anything I can do to reduce the burden?”
Summaries of the latest from Washington and the courts—what’s coming, what’s contemplated and what’s critical to plan sponsors.
Financial Sense
Pension deficits for companies on the S&P 1500 Index remain above year-end 2013 levels, following a drop in equity markets and a minor interest rate increase during July. According to a report from benefits consulting firm Mercer, the estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained at 85% as of the end of July 2014. The month’s drop in equity markets, accompanied by slight increases in interest rates used to calculate corporate pension plan liabilities, held funded status relatively flat compared with the prior month.
The California Public Employees’ Retirement System (CalPERS) announced a $500 million global infrastructure partnership with UBS Global Asset Management (UBS). CalPERS will contribute $485 million to the newly formed company, while UBS will contribute $15 million and act as managing member. The partnership will operate as Golden State Matterhorn, LLC and will pursue infrastructure investment opportunities in the U.S. and global developed markets. For CalPERS, infrastructure investments returned 22.8% during the 2013-14 fiscal year.
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?
Small Talk
Is Technology Replacing Employees?
Some employees are being replaced by new technology, says a new survey from human capital solutions provider CareerBuilder. Joint research from CareerBuilder and Economic Modeling Specialists International (EMSI) reveals that almost one-quarter of companies (21%) say they have replaced employees with automation technology. Among companies with more than 500 employees, the number is 30%. While some jobs have been eliminated due to the adoption of new technology, more than two-thirds (68%) of companies who have replaced employees with automation say these actions have also resulted in the creation of new positions. Thirty-five percent of companies say they ended up creating more jobs in their firms than they had prior to the automation.
ON THIS DATE:  In 1787, at the Constitutional Convention in Philadelphia debate began on the first draft of the U.S. Constitution. In 1890, at Auburn Prison in New York, the first execution by electrocution in history was carried out against William Kemmler, who had been convicted of murdering his romantic interest, Matilda Ziegler, with an axe. In 1945, at 8:16 a.m. local time, an American B-29 bomber, the Enola Gay, dropped the world’s first atom bomb over the Japanese city of Hiroshima. Approximately 80,000 people were killed as a direct result of the blast, and another 35,000 were injured. At least another 60,000 died by the end of the year from the effects of the fallout. In 1965, President Lyndon Baines Johnson signed the Voting Rights Act, guaranteeing African Americans the right to vote. In 1986, William J. Schroeder, the world’s longest surviving recipient of a permanent artificial heart died. He lived 620 days with the Jarvik-7 manmade heart. In 1991, in a letter to around 150 of its United States franchisees, the French automaker Peugeot (manufacturer of both Peugeot and Citroen cars) announced it would stop producing cars for the U.S. market as of the following September after five years of steadily decreasing sales. In 1997, Apple Computer and Microsoft agreed to share technology in a deal giving Microsoft a stake in Apple’s survival.   WEDNESDAY WISDOM: “There is nothing which we receive with so much reluctance as advice.”—Joseph Addison, English writer and politician       Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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