Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
December 18th, 2015
Benefits & Administration
Retirees Today Need Much More Savings
Not only do current-day prospective retirees greatly need a reasonably attractive risk-adjusted fixed income coupon interest rate, but they also likely need stronger personal income growth that enables adequate lifetime savings. In addition, retirees need enough excess investment principal to act as a buffer against the corrosive portfolio effects of future consumer price inflation, concludes a report from S&P Capital IQ and SNL Financial, “Retirees Can No Longer Afford to Live on Investment-Grade Fixed Income Returns.”Read more >
Nearly half of Americans (49%) think helping their children pay for their education is more important than saving for their own retirement, according to a survey by RBC Wealth Management-U.S. But, experts advise individuals not to neglect retirement planning.Read more >
MOST READ ARTICLES
1
2021 Target-Date Fund Survey
2
The DOL Has Begun Retirement Plan Cybersecurity Audits
3
2020 Recordkeeping Survey
4
ACA Ruling Signifies Relief for Employers
5
TRIVIAL PURSUITS: What do the M’s stand for in M&Ms?
Suggested Actions for DB Plan Sponsors in 2016
“Meager investment returns and low interest rates made 2015 a challenging year for many defined benefit plans, with funded status rising only modestly,” says Matt McDaniel, U.S. head of defined benefit risk at Mercer Retirement. “Changing regulations and market volatility have meant that sponsors who have been proactive in managing their obligations and developing their strategy have been rewarded.” According to McDaniel, looking ahead, Mercer believes “the path to improvement will be through taking actions when opportunities present themselves, and not waiting for a slow melt up in markets and rates.” Mercer has outlined key investment issues it says DB plan sponsors should focus on in the new year.Read more >
Is It Time to Bump Up DB Rate Assumptions?
The annual pension accounting research study by SEI Institutional, in its 14th year, outlines how some plan sponsors and auditors are interpreting the events in recent years and the impact of the current economic environment. Based on this analysis, and assuming no change during December 2015, plan sponsors with a December 31 measurement date should consider increasing the discount rate they are using—but not by much, if at all.Read more >
Sponsored message from MetLife
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Visit the Stable Value Educational Hub.Read more >
Economic Events

In the week ending December 12, the advance figure for seasonally adjusted initial claims for unemployment insurance was 271,000, a decrease of 11,000 from the previous week’s unrevised level of 282,000. The four-week moving average was 270,500, a decrease of 250 from the previous week’s unrevised average of 270,750.

The average interest rate for a 30-year fixed-rate mortgage is 3.97%, up from 3.95% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.22%, up from 3.19%.
Market Mirror

Steep drops in energy prices and metals Thursday pulled down the stocks of oil and gas producers and mining companies, and the market reversed its gains from Wednesday. The Dow lost 253.25 points (1.43%) to finish at 17,495.84, the NASDAQ closed 68.58 points (1.35%) lower at 5,002.55, and the S&P 500 decreased 31.18 points (1.50%) to 2,041.89. The Russell 2000 was down 13.61 points (1.18%) at 1,135.36, and the Wilshire 5000 fell 306.28 points (1.44%) to 20,949.75.

On the NYSE, 3.2 billion shares traded, and on the NASDAQ, 2.7 billion shares changed hands, with declining issues outnumbering advancing issues nearly 2 to 1 on both exchanges.

The price of the 10-year Treasury note increased 21/32, bringing its yield down to 2.227%. The price of the 30-year Treasury bond climbed 1 15/32, decreasing its yield to 2.932%.
Compliance
Same-Gender Couple Benefits Guidance Issued by IRS
A notice from the Internal Revenue Service (IRS) gives guidance to plan sponsors, applying the Supreme Court’s same-gender marriage case to retirement plans, as well as other benefits. The case, Obergefell v. Hodges, decided in June 2015, held that under the 14th Amendment states cannot deny same-gender couples the right to marry and must recognize same-gender marriages performed in other states. The Treasury and the IRS said they understand that some plan sponsors may alter aspects of their employee benefit plans, or how their plans are administered, in response to the decision, and some plan sponsors have already asked for clarification of how it might apply to some employee benefit plans.Read more >
The 2016 Pension Benefit Guaranty Corporation (PBGC) Comprehensive Premium Filing Instructions (including the illustrative form) have been approved by the Office of Management and Budget (OMB) and are now available on PBGC’s website.Read more >
Budget Deal Would Provide ‘Cadillac Tax’ Relief
A major tax provision of the Affordable Care Act (ACA) that has employers scurrying to avoid it may be delayed if the new budget deal approved by Congress is signed by the president. The Consolidated Appropriations Act, 2016, includes a two-year delay of the 40% excise tax on high-cost health plans (also called the Cadillac tax), making it effective in 2020 rather than 2018. The measure would also make the tax deductible for employers, further reducing their cost burden.Read more >
Investing
State Street Corporation announced it is informing clients about a review it has initiated into the manner in which it invoiced certain expenses to asset servicing clients. The review, in its preliminary stages, addresses the amounts invoiced for specific categories of expenses. A spokesperson told PLANSPONSOR since the firm is in the preliminary stages of the review, it is unable to estimate how many employer-sponsored retirement plan clients, if any, are affected. State Street notes that “this is an issue that we identified and one that we are committed to resolving.”Read more >
Small Talk

ON THIS DATE: In 1787, New Jersey became the third state to ratify the U.S. Constitution. In 1903, the Panama Canal Zone was acquired ‘in perpetuity’ by the U.S. for an annual rent. In 1935, a $1 silver certificate was issued for the first time in the U.S. In 1956, “To Tell the Truth” debuted on CBS-TV. In 1956, Japan was admitted to the United Nations. In 1979, the sound barrier was broken on land for the first time by Stanley Barrett when he drove at 739.6 mph. In 1987, Ivan F. Boesky was sentenced to three years in prison for plotting Wall Street’s biggest insider-trading scandal. In 2001, in Seattle, Washington, Gary Leon Ridgeway pled innocent to the charge of mur.der for four of the Green River serial kil.lings. In 2009, General Motors announced that it would shut down its Saab brand.

 

And now it’s time for FRIDAY FILES!
100 years of Christmas toys.Read more >
These illusions will amaze you.Read more >

In Modesto, California, a man was attending a firearms safety training class. During the course, the instructor was using a training gun, a rubber fake with no firing mechanism, said a Modesto Police Department spokeswoman, according to the Modesto Bee. But as the class was ending, he removed that prop from his holster and replaced it with his real handgun. About that time, another student asked the instructor to demonstrate what to do if attacked by someone armed with a knife, and the man volunteered to portray the attacker in a role-playing exercise. “During the scenario, the instructor drew the firearm and it accidentally discharged” injuring the man, a witness said.

In Sherman Oaks, California, a coach at a high school recently uploaded to Instagram an aerial image that was on his computer desktop showing the school’s football stadium. However, he did not realize that the image on his computer revealed he had an open tab for a por.nography website. The Mirror reports that he also had a tab open for searching education/teaching jobs, which he may have no luck with now.

In Sydney, Australia, a man stole a 20-ton garbage truck, and managed to drive it for 13 kilometers. But authorities had no problem catching up with him as he couldn’t get the truck out of first gear and it was slow-going for that 13 kilometers, according to The Daily Telegraph.
A house cat beats up a tiger.Read more >

In Morehead, Kentucky, a man took his child to a Walmart for the state’s Shop with a Trooper program. But, the local CBS News station reports, that before the dad made it out the door, Walmart’s loss prevention team caught him with a $40 drill for which he didn’t pay. Troopers were stunned they had to arrest the man joining in this community program.

In St. Petersburg, Florida, a boy on a bike approached an 89-year-old man at a gas station claiming that a tire on the passenger side of the man’s care was low on air. When the man exited his vehicle to check, the boy jumped in the driver’s seat and sped off. UPI reports that when police were able to apprehend the boy they were less surprised by his actions. Sadly, he had been arrested more than 20 times since the age of nine.

In Vienna, Austria, a tourist couple climbed aboard the famous giant Ferris wheel Wiener Riesenrad. An employee decided to let them go around one more time, but handed the controls to another employee who didn’t know they were on the ride. The second employee packed it in for the night and turned the Ferris wheel off, leaving the couple stranded at the top. The Toronto Sun reports that the couple enjoyed the view for a while, but reportedly became bored and started calling around for help. Ferris wheel staff sped back to the attraction to let them down.

Happy weekend, everyone!
Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.Read more >

Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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