Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 12th, 2014
Benefit Briefs
Defined contribution (DC) plans are an important part of the U.S. retirement system, says a research report. “Building Retirement Security Through Defined Contribution Plans,” authored by Professors Jeffrey R. Brown and Scott J. Weisbenner from the University of Illinois at Urbana at Champaign, was written in cooperation with the American Council of Life Insurers. The report indicates that positive strides have been taken by DC plan sponsors in recent years, especially in the areas of increasing participation, providing more diversified portfolios and providing immediate eligibility to employees that are more likely to switch employers at various times throughout their career. 
The Village of Forest Park, Illinois, has retreated from moving employee 457 retirement plan accounts to a new provider. The village council voted in December to move the accounts from longtime oversight by Nationwide Retirement Solutions to a new provider, AXA Equitable, according to the Forest Park Review. Forty-seven different Nationwide funds were slotted to disappear and be replaced with AXA funds with similar characteristics. However, employees became upset when the new arrangement was announced in late January.
A Chattanooga, Tennessee-based health care system is joining the trend of moving employees from a defined benefit retirement plan to a defined contribution plan. Erlanger Health System’s board of trustees voted unanimously to freeze its pension and place employees into a new 403(b) plan. As with other corporate and nonprofit employers that made the switch, the hospital cites costs as a reason.
Economic Events
The U.S. Census Bureau announced that December 2013 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $442.4 billion, up 0.5% from the revised November level and were up 5.8% from the December 2012 level. The November preliminary estimate was revised upward $0.3 billion or 0.1%. December sales of durable goods were up 0.3% from last month and were up 5.6% from a year ago. Sales of lumber and other construction materials were up 2.3% from last month. Sales of nondurable goods were up 0.6% from November and were up 6.0% from last December. Sales of drugs and druggists’ sundries were up 3.4% from last month and sales of paper and paper products were up 2.8%.
Market Mirror
Tuesday, the Dow climbed 192.98 points (1.22%) to 15,994.77, the NASDAQ increased 42.87 points (1.03%) to 4,191.05, and the S&P 500 gained 19.91 points (1.11%) to finish at 1,819.75. The Russell 2000 was up 10.42 points (0.93%) at 1,129.15, and the Wilshire 5000 closed 205.69 points (1.07%) higher at 19,441.10. On the NYSE, 3.2 billion shares traded, with advancing issues outnumbering declining issues more than 3 to 1. On the NASDAQ, 2.6 billion shares changed hands, with 2.6 advancers for every decliner. The price of the 10-year Treasury note decreased 15/32, increasing its yield to 2.724%. The price of the 30-year Treasury bond fell 24/32, bringing its yield up to 3.692%.
Financial Sense
Strategies for Locking in Pension Funding Gains
A new analysis from Russell Investments, featured in its January “LDI Update” report, finds while 2013 saw an increase in the funded status of pension plans, this year has begun on a less favorable note. The analysis points out there are ways plan sponsors can attempt to lock in pension funding gains. Marty Jaugietis, managing director, LDI Solutions, Russell Investments tells PLANSPONSOR, “There should be some modeling done of the impact of a reduction in funded status volatility.”
Rules & Regulators
Time to End Complacency About Plan Errors
More defined contribution retirement plans are out of compliance with Department of Labor (DOL) and Internal Revenue Service (IRS) regulations than some might think. Brett Goldstein, director of Retirement Planning at American Investment Planners LLC in Jericho, New York, tells PLANSPONSOR the most common DOL violation he sees among his clients is the failure of the trustee to timely remit employee contributions and loan repayments to the plan. The most common IRS violation is the failure to have the proper plan documents. “The shocking part is that most employers don’t care and only correct the problems when they get caught,” he says.
The Internal Revenue Service (IRS) will host a phone forum next month on the 2013 Cumulative List. During the call, the IRS Employee Plans (EP) Technical Guidance staff will discuss the list of changes plan sponsors and practitioners must make to a plan before submitting determination letter applications beginning February 1.
Treasury Modifies Rules for ACA Employer Mandate
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Patient Protection and Affordable Care Act (ACA). The final rules phase in the percentage of full-time workers that employers with 100 or more employees need to offer coverage to–from 70% in 2015 to 95% in 2016 and beyond.
Allocating Investment Fund Settlement Checks
“Our plan recently received a Securities and Exchange Commission (SEC) settlement check for approximately $500.00 related to market-timing that occurred in one of our 403(b) plan investment options several years ago. Not only did our plan terminate the investment option long ago, but we’ve even changed recordkeepers since that time, so identifying affected participants would be impossible. What should we do with the check? It is so small relative to our plan assets (which are in the tens of millions) I am tempted simply to return it. Is that a prudent course of action?”
Sponsored message from Russell Investments
Adaptive Retirement Accounts Discussion with Russell Investments
Click here to see Josh Cohen, Russell Investments’ Defined Contribution Practice Leader, discuss Adaptive Retirement Accounts.
Small Talk
Most Don't Want to Marry Debt
Expecting a marriage proposal, or acceptance of one, this Valentine’s Day? Maybe not, if you’re in debt. The majority of those who participated in a recent National Foundation for Credit Counseling (NFCC) poll, the Financial Literacy Opinion Index, say they would have serious reservations about taking on the debt of the person they love, even to the point of ending the relationship.
ON THIS DATE:  In 1973, the return of U.S. POWs began when North Vietnam released 142 of 591 U.S. prisoners at Hanoi’s Gia Lam Airport as part of what was called Operation Homecoming. In 1999, the five-week impeachment trial of Bill Clinton came to an end, with the Senate voting to acquit the president on both articles of impeachment: perjury and obstruction of justice. In 2008, in an attempt to cut costs, struggling auto giant General Motors (GM) offered buyouts to all 74,000 of its hourly employees in the U.S. represented by the United Auto Workers (UAW) union. The move came after GM lost $38.7 billion in 2007, which at the time was the largest loss ever experienced by any car maker. (Two weeks later, on February 26, the loss was adjusted by $4.6 billion, to $43.3 billion.) GM offered its employees a range of buyout options, including a $140,000 lump payment to those who worked at the company for at least 10 years and agreed to give up their health benefits and pension. In 2008, Hollywood’s longest work stoppage since 1988 ended, when members of the Writers Guild of America (WGA) voted by a margin of more than 90% to go back to work after a walkout that began the previous November 5.   WEDNESDAY WISDOM: “What you do today can improve all your tomorrows.”—Ralph Marston, writer   Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy at 
News from  Copyright © Asset International, Inc., 2014.  All rights reserved.  No reproduction without prior authorization.
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Editorial: Alison Cooke Mintzer


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