Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 14th, 2014
Benefit Briefs
Ensuring Best Practices for NQDC Plans
As the year began, information abounded about how qualified retirement plans can review their plans for compliance and implement best practices. But, what about non-qualified plans? Yong Lee, chief operating officer for retirement plan services provider MullinTBG, tells PLANSPONSOR that there are four main areas that non-qualified deferred compensation (NQDC) plan sponsors should consider in examining their plans.
Using its proprietary Retirement Security Projection Model (RSPM), the Employee Benefit Research Institute (EBRI) finds last year’s gains in the financial markets and housing values mean fewer Baby Boomer and Generation X households are likely to run short of money in retirement. However, factors such as age, income, and especially access to an employment-based defined contribution retirement plan, can produce significant individual differences, EBRI says in a report. The risks of a long life and high health-care costs drive huge variations in retirement income adequacy, the model shows.
Accumulation No Longer the Name of the Game
The retirement industry has shifted its focus from accumulation to income in retirement, changing the way tools present readiness and income projection. Plan advisers and plan sponsors now want to be able to tell participants how their accumulated assets in a 401(k) plan translate into income they can live on in retirement, says Jamie Ohl, president of tax-exempt markets for ING U.S. Retirement.
Fidelity Investments finds the average 401(k) balance has continued to increase, ending the fourth quarter of 2013 at a record high of $89,300. According to an analysis by Fidelity, the growth represents a 15.5% increase from a year earlier and nearly doubles the low reached in March 2009, when the average 401(k) balance was $46,200.
Globally Mobile Employees and the ACA
The Patient Protection and Affordable Care Act (ACA) imposes new requirements and related penalties for employers regarding health insurance coverage. But how do globally mobile employees (e.g., those on a long-term assignment to the U.S. or abroad, or who frequently cross borders on business travel) factor into the equation? An “Insights” report from PwC’s Human Resource Services and Global Mobility addresses this question.
Buyer's Market
Through a partnership with GetInsured, insurance exchange provider SelectQuote Benefit Solutions has added health insurance for pre-65 individuals to their employer benefits portfolio. SelectQuote’s pre-65 exchange, offered through GetInsured, is compliant with the Patient Protection and Affordable Care Act (ACA).
Prudential Adds Russell TDFs to IncomeFlex
Prudential Retirement is now offering defined contribution (DC) plans guaranteed income solutions that include Russell Investments’ lineup of institutional target-date funds (TDFs). “We are happy to welcome Russell Investments’ LifePoints Institutional Target Date Funds to the list of target-date funds available with IncomeFlex,” says Srinivas Reddy, head of Prudential Retirement’s Institutional Income and Capital Markets, based in Newark, New Jersey.
Five mutual funds from BlackRock Inc. seek to deliver a total return that tracks the expected median cost of lifetime income. The funds aim to provide long-term investment results that correspond to the total return of the applicable BlackRock CoRI Retirement Indexes, known as the CoRI Indexes. Investors can remain in the CoRI fund for up to 10 years after turning 65 and can take distributions as part of a retirement income plan.
Economic Events
The U.S. Census Bureau announced the combined value of distributive trade sales and manufacturers’ shipments for December, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1.3 trillion, up 0.1% from November 2013, and up 3.8% from December 2012. Advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $427.8 billion, a decrease of 0.4% from the previous month, but 2.6% above January 2013. Total sales for the November 2013 through January 2014 period were up 3.4% from the same period a year ago. The November to December 2013 percent change was revised from +0.2% to -0.1%. In the week ending February 8, the advance figure for seasonally adjusted initial claims for unemployment insurance was 339,000, an increase of 8,000 from the previous week’s unrevised figure of 331,000, the Labor Department reported. The four-week moving average was 336,750, an increase of 3,500 from the previous week’s revised average of 333,250. The average interest rate for a 30-year fixed-rate mortgage is 4.28%, up from 4.23% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.33%, unchanged from a week ago.
Market Mirror
Thursday, the Dow was up 63.65 points (0.40%) at 16,027.59, the NASDAQ climbed 39.38 points (0.94%) to 4,240.67, and the S&P 500 closed 10.57 points (0.58%) higher at 1,829.83. The Russell 2000 gained 15.25 points (1.35%) to finish at 1,147.79, and the Wilshire 5000 closed at 19,585.69, up 133.98 points (0.69%). On the NYSE, 3.2 billion shares traded, with a near 3 to 1 lead for advancers. On the NASDAQ, 2.7 billion shares changed hands, with 2.6 advancing issues for every declining issue. The price of the 10-year Treasury note was up 17/32, bringing its yield down to 2.734%. The price of the 30-year Treasury bond increased 21/32, decreasing its yield to 3.686%.
Financial Sense
Institutions Like Smart Beta
New analysis from State Street Global Advisors (SSgA) shows smart beta strategies, designed to take advantage of both active and passive investing principals, are gaining popularity. The analysis, based on the firm’s recent “Beyond Active and Passive, Advanced Beta Comes of Age” study, finds advanced or “smart” beta strategies are playing a more influential role in some of the world’s largest portfolios.  According to Adrian Banner, CEO and chief investment officer of INTECH Investment Management LLC, which provides access to smart-beta portfolios and mathematically driven investment solutions, the terms “smart beta” and “advanced beta” don’t have precise definitions. Generally, he says, smart beta describes rules-based investment strategies that do not rely on market-capitalization weighting to set asset allocations within an index-tracking portfolio.
The World at Large
Four in 10 UK employers are worried increasing numbers of over 65s in the workplace will ramp up benefits costs and hold back younger staff.
The UK Pensions Management Institute will launch a qualification aimed at helping employers who want to offer non-regulated at-retirement advice to staff.
Sponsored message from PLANSPONSOR
PLANSPONSOR Plan Sponsors of the Year These awards recognize retirement plan sponsors that demonstrate leadership in providing a more secure retirement for workers across several categories and honored at the Awards for Excellence dinner. View the finalists and more dinner information.
Small Talk
The America Saves campaign has launched a new Assess Your Savings Plan tool for people to review current savings strategies and find new ways to save. The online tool is being released in connection with America Saves Week 2014, which runs from February 24 to March 2.
ON THIS DATE:  Around the year 278 A.D., Valentine, a holy priest in Rome in the days of Emperor Claudius II, was executed for continuing to perform marriages when they had been banned by Emperor Claudius. In 1929, four men dressed as police officers entered gangster Bugs Moran’s headquarters on North Clark Street in Chicago, lined seven of Moran’s henchmen against a wall, and shot them to death. The St. Valentine’s Day Massacre, as it is now called, was the culmination of a gang war between arch rivals Al Capone and Bugs Moran. In 1929, penicillin was discovered by young bacteriologist Sir Alexander Fleming.   And now it’s time for FRIDAY FILES!
Two women who have been best friends for 94 years share what they feel about today’s pop culture. Guaranteed to make you smile.
In Dokka, Norway, a 10-year-old boy put his 18-month old sister into the family’s car one morning while his parents were still sleeping and set off to visit his grandparents in Valdres, about 60 kilometres away. He drove more than 10 kilometres before veering off the road, where he was found by a snowplow driver who alerted police. According to the UK’s Daily Mail, The boy told the snowplow driver he was a dwarf and had forgotten his driver’s license at home. The children were not injured, the car was not damaged, and no charges were filed.
In Ipswich, Queensland, Australia, a teenager entered a gas station threatening clerks and allegedly demanding money, though he only left with a bottle of soda, The Queensland Times reports. Employees were terrified as the man was brandishing a chainsaw, damaging much of the store and a vehicle parked outside before he left.  His “disguise” was not as terrifying—he was wearing a flower pot.
In Akron, Ohio, in a clear example of “don’t shoot (or bite) the messenger,” a man approached his postal carrier to see if he had received a check he had been waiting for. When told no, the man became angry, grabbed the postal worker’s pepper spray and squirted him in the eyes. According to the Akron Beacon Journal, the two men then started wrestling in the street, and the postal worker said the man bit him three times in the leg during their fight. The man was arrested on misdemeanor charges of assault and resisting arrest.
In London, England, security personnel at Heathrow airport recently confiscated a gun from a traveler. The traveler recently posted on social media that he has traveled the world with it, but Heathrow labeled it a security threat and took it. It wasn’t his gun, it was the gun for his son’s Woody from Toy Story doll.
In Sandy, Utah, a would-be burglar thought of a clever idea to enter a jewelry store, but didn’t plan his escape as well. The 31-year-old entered the jewelry store by going through a neighboring bakery and climbing down through the ceiling of Sierra-West Jewelers, KSL TV in Utah reports. While alarms were going off, he smashed one case and filled his bag with jewelry. But, he was unable to unlock the door from the inside, and when he tried to break through it with a fire extinguisher, he realized it was shatterproof glass. The man just chilled and smoked a couple of ciga.rettes until the owner came and unlocked the door for police to arrest him.   Have a great weekend, everyone!  We are off Monday for Presidents’ Day, but NewsDash will be back in your inbox Tuesday.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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