Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 19th, 2015
Benefits & Administration
Participants Don’t Realize Benefit of Small Savings Boost
People just don’t realize what their spending and savings behaviors add up to over a long period of time—say, 25 or 30 years, the length of time they might have to save for retirement, says Fidelity Investments. Fidelity points out that when compound interest and market growth potential are factored in, saving $50 a month more today could translate into an additional $270 of monthly retirement income. However, about two-thirds of those polled by Fidelity far underestimated what that small savings boost today would amount to in retirement.Read more >
More than one-quarter (28%) of Americans say high medical expenses are their biggest financial worry about retirement. A Bankrate.com survey report reveals the highest-income households (over $75,000 per year) are even more concerned about high medical expenses than the overall population. The second biggest worry is running out of money, which is the greatest fear for Millennials, followed by not being able to afford daily expenses (18%) and having too much debt (11%).Read more >
SOA Maps Required Pension Contributions
Significant increases in aggregate contribution requirements lie ahead for single-employer defined benefit (DB) pension plans, according to an updated analysis from the Society of Actuaries (SOA). This doesn’t mean plan sponsors will immediately have to fork over more money to their pension plans, the SOA report explains. In fact, the SOA actually projects a reduction in the minimum annual required contribution for the next decade or so. Beyond this point the prospects of increasing longevity and weaker returns continue to expand pension liabilities—potentially at problematic rates for all but the healthiest corporations.Read more >
New research from the Employee Benefit Research Institute (EBRI) indicates the retirement savings gap for Americans varies widely by gender and marital status, among other factors. The aggregate national retirement savings deficit is about $4.13 trillion for all U.S. households between ages 25 and 64, according to EBRI’s new analysis based on results from its proprietary Retirement Savings Projection Model (RSPM). The Retirement Savings Shortfalls (RSS) show that for those on the verge of retirement (Early Baby Boomers), the deficits vary from $19,304 (per individual) for married households, increasing to $33,778 for single males and $62,734 for single females.Read more >
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Compliance
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Ask the Experts
Ask the Experts – ACP Testing After a Merger
“Our hospital merged with another private tax-exempt hospital last year, and both hospitals are now part of the same controlled group for retirement plan testing purposes. How is ACP testing affected, if at all?”Read more >
Sponsored message from Vanguard
Vanguard’s Economic & Investment Outlook
According to Vanguard’s newly released Economic and Investment Outlook, the U.S. economy will likely remain resilient with anticipated growth above trend in the new term, but it won’t be immune to the recessionary and deflationary risks.Read more >
Products, Deals & People
New Solution Helps Retirees Continue Benefits
The RetireeZone Web portal from Buck Consultants at Xerox gives employers the ability to offer voluntary benefits coverage to retirees, without increasing company payroll and benefits costs. “Retirees need to replace coverage they had as active employees, but often have budget issues as they plan their retirement lifestyle,” says Jim Gallic, a principal with Buck Consultants at Xerox. “Employers usually don’t have the time, knowledge or ability to address these needs. RetireeZone offers a strategy to deal with these pressing concerns.”Read more >
Economic Events

Privately owned housing completions in January were at a seasonally adjusted annual rate of 930,000, the Census Bureau reports. This is 1.3% above the revised December estimate of 918,000 and is 9.4% above the January 2014 rate of 850,000. Single-family housing completions in January were at a rate of 649,000. This is 2.3% below the revised December rate of 664,000. The January rate for units in buildings with five units or more was 274,000.

The Producer Price Index for final demand decreased 0.8% in January, according to the Bureau of Labor Statistics. Final demand prices moved down 0.2% in both December and November. In January, the index for final demand goods dropped 2.1%, and prices for final demand services fell 0.2%.

Market Mirror

Major U.S. stock indices ended mixed but little changed Wednesday after minutes from a Federal Reserve meeting in January showed that policymakers were in no hurry to raise interest rates. The Dow was down 17.73 points (0.10%) at 18,029.85, the NASDAQ was up 7.10 points (0.14%) at 4,906.36, and the S&P 500 decreased by 0.66 of a point (0.03%) to 2,099.68. The Russell 2000 closed 2.94 points (0.24%) higher at 1,227.95, and the Wilshire 5000 ticked up 8.72 points (0.04%) to 22,161.03.

On the NYSE, 3.2 billion shares traded, with 1.2 advancing issues for every declining issue. On the NASDAQ, 2.8 billion shares changed hands, with a slight lead for advancers.

The price of the 10-year Treasury noted increased 18/32, bringing its yield down to 2.079%. The price of the 30-year Treasury bond was up 17/32, decreasing its yield to 2.708%.

Investing
DB Investment Consultants Look Globally for Growth
A new report from Cerulli Associates notes that during the past year, robust equity markets decreased the value of pension liabilities, and resulted in improved funding levels for many corporate defined benefit (DB) plans. As more pension plans’ funded status is enhanced, those that are on liability-driven investing (LDI) glidepaths will start to reduce their return-seeking risky assets and replace them with fixed income. More than half (56%) of investment consultants surveyed by Cerulli indicated they are likely to increase their corporate DB clients’ U.S. fixed-income exposure during the next one- to two-year period. However, with traditional fixed-income investments continuing to provide unattractive returns, consultants are looking for opportunities overseas.Read more >
Small Talk
ON THIS DATE: In 1878, Thomas Alva Edison was awarded U.S. Patent No. 200,521 for the phonograph. In 1942, U.S. President Franklin Roosevelt signed an executive order giving the military the authority to relocate and intern Japanese-Americans. In 2004, former Enron Corp. chief executive Jeffrey Skilling was charged with fraud, insider trading and other crimes in connection with the energy trader’s collapse. Skilling was later convicted and sentenced to more than 24 years in prison.
SURVEY SAYS: To do their job well, retirement plan committees need to keep up with the latest plan design and investment trends. This week, I’d like to know, do you think your company’s retirement plan committee is in tune with the latest trends? Do you think it’s helpful for non-executive employees to serve on retirement plan committees? You may respond to this week’s survey by 6 p.m. Pacific time today.Read more >
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