Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 26th, 2014
Benefit Briefs
“Our university is attempting to put together a faculty retirement incentive plan. Are there any enhancements to our 403(b) plan that we can make as a part of this package in order to incentivize faculty to retire?”
Plan Sponsors See Value in Offering Managed Accounts
A greater focus on participant outcomes and their own fiduciary responsibilities may be leading more plan sponsors to adopt managed accounts for their retirement plans. Sangeeta Moorjani, senior vice president of investment services at Fidelity in Boston, tells PLANSPONSOR a couple of factors contribute to the rise in demand. Not only are plan sponsors much more focused on making sure participants are retirement ready, they’re also seeking help managing their fiduciary risk, and from the plan participant perspective, employees seem to need more and more assistance.
Retirees Worried About Ongoing Benefits
Unprotected pensions, loss of retiree health care benefits and reduced Social Security payments worry retirees. More than half (51.3%) of retirees rank the security of their pensions and retirement savings as the most important issue they face, according to results of an online survey conducted by, in conjunction with former Chairman of the Richmond Federal Reserve Bank and former White House Employee Retirement Income Security Act (ERISA) adviser, Dr. Thomas J. Mackell, Jr. Nearly one-third (30%) of retirees polled say they are concerned their defined pension benefits could be transferred to an insurance annuity, resulting in loss of ERISA and Pension Benefit Guaranty Corporation (PBGC) protections.
Regulator Questioning Moves to Annual 401(k) Plan Match
The Massachusetts Securities Division is looking into how many 401(k) plan sponsors have moved to paying deferral matching contributions annually. According to a statement from Secretary of the Commonwealth William F. Galvin, a letter has been sent to the 25 largest 401(k) plan providers seeking the number of plans they administer that have shifted to year-end lump-sum matches, the number of affected employees, and the date of the change. It also seeks the disclosure information provided to plan participants about the potential risks associated with the change. The statement notes that AOL shifted from a per-pay period distribution of the employer contribution to a year-end distribution, but in response to a negative reaction from its employees the Internet company reversed its position. “At a time when most Americans have much of their retirement savings in these 401(k) plans, it is crucial that they are made aware of the risks involved when a company shifts to a year-end distribution,” Secretary Galvin says.
Buyer's Market
Non-profit organizations that sponsor 403(b) plans are asked to participate in the 2014 Plan Sponsor Council of America (PSCA) 403(b) Plan Survey. The sixth annual survey, sponsored by the Principal Financial Group, features relevant questions about key market topics. Non-profit organizations that participate will receive a free copy of the survey report and an invitation to a webinar that provides an in-depth discussion of the results.
Economic Events
The Conference Board Consumer Confidence Index, which had increased in January, fell moderately in February. The Index now stands at 78.1 (1985=100), down from 79.4 in January. The decline was driven by the Expectations Index, which dropped to 75.7 from 80.8. The Present Situation Index, by contrast, climbed from 77.3 to 81.7.
Market Mirror
Tuesday, the Dow was down 27.48 points (0.17%) at 16,179.66, the NASDAQ declined 5.38 points (0.13%) to 4,287.59, and the S&P 500 lost 2.49 points (0.13%) to close at 1,845.12. The Russell 2000 declined by 0.61 (0.05%) to 1,173.95, and the Wilshire 5000 slipped 16.79 points (0.08%) to 19,795.79. On the NYSE, 3.2 billion shares traded, with a slight lead for decliners. On the NASDAQ, 2.6 billion shares changed hands, with 1.5 declining issues for every advancing issue. The price of the 10-year Treasury note was up 10/32, and the price of the 30-year Treasury bond increased 22/32, bringing their yields down to 2.705% and 3.660%, respectively.
Financial Sense
Based on pricing research conducted in January 2014, Mercer found the UK is the most expensive location to insure retiree defined benefit (DB) pension obligations relative to the liabilities reflected in company accounts. According to the index, the cost of insuring £100 million worth of retiree obligations in the UK would be around 23% more than the equivalent accounting liabilities. This compares to 17% in Ireland, 8.5% in the United States and just 5% in Canada.
Rules & Regulators
Failed to Provide Safe Harbor 401(k) Plan Notice?
Failed to provide the safe harbor 401(k) plan notice to employees eligible to participate in the plan? There’s a fix for that. In a recently updated page on the Internal Revenue Service (IRS) website, the agency notes that the appropriate correction for a late safe harbor 401(k) notice depends on the impact on individual participants.
Sponsored message from PLANSPONSOR
PLANSPONSOR Plan Sponsors of the Year – 403(b)
Finalists include Gilman School, Moffitt Cancer Center, Texas Association of School Boards, Inc., and Washington St. Board for Community & Technical Colleges. Winners in each category will be announced in February and recognized at the Awards for Excellence dinner. View other categories.
Small Talk
Refunds May Be a Good Thing for Some Taxpayers
Financial experts say it is better to balance tax withholding to receive more money per paycheck rather than a refund at tax time. In theory, this would allow taxpayers to benefit from putting their money to work for them sooner and therefore not miss out on potential returns. This might be true if individuals invested that extra pay, but recent research from shows this isn’t the case. According to the survey, 69% of those who prefer a refund save at least half of that refund, compared with 54% who save the extra money they get each paycheck from a minimized withholding level.
ON THIS DATE:  In 1919, the Grand Canyon National Park was established. In 1929, the Grand Teton National Park was established. In 1949, from Carswell Air Force Base in Fort Worth, Texas, the Lucky Lady II, a B-50 Superfortress, took off on the first nonstop round-the-world flight. In 1993, a bomb exploded in the parking garage beneath the World Trade Center in New York City.   WEDNESDAY WISDOM: “While we are postponing, life speeds by.”—Lucius Annaeus Seneca, Roman stoic philosopher
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PLANSPONSOR’s 2014 Plan Sponsor of the Year Winner
Finalists for the PLANSPONSOR Plan Sponsor of the Year Award in the Corporate 401(k) >$1B category are Eastman Chemical Company (Kingsport, Tennessee), Google Inc. (Mountain View, California) and Microsoft Corporation (Redmond, Washington). And the winner is…