Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 27th, 2014
Industry Insights
“America Saves Week” states that its objective is to provide an “opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status and ‘Set a Goal. Make a Plan. Save Automatically’.” Companies that offer an automatic enrollment feature with their 401(k) plans are doing their employees a favor, says Rich Rausser, senior vice president of Client Services at Pentegra Retirement Services.
Benefit Briefs
What That 1% Increase Can Do for Participants
For those plan sponsors who may be hesitant to add an automatic deferral escalation feature to their defined contribution (DC) plans, here’s something to consider. An analysis by Fidelity Investments shows that for a 25-year-old, a 1% deferral increase—about $33 per month for someone making $40,000—could result in an additional $200 to $330 per month in retirement income. “I think the data definitely shows that by making an automatic annual increase, plan sponsors will benefit many more participants,” Beth McHugh, vice president of Thought Leadership and Market Insights at Fidelity in Albuquerque, New Mexico, tells PLANSPONSOR.
Health care issues may be causing employees to dial back their saving for retirement, says a new survey. “From virtually nowhere five or six years ago, health care expenses in retirement today are the driving anxiety for pre-retirees, now in the same league as having adequate overall retirement savings to begin with,” say the authors of the most recent edition of the Mercer Workplace Survey. “It’s not a stretch to acknowledge that health care issues today have more urgency than before, and that this shift puts retirement savings under stress.”
Don’t Know Much About… Investment Options
About one-third of Americans who participate in a workplace-sponsored retirement plan say they are not familiar with its investment options, research finds. The first culprit could be menu construction, according to David Ray, managing director, head of institutional retirement plan sales at TIAA-CREF. “A lot of research shows that too many options are too many options,” Ray tells PLANSPONSOR.
Workplace benefits are critical to the financial security of middle-class employees, says a new study. The “Guardian Workplace Benefits Study” indicates many middle-class employees struggle with achieving their financial goals, citing “making ends meet” as highly important, with eight in 10 saying the reduction of debt is their most important goal. Many focus on “here and now” goals, with only six in 10 saying they are doing well with regard to saving for retirement and ensuring those savings will last a lifetime.
Better Outcomes Through Better Websites?
Recordkeepers and other retirement plan service providers are not meeting client demand for online tools and reporting technologies shown to improve outcomes and ease administrative burdens. That’s the conclusion drawn by Julia Binder, director of e-business research at the financial services consulting firm kasina, in two new white papers. Binder’s research examines both the participant-facing and sponsor-facing Web capabilities of a list of well-known providers. She tells PLANSPONSOR that, with a few notable exceptions, the majority of companies her firm examined could do substantially more with current technology to support both sponsors and participants.
Buyer's Market
Those with retirement plans and health savings accounts (HSAs) offered by Wells Fargo can now track account information in a central online location. Accessing the Wells Fargo website ( will allow these customers to review a full picture of their financial assets to help with financial and retirement planning, the firm says. The integrated approach will also let Wells Fargo customers view balances for checking, savings, and credit card accounts, as we as information regarding outstanding loans and insurance.
Economic Events
Sales of new single-family houses in January were at a seasonally adjusted annual rate of 468,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.6% above the revised December rate of 427,000 and is 2.2% above the January 2013 estimate of 458,000.
Market Mirror
Yesterday, the Dow inched up 18.75 points (0.12%) to 16,198.41, the NASDAQ was up 4.48 points (0.10%) at 4,292.06, and the S&P 500 was virtually unchanged at 1,845.16. The Russell 2000 climbed 7.77 points (0.66%) to 1,181.72, and the Wilshire 5000 increased 23.19 points (0.12%) to 19,818.98. On the NYSE, 3.2 billion shares traded, and on the NASDAQ, 2.6 billion shares exchanged hands, with 1.5 advancing issues for every declining issue on both exchanges. The price of the 10-year Treasury note and the price of the 30-year Treasury bond decreased 2/32, increasing their yields to 2.671% and 3.629%, respectively.
Rules & Regulators
Helping Low-Income Workers Prepare for Retirement
Witnesses during a U.S. Senate subcommittee hearing shared issues and proposals policymakers should consider to ensure the retirement security of low-income workers. Diane Oakley, executive director of the National Institute on Retirement Security (NIRS) in Washington, D.C., noted that with the disappearance of secure pensions, significant retirement security challenges face Baby Boomers and the upcoming generations of working families. “A sustained increase in retirement savings is needed to put all Americans on a path toward financial security,” she said.
During a U.S. Senate subcommittee hearing, a Treasury official discussed details and the intent of the myRA proposal. According to J. Mark Iwry, senior advisor to the Secretary and Deputy Assistant Secretary (Tax Policy) Retirement and Health Policy at the United States Department of the Treasury, Treasury intends to begin phasing in the myRA program by the end of 2014. “While obviously not nearly enough to fund a secure retirement, $15,000 may be enough to ‘prime the pump’ and instill a lifelong habit of continued saving, and should be enough to make a saver’s account viable in the private sector,” Iwry said.
Morgan Stanley, ING Revenue-Sharing Suit Dismissed
Revenue-sharing payments are not necessarily a violation of the Employee Retirement Income Security Act (ERISA), but they are if not disclosed, a court ruled. In a case alleging revenue-sharing payments between Morgan Stanley Company and ING Life Insurance and Annuity Company violated ERISA prohibited transaction rules, the U.S. District Court for the Southern District of New York found “[f]ee-sharing arrangements or kickbacks do not in-and-of themselves create a violation, but their non-disclosure does.” The court said ERISA Section 408(b)(2) does not require invoices of the payments to be provided, but only a description of the compensation arrangements. Skin Pathology Associates was informed in writing of the arrangement between Morgan Stanley and ING and signed off on it.
Sponsored message from PLANSPONSOR
PLANSPONSOR Plan Sponsors of the Year – Corporate 401(k) – less than $50M Finalists include COX SMITH MATTHEWS INCORPORATED, Draper, Inc. and Landsman Development Corp. Winners in each category will be announced in February and recognized at the Awards for Excellence dinner. View other categories.
Small Talk
ON THIS DATE:  In 1827, a group of masked and costumed students danced through the streets of New Orleans, Louisiana, marking the beginning of the city’s famous Mardi Gras celebrations. In 1922, in Washington, D.C., the 19th Amendment to the U.S. Constitution, providing for female suffrage, was unanimously declared constitutional by the eight members of the U.S. Supreme Court. In 1973, angered over a long history of violated treaties, mistreatment, and discrimination, 200 members of the American Indian Movement (AIM) occupied the tiny hamlet of Wounded Knee, South Dakota. In 1980, “I Will Survive” won the first—and last—Grammy ever awarded for Best Disco Recording.
SURVEY SAYS: In case you haven’t noticed from our coverage, this week is “America Saves Week.” I’d like to know, does your company do any employee retirement savings education during the week? What can your company do better to encourage employees to save for retirement? You may respond to this week’s survey by 6 p.m. Pacific time today.
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Plan Sponsor of the Year Winner: Corporate 401(k) <$50M
Finalists for the 2014 PLANSPONSOR Plan Sponsor of the Year Award in the Corporate 401(k): <$50M category are Cox Smith (San Antonio, Texas), Draper Inc. (Spiceland, Indiana) and Landsman Development Corp. (Rochester, New York). And the winner is…
Plan Sponsor of the Year Winner: Corporate 401(k) $50M to $1B
Finalists for the 2014 PLANSPONSOR Plan Sponsor of the Year Award in the Corporate 401(k): $50M to $1B category are Akin Gump Strauss Hauer & Feld LLP (Washington, D.C.), American Woodmark Corporation (Winchester, Virginia), O.C. Tanner Company (Salt Lake City, Utah), Range Resources Corporation (Fort Worth, Texas) and Vermeer Corporation (Pella, Iowa). And the winner is…
IRS Notice Defines Retirement Plan Tax Distribution Exceptions
ERISA Advisory Council Explores Annuity Default Options in DC Plans
Ask the Experts
Who Is Eligible for Special Age 60-63 Catch-up Contributions?

Editorial: Alison Cooke Mintzer


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