Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 3rd, 2014
Webcast Event
Please join us to hear the views of three industry experts on evolving trends in target-date funds (TDFs) and other qualified default investment alternatives (QDIAs). Findings from a recently conducted survey, sponsored by Janus and PLANSPONSOR magazine, will be recapped and discussed, providing insight into plan sponsors’ assessments of QDIA and target-date issues. According to the survey, plan sponsors are gaining confidence in these offerings. However, with this confidence, there seems to be less concern regarding fiduciary risk, as well as a lack of understanding about who should review the underlying investments in these options.
Benefit Briefs
Just out of Reish: Plan Committee Agendas
The fiduciaries of Employee Retirement Income Security Act (ERISA) retirement plans have a long list of duties. The agendas for plan committee meetings typically are evidence that a committee is performing those duties. To help committees put their focus where needed, here is a proposed list of topics for participant-directed plans, such as 401(k)s and 403(b)s.
Economic Events
THE ECONOMIC WEEK AHEAD: Today, the Census Bureau will report about construction spending for December 2013, and tomorrow, it will report about factory orders for December. Thursday, the Labor Department will issue its initial claims report. Friday, we’ll see a report on nonfarm payrolls from the Bureau of Labor Statistics and learn the unemployment rate for January.
Market Mirror
Major U.S. stock indices just couldn’t keep their upward momentum, as the Dow fell back 149.76 points (0.94%) Friday, to 15,698.85. The NASDAQ was down 19.25 points (0.47%) at 4,103.88, and the S&P 500 closed 11.60 points (0.65%) lower at 1,782.59. The Russell 2000 decreased 8.52 points (0.75%) to 1,130.84, and the Wilshire 5000 closed at 19,105.24, down 112.98 points, or 0.59%. On the NYSE, 3.2 billion shares traded, with 1.6 declining issues for every advancing issue. On the NASDAQ, 2.6 billion shares changed hands, with a 2.4 to 1 ratio of decliners to advancers. The price of the 10-year Treasury note was up 12/32, bringing its yield down to 2.653%. The price of the 30-year Treasury bond increased 19/32, decreasing its yield to 3.603%. WEEK’S WORTH: For the week ending January 31, the Dow fell 1.14%, the NASDAQ was down 0.59% and the S&P 500 decreased 0.43%. The Russell 2000 lost 1.16%, and the Wilshire 5000 slipped 0.33%.
The World at Large
Around three in 10 employers have opted to auto-enroll workers through the UK’s National Employment Savings Trust (NEST), with small and medium sized employers attracted to the scheme. Drawing from this rich resource, NEST delivered its NEST Insight report this week, but what is the feeling among its membership about saving into a defined contribution (DC) pension?
Rules & Regulators
PBGC Reviving Partition Authority Despite Limited Resources
For the third time in its history, the Pension Benefit Guaranty Corporation (PBGC) is using its authority to partition an insolvent employer’s participants from a multiemployer plan to boost the plan’s financial position. The agency announced it approved a request from the Bakery and Sales Drivers Local 33 Industry Pension Fund to separate 330 former Hostess participants from the plan, and pay PBGC-guaranteed benefits so promised benefits for most of the plan’s members would remain intact. During a press briefing, PBGC Director Joshua Gotbaum explained plans in this critical status have for years come to the agency saying they have adequate resources to pay for active employees, but do not have enough resources to pay for employees of companies that went out of business. The agency has the authority to take responsibility for those companies that have gone out of business, called partition ability, but until now has only used this authority twice—not because the agency does not want to help, but because its multiemployer program does not have adequate funds to do so.
PBGC Premium Hikes Shake Up Buyout Landscape
A 16% increase in 2014 Pension Benefit Guaranty Corporation (PBGC) premiums pushed Mercer’s Pension Buyout Index into positive territory, meaning it could be cheaper for many employers to annuitize pension liabilities than maintain them. Researchers at Mercer tell PLANSPONSOR that the increase in PBGC premiums caused the relative economic cost of running a pension plan (as compared with projected benefit liabilities) to jump about 40 basis points for a theoretical plan, up to 108.6% of liabilities. The cost of retaining liabilities hovers above real liability values due to such things as administrative costs, management fees and insurance premiums.
Small Talk
Aging Viewed as Lesser Problem by Americans than Others
Americans are not as likely to label aging as a major national problem compared with the citizens of other countries, a study finds. “Attitudes About Aging: A Global Perspective,” from the Pew Research Center, finds only one in four Americans believe the aging of the population is a serious issue for the country. The study finds those who think of aging as a major problem are likely to be older themselves. In the United States, older adults are twice as likely as young adults (34% vs. 18%) to say aging is a major problem. Nearly one-quarter (24%) of U.S. respondents surveyed for the study are very confident they will have an adequate standard of living in their old age, while over one-third (39%) are somewhat confident.
ON THIS DATE:  In 1924, Woodrow Wilson, the 28th president of the United States, died in Washington, D.C., at the age of 67. In 1959, rising American rock stars Buddy Holly, Ritchie Valens and J.P. “The Big Bopper” Richardson were killed when their chartered Beechcraft Bonanza plane crashed in Iowa a few minutes after takeoff from Mason City on a flight headed for Moorehead, Minnesota. Investigators blamed the crash on bad weather and pilot error. Singer Don McLean memorialized Holly, Valens and Richardson in the 1972 No. 1 hit “American Pie,” which refers to February 3, 1959 as “the day the music died.” In 1994, President Bill Clinton lifted a 19-year-old trade embargo of the Republic of Vietnam. The embargo had been in place since 1975, when North Vietnamese forces captured the city of Saigon in South Vietnam during the Vietnam War. In 2002, the New England Patriots defeated the heavily favored St. Louis Rams, 20-17, to take home their first Super Bowl victory. Pats’ kicker Adam Vinatieri made a 48-yard field goal to win the game just as the clock expired. In 2005, Alberto Gonzales won Senate confirmation as the nation’s first Hispanic attorney general.
SURVEY SAYS: Do You Do Lunch?
Last week, I asked NewsDash readers, Do you take a break from work for lunch? More than half (55.4%) of responding readers indicated that yes, they do take a break for lunch, whether they eat or not. More than four in ten (43.2%) said they do not. Of those who typically take a lunch break, 46% reported they take 45 minutes to one hour, 19.5% take 15 minutes or less, 13.3% take 16 to 30 minutes, and 18.6% take 31 to 45 minutes. Nearly 3% indicated they take more than an hour for a lunch break. When asked how they spend their time during lunch breaks, besides eating, more than four in ten (44.5%) said they use the time to run errands or shop. Reading was the next most-favored activity, selected by 38.3% of respondents, followed by surfing the Web or online shopping, chosen by 35.2%. In verbatim responses, many readers said taking a break from work for lunch is needed to distress, reenergize and refocus, while others explained their reasoning for continuing to work during lunch. Some reported they try to take a lunch break, but if often gets interrupted, with some describing a very hectic “nosh” as their “lunch.” But, a few also described relaxing lunch scenarios. Editor’s Choice this week goes to the reader who said: “Having worked through lunch for years, I not only now take an hour break, but have lost 20 pounds! Oh the irony…”
Thanks to everyone who participated in our survey!    One of two readers selected as winners of our SURVEY SAYS asking for help with our participant survey has been notified, but the other is still unidentified. If you submitted a question regarding the perception of whether the government has responsibility for individuals’ retirement readiness, please e-mail me at