Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 4th, 2014
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Industry Insights
Fed Tapering Effect on Fixed Income Allocations
Year-end reflection has led many defined benefit plan sponsors to revisit a perplexing problem they have been facing all year: What should be done with fixed income allocations in light of the expected rise in rates due to Fed tapering?
Benefit Briefs
Lessons Learned from Others’ Mistakes
When the Internal Revenue Service (IRS) launched a series of “LESE [Learn, Educate, Self-correct and Enforce] examinations” last year, one of its intentions was to discover trends in compliance failure among qualified retirement plans. The IRS also hoped the projects, in which auditors reviewed 50 qualified plans with similar characteristics to measure compliance across certain subsets of plans, could educate the public about these trends and thereby stall their growth.
Are You Getting Enough from Your Adviser?
Small retirement plan sponsors may not be getting the services from an adviser they need. Just fewer than half of plan sponsors do not think they are getting good value for their plan, says Stephen Davis of Guardian Retirement Solutions. It’s a surprising statistic, but, “they’re out there, and they’re looking for help,” Davis tells PLANSPONSOR. In the micro plan market (less than $5 million in assets, and fewer than 100 participants), plan sponsors face a number of challenges to running a plan. Employers in this market should be sure that they are getting the best service from an adviser.
Buyer's Market
John Hancock Reduces Mutual Fund Expenses
John Hancock Investments is contractually lowering expenses for nearly all funds with Class R6 institutional share classes. As of February 1, for nearly all R6 shares, the funds’ adviser has agreed to contractually waive and/or reimburse all class-specific expenses.
Economic Events
Spending on private construction was at a seasonally adjusted annual rate of $ 663.9 billion in December 2013, 1.0% above the revised November estimate of $ 657.1 billion. Residential construction was at a seasonally adjusted annual rate of $ 352.6 billion in December, 2.6% above the revised November estimate of $ 343.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $ 311.3 billion in December, 0.7% below the revised November estimate of $ 313.4 billion.
Market Mirror
Major U.S. stock indices started February off on a bad note, as the Dow fell 326.05 points (2.08%) to 15,372.80 yesterday. The NASDAQ plummeted 106.92 points (2.61%) to 3,996.96, and the S&P 500 lost 40.70 points (2.28%) to finish at 1,741.89. The Russell 2000 dropped 36.28 points (3.21%) to 1,094.60, and the Wilshire 5000 closed 462.14 points (2.42%) lower at 18,643.10. On the NYSE, 3.2 billion shares traded, with declining issues outnumbering advancing issues nearly 6 to 1. On the NASDAQ, 2.7 billion shares changed hands, with a 6 to 1 lead for decliners. The price of the 10-year Treasury note was down 1/32, and the price of the 30-year Treasury bond declined 2/32, increasing their yields to 2.654% and 3.608%, respectively.   
Financial Sense
Asset Allocation Funds Post Strong 2013 Performance
Target-date funds had an average total return of 5.4% for the fourth quarter of 2013, according to Morningstar data. However, returns were significantly less than the 10.5% return of the S&P 500 due to poor performance in non-U.S. equities and bonds, the “Ibbotson Target-Date Report 4Q 2013” shows. For the 2013 calendar year, the average total return for target-date funds was a very strong 16.3%.
Small Talk
ON THIS DATE:  In 1789, George Washington became the first and only president to be unanimously elected by the Electoral College. He repeated this notable feat on the same day in 1792. In 1826, “The Last of the Mohicans” by James Fennimore Cooper was published. In 1861, in Montgomery, Alabama, delegates from South Carolina, Mississippi, Florida, Alabama, Georgia, and Louisiana convened to establish the Confederate States of America. In 1922, the Ford Motor Company acquired the failing luxury automaker Lincoln Motor Company for $8 million. In 1938, Disney released “Snow White and the Seven Dwarfs.” In 1974, Patty Hearst, the 19-year-old daughter of newspaper publisher Randolph Hearst, was kidnapped from her apartment in Berkeley, California. Three days later, the Symbionese Liberation Army (SLA), a small U.S. leftist group, announced in a letter to a Berkeley radio station that it was holding Hearst as a “prisoner of war.” In 1983, singer Karen Carpenter died from heart failure brought on by her long, unpublicized struggle with anorexia.   TUESDAY TRIVIA: Elevators move the equivalent of the world’s population every 72 hours.
TRIVIAL PURSUITS: Where was the first passenger safety elevator installed?
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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