Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 4th, 2015
Benefits & Administration
Few Making Plans for Lifetime Income
Eighty-four percent of Americans want a guaranteed monthly paycheck in retirement, but only 14% have taken steps to ensure lifetime income with the purchase of an annuity, according to the TIAA-CREF 2015 Lifetime Income Survey. Also troubling, 44% of Americans are not sure whether receiving regular monthly income in retirement is even an option under their current retirement plan/plans. The survey results emphasize the need for better education about lifetime income options, TIAA-CREF says, and how lifetime income planning can provide financial security for people lacking pensions.Read more >
Ask the Experts
Ask the Experts – What Is a FICA Alternative Plan?
“I recently started working in the employee benefits department at a large public university. Among the retirement plans that they sponsor is something called a ‘FICA alternative’ plan, but I can locate little information about the plan. Can the Experts tell me if they have ever heard of such a plan?”Read more >
Economic Events
New orders for manufactured goods in December, down five consecutive months, decreased $16.4 billion or 3.4% to $471.5 billion, the U.S. Census Bureau reported. This followed a 1.7% November decrease. Excluding transportation, new orders decreased 2.3%. Shipments, down four of the last five months, decreased $5.3 billion or 1.1% to $488.2 billion. This followed a 1.0% November decrease.  
Market Mirror
A 7% increase in the price of oil gave investors hope that the long-running collapse in oil prices could be ending, helping U.S. stock indices end higher Tuesday. The Dow gained 305.36 points (1.76%) to finish at 17,666.40, the NASDAQ was up 51.05 points (1.09%) at 4,727.74, and the S&P 500 increased 29.14 points (1.44%) to 2,049.99. The Russell 2000 climbed 21.45 points (1.82%) to 1,196.96, and the Wilshire 5000 closed 314.31 points (1.47%) higher at 21,624.78.   On the NYSE, 3.2 billion shares traded, with a 4 to 1 lead for advancers. On the NASDAQ, 2.8 billion shares changed hands, with 2.6 advancing issues for every declining issue.   The price of the 10-year Treasury note decreased 1 4/32, bringing its yield up to 1.791%. The price of the 30-year Treasury bond fell 2 28/32, increasing its yield to 2.380%.
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Compliance
Cap on Savings Raises Industry Hackles
Several advocacy organizations—ERIC, ICI and ASPPA—issued statements weighing in on President Obama’s proposed fiscal 2016 budget, with adjectives and comments like “misses the mark,” “wrongheaded” and “disappointing.” All expressed disapproval at the idea of limiting the amount savers can stash, pre-tax, in retirement accounts, a savings cap that resurfaces annually. Judy Miller, director of retirement policy for the American Society of Pension Professionals and Actuaries (ASPPA), maintains that some parts of the budget could expand retirement plan coverage, while others are likely to undermine them.Read more >
From the Magazine
Saxon Angle: Department of Labor Investigations
With higher frequency than in the past, fiduciaries of plans covered by the Employee Retirement Income Security Act (ERISA) are receiving unexpected letters from the Department of Labor (DOL) giving notice of an investigation ‘‘to determine whether any person has violated or is about to violate’’ one of ERISA’s fiduciary responsibility provisions. This can be a scary moment for plan sponsors who believe they have done everything right, but also know that the statute provides a myriad of foot faults, any of which may lead to a violation. Understanding how these DOL investigations work, what to expect if you are targeted for one and the types of claims the department may assert can help smooth out the review process.Read more >
Investing
S&P Agrees to Compensate California Pension Funds
Standard & Poor’s Financial Services (S&P) and its parent company, McGraw-Hill Financial Inc., agreed to resolve federal and state civil claims related to S&P’s conduct in inflating ratings of residential mortgage-backed securities and structured investment vehicle notes.The State of California, through Attorney General Kamala D. Harris’ office, will recover $210 million in damages, from which the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) will receive allocations for their losses on investments of certain S&P-rated securities. Separately, S&P will also pay CalPERS $125 million to settle CalPERS’ specific lawsuit.  Read more >
Institutional asset owners had a sixth consecutive year of positive returns in 2014, gaining approximately 7% at the median for the year, according to Northern Trust Universe data. For the 12 months ended December 31, 2014, corporate Employee Retirement Income Security Act (ERISA) plans generally performed best among all plan types, with a median return of 8.5%. Public funds had a median return of 6.8% for the year, and foundation and endowment plans had a 5.9% median return for the year.Read more >
Small Talk
CareerBuilder’s annual survey about worker tardiness never fails to deliver some bizarre excuses. Car trunk thieves, gas station stick-ups and shower mishaps are the types of incidents some workers claim prevented them from getting to work on time last year, according to CareerBuilder. When asked how often they come in late to work, more than one in five workers (23%) admitted they do it at least once a month, and 14% say it’s a weekly occurrence for them. Of the workers who have admitted to being late for work in the past, 30% have lied about the reason for their tardiness.Read more >
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 1824, J.W. Goodrich introduced rubber galoshes to the public. In 1861, in Montgomery, Alabama, delegates from South Carolina, Mississippi, Florida, Alabama, Georgia and Louisiana convened to establish the Confederate States of America. In 1932, the first Winter Olympics to be held in the United States opened at Lake Placid, New York. In 1938, Disney released “Snow White and the Seven Dwarfs.” In 1957, Smith-Corona Manufacturing Inc., of New York, began selling portable electric typewriters. The first machine weighed 19 pounds. In 1983, singer Karen Carpenter died, succumbing to heart failure brought on by her long, unpublicized struggle with anorexia.
WEDNESDAY WISDOM: “If you fell down yesterday, stand up today.” —H.G. Wells, writer
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