Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 6th, 2014
Benefit Briefs
Deadlines for Corrective Distributions
“Our vendor indicates the deadline for corrective distributions from non-discrimination testing is March 15 (2 ½ months after the close of the plan year, and we utilize a calendar year as our plan year). However, our adviser states the deadline for correction is not until 12 months after the close of the plan year, or December 31 in our case. Who is correct?”
Buyer's Market
Schwab Introduces All-ETF 401(k) Platform
Schwab Retirement Plan Services, Inc. has launched a full-service 401(k) program based on low-cost exchange-traded funds (ETFs). “We are now launching an additional version of Schwab Index Advantage with the goal of further driving down investment costs by using low-cost exchange-traded funds,” says Steve Anderson, head of Schwab Retirement Plan Services. “This is a philosophical shift,” Anderson tells PLANSPONSOR. “It minimizes cost and maximizes personal investment and advice.” Anderson also believes the solution’s attractiveness to plan sponsors will be philosophical in nature.”
Employee benefits cloud-based technology and services provider bswift has launched Springboard Marketplace, a private health and benefits exchange. The platform enables employees and employers to manage their benefits budgets via a defined contribution model, aided by a decision-support tool to help employees make choices.
Market Mirror
Wednesday, the Dow slipped 5.01 points (0.03%) to 15,440.23, the NASDAQ decreased 19.97 points (0.50%) to 4,011.55, and the S&P 500 was down 3.56 points (0.20%) at 1,751.64. The Russell 2000 fell 9.25 points (0.84%) to 1,093.59, and the Wilshire 5000 closed 46.95 points (0.25%) lower at 18,738.25. On the NYSE, 3.2 billion shares changed hands, with 1.4 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares traded, with a more than 2 to 1 lead for decliners. The price of the 10-year Treasury note decreased 11/32, bringing its yield up to 2.672%. The price of the 30-year Treasury bond fell 26/32, increasing its yield to 3.649%.
Financial Sense
New PBGC Premium Date Could Help Funding
Large single employer and multiemployer defined benefit plans may get help with funding due to a later date for paying premiums to insure their plans. The Pension Benefit Guaranty Corporation (PBGC) is moving the flat-rate premium due date for large plans to later in the premium payment year. Serena Simons, Segal’s senior vice president and leader of its national retirement compliance practice tells PLANSPONSOR: “The money is in the plan, the assets stay in the plan longer and the plan gets the benefit of those assets—primarily in the form of investment earnings.”
Institutional assets tracked by the Wilshire Trust Universe Comparison Service (Wilshire TUCS) saw double-digit returns during 2013. “This was a quarter and a year where exposure to U.S. equities trumped all other asset classes. The Wilshire 5000 Total Market Index was up 10.11% and 33.07%, respectively, during the fourth quarter and in 2013, versus international equity’s 4.77% and 15.29%, respectively, for the MSCI AC World ex U.S.,” says Robert J. Waid, managing director, Wilshire Associates.
Assets at U.S. institutional pension funds increased 12% in 2013 to a record $18.9 trillion, says a new study. According to Towers Watson’s annual “Global Pension Assets Study,” global institutional pension fund assets in the 13 major markets grew by 9.5% during 2013 (compared with 6.9% in 2012) to reach a new high of almost $32 trillion. The growth is the continuation of a trend that started in 2009, say the study authors, when assets grew 18%. It is also in sharp contrast to a 22% decline during 2008, when assets fell to around $20 trillion.
The World at Large
The National Association of Pension Funds (NAPF) research revealed 74.2% of businesses say adhering to the new defined contribution (DC) code of practice is a “concern.” The rules, published late last year, require trust-based company schemes to demonstrate they comply with the regulator’s DC “quality features”—which cover various areas of governance, administration and investment—or, where they do not, to explain why.
Rules & Regulators
Groups Ask for Stronger Presumption in Stock Drop Cases
In a brief of amici curiae filed for the case Fifth Third Bancorp v. John Dudenhoeffer in support of Third Fifth Bancorp, industry groups argue to the Supreme Court that plan sponsors will be discouraged from offering employer stock absent a strong presumption of prudence that applies at the pleading stage of the court process. The groups say if the standard for overcoming the presumption of prudence is weakened or rendered inapplicable at the pleading phase, the costs of offering employer stock could increase dramatically. There is also a concern that employees would file nuisance suits every time a company’s stock price decreased.
The Department of Labor (DOL) has obtained consent judgments against Robert La Courciere and Pamela Babbish, former trustees of the Fourslides Inc. pension plan. These judgments follow the recovery of $490,594 owed to the plan. La Courciere and Babbish were alleged to have caused the transfer of plan assets to Fourslides and the payment of excessive fees to service providers, while La Courciere also entered into a prohibited loan of nearly half the plan’s assets to a party-in-interest.
The Department of Labor (DOL) has filed a lawsuit against a Lilburn, Georgia contracting firm, on behalf of the firm’s retirement plan participants, to recover losses resulting from prohibited loans and investments.
Small Talk
Couples Disagree About Retirement, Money Matters
Fidelity Investments’ “Couples Retirement Study” finds approximately four in 10 working couples (38%) disagree about the lifestyle they expect to lead in retirement. In addition, the study shows more than half (51%) of couples admit to arguing either frequently or occasionally about money, with 38% of those couples never resolving things in a mutually agreeable way.
ON THIS DATE:  In 1820, the first organized immigration of freed slaves to Africa from the United States departed New York harbor on a journey to Freetown, Sierra Leone, in West Africa. The U.S. Congress, in 1819, had appropriated $100,000 to be used in returning displaced Africans, illegally brought to the United States after the abolishment of the slave trade in 1808. In 1952, after a long illness, King George VI of Great Britain and Northern Ireland died in his sleep at the royal estate at Sandringham. Princess Elizabeth, the oldest of the king’s two daughters, was next in line to succeed him.
SURVEY SAYS: Exchange-traded funds (ETFs) are gaining interest among investors as a potential lower-cost option to mutual funds. Some companies offer ETF options in their retirement plan lineups for employees, and now Schwab has introduced and all-ETF 401(k) platform. This week, I’d like to know, does your company’s retirement plan offer ETFs as investment options, and if ETFs were available, would you put your retirement savings into one? You may respond to this week’s survey by 6 p.m. Pacific time today.
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Editorial: Alison Cooke Mintzer


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