Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
February 7th, 2014
Benefit Briefs
DC Participants Maintained Status Quo in 2013
Most defined contribution (DC) retirement plan
participants stayed the course with their asset allocations as stock values
generally rose over the first nine months of 2013. According to a report from
the Investment Company Institute (ICI), during the first three quarters of
2013, 9.2% of DC plan participants changed the asset allocation of their
account balances and 6.8% changed the asset allocation of their contributions. These
levels of reallocation activity were similar to the reallocation activity
observed in the same time frame a year earlier, the ICI says. Contribution
activity was similar as well.
Plan Sponsors Still Working to Reduce Health Benefit Costs
While medical plan cost increases continue to
decelerate, overall health plan costs are still on the rise, according to data
compiled in the 2014 Segal Health Plan Cost Trend Survey. Faced with this
reality, plan sponsors are becoming increasingly more progressive and creative
in their efforts to manage costs while delivering high-quality, cost-effective
health care, the survey report says. Many plan designs, for example, now
include greater levels of participant out-of-pocket costs.
Will Employers Respond to Long-Term Care Concerns?
As the population ages and long-term care is a
greater concern for retirement, long-term care insurance may become a more
widespread employee benefit offering. Long-term care insurance companies paid
nearly $7.5 billion in claim benefits to 273,000 individuals in 2013, a rise of
13%, the American Association of Long Term Care Insurance reports. According to
Jesse Slome, director of the national trade group, historic low interest rates
for a long period of time drove the marketplace to its current state. “The vast
majority of long-term care insurance is now sold on an individual basis,” Slome
tells PLANSPONSOR.
Buyer's Market
Taking Auto Plan Features a Step Further
Automatic retirement plan features are gaining
traction as a best practice way to help participants achieve retirement
readiness, but one provider is taking them a step further. Ted Goldman,
national retirement leader with Buck Consultants in Washington, D.C., tells
PLANSPONSOR, “We’ve crossed the hurdle of plan sponsors not wanting to force
participants to save, but the shortfall [of automatic features] is plan
sponsors are putting participants in or increasing their savings at a low level
and treating everyone the same.” Buck has built a three-feature solution it
feels could change the defined contribution (DC) retirement plan landscape
going forward.
OneAmerica Joins Pension Buy-Out Marketplace
American United Life Insurance Company (AUL)
introduced a pension risk transfer solution. AUL, a OneAmerica company, is
offering Pension Risk Transfer, a Single Premium Group Annuity (SPGA)
guaranteed buy-out product that allows plan sponsors to transfer pension risk
to AUL. It is a true buy-out product by which AUL will assume all liability and
contact with participants, Andy Wilkinson, vice president and actuary at
OneAmerica in Indianapolis, Indiana, tells PLANSPONSOR.
Economic Events
In the week
ending February 1, the advance figure for seasonally adjusted initial claims for
unemployment insurance was 331,000, a decrease of 20,000 from the previous
week’s revised figure of 351,000, the Labor Department reported. The four-week
moving average was 334,000, an increase of 250 from the previous week’s revised
average of 333,750. The average interest rate for a 30-year fixed-rate
mortgage is 4.23%, down from 4.32% one week ago, according to Freddie Mac. The
average interest rate for a 15-year fixed-rate mortgage is 3.33%, down from
3.40%.
Market Mirror
Yesterday, the Dow climbed 188.30 points
(1.22%) to 15,628.53, the NASDAQ was up 45.57 points (1.14%) at 4,057.12, and
the S&P 500 rose 21.79 points (1.24%) to 1,773.43. The Russell 2000 gained
10.33 points (0.94%) to finish at 1,103.93, and the Wilshire 5000 closed 218.83
points (1.17%) higher at 18,957.08. On the NYSE, 3.2 billion shares traded,
with advancing issues outnumbering declining issues nearly 3 to 1. On the
NASDAQ, 2.7 billion shares changed hands, with a near 2 to 1 lead for advancers. The price of the 10-year Treasury note was unchanged,
with its yield at 2.702%. The price of the 30-year Treasury bond slipped 1/32,
increasing its yield to 3.672%.
Financial Sense
Time to Overhaul the Bond Portfolio
Corporate pensions will continue de-risking;
allocations will shift with outcomes in mind, and rising interest rates are on
everyone’s mind, says a report by eVestment and Casey, Quirk & Associates. In
the 2014 Global Investor Survey, investment consultants, institutional asset
owners and intermediaries worldwide forecast significant fixed-income
restructuring this year amid concern about rising interest rates and a jump in
real assets investing. Investors and their managers will continue to strengthen
outcome-oriented investing, as investors splinter into more specific types of
asset allocation and buying behavior.
Stable Value Performance Down, Products Improved
Stable value funds’ returns were lower in 2013,
but the product offerings continue to improve. In general, underlying portfolio
performance was weak during the most recent quarter due to a sell-off in many
of the fixed income markets, according to Blue Prairie Group’s (BPG) Stable
Value Database Executive Summary. The data shows this downward movement in
performance has been occurring over the last six quarters or so, mostly due to
the sustained low interest rate environment.
Small Talk
ON
THIS DATE:
  In
1914, the silent film “Kid Auto
Races at Venice” premiered in theaters, featuring the actor Charlie Chaplin in
his first screen appearance as the “Little Tramp,” the character that would
become his best-known onscreen alter ego. In 1964, “Beatlemania” arrived in America with the first
visit to the United States by the Beatles. The British rock-and-roll quartet had
just scored its first No. 1 U.S. hit six days before with “I Want to Hold
Your Hand.” In 1984, while in
orbit 170 miles above Earth, Navy Captain Bruce McCandless became the first
human being to fly untethered in space when he exited the U.S. space shuttle
Challenger and maneuvered freely, using a bulky white rocket pack of his own
design. In 1992, the nations of
Western Europe united in the spirit of economic cooperation with the signing of
the Maastricht Treaty of European Union. In 1999, King Hussein bin Talal, the 20th century’s longest-serving
executive head of state died, and his son Prince Abdallah bin Hussein ascends
to the Jordanian throne.   And now it’s time for FRIDAY FILES!  
Is this driver out of control or does he always
parallel park this way?
In China, Maine, a woman
called last week after hearing what she believed to be a fight coming from a
neighbor’s home in the town of China. The caller said she heard screaming and
thought there was a domestic assault. The Morning
Sentinel
 reports four state troopers responded and talked to the neighbor. The
neighbor explained she raises pigs and the screaming was coming from an
overjoyed male pig that had been placed in a pen with five sows in heat. In Houston, Texas, Jim
“Mac” Macinvale, owner of Gallery Furniture, made a deal with his
customers. He said if a customer bought $6,000 worth of furniture within two
weeks of the Super Bowl and had it delivered by game day, they would get their
money back, but only if the Seahawks won. The bet cost him over $ 7 Million and
he kept his end of the deal. “As far as financially
we didn’t do well but we did a great job building the brand and delighting
customers.  If we do that the business would
continue to grow, “he said, according to Philadelphia’s Fox News website.
What children think about luxury food.
In Roseland, Ilinois, a man
entered woman’s garage and demanded she hand over her 2012 Honda MDX’s keys.
She surrendered the keys and then fled the garage, but not before closing the garage
door behind her. She called police who arrived and opened the garage door to
find the would-be thief sitting in the driver’s seat with the keys in the
ignition, according to the Chicago
Tribune
. In Vero Beach, Florida, a
caller reported a man was “very intoxicated” and driving a blue
Nissan. Deputies spotted the blue Nissan turn into the driveway of a residence.
The driver, who smelled of booze and slurred his speech, said he’d had a couple
of Coors Lights. During one field sobriety test known as the “walk and
turn” exercise, a deputy asked the man about 16 times to put his right
foot in front of his left. At one point he began the exercise by going the
wrong direction and used his arms for balance. He couldn’t finish the exercise.
“I can’t do that,” the man is quoted as saying, according to
TCPalm.com. “I can’t dance like (Britney) Spears.” Breath tests
measured his blood alcohol content at 0.219 and 0.222.   
What your sleeping position says about you.
In Jensen Beach, Florida, a
Taco Bell manager called police saying a truck was in the drive-thru lane with
the engine revving and smoke coming out and that the driver may have fallen
asleep, NBC Miami reports. When deputies arrived, they found the driver either
passed or snoozing, smelling of booze with his foot on the truck’s accelerator,
police said. When one of the deputies asked for Falkner’s identification, he
replied “No.” When asked again, he reached into his fast food bag and
took out a taco. When the man finally got out of the truck, the deputies
discovered the truck was on fire, and quickly used extinguishers to douse the
flames. The man told deputies he’d had “a beer,” but breath tests
measured his blood alcohol content at 0.227 and 0.225. In Denver, Colorado, a
woman walked into her home to find a broken window in the kitchen. She called
police and told them she would wait at the local McDonald’s because she didn’t
feel safe in her house, the local ABC news station reports. While waiting in
her car in the parking lot, a man approached her and asked her if she’d like to
purchase a PS3. She said no, but then noticed the man was with another man who
was wearing a unique Washington Redskins jacket that belonged to her. Afraid to
approach the men herself, she went to the gas station neighboring the McDonald’s
and told two men what was going on. The two men just happened to be two
off-duty police officers who promptly arrested the two men for investigation of
burglary. Have a great weekend!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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