Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 14th, 2014
Benefit Briefs
Communicating with Employees About Health Care
Having effective communication with employees about health care is more important than ever, according to Jennifer Benz, CEO of Benz Communications. In a webinar hosted by the San Francisco-based firm, “Beyond a Two-Week Window: Ten Ways to Make Annual Enrollment a Success in an Era of Health Reform,” Benz said, “Many people feel unequipped to make decisions about health care coverage. Health care is complex and technical in nature and is difficult enough for people to navigate. Health care reform makes things even more difficult.” She said employers need to provide employees with information that allows them to make good choices when it comes to health care. She offered 10 steps by which this can be achieved.
The Illinois Supreme Court has ruled retiree health benefits for public employees are protected benefits under the Pension Protection Clause of the state’s constitution. The court noted that Article XIII, section 5 of the Illinois constitution provides that “[m]embership in any pension or retirement system of the State … shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” The court concluded that since eligibility for all of the benefits at issue in the case is conditioned on membership in one of the State’s various public pension systems, they are within that section’s protections.
Financial literacy programs can help employers get employees more engaged in smart decision-making and planning for their retirement. People have a great deal of information competing for their attention; they are subject to ever-increasing bombardment, Bellaria Jimenez, managing director of MetLife Solutions Group, tells PLANSPONSOR, noting that the Internet is a special contributor. “The more accessible information is, the more complicated our world is,” she says. “People are confused.” Plan sponsors have a chance to make a difference by educating their workers so they can meet their goals, and one way to provide education is through a financial literacy program.
Buyer's Market
Fidelity Offers Roadmap for Improving Retirement Outcomes
Fidelity Investments has launched an initiative to help employers evaluate and improve the retirement readiness of their employees. Retirement Vision 2020 is a four-step approach to improving retirement outcomes for employees and help them better prepare for retirement: Designing the retirement plan for income, accounting for health care expenses, engaging and empowering employees via guidance and access to resources, and helping employees transition into retirement with confidence.
Industry Voices
Industry Voice: A Serious Game of Retirement Readiness
Preaching retirement readiness to motivate plan participants has missed the target, but helping them “keep score” of their success might be the answer. Clearly it’s time for a new approach. When it comes to encouraging plan participants to make the most of their employer-sponsored, voluntary retirement savings benefits, the retirement services industry has, by and large, fallen short.
Economic Events
THE ECONOMIC WEEK AHEAD: Tomorrow, the Census Bureau will report about retail sales for June and business inventories for May. Wednesday, the Bureau of Labor Statistics will reveal the producer price index (PPI) for June. Thursday, the Labor Department will issue its initial claims report, and the Census Bureau will report about housing starts for June.
Market Mirror
Friday, the Dow was up 28.74 points (0.17%) at 16,943.81, the NASDAQ closed 19.29 points (0.44%) higher at 4,415.49, and the S&P 500 ticked up 2.89 points (0.15%) to 1,967.57. The Russell 2000 decreased 1.93 points (0.17%) to 1,159.93, and the Wilshire 5000 increased 23.19 points (0.11%) to 20,828.86. On the NYSE, 3.2 billion shares changed hands, with 1.2 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares traded, with a slight lead for decliners. The yields of the 10-year Treasury note and 30-year Treasury bond were 2.520% and 3.339%, respectively. WEEK’S WORTH: For the week ending July 11, the Dow was down 0.73%, the NASDAQ lost 1.57%, and the S&P 500 decreased 0.90%. The Russell 2000 fell 3.99%, and the Wilshire 5000 finished 1.32% lower.
Rules & Regulators
PBGC Director Josh Gotbaum Resigns
After four years at the Pension Benefit Guaranty Corporation (PBGC)—the longest tenure of any PBGC executive director or director—Josh Gotbaum will step down next month. Gotbaum said he has mixed emotions about leaving, noting the accomplishments the agency has achieved under his direction, as well as the additional work he feels needs to be done.
Industry Responses Vary on TDF Disclosure Proposals
About 30 investment firms and other parties responded to the Securities and Exchange Commission’s latest call for comments about a still-pending 2010 proposal to strengthen target-date fund disclosures. As Securities and Exchange Commission (SEC) Chair Mary Jo White explained during a brief address preceding a recent SEC Investor Advisory Committee meeting, commenters have generally favored “appropriately tailored enhanced disclosure requirements for target-date fund marketing materials.” However, a number of commenters expressed concerns that standardized risk measures called for in the proposal are likely to confuse or mislead investors—while still others supported the proposal in full, citing the potential usefulness of a standardized risk measure for use target-date fund (TDF) benchmarking.
Financial Sense
A former CEO of the California Public Employees Retirement System (CalPERS) has plead guilty to a charge of conspiracy to commit bribery and fraud. Federico R. Buenrostro entered his plea to a federal U.S. district court, admitting that he took $200,000 in cash and other bribes from former CalPERS board member Alfred Villalobos to influence the pension fund’s investment decisions, according to a news report in the Sacramento Bee. While there has not yet been a sentencing recommendation, Buenrostro could get up to five years in prison and a $250,000 fine.
Small Talk
Many Americans have concerns about finances, particularly whether they are saving enough for retirement, according to a new survey from The Harris Poll. Almost three-quarters of preretiree workers (74%) polled say they worry about having enough money to retire. One thing these preretiree workers are not counting on, for post-retirement income, is Social Security. The poll also finds Americans are having trouble for a number of reasons, including living paycheck to paycheck and cannot afford to put money in savings (cited by 46% of respondents).
ON THIS DATE:  In 1789, the French Revolution began with Parisians stormed the Bastille prison and released the seven prisoners inside. In 1798, the U.S. Congress passed the Sedition Act. The act made it a federal crime to write, publish, or utter false or malicious statements about the U.S. government. In 1868, Alvin J. Fellows patented the tape measure. In 1881, Sheriff Pat Garrett shot Henry McCarty, popularly known as Billy the Kid, to death at the Maxwell Ranch in New Mexico. In 1913, Gerald R. Ford was born in Omaha, Nebraska. In 1946, Dr. Benjamin Spock’s “The Common Sense Book of Baby and Child Care” was first published. In 1967, Houston Astros player Eddie Mathews hit his 500th career home run. In 1968, Atlanta Braves player Henry “Hank” Aaron hit the 500th home run of his career. In 1987, Steve Miller of The Steve Miller Band got a star on the Hollywood Walk of Fame. In 1995, released to the pubic one week earlier, the brand-new MP3 format—known formally as “MPEG-1 Audio Layer 3,” an efficient new format for the encoding of high-quality digital audio using a highly efficient data-compression algorithm—was given its name and its familiar “.mp3” file extension.
SURVEY SAYS: Electronic Communications
Last week, I asked NewsDash readers which required communications they offer to retirement plan participants electronically, and whether they think this makes participants more likely to read them? The summary plan description (SPD) is the required communication most offered electronically, selected by 75% of respondents, followed by the summary annual report (67.9%), and participant statements and participant fee disclosures (60.7% each). Fourteen percent of responding readers reported they do not offer any of the required communications electronically, and none of the respondents indicated they offer all the communications electronically. When asked if offering communications electronically makes it more likely participants will read them, only 6.9% said yes, while 48.3% indicated this is true for some participants. The other 44.8% said no. In verbatim comments, some respondents explained why they still provide paper. Most agreed that electronic communications is not the answer to getting participants to pay attention to them, with one reader offering a suggestion for that: “The participants would read the notices if they were written in plain English and not the hybrid Lawyerese that most are written in.” Several said the benefits of electronic communications are they lower cost and “save a tree.” Editor’s Choice goes to the reader who said, “Participants will never read communications… MAYBE if you told everyone JK Rowling wrote them.” A big thank you to everyone who participate in our survey!
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