Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 15th, 2014
Benefit Briefs
Employees Open to Retirement Savings Intervention
Two in five retirement plan participants polled said employers should give employees “a slight nudge” in encouraging them to save for retirement. An additional two in five want either “a strong nudge” or a “kick in the pants,” according to the national survey conducted by American Century Investments. A majority of participants (64% of those ages 55 to 65, and 59% of those ages 25 to 54) indicated they feel having automatic enrollment would have led to at least a minor increase in retirement savings. Additionally, both groups favor a higher default contribution rate for automatic enrollment.
A new LIMRA survey shows 84% of people participating in defined contribution (DC) retirement plans feel it is their responsibility to fund their own retirement. The survey shows 77% of working Americans believe all workers should have access to retirement savings plan at work and such plans are an effective way to save for retirement. Six in 10 Americans agree that those who save in a DC plan specifically are likely to achieve a secure retirement.
Addressing DC Investor “Home Country Bias”
“Home country bias” is a diversification problem that is still dogging investors, new research suggests. U.S. companies account for about half of the total global market capitalization and a far lower percentage of total global revenue, according to independent reports from Strategic Insight (an Asset International company) and Portfolio Evaluations, Inc. (PEI)—yet it’s common for U.S. investors to maintain 80% or more of their equity allocations in domestic stock. Both firms recently published research warning that a greater global focus is required to truly diversify portfolio exposures and broaden potential sources of investment returns. Achieving proper diversification across U.S. and global markets is especially important for workplace retirement savers.
401(k) Investors See Lower Mutual Fund Expenses in 2013
Participants of 401(k) plans saw lower expense ratios when investing in long-term mutual funds during 2013, according to a report from the Investment Company Institute (ICI). “The Economics of Providing 401(k) Plans: Services, Fees and Expenses, 2013” shows that at year-end 2013, nearly 38% of 401(k) plan assets were invested in equity mutual funds. In 2013, 401(k) plan participants who invested in equity mutual funds paid an average expense ratio of 0.58%, down from 0.63% in 2012.
Buyer's Market
National Financial Partners Corp. (NFP) and benefitRFP, Inc. have formed a strategic partnership to expand executive benefits services and improve plan designs. The partnership will offer the means to provide targeted recommendations for nonqualified deferred compensation plan administration and funding providers based on a client’s specific planning requirements, according to the two firms.
Mercer Launches Total Wellness Campaign
Consulting firm Mercer has launched a total wellness education campaign, known as Mercer Benefits U, for employees whose retirement and health plans it administers. Designed to take a holistic approach to managing one’s health, wealth, and well-being, Mercer Benefits U features a college-campus visual theme and app-like functionality developed especially for mobile devices. It also offers interactive courses in three different “schools”: The School of Retirement, School of Health, and School of Total Wellness.
Market Mirror
Major U.S. stock indices had a good start to the week yesterday, with the Dow up 111.61 points (0.66%) at 17,055.42, the NASDAQ 24.93 points (0.56%) higher at 4,440.42, and the S&P 500 closing at 1,977.10, an increase of 9.53 points (0.48%). The Russell 2000 increased 5.69 points (0.49%) to 1,165.62, and the Wilshire 5000 gained 98.40 points (0.47%) to finish at 20,927.26. On the NYSE, 3.2 billion shares changed hands, with 1.7 advancing issues for every declining issue. On the NASDAQ, 2.8 billion shares traded, with a 1.6 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note was down 7/32, bringing its yield up to 2.545%. The price of the 30-year Treasury bond decreased 19/32, increasing its yield to 3.370%.
Rules & Regulators
Retirement Plan Administration for Employees in Military
Retirement plan sponsors should become familiar with laws covering employees who have served, or are serving, in the military to ensure compliance with plan administration rules, says TIAA-CREF. Rehiring any employee can present its own set of challenges for retirement plan administration. But, for military service member employees, plan sponsors also have two key pieces of legislation with which they must comply: (1) the Uniformed Services Employment and Reemployment Rights Act (USERRA); and (2) the Heroes Earnings Assistance and Relief Tax Act (HEART). Not complying with these laws can result in regulator action. Ed Moslander, senior managing director and head of institutional client services at TIAA-CREF, tells PLANSPONSOR that as veterans return to work from military service, plan sponsors need to ensure they are granted the rights and benefits they are entitled to receive.
The Internal Revenue Service (IRS) will be presenting a free webinar about the impact of new health care benefits law on state and local governments. The webinar will cover topics related to the Patient Protection and Affordable Care Act (ACA) such as: defining an applicable large employer; determining whether or not the entity is an applicable large employer; when and how the employer shared responsibility rule applies; and forms of transition relief.
Financial Sense
Pensions Increase Investments in Alternatives
Total assets managed by the top 100 alternative investment managers globally reached $3.3 trillion in 2013, compared with $3.1 trillion in 2012, Towers Watson research finds. The Global Alternatives Survey, conducted in conjunction with the UK’s Financial Times shows pension fund assets represent one-third (33%) of the top 100 alternative managers’ assets, followed by wealth managers (18%), insurance companies (9%), sovereign wealth funds (6%), banks (3%), funds of funds (3%), and endowments and foundations (3%). Allocations to alternative assets by pension funds now account for around 18% of all pension fund assets globally, up from 15 years ago when it was 5%, says Brad Morrow, head of manager research, Americas, based in New York.
Small Talk
ON THIS DATE:  In 1903, the newly formed Ford Motor Company took its first order from Chicago dentist Ernst Pfenning—an $850 two-cylinder Model A automobile with a tonneau (or backseat). The car, produced at Ford’s plant on Mack Street (now Mack Avenue) in Detroit, was delivered to Dr. Pfenning just over a week later. In 1916, in Seattle, Washington, Pacific Aero Products—now Boeing Co.—was incorporated by William Boeing. In 1965, the unmanned spacecraft Mariner 4 passed over Mars at an altitude of 6,000 feet and sent back to Earth the first close-up images of the red planet. In 1997, spree killer Andrew Cunanan murdered world-renowned Italian fashion designer Gianni Versace on the steps outside his Miami mansion.   TUESDAY TRIVIA: The plastic things on the end of shoelaces are called aglets.
TRIVIAL PURSUITS: Former President Gerald R. Ford was given a different name at birth. Do you know what it was, or how he came to be Gerald R. Ford?
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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