Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 16th, 2014
Benefit Briefs
The Plan Sponsor’s Auto Feature Paradox
Misconceptions about automatic features in retirement plans are passed around like fruitcakes: Stephen Moser’s white paper might clear up some of the confusion. People won’t like being forced into a plan… It costs too much… Plan sponsors have a number of reasons for not adopting auto enrollment or automatic deferral increases in their plans. Recently, an HR manager said quite firmly that people do not like to be told what to do: an excellent reason he didn’t think auto features would be right for his company, according to Moser. He also said, equally firmly, that he wanted to implement auto enrollment—but cost was holding him back. Is this the plan sponsor’s paradox?
Millennials Need to Put Retirement Strategies in Writing
While Millennials are very focused on retirement-related issues, these employees still need to create a strategy for long-term retirement success, according to a survey from the Transamerica Center for Retirement Studies. Millennial employees (those born between 1979 and 1996) are focused on retirement in a big way, says Catherine Collinson, president of the center. “The 15th Annual Transamerica Retirement Survey finds that three out of four are already discussing saving, investing and planning for retirement with family and friends. Millennials are twice as likely to frequently discuss retirement compared to their parents’ generation,” she says. “We also find that 18% of Millennials frequently discuss the topic, compared with just 9% of their Baby Boomer counterparts.” However, while 59% of Millennial employees say they have a retirement strategy, only 13% have a written plan and the other 46% have a plan but have not written it down.
Buyer's Market
Pinnacle Plan Design hired Lauren Okum as a consulting actuary. Okum will be responsible for the design and administration of defined benefit retirement plans, with a focus on the mid-sized to large plan markets. She will consult with employers that are looking to implement a defined benefit retirement plan as well as other third-party administrators that are looking to outsource their actuarial needs. Additionally, she will be part of Pinnacle’s team that offers continuing professional education (CPE) and other industry education to financial advisers, wholesalers, certified public accountants (CPAs), attorneys, and third-party administrators.
Prudential Fixed Income expanded its emerging markets team with the hiring of Matthew C. Duda. Duda has been named a principal and emerging markets debt portfolio specialist. Prudential Fixed Income, with $418 billion in assets under management as of March 31, 2014, offers institutional investors needs-based solutions across all fixed income markets, with a focus on credit strategies and liability-driven investing.
Industry Voices
When Did Benefits Become a Burden?
Traditionally, employee benefits were seen as a way for employers to make a positive financial impact and give back to the people they wanted to attract and retain. So why is it that employers have become overwhelmed and burdened by the very thought of offering employee benefits?
Economic Events
The U.S. Census Bureau announced that the combined value of distributive trade sales and manufacturers’ shipments for May, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,343.3 billion, up 0.4% from April, and up 4.6% from May 2013. Advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.9 billion, an increase of 0.2% from the previous month, and 4.3% above June 2013. Total sales for the April through June period were up 4.5% from the same period a year ago.
Market Mirror
Tuesday, the Dow ticked up 5.26 points (0.03%) to 17,060.68, the NASDAQ fell 24.03 points (0.54%) to 4,416.39, and the S&P 500 was down 3.82 points (0.19%) at 1,973.28. The Russell 2000 lost 11.81 points (1.01%) to finish at 1,153.81, and the Wilshire 5000 closed 61.41 points (0.29%) lower at 20,865.85. On the NYSE, 3.2 billion shares traded, with decliners outnumbering advancers nearly 2 to 1. On the NASDAQ, 2.7 billion shares changed hands, with 2.5 declining issues for every advancing issue. The price of the 10-year Treasury note slipped 1/32, bringing its yield up to 2.551%. The price of the 30-year Treasury bond was unchanged, with its yield at 3.372%.
Rules & Regulators
How Tax Reform Could Affect Retirement Plans
In her recent paper, “How Tax Reform for Retirement Plans Can Affect Risk and Compliance,” Marcia Wagner, principal and founder of the Wagner Law Group, looks at various proposals in the pipeline that seek to update the architecture of retirement vehicles and thus provide more revenue that could be used to alleviate the nation’s deficit. When asked about the proposed 2014 Tax Reform Act (TRA) and how freezing the contribution limits for 10 years would generate revenues for the federal government, Wagner tells PLANSPONSOR, “Anything that has an after-tax status is revenue. It may well be that the time of annual contribution limits, and pre-tax limits in particular, is coming to an end. If this does turn out to be the case, there will definitely be a disincentive, especially in the non-highly compensated realm, to using after-tax retirement vehicles.”
Financial Sense
Retirement Plan Implications of U.S. Sanctions on Russia
If you thought the United States’ imposition of sanctions on Russia would have little or no impact on our retirement system, you would be wrong. Because it is not uncommon for U.S. retirement plans to allocate some portion of their holdings to international investments—including investments in Russia and other former Eastern Bloc countries—sanctions that restrict the companies with which U.S. plans can do business cannot be ignored.
The two largest public pension funds in the U.S. have reported fiscal year returns of more than 18%, in part due to strong equity returns. The California Public Employees’ Retirement System (CalPERS) reported a preliminary 18.4% return on investments for the 12 months that ended June 30, 2014. The gain marks the fourth double-digit return the pension fund has earned in the last five years. The California State Teachers’ Retirement System (CalSTRS) closed the 2013-14 fiscal year with an 18.66% return on its investments.
Small Talk
People are more connected to their smartphones and other mobile technology than ever, ranking them as important as their toothbrushes and deodorant. The “Trends in Consumer Mobility Report 2014” from Bank of America finds that Americans see their smartphone as “an indispensable companion.” In terms of importance to their daily life, 91% of respondents overall rank their mobile/smartphone as most important, tying with their car and deodorant, and surpassed only by their toothbrush (95%) and the Internet in general (93%). Coffee was near the bottom the list (60%). However, when it comes to age groups, the youngest Millennials (ages 18 to 24) view their smartphone as the most important part of their daily lives (96%), while the Internet (88%), deodorant (90%) and their toothbrush (93%) were deemed as slightly less important.
ON THIS DATE:  In 1790, Congress declared Washington, D.C., the nation’s new capital. In 1935, the world’s first parking meter, known as Park-O-Meter No. 1, was installed on the southeast corner of what was then First Street and Robinson Avenue in Oklahoma City, Oklahoma. In 1945, at 5:29:45 a.m., the Manhattan Project came to an explosive end as the first atom bomb was successfully tested in Alamogordo, New Mexico. In 1951, J.D. Salinger’s only novel, “The Catcher in the Rye,” was published by Little, Brown. In 1966, Tommy James and The Shondells earned their first No. 1 hit with “Hanky Panky.” In 1969, at 9:32 a.m. EDT, Apollo 11, the first U.S. lunar landing mission, was launched from Cape Canaveral, Florida, on an historic journey to the surface of the moon. In 1981, after 23 years with the name Datsun, executives of Nissan changed the name of their cars to Nissan. In 1985, the All-Star Game, televised on NBC-TV, was the first program broadcast in stereo by a TV network. In 1999, John F. Kennedy, Jr.; his wife, Carolyn Bessette Kennedy; and her sister, Lauren Bessette, died when the single-engine plane that Kennedy was piloting crashed into the Atlantic Ocean near Martha’s Vineyard, Massachusetts.   WEDNESDAY WISDOM: “Now and then it’s good to pause in our pursuit of happiness and just be happy.”—Guillaume Apollinaire, French poet     Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
News from   Copyright © Asset International, Inc., 2014. All rights reserved.  No reproduction without prior authorization.
EBSA Head Lisa Gomez Says DOL Continues Honing Retirement Security Rule
Data and Research
Early Withdrawals Found to Exacerbate 401(k) Account Disparities Across Race, Gender
Ask the Experts
Are Roth Excess Deferrals Taxed Twice?

Editorial: Alison Cooke Mintzer


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