Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 16th, 2018
Benefits & Administration
Asset Class Returns Account for Disparity in Public DB Plan Performance Results
On average, the annualized return for public defined benefit (DB) plans from 2001 to 2016 was 5.5%—well below the typical actuarially assumed return, the Center for Retirement Research (CRR) at Boston College notes in an Issue Brief.  However, the returns for plans in the top and bottom quartiles were 6.3% and 4.6% respectively—a difference the CRR says could account for roughly a 20-percentage-point disparity in their funded ratios. The differences in overall portfolio returns could result from differences in asset allocation and/or asset class returns. Its analysis ultimately found, “In terms of explaining the underperformance of plans in the lower quartiles, the small differences in allocation among plans were secondary to the differences in asset class returns. While allocation did account for about one-quarter of the total 16-year underperformance for bottom quartile plans (with returns accounting for the remaining three quarters), returns accounted for almost the entire underperformance for the middle two quartiles.”Read more >
Products, Deals and People
Retirement Industry People Moves
Industry expert replaces BPAS SVP of Fiduciary Services; USI Consulting employs VP of Retirement Services; Cafaro Greenleaf announces addition of investment analyst; and more.Read more >
Economic Events
THE ECONOMIC WEEK AHEAD: Today, the Census Bureau will report about retail sales for June and business inventories for May. Wednesday, the Census Bureau will report about housing starts for June. Thursday, the Labor Department will issue its initial claims report.
Recent TDF Performance Lawsuits Raise Insurer Ire
Microsoft Latest Target of Lawsuits Over TDF Suite
Florida's DeSantis Joins Other GOP Pols in Opposing ‘Woke Capital’
Market Mirror

Friday, the Dow closed 94.52 points (0.38%) higher at 25,019.41, the NASDAQ was up 2.06 points (0.03%) at 7,825.98, and the S&P 500 increased 3.02 points (0.11%) to 2,801.31. The Russell 2000 was down 3.20 points (0.19%) at 1,687.08, and the Wilshire 5000 increased 26.93 points (0.09%) to 29,261.38.


The price of the 10-year Treasury note was up 5/32, decreasing its yield to 2.828%. The price of the 30-year Treasury bond increased 9/32, bringing its yield down to 2.930%.


WEEK’S WORTH: For the week ending July 13, the Dow gained 2.30%, the NASDAQ finished 1.9% higher, and the S&P 500 increased 1.50%. The Russell 2000 decreased 0.41%, and the Wilshire 5000 was up 1.36%.
Sponsored message from Conning
Conning’s Annual Corporate Pension Review 2017 – A Year of Improvement.Read more >
HSA Amendment Bills Moved to U.S. House
Among the bills approved by the House Ways and Means Committee is one that would qualify significantly more health treatments, services and over-the-counter drugs for health savings account (HSA) spending.Read more >
Former New York Retirement Fund Employee Sentenced in Pay-to-Play Scheme
Navnoor Kang allegedly used his position to direct up to $2.5 billion in state business to registered representatives at two different broker/dealers.Read more >
Legislators Propose Expanded Features for SIMPLE Plans
The SIMPLE Plan Modernization Act has been introduced by Senators Susan Collins (R-Maine) and Mark Warner (D-Virginia) to provide greater flexibility and access to small business employers and employees seeking to use SIMPLE plans to save for retirement. Among other things, the new law would raise the contribution limit for SIMPLE plans from $12,500 to $15,500 for the smallest businesses and give businesses with 26 to 100 employees the option of the higher limits.Read more >
Small Talk
ON THIS DATE: In 1779, American troops under General Anthony Wayne captured Stony Point, New York. In 1790, the District of Columbia, or Washington, D.C., was established as the permanent seat of the United States Government. In 1862, David G. Farragut became the first rear admiral in the U.S. Navy. In 1926, the first underwater color photographs appeared in “National Geographic” magazine. The pictures had been taken near the Florida Keys. In 1935, Oklahoma City became the first city in the U.S. to install parking meters. In 1945, the United States detonated the first atomic bomb in a test at Alamogordo, New Mexico. In 1951, J.D. Salinger’s novel “The Catcher in the Rye” was first published. In 1957, Marine Major John Glenn set a transcontinental speed record when he flew a jet from California to New York in 3 hours, 23 minutes and 8 seconds. In 1964, Little League Baseball Incorporated was granted a Federal Charter unanimously by the United States Senate and House of Representatives. In 1969, Apollo 11 blasted off from Cape Kennedy, Florida, and began the first manned mission to land on the moon. In 1981, after 23 years with the name Datsun, executives of Nissan changed the name of their cars to Nissan. In 2009, in Chicago, Sears Tower was renamed Willis Tower.
SURVEY SAYS RESPONSES: Last week, I asked NewsDash readers, “Does your retirement plan use education or features to discourage plan participants from taking loans, and if so, how?” More than six in ten (63.6%) responding readers said their retirement plan uses education or plan design features to discourage participants from taking loans, while 36.4% said it does not. More than one-quarter (27.3%) indicated their plans do not offer a loan feature—a good way to discourage participant loans. More than four in ten (40.9%) reported that the number of loans outstanding is limited to one, 13.6% said loans are limited to only certain accounts, such as employee deferrals, and 4.5% said loans can only be taken for reasons of substantial hardship. Although no one said participants applying for a loan MUST attend an educational session first, in “other” responses, readers indicated that they send out information about how taking a loan can affect retirement savings, there’s messaging on the plan website about the effects of taking a loan or when applying for a loan online, a message pops up directing the participant to an education piece. In verbatim comments, several readers advocated for not allowing loans at all in retirement plans, but some pointed out the good things, such as participants paying interest to themselves, as long as they don’t default on the loan. Editor’s Choice goes to the reader who said: “If participants would have taken a loan outside of the plan anyway, at a higher rate, they would have to repay the lender with after-tax money, rather than themselves. So the repaid amount is gone, rather than reinstated in the DC account. It can be a reasonable strategy… IF the participant continues making their usual deferral while repaying the loan, and doesn’t default on the loan if employment ends.” A big thank you to all who participated in the survey!Read more >
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Editorial: Alison Cooke Mintzer


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