Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 2nd, 2014
Benefit Briefs
Increasing Participation in 403(b) Plans
With some exceptions, sponsors of 403(b) retirement plans, especially school systems, have problems getting employees to participate in the plans. According to Stephen R. Banks, co-founder of TSA Consulting Group in Tucson, Arizona, only around 30% of eligible employees are participating in 403(b)s sponsored by school systems. Banks told attendees of the 2014 National Tax-Sheltered Savings Association (NTSA) 403(b) Summit one reason employees do not participate in 403(b) plans is the employer is not engaged.
While the use of automatic enrollment is increasing in private-sector retirement plans, public-sector plans offered by local governments are slower in adopting the feature. A brief from the Center for State and Local Government Excellence, “Using Automatic Enrollment in Local Government Retirement Plans to Increase Savings,” contends while many local governments have supplemental savings plans, there are few incentives for employees to enroll in them. In addition, Paula Sanford, a researcher with the University of Georgia and the brief’s author, finds the main reasons local governments have been slow to adopt automatic enrollment include legal constraints, government perceptions, labor questions and administrative challenges.
Using 403(b) Employer Contributions as Compensation
Public K-12 school systems that offer 403(b) plans have an extra tool for solving certain reward and budget issues. As their 403(b)s are not subject to the Employee Retirement Income Security Act (ERISA) and not subject to nondiscrimination testing for employer contributions, they have an opportunity to solve a number of problems using employer contributions as compensation, according to Ellie Lowder of TSA Consulting and Training Services in Tucson, Arizona. Non-electing churches and qualified church-controlled organizations (QCCOs) can use employer contributions in similar ways as well, she told attendees of the National Tax-Sheltered Savings Association’s (NTSA’s) 2014 403(b) Summit.
Cash Balance Plans Gaining Popularity
The number of cash balance retirement plans has increased, according to a report from Kravitz, Inc. The “2014 National Cash Balance Research Report” says cash balance plans now make up 25% of all defined benefit (DB) retirement plans, up from only 2.9% in 2001. The number of cash balance plans increased by 22% versus a 1% increase in number of 401(k) plans. Kravitz points to a number of factors behind the growth of cash balance plans.
Buyer's Market
Buck Consultants has appointed Bruce W. Sherman, M.D., as the medical director of RightOpt, the firm’s private health insurance exchange. In his role, Sherman will provide physician-level expertise for RightOpt’s continuing member engagement strategy, clinical management strategy and high performance network development. His responsibilities will also include developing key clinical metrics to evaluate and improve population health.
MFS Investment Management has released the MFS Managed Wealth Fund, a flexible equity fund that seeks to provide capital growth with moderate volatility. The fund also aims to mitigate the effects of significant declines in equity markets. In seeking to achieve its total return investment objective, the fund will invest in three underlying MFS funds—MFS Growth Fund, MFS Value Fund and MFS Institutional International Equity Fund—for exposure to U.S. and international equities. The fund will also use derivative instruments to manage its net exposure to the equity market, based on its management team’s view of risk and reward opportunities.
Rainforth Joins MassMutual as Not-for-Profit Leader
MassMutual Retirement has appointed Vince Rainforth as the national practice leader for not-for-profit (NFP) retirement plans. Rainforth will be responsible for leading business development in the NFP market. He will lead a team of six retirement plan specialists who assist MassMutual’s 85 retirement service directors and 90 relationship managers as they support financial advisers and their NFP clients in selecting and implementing retirement plans. Another 90 education specialists help plan participants determine their retirement savings needs and encourage retirement plan participation.
Principal Financial Group, J.P. Morgan Retirement Plan Services and Wells Fargo are the top three recordkeepers by total employee stock ownership plan (ESOP)/KSOP assets, according to the 2014 PLANSPONSOR Recordkeeping Survey.
Industry Voices
Industry Voice: HSAs Should Be on Health Care Playlist
If you’re thinking of adding a high-deductible health plan (HDHP) with a health savings account (HSA) feature to your organization’s health care “playlist” this year, you’re not alone. Fidelity is working with many employers to add HSA-eligible health plans to their plan design to help control health care costs and avoid potential exposure to the “Cadillac Tax” in 2018. But there are additional benefits both to the employer and employee than meets the eye.
Economic Events
The U.S. Census Bureau of the Department of Commerce announced that construction spending during May was estimated at a seasonally adjusted annual rate of $956.1 billion, 0.1% above the revised April estimate of $955.1 billion. The May figure is 6.6% above the May 2013 estimate of $896.6 billion. During the first five months of this year, construction spending amounted to $358.1 billion, 8.2% above the $331.1 billion for the same period in 2013.
Market Mirror
Tuesday, the Dow closed 129.47 points (0.77%) higher at 16,956.07, the NASDAQ climbed 50.47 points (1.15%) to 4,458.65, and the S&P 500 increased 13.09 points (0.67%) to 1,973.32. The Russell 2000 gained 12.98 points (1.09%) to finish at 1,205.94, and the Wilshire 5000 was up 146.12 points (0.70%) at 21,008.86. On the NYSE, 3.2 billion shares traded, with a near 2 to 1 lead for advancers. On the NASDAQ, 2.7 billion shares changed hands, with 2.7 advancing issues for every declining issue. The price of the 10-year Treasury note decreased 10/32, increasing its yield to 2.567%. The price of the 30-year Treasury bond fell 20/32, bringing its yield up to 3.395%.
Rules & Regulators
Treasury Issues Final Rules for In-Plan Longevity Annuities
The U.S. Department of the Treasury issued final rules regarding longevity annuities—aimed at bringing more flexibility to retirement savers using the fixed-income vehicles as a longevity hedge. Treasury officials, along with the Internal Revenue Service (IRS), say the final rules make longevity annuities more accessible to the 401(k) and individual retirement account (IRA) markets. In short, the final rules ease certain minimum distribution requirements that have made it difficult for retirees to purchase and hold longevity annuity products without potentially jeopardizing the qualified status of their accounts.
Financial Sense
A report from the Pension Benefit Guaranty Corporation (PBGC) provides evidence premium increases are not needed, said American Benefits Council President James A. Klein in a statement. The PBGC’s “FY 2013 Projections Report” finds the financial condition of agency’s insurance program for single-employer plans, which covers about 30 million participants, is likely to improve over the next decade.
Small Talk
Social Media Presence Hurts Some Job Applicants
More employers are using job applicants’ social media content to help them decide whether or not he or she will be hired, says a new CareerBuilder survey. The survey finds 51% of employers who research job candidates on social media said they have found content that caused them to not hire the candidate. This is up from 43% of employers that said the same in 2013, and 34% in 2012. As part of the survey, employers shared the strangest things they have discovered on a job candidate’s, or a current employee’s, social media profiles.
ON THIS DATE:  In 1776, the Second Continental Congress, assembled in Philadelphia, formally adopted Richard Henry Lee’s resolution for independence from Great Britain. In 1850, B.J. Lane patented the gas mask. In 1857, New York City’s first elevated railroad officially opened for business. In 1881, only four months into his administration, President James A. Garfield was shot as he walked through a railroad waiting room in Washington, D.C. In 1900, in the sky over Germany’s Lake Constance, Count Ferdinand Graf von Zeppelin, a retired Prussian army officer, successfully demonstrated the world’s first rigid airship. In 1937, American aviation pioneer Amelia Earhart disappeared in the Central Pacific during an attempt to fly around the world at the equator. In 1947, an object crashed near Roswell, New Mexico. The U.S. Army Air Force insisted it was a weather balloon, but eyewitness accounts led to speculation that it might have been an alien spacecraft. In 1964, U.S. President Lyndon B. Johnson signed into law the historic Civil Rights Act in a nationally televised ceremony at the White House. In 1976, the U.S. Supreme Court ruled the death penalty was not inherently cruel or unusual. In 1977, Hollywood composer Bill Conti scored a No. 1 pop hit with the single “Gonna Fly Now (Theme From Rocky).”   WEDNESDAY WISDOM: “Don’t watch the clock; do what it does. Keep going.”—Sam Levenson, American television host and journalist     Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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