Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 21st, 2014
Benefit Briefs
Equity Overweighting Likely as 401(k)s See Record Balances
Savings in defined contribution (DC) retirement plan accounts recordkept by Fidelity grew 12.9% in the last year, to an average balance of $91,000. The average balance is up from $80,600 at the end of the second quarter 2013, Fidelity says. The figure includes all employees participating in workplace retirement plans served by Fidelity, regardless of career stage. For those employees who have been active in a workplace 401(k) retirement plan for 10 years or longer, average balances rose 15% per year over the past decade to reach $246,200, according to a quarterly Fidelity analysis. Jeanne Thompson, vice president of thought leadership for Fidelity Investments, says the growth has caused a significant amount of unintentional style drift within retirement portfolios.
More employers are using wellness programs in an effort to reduce health care spend, but employee participation is a challenge. The 2014 Benefits Strategy and Benchmarking Survey from Arthur J. Gallagher & Co. shows 44% of respondents offer a wellness program for their employees, and nearly three-fourths (73%) say employee participation is their number one wellness challenge. Arthur J. Gallagher says a key to encouraging participation is recognizing that employees, and their families, have unique needs when it comes to wellness; employers should not limit their wellness programs to health assessments and biometric screenings. “Taking a personalized approach to wellness offerings will increase participation,” according to the report.
Employers Experiencing Lull Before ACA Storm
Employers may be feeling a little less stressed about health care reform, but that’s not because it’s no longer a priority. The Patient Protection and Affordable Care Act (ACA) remained the regulatory issue that respondents to Littler Mendelson’s Third Annual Executive Employer Survey expect to have the most impact on their workplace during the next 12 months; however, those that felt it would have a significant impact dropped 16 percentage points from 57% in the 2013 survey to 41% in 2014. “It’s not to say that employers are no longer concerned about the ACA—they are, and health care reform continues to be one of the most pressing issues on the minds of all employers,” says Steven Friedman, co-chair of Littler’s Employee Benefits Practice. “However, uncertainty surrounding the ACA, as well as delays in its implementation, has created confusion among employers. In response, 58% said they have engaged employee benefits attorneys or consultants to help track changing deadlines and upcoming compliance obligations.”
Buyer's Market
Videos Prove to Be Engaging Benefits Communications
Tired of the same old postcards to participants? Some plan sponsors find a video postcard is very effective for benefits communication. Flimp Media, which provides video production and Web-based communications services for the employee benefits industry, tracked interactive video postcards sent internally by employers to inform participants of benefit changes, and put together a study about the responses. Wayne Wall, chief executive of Flimp, says the results were surprising. “Overall, with these benefit communication campaigns, I never expected this level of response,” he tells PLANSPONSOR. The video communications campaigns generated an average 79% employee engagement rate (the percentage of employees who opened and watched the video postcard content) and 1.03 responses per employee video view.
Industry Voices
Industry Voice: Best Practices to Support DOL Compliance
As an adviser and the designated plan sponsor at my own firm, my dual roles give me valuable insights into the opportunities—and many challenges—of building and maintaining a defined contribution plan that offers the greatest possible benefits to plan participants while also protecting the plan’s tax-favored status and the personal liability of plan sponsors themselves. For many of the plan sponsors I advise (and myself as well), the recent move by the Department Of Labor (DOL) to step up compliance enforcement of company-sponsored retirement plans has them feeling less than confident about how well their plans adhere to current DOL rules and regulations. By taking the time to review best practices, making necessary process adjustments to support compliance, and scheduling an annual review to stay educated about the DOL’s ever-changing rules and regulations, plan sponsors can set the stage for success in case of a formal plan audit. From a best practices perspective, here are the three key areas to consider.
Economic Events
THE ECONOMIC WEEK AHEAD: Tomorrow, we’ll learn the consumer price index (CPI) for June from the Bureau of Labor Statistics, and the National Association of Realtors will reveal existing home sales for June. Thursday, the Labor Department will release its initial claims report, and the Census Bureau will report about new home sales for June. Friday, the Census Bureau will issue a report about durable goods orders for June.
Market Mirror
The Dow closed 123.37 points (0.73%) higher Friday at 17,100.18, while the NASDAQ climbed 68.70 points (1.57%) to 4,432.15, and the S&P 500 increased 20.10 points (1.03%) to 1,978.22. The Russell 2000 gained 18.01 points (1.59%) to finish at 1,151.61, and the Wilshire 5000 was up 224.87 points (1.09%) at 20,912.56. On the NYSE, 3.2 billion shares changed hands, with advancing issues outnumbering declining issues 4.5 to 1. On the NASDAQ, 2.8 billion shares traded, with 3.8 advancing issues for every declining issue. The price of the 10-year Treasury note decreased 10/32, increasing its yield to 2.484%. The price of the 30-year Treasury bond fell 14/32, bringing its yield up to 3.292%. WEEK’S WORTH: For the week ending July 18, the Dow climbed 0.92%, the NASDAQ increased 0.38%, and the S&P 500 gained 0.54%. The Russell 2000 fell 0.72%, and the Wilshire 5000 was up 0.40%.
Financial Sense
Options for Pension Risk Transfer Expanding
A pension plan transaction recently announced by British Telecom, offers a glimpse of a coming pension risk transfer option for U.S. defined benefit plan sponsors. The transaction is different and newer than the pension buy-ins and buy-outs that are increasingly being used by plan sponsors, however. Amy Kessler, a senior vice president and head of Longevity Reinsurance within Prudential Retirement’s Pension Risk Transfer business, explains to PLANSPONSOR that in the UK, many pension plans that began using liability-driven investing (LDI) years ago now have 70% to 80% of their portfolios invested in fixed-income with longer durations to match liabilities, and because they are so heavily invested in fixed income, they are no longer expected to “outrun” life expectancies. If life expectancies continue to increase, the pension plans will have to come up with cash to continue paying annuitants. Rather than retain that risk, the largest plans in the UK are buying longevity insurance to lock in a future cash flow that will help pay benefits after annuitants reach their life expectancy.
While funding of defined benefit (DB) pension plans improved in 2013, funding for other post-employment benefits (OPEB) has not fared as well, says a new paper from S&P Dow Jones Indices. According to “S&P 500 Corporate Pensions and Other Post-Employment Benefits (OPEB): The Final Frontier,” DB plan deficits were cut in half, from $224 billion in 2013 from $452 billion in 2012, and plans’ funded status increased from 77.3% to 87.8%. During the same period, the funding status of OPEB grew from 22.3% to 28.5%.
The World at Large
Last week, the UK Government appointed a new “champion” for older workers. Her task, first described in the government’s fuller working framework document published last month, will be to make the case for older workers within the business community and challenge “outdated perceptions.”
Small Talk
ON THIS DATE:  In 1925, schoolteacher John T. Scopes was convicted of violating Tennessee’s law against teaching evolution in public schools. For the case dubbed “The Monkey Trial,” the jury only conferred for a few moments in the hallway before returning to the courtroom with a guilty verdict. In 1930, the Veterans Administration of the United States was established. In 1973, “Soul Makossa” was the first disco record to make the Top 40. In 2002, WorldCom Inc. filed for Chapter 11 bankruptcy protection. At the time it was the largest bankruptcy in U.S. history. In 2011, NASA’s space shuttle program completed its final, and 135th, mission, when the shuttle Atlantis landed at Kennedy Space Center in Florida.
SURVEY SAYS: Must-Have Everyday Items
Last week, we covered a survey which indicated some people rank their mobile phones as more important to them than deodorant. So, I asked NewsDash readers, from a list of items used in daily life, which one could you not give up? Let me stipulate up front that I realized my list was not an exhaustive list of items readers may think were indispensable in their everyday lives, but I was trying to get a sense of how important technology has become. I also must say, respondent demographics were skewed towards the “older” generations (to which I belong, so do not get offended), which may have some bearing on the results. From the list of items used in daily life, the toothbrush was the item the most respondents (41.9%) feel is a must-have, followed by the car (25%). Eight percent of responding NewsDash readers indicated they could give up any items on the list, and none of them selected iPod, e-Reader, gaming system or other electronic entertainment as their must-have items. The mobile phone was selected by 3.8% of respondents, while laptop/computer and debit/credit card were each selected by 6.3%. Verbatim comments such as “I’m over 60 so I lived much of my life without many of these,” are why I said the skew of the demographics likely affected the choices. Apparently, a good number of NewsDash readers live in rural areas, as many said in verbatim comments that’s why they selected the car as their must-have item. And, a good number are considerate to others, as the hygiene items were chosen based on what others would experience: “While I feel I could give them all up, you might want to canvas those around me on things like deodorant… I could live without it, but I’m not sure they could live with my living without it…” Of course, many revealed must-haves that were not on my list: toilet paper, coffee, chocolate, fashionable clothing, to name a few. Editor’s Choice goes to the reader who said: “As for my ‘must-have’ item, it was neck and neck between my mobile phone and toothbrush, so I’m counting on my mobile one day coming with a toothbrush attachment.” A big thank you to everyone who responded to the survey!
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 PLANSPONSOR.com   Copyright © Asset International, Inc., 2014. All rights reserved.  No reproduction without prior authorization.
MOST READ ARTICLES
1
2021 Recordkeeping Survey
2
Giving Employees the Financial Wellness Help They Want
3
DOL Clears Up Timing for Lifetime Income Illustrations
4
2020 Recordkeeping Survey
5
TRIVIAL PURSUITS: What do the M’s stand for in M&Ms?

Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

Advertising: advertise@strategic-i.com

Subscribe to NEWSDash, click here .

To unsubscribe, click here.

BrightScope / CIO / FWW / Investor Economics / LiquidMetrix / Market Metrics / Matrix Solutions / PLANADVISER / Plan For Life / PLANSPONSOR / Simfund