Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 21st, 2015
Benefits & Administration
Choice a Detriment to Public Worker Retirement Savings
Research suggests that public employees who have their pension benefits reduced will not likely improve savings behaviors to make up for it. Researchers explored employee behavior when the state of Utah moved away from its traditional defined benefit pension plan and offered new hires a choice between a defined contribution (DC) plan and a hybrid plan. Robert L. Clark, from the Poole College of Management at North Carolina State University; Olivia S. Mitchell from the University of Pennsylvania’s The Wharton School; and Emma Hanson, from the North Carolina Department of State Treasurer Retirement Systems Division, conclude that their analysis provides evidence suggesting it is important not to neglect the effects of retirement plan restructuring on public employee behavior.Read more >
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Building Inclusivity Into Employee Benefits
Sponsors Actively Working to Derisk DBs
Plan sponsors feel tremendous pressure from their defined benefit (DB) plans and are looking to reduce their risks, according to the Mercer / CFO Research 2015 Risk Survey, “Taking the Next Step in Pension Risk Management: Planning to Move Ahead.” In 2013, when Mercer conducted its previous survey, funded status improved to 88% due to rising interest rates and strong equity returns. However, in 2014, it fell to 79%, prompting 70% of DB plan sponsors in 2015 to contribute more than the required minimum amount to their DB plans. In addition, 59% of sponsors have offered some type of one-time lump-sum payment to DB plan participants, and another 49% expect to offer such a payment within the next two years.Read more >
Ask the Experts
Nondiscrimination Testing Required for 403(b)s
“What types of nondiscrimination tests are required for 403(b) plans? For example, is a top-heavy test required?”Read more >
Sponsored message from Charles Schwab
“The unique value of Target-Date Funds” from Charles Schwab Investment ManagementRead more >
Market Mirror

Yesterday, the Dow was up 13.96 points (0.08%) at 18,100.41, the NASDAQ increased 8.72 points (0.17%) to 5,218.86, and the S&P 500 ticked up 1.64 points (0.08%) to 2,128.28. The Russell 2000 lost 6.87 points (0.54%) to finish at 1,260.22, and the Wilshire 5000 slipped 7.56 points (0.03%) to 22,413.11.

On the NYSE, 3.2 billion shares changed hands, and on the NASDAQ, 2.9 billion shares traded, with declining issues outnumbering advancing issues more than 2 to 1 on both exchanges.

The price of the 10-year Treasury note was down 8/32, increasing its yield to 2.375%. The price of the 10-year Treasury note decreased 11/32, bringing its yield up to 3.106%.

From the Magazine
Some Confusion in Understanding Glide Paths
Knowing a target-date fund (TDF)’s glide path is crucial to understanding its risk profile and to selecting the right fund for a plan sponsor’s participants. For years, the industry has divided target-date suites into “to retirement” funds and “through retirement” funds, based on whether the asset allocation reaches its most conservative point at the date of retirement—for “to” funds—or sometime beyond—for “through” funds. Still, this distinction remains a point of confusion for many plan sponsors.Read more >
Stable Value Funds More Complicated Than Realized
After spending their careers scrimping and saving, many participants are all too happy to pull their retirement funds out of volatile equity markets and trade the prospect of high returns for the safety of capital. Money market funds used to be a logical choice, but these have offered no return to speak of since the financial crisis. Another option for capital preservation is stable value funds—one of the first investments available in defined contribution (DC) plans, going back to the 1970s.Read more >
Investing
International Equity Tops Fund Flows in June
Net inflows to stock and bond mutual funds and exchange-traded products (ETPs) totaled $8.5 billion in June. Long-term mutual funds saw net outflows of $5.4 billion in aggregate during the month, while ETPs experienced roughly $14 billion of net deposits, according to Strategic Insight, an Asset International company. Investor demand in June was led by international equity offerings, which attracted nearly $25 billion of net inflows in total across funds and ETPs.Read more >
Small Talk

ON THIS DATE: In 1925, schoolteacher John T. Scopes was convicted of violating Tennessee’s law against teaching evolution in public schools. In 1930, the Veterans Administration of the United States was established. In 1973, the song “Soul Makossa” by the Paris-based Cameroonian artist Emmanual “Manu” Dibango was the first disco song to enter the BillBoard 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.

 

TUESDAY TRIVIA: The first TV game show in America was “Truth or Consequences,” which started as a show on NBC Radio. Contestants had a few seconds to answer a trivia question correctly before a buzzer sounded. If the contestant could not answer the question correctly, he or she had to complete an embarrassing stunt.

TRIVIAL PURSUITS: “Soul Makossa” is said to be the first disco song to break the Top 40, but it is better known as the inspiration for Michael Jackson’s chant in “Wanna Be Startin’ Somethin”” The chant in “Soul Makossa” is “mama-ko, mama-sa, maka-mako-sa.” What, if anything, does this mean?Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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