Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 23rd, 2014
Benefit Briefs
Research Targets Average 14% Deferral Rate
A secure retirement is achievable if retirement plan participants start saving early and consistently, and at levels far above 3%, according to findings from the Center for Retirement Research (CRR) at Boston College. Individuals with a workplace-based retirement plan should look to that plan, whether it’s a 401(k) or other retirement savings plan, for 35% of their retirement income, on average, the CCR study contends. The average required savings rate to achieve that level of targeted income is 14%—that is, if savings starts at age 35 and retirement occurs at age 65, according to “How Much Should People Save?”
Buyer's Market
Nuveen Adopts RiskFirst Technology
Nuveen Asset Management will use RiskFirst’s web-based analytics platform, PFaroe, to help craft customized liability-driven investment (LDI) strategies for institutional clients, particularly defined benefit pension plans. Nuveen says the PFaroe product will be used by the firm’s recently formed Institutional Solutions Group as it builds and delivers LDI strategies for pension plans, public funds, foundations and endowments, insurance companies and other institutional investors.
Wagner Law Group Adds Two
Stephen Rosenberg, an Employee Retirement Income Security Act (ERISA) and labor law litigator, has joined The Wagner Law Group as “of counsel.” Rosenberg has extensive experience as an ERISA lawyer, the firm says, and has litigated a wide range of denial of benefit, breach of fiduciary duty, and class action cases related to retirement plans. Rosenberg will be joined at Wagner Law Group by his associate, Caroline Fiore, a commercial and regulatory lawyer with a background in administrative law, commercial litigation, insurance, class action, employee benefits and ERISA disputes.
Burnham Benefits Insurance Services, an employee benefits brokerage firm, has named Helen Vits as a senior account executive. She will consult with clients as they structure their employee benefit packages—from initial procurement and analysis to implementation. The firm notes that the enactment of the Patient Protection and Affordable Care Act (or ACA) has ushered in a need for subject matter experts with the skills to adapt to changes and recommend solutions to keep clients competitive in the job market.
Industry Voices
Industry Voice: Getting Participants to Save More
Corporate America has a generation of older employees who do not have enough money saved for retirement. The result is that the Baby Boomers are either not retiring or they are retiring into financial hardship. Corporate America and Washington are starting to recognize the shortfall and understand the source of the problem. I stand up in front of enrollment groups and tell participants that they have a great 401(k) plan with highly ranked, style-specific, low-expense-ratio investment choices. We explain that their plan is with an outstanding, low-cost recordkeeper that offers the best in enrollment and educational materials. We reinforce the message that their plan sponsor is doing their part by paying the administrative fees and matching the participants’ contributions. Unfortunately, if the participant doesn’t contribute enough, all our efforts are wasted. How do we get the average participant to contribute more?
Economic Events
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in June after rising 0.4% in May, according to the Bureau of Labor Statistics. The index for all items less food and energy rose 0.1% in June after increasing 0.3% in May. Real average hourly earnings were unchanged in June, seasonally adjusted. Average hourly earnings rose 0.2% and the CPI-U rose 0.3%. Real average weekly earnings were unchanged over the month. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 2.6% to a seasonally-adjusted annual rate of 5.04 million in June from an upwardly-revised 4.91 million in May, according to the National Association of Realtors. Sales are at the highest pace since October 2013 (5.13 million), but remain 2.3% below the 5.16 million-unit level a year ago.
Market Mirror
Tuesday, the Dow was up 61.81 points (0.36%) to 17,113.54, the NASDAQ increased 31.31 points (0.71%) to 4,456.02, and the S&P 500 gained 9.90 points (0.50%) to 1,983.53. The Russell 2000 added 9.49 points (0.83%) to finish at 1,156.15, and the Wilshire 5000 closed 111.23 points (0.53%) higher at 20,972.80. On the NYSE, 3.23 billion shares traded, with 2.2 declining issues for every advancing issue. On the NASDAQ, 2.76 billion shares changed hands, advancers outnumbering decliners about 2 to 1. The price of the 10-year Treasury note rose 2/32, dropping its yield up to 2.463%. The price of the 30-year Treasury bond was up 4/32, with its year down to 3.253%.
Financial Sense
Examining Investment Share Classes
Choosing the right share class needs careful consideration as the Department of Labor (DOL) is paying more attention to investment menu options, experts say. Several larger plans are being sued over costs of investment options. In Tibble vs. Edison, cited as a watershed moment, the plan sponsor was found to have breached fiduciary responsibility because it did not offer institutionally priced shares of a fund that were, in fact, available. The curtain is gradually being pulled back on this practice, according to Philip J. Koehler, chief executive of ERISA Fiduciary Administrators. “It’s a key issue,” Koehler says. “You’d think highly sophisticated managers and advisers would be more aware, but nevertheless, high-priced, revenue-share classes wind up on investment lineups.”
Small Talk
Work Not Just About the Paycheck
Just over half of Americans (51%) would continue to work, even if they did not need to financially. A new survey from CareerBuilder finds that not all people dream of hitting it big and leaving their offices behind. In fact, if they won the lottery, 30% of respondents to a recent CareerBuilder poll say they would even keep their current job. The two most common reasons to continue working, even though they did not have to, were: they would be bored if they didn’t work (77%) and work gives them a sense of purpose and accomplishment (76%).
ON THIS DATE: In 1885, just after completing his memoirs, Civil War hero and former President Ulysses S. Grant died of throat cancer. In 1976, members of the American Legion arrived in Philadelphia to celebrate the bicentennial of U.S. independence. Soon after, many began suffering from a mysterious form of pneumonia. Their ailment would come to be known as Legionnaires’ disease. In 1984, 21-year-old Vanessa Williams gave up her Miss America title, the first resignation in the pageant’s history, after Pen.thouse magazine announced plans to publish photos of the beauty queen in its September issue. In 1988, Guns N’ Roses’ first hit single, “Sweet Child O’ Mine,” entered the Billboard Top 40.   Wednesday Wisdom: “The brain is a wonderful organ; it starts working the moment you get up in the morning and does not stop until you get into the office.” – Robert Frost
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