Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 29th, 2014
Benefit Briefs
The Search for the Right TPA
Plan sponsors need to carefully consider their options when it comes to choosing a third-party administrator (TPA) for their retirement plans. One issue in particular that plan sponsors need to examine is whether or not they should use their payroll provider as their TPA. There are some definite advantages to using a payroll provider as a TPA. “The major advantage of using a payroll provider for your 401(k) plan is the integration of payroll for deferral uploads and data sharing,” James F. Sampson, managing principal for Cornerstone Retirement Advisors, tells PLANSPONSOR.
Employer-provided medical care was available to 86% of full-time private industry employees in the United States as of March, according to survey results from the U.S. Bureau of Labor Statistics (BLS). The BLS National Compensation Survey, which provides measures of compensation cost levels and trends, as well as incidence and provisions of employee benefit plans, also finds that only 23% of part-time employees had medical care benefits available. Access or availability also varied by establishment size, with 57% for employees of small businesses (those with fewer than 100 employees), compared with 84% in medium and large businesses (those with 100 employees or more). Retirement benefits followed a similar pattern, according to the survey data.
Personal Accountability in a DC Retirement Plan World
The concept of retirement income planning may be common parlance among industry professionals, but plan participants are still adjusting to the new age of personal accountability. For many workers in the U.S., the effort of saving for retirement is no longer a cradle-to-grave proposition with a generous lifetime pension waiting at the back end, says Shams Talib, a senior partner at Mercer and leader of the consulting firm’s retirement business in North America. Talib says a number of recent Mercer research projects suggest younger workers—especially those born after the end of the Baby Boom, circa 1965—must come to a new understanding of retirement if they are to successfully self-fund their golden years.
Defined contribution (DC) plan participants on both sides of the Atlantic are worried about retirement, according to research from State Street Global Advisors (SSgA). Less than one-third of DC participants in three countries—the U.S., U.K. and Ireland—feel confident they will have enough saved through an employer-sponsored retirement plan to afford the lifestyle they want in retirement. The numbers are: just 31% of U.S. participants, 26% of U.K. participants and 17% of Irish participants expressing confidence in retirement preparedness, according to the “DC Transatlantic Survey” from SSgA. The results show that DC participants see themselves as savers rather than investors, explains Nigel Aston, managing director and SSgA’s head of DC in the U.K, based in London.
HSAs Offer a Good Boost to Retirement Savings
Using health savings accounts (HSAs) can boost savings for medical expenses in retirement as well as save employees tax dollars now. Research from the Employee Benefit Research Institute (EBRI) shows an individual who saves in an HSA for 10 years could accumulate between $53,000 and $68,000, depending on the rate of return realized and on the contribution rates assumed. After saving for 40 years, an individual could have nearly $1.1 million if the realized rate of return were 7.5%.
The Social Security Board of Trustees reports the combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2033. This is unchanged from the last two years, with 77% of benefits still payable at that time. The DI Trust Fund will become depleted in 2016, also unchanged from last year’s estimate, with 81% of benefits still payable. The combined trust fund reserves are still growing and will continue to do so through 2019. Beginning with 2020, the cost of the program is projected to exceed income.
Buyer's Market
Firms Join Forces for Pension Risk Transfer Services
Penbridge Advisors and P-Solve have formed a strategic alliance that will allow sponsors of defined benefit (DB) plans to integrate pension risk transfer (PRT) information and advice within a fiduciary asset management offering. Penbridge Advisors, a Stamford, Connecticut-based provider of PRT-related services, will primarily help plan sponsors evaluate the cost-effectiveness of annuity buyouts relative to other pension de-risking strategies. P-Solve, a London-based provider of fiduciary asset management services for institutional investors, will work with plan sponsors to create and implement an investment and risk management plan to help achieve their pension de-risking and termination goals.
USI Consulting Group named Joyce C. Suleski as senior vice president and practice leader for the firm’s health and welfare administration practice. Prior to joining USI Consulting Group, Suleski held various account management and sales roles with Wellpoint, Inc./Anthem, Marsh & McLennan/Mercer, Aon Consulting and MetLife.
Scorecard Helps Employers Benchmark Wellness Programs
Mercer and the Health Enhancement Research Organization (HERO) have released a new version of the HERO Scorecard survey tool, which helps employers benchmark their wellness programs. Version 4.0 of the scorecard, which is available free of charge, allows employers to evaluate their employee health management efforts and to benchmark their program and outcomes against companies of similar sizes and industries.
Nyhart Actuary and Employee Benefits has opened a new sales and consulting office in Denver. The expansion into the Rocky Mountain region will enable Nyhart to more effectively serve local clients and give Colorado businesses a competitive option for pension, 401(k) and other employee benefit design and administration services, the firm says.
Economic Events
In yesterday’s THE ECONOMIC WEEK AHEAD, we said Friday, we’ll see a report about nonfarm payrolls from the Bureau of Labor Statistics and learn the unemployment rate for June. The Bureau of Labor Statistics will report the unemployment rate for July. We apologize for the error.
Market Mirror
Yesterday, the Dow ticked up 22.02 points (0.13%) to 16,982.59, the NASDAQ slipped 4.65 points (0.10%) to 4,444.91, and the S&P 500 increased by 0.57 (0.03%) to 1,978.91. The Russell 2000 was down 5.22 points (0.46%) at 1,139.50, and the Wilshire 5000 closed 12.12 points (0.06%) lower at 20,895.05. On the NYSE, 3.2 billion shares traded, with 1.3 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares changed hands, with a 1.7 to 1 ratio of decliners to advancers. The price of the 10-year Treasury note was down 6/32, bringing its yield up to 2.488%. The price of the 30-year Treasury bond decreased 11/32, increasing its yield to 3.257%.
Financial Sense
Investment returns at private foundations rose to an average of 15.6% in 2013 – the second-straight year of double-digit average returns. According to the 2013 Council on Foundations-Commonfund Study of Investments for Private Foundations (CCSF), the highest return, at 16.5%, was earned by organizations with assets greater than $500 million. Foundations lowered allocations to domestic equities while increasing allocations to fixed income for fiscal year 2013.
Small Talk
ON THIS DATE:  In 1909, the newly formed General Motors Corporation (GM) acquired the country’s leading luxury automaker, the Cadillac Automobile Company, for $4.5 million. In 1914, the first transcontinental telephone service was inaugurated when two people held a conversation between New York, New York, and San Francisco, California. In 1950, Disney’s adaptation of Robert Louis Stevenson’s “Treasure Island” was released. In 1958, the U.S. Congress passed legislation establishing the National Aeronautics and Space Administration (NASA), a civilian agency responsible for coordinating America’s activities in space. In 1967, The Doors score their first No. 1 hit with “Light My Fire.”   TUESDAY TRIVIA: Polar bears have black skin under which there is a layer of fat that can measure 4.5 inches (11.5 centimeters) thick.
TRIVIAL PURSUITS: What color is a polar bear’s fur?
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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