Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 30th, 2014
Webcast Event
Exchange-traded funds can offer retail investors low operating expenses, access to diverse asset classes and transparency—with the ability to respond to market conditions during the day. Now, retirement plan participants can access the benefits exchange-traded funds provide within a framework built specifically for retirement plans. Join us as Schwab Retirement Plan Services shares a new approach, one that supports exchange-traded funds as core investment options in 401(k)s, and addresses common questions from the industry.
Benefit Briefs
Helping Retirement Plan Participants Invest Responsibly
Retirement plan sponsors may want to offer so-called responsible investment options in their plans, but may have some concerns. Earle Allen, vice president of Cammack Retirement Group, and author of a paper about responsible investing, notes that one limitation of such investments is that the negative screening process can result in a significantly restricted pool of potential companies from which to choose. Plan sponsors may also be concerned that responsible investments in general may not perform as well as other non-responsible investments, he says. “This may cause a fiduciary problem for them. So, if the participant demand is not there, plan sponsors are typically reluctant to undertake that potential risk for limited benefit.”
GAO Questions Advantages of Managed Accounts
A lack of information and consistent standards makes it difficult for 401(k) plan sponsors to gauge whether managed account services truly benefit participants over the long term, says a new report. In the report, “401(k) Plans: Improvements Can Be Made to Better Protect Participants in Managed Accounts,” the U.S. Government Accountability Office (GAO) says because little is known about whether managed accounts are advantageous for 401(k) plan participants, and whether plan sponsors understand their own role and potential risks, it was asked to review and answer these questions. After reviewing eight managed account providers in 2013, who represented about 95% of the industry involved in defined contribution plans, the GAO found that these providers varied in how they structured managed accounts, including the services they offered and their reported fiduciary roles.
Industry Voices
Industry Voice: Be the Catalyst!
Make no mistake, what we (collectively) are doing is trying to start a social movement focused on how people become financially secure in a challenging world. And like any movement, the environment needs to be right and we need catalysts to build communities that will ensure our movement reaches that oh so elusive “Tipping Point.” The environment is indeed right, with all statistics pointing to heightened anxiety and concern around all matters financial and, yes, I’m asking you to Be That Catalyst. But how?
Economic Events
The Conference Board Consumer Confidence Index, which had improved in June, increased in July. The Index now stands at 90.9 (1985=100), up from 86.4 in June. The Present Situation Index increased to 88.3 from 86.3, while the Expectations Index rose to 92.7 from 86.4 in June.
Market Mirror
Tuesday, the Dow closed 70.48 points (0.42%) lower at 16,912.11, the NASDAQ slipped 2.21 points (0.05%) to 4,442.70, and the S&P 500 was down 8.96 points (0.45%) at 1,969.95. The Russell 2000 ticked up 2.24 points (0.20%) to 1,141.74, and the Wilshire 5000 lost 78.69 points (0.38%) to finish at 20,816.36. 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 1.3 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note was up 6/32, bringing its yield down to 2.463%. The price of the 30-year Treasury bond increased 18/32, decreasing its yield to 3.227%.
Rules & Regulators
The Pension Benefit Guaranty Corporation (PBGC) is taking over the pension plans sponsored by the estate of a businessman whose business activities were mired in controversy. The PBGC will pay retirement benefits for 2,101 people covered by the APL/NVF Consolidated Pension Plan, which is sponsored by the estate of businessman Victor Posner. The New York Times called Posner “a master of the hostile takeover from the mid-1960’s until the early 1990’s.” The PBGC said it is stepping in because the assets of the Posner estate are being distributed by a Florida probate court, and the pension plan will be abandoned. The APL/NVF Consolidated Pension Plan will end as of July 31, 2014.
The Department of Labor’s Employee Benefits Security Administration (EBSA) will conduct a webcast for small businesses and their retirement benefit services providers on August 6. Internal Revenue Service (IRS) experts will also join the hour-long EBSA webcast, called “Choosing a Retirement Solution for your Small Business.”
Financial Sense
Downside Protection Comes at a Price
Market corrections are notoriously difficult—many say impossible—to predict, but that doesn’t mean investors should abandon the idea of preparing in advance for the next correction. After several years of much-needed stability, volatility has reemerged in the equity markets in a big way, according to a new analysis from investment management and financial services firm Gerstein Fisher. Gregg Fisher, chief investment officer for Gerstein Fisher, urges long-term investors, such as workplace retirement plan sponsors, to keep in mind that market corrections are a normal and even healthy aspect of embracing risky assets such as stocks—without them, investors would not collect a risk premium for equity holdings. Still, everyone would like to find an investment strategy that allows for strong growth on the upside while also limiting damage when the markets turn south, he says.
Small Talk
Home and Work Boundaries Are Blurring
Even when Americans are away from work, they are thinking about work, says a recent poll from employment services provider Randstad. For example, many Americans cannot seem to enjoy their vacations, with thoughts of work running through their heads. Forty-two percent of poll respondents feel compelled to check in with work while on vacation. A June survey by collaboration software and services provider PGi came up with similar findings about the blurring of home and work boundaries, noting that 88% of respondents work above and beyond the traditional 40-hour work week. PGi also asked employees what they would do if they had an extra 60 minutes each day.
ON THIS DATE:  In 1619, in Jamestown, Virginia, the first elected legislative assembly in the New World—the House of Burgesses—convened in the choir of the town’s church. In 1945, the USS Indianapolis was torpedoed by a Japanese submarine and sank within minutes in shark-infested waters. Only 317 of the 1,196 men on board survived. The Indianapolis had delivered key components of the atomic bomb that would be dropped a week later at Hiroshima to Tinian Island in the South Pacific. In 1956, President Dwight D. Eisenhower signed a law officially declaring “In God We Trust” to be the nation’s official motto. In 1965, President Lyndon B. Johnson signed Medicare into law. In 1966, the three-chord song “Wild Thing” became a No. 1 hit for The Troggs. In 1974, the U.S. House of Representatives Judiciary Committee voted to impeach President Nixon for blocking the Watergate investigation and for abuse of power. In 1976, American Bruce Jenner won gold in the decathlon at the Montreal Olympics. His 8,617 points set a world record in the event. In 2003, the last of 21,529,464 classic Volkswagen Beetles built since World War II rolled off the production line at Volkswagen’s plant in Puebla, Mexico.   WEDNESDAY WISDOM: “Better be wise by the misfortunes of others than by your own.”—Aesop, Greek storyteller        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   Copyright © Asset International, Inc., 2014. All rights reserved.  No reproduction without prior authorization.
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Ask the Experts
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Editorial: Alison Cooke Mintzer


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