Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 7th, 2014
Benefit Briefs
Current Guidelines for Electronic Communications
The Employee Retirement Income Security Act (ERISA) requires multiple disclosures of information about retirement plans to participants on a regular basis, a key protection of the act. But, the time and expense of doing so make electronic delivery a good option. Electronic delivery can be a boon, as long as plan sponsors follow the rules. Email and other electronic methods can simplify the disclosure process, provide a more reliable way to deliver information and possibly even reduce administration costs for the plan over time. Provided the plan sponsor meets the proper requirements, almost all notices and statements can be delivered to participants electronically, according to Andrew Miller, director of retirement services at the Principal Financial Group.
Public Sector More Retirement Confident
More than two-thirds of state and local public workers polled expressed confidence they would have enough money to live comfortably in retirement. According to a survey from The Pew Charitable Trusts, 69% of public employees said they were very or somewhat confident they would have enough money to live comfortably in retirement, compared with 55% of Americans surveyed for the Employee Benefit Research Institute’s (EBRI) 2014 Retirement Confidence Survey. State and local employees said retirement plan design affects decisions about when to stop working.
Buyer's Market
Published every June, the PLANSPONSOR Recordkeeping Survey is now available in print. It consists of 16 pages of comparative client profile, market share and product data for 75 providers of defined contribution recordkeeping services.
Helping DC Plans Improve Investment Outcomes
A manager of managers approach may help defined contribution (DC) plan sponsors offer more diversified investment options to participants without overwhelming them with too many options or increasing costs. A manager of managers’ fund aims to achieve its objectives by selecting differentiated managers and giving them a mandate to make investment decisions on behalf of the fund. The rationale is diversification and balance can be better achieved by allocating assets to more than one manager, each with a distinct style. The manager of managers role is to select the managers, monitor performance and risk, and alter the composition of the fund to adapt to market conditions. Scott Brooks, head of defined contribution at SEI, explains the concept.
RiversEdge Advanced Retirement Solutions announced its mobile application is now available to retirement plan participants whose accounts are recordkept by the company. RIVERSEDGE MOBILE gives participants the ability to check account balances, view investment options, monitor their account’s investment performance, track contributions and review account transactions.
Economic Events
In the week ending June 28, the advance figure for seasonally adjusted initial claims for unemployment insurance was 315,000, an increase of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 312,000 to 313,000. The four-week moving average was 315,000, an increase of 500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 314,250 to 314,500. Total nonfarm payroll employment increased by 288,000 in June, and the unemployment rate declined to 6.1%, according to the Bureau of Labor Statistics. Job gains were widespread, led by employment growth in professional and business services, retail trade, food services and drinking places, and health care. The average interest rate for a 30-year fixed-rate mortgage is 4.12%, down from 4.14% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.22%, unchanged from one week ago. THE ECONOMIC WEEK AHEAD: Thursday, the Labor Department will issue its initial claims report, and the Census Bureau will report about wholesale inventories for May.
Market Mirror
Last Thursday, the Dow finished 92.02 points (0.54%) higher at 17,068.26, the NASDAQ increased 28.19 points (0.63%) to 4,485.93, and the S&P 500 was up 10.82 points (0.55%) at 1,985.44. The Russell 2000 climbed 8.65 points (0.72%) to 1,208.15, and the Wilshire 5000 gained 110.43 points (0.53%) to close at 21,107.54. On the NYSE, 3.2 billion shares changed hands, with 1.3 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares traded, with a more than 2 to 1 lead for advancers. The price of the 10-year Treasury note was down 3/32, bringing its yield up to 2.638%. The price of the 30-year Treasury bond decreased 6/32, increasing its yield to 3.471%. WEEK’S WORTH: For the week ending July 3, the Dow finished 1.28% higher, the NASDAQ climbed 2.00%, and the S&P 500 increased 1.25%. The Russell 2000 gained 1.57%, and the Wilshire 5000 was up 1.25%.
Rules & Regulators
Pre-Approved 403(b) Document Program Furthers Uniformity
403(b) plan documents currently may be presented in a myriad of forms, but pre-approved prototype plans are coming, which will provide some uniformity, notes Barbara J. Webb of PenServ Plan Services, Inc. Webb, director of technical services at the Horsham, Pennsylvania-based firm, told attendees of the National Tax-deferred Savings Association’s (NTSA) 2014 403(b) Summit, just like other qualified plan types, 403(b)s will have a restatement period every six years, and even non-Employee Retirement Income Security Act (ERISA) 403(b)s will be subject to the amendment requirements. Plan sponsors will no longer have the option of having “specimen plans”—typically, documents that were offered as a model, or to give a gist, of how the plan works, and that were signed off on by plan sponsors’ attorneys.
Financial Sense
New Mortality Tables Will Impact Pension Management
Wilshire Consulting estimates defined benefit pension plan liabilities will increase between 3% to 8% in total for most plans when they move to new Society of Actuaries mortality tables. When the impact of improved mortality is adopted by the Internal Revenue Service (IRS), the result will be lower funded ratios and higher minimum required contributions. Wilshire notes many corporate pension plan sponsors have adopted funded ratio based de-risking glide paths. The liability used to calculate the funded ratio is often the Projected Benefit Obligation (PBO) or balance sheet liability. As a result of the mortality assumption change, the funded ratio used to determine the asset allocation will decrease and may indicate that an alternative, most likely higher risk, asset allocation is appropriate.
Banks Ask to Continue Managing Pension Assets
BNP Paribas and Credit Suisse, which have each pled guilty to U.S. criminal charges, are asking to be able to keep managing U.S. pension plan assets. The banks have applied for an exemption that would enable them to keep their status as qualified professional asset managers (QPAMs). The QPAM Exemption allows the manager to engage in transactions with parties in interest with respect to the plan without running afoul of the prohibited transaction restrictions of the Employee Retirement Income Security Act (ERISA) or the Internal Revenue Code. It contains an anti-criminal rule that requires that neither the QPAM nor any of its affiliates have been convicted of a variety of crimes within 10 years immediately prior to the transaction.
Small Talk
ON THIS DATE:  In 1846, U.S. annexation of California was proclaimed at Monterey after the surrender of a Mexican garrison. In 1865, Mary Surratt was executed by the U.S. government, accused of being a conspirator in Abraham Lincoln’s assassination. She was the first woman executed by the U.S. federal government. In 1930, construction of the Hoover Dam began. In 1949, “Dragnet” was first heard on NBC radio. In 1976, for the first time in history, women were enrolled into the United States Military Academy at West Point, New York. In 1981, President Ronald Reagan nominated Sandra Day O’Connor, an Arizona court of appeals judge, to be the first woman Supreme Court justice in U.S. history.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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