Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
July 8th, 2014
Benefit Briefs
Employers Seek to Control Benefits Costs and Risks
Employers mark controlling health care costs as their top benefits priority, followed closely by controlling costs and risks for retirement plans, says a new report from Prudential Financial. More than half of employers say they are likely to offer lump-sum distributions to DB plan participants over the next two years. More than half of employers believe a significant portion of their work force will have to delay retirement because of inadequate savings; 59% say they have seen the average retirement age increase over the past five years, and 61% believe it will continue to rise.
Responding to Lagging 401(k) Participant Engagement
The severity of the Great Recession seems to have diminished overall participant engagement with 401(k) plans, according to an analysis by Putnam. The firm says financial communications need to evolve and adopt the online marketing practices that touch savers every day. In addition, plan providers have access to a wealth of data about savers, including age, compensation and deferral rates. Presenting personalized, actionable messages in the context of lifetime income could provide the “nudge” needed to increase engagement.
Good Retirement Savings, Health Habits Connected
Researchers at St. Louis, Missouri’s Washington University have found a connection between good retirement savings habits and good health habits. In “Healthy, Wealthy, and Wise: Retirement Planning Predicts Employee Health Improvements,” Lamar Pierce, associate professor of strategy at the university’s Olin Business School, and doctoral candidate Timothy Gubler find an employee’s decision to contribute to a 401(k) retirement plan predicted whether he or she would act to correct poor physical health indicators that were revealed during an employer-sponsored health examination.
Buyer’s Market
Eighty-eight percent of the assets represented in PLANSPONSOR’s 2014 Recordkeeping Survey are in 401(k), 403(b) and 457 plans—a jump of more than 20% from 2012 for those plan types. The number of such plans also increased, but only by a marginal 0.6%.
Market Mirror
Yesterday, the Dow was down 44.05 points (0.26%) at 17,024.21, the NASDAQ fell 34.40 points (0.77%) to 4,451.53, and the S&P 500 closed 7.79 points (0.39%) lower at 1,977.65. The Russell 2000 lost 20.50 points (1.70%) to finish at 1,187.65, and the Wilshire 5000 decreased 128.18 points (0.61%) to 20,979.36. On the NYSE, 3.2 billion shares traded, with declining issues outnumbering advancing issues more than 2 to 1. On the NASDAQ, 2.8 billion shares changed hands, with a near 4 to 1 lead for decliners. The price of the 10-year Treasury note was up 5/32, bringing its yield down to 2.620%. The price of the 30-year Treasury bond increased 17/32, decreasing its yield to 3.442%.
Rules & Regulators
Health Plan to Repay Clients for Undisclosed Fees
A group health plan will repay clients for failing to disclose fees to them. Under a consent judgment from the U.S. District Court for the District of Minnesota, the Pro Systems Corp. Group Health Plan will restore $203,212 to clients to resolve a lawsuit, Perez v. Pro Systems Corp, et al, filed with the court by the Department of Labor (DOL). The suit alleged violations of the Employee Retirement Income Security Act (ERISA) for failing to disclose to clients that some fees collected for insurance costs were used for purposes unrelated to the health plan.
GAO Recommends Changes to Form 5500
The Government Accountability Office (GAO) is recommending that regulators consider modifying Form 5500 plan investment and service provider fee information. Stakeholders interviewed by the agency said the form’s information about service provider fees was misaligned with other required fee disclosures, and also cited various exceptions and gaps in current reporting requirements as major challenges. Specifically, the stakeholders said Form 5500 service provider fee information does not align with other information that service providers must disclose to plan sponsors, forcing providers to produce two different sets of information.
Financial Sense
Financial Savviness Linked to Better 401(k) Returns
Employees who improve their financial knowledge have a better chance of improving the investment returns on their retirement accounts, a paper published by the National Bureau of Economic Research (NBER) suggests. The research report, “Financial Knowledge and 401(k) Investment Performance,” says risk-adjusted annual expected returns are 130 basis points higher for the most financially knowledgeable retirement plan participant than for the least financially knowledgeable. The more financially knowledgeable participants hold more equity in their portfolios, and hence can expect higher risk-adjusted returns. The most knowledgeable hold 11.5% more stock than their least knowledgeable counterparts and they can anticipate earning around 10% more, the research found.
Small Talk
ON THIS DATE:  In 1776, a 2,000-pound copper-and-tin bell now known as the “Liberty Bell” rang out from the tower of the Pennsylvania State House (now Independence Hall) in Philadelphia, summoning citizens to the first public reading of the Declaration of Independence. In 1889, The Wall Street Journal was first published. In 1972, “Lean On Me” by Bill Withers began its first stay at No. 1 on the pop charts.   TUESDAY TRIVIA: The first automatic telephone answering machine, invented by Willy Müller in 1935, was a three-foot-tall device.
TRIVIAL PURSUITS: Which state has the smallest 65-and-older population?
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Editorial: Alison Cooke Mintzer


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