Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 11th, 2014
Benefit Briefs
Auto Features Boosting Participation, Savings Rates
Retirement plan participation and savings rates are rising due to adoption of automatic plan features, says Vanguard in “How America Saves 2014.” Automatic enrollment increases participation, but it also has a positive effect on other auto features, the analysis finds. Among plans that automatically enroll employees, 69% also automatically increase their contribution rates annually, and 98% use target-date funds (TDFs), a balanced investment option or managed account as the default investment option. Vanguard’s report is an annual look at investor trends in the 401(k) and other defined contribution (DC) retirement plans that the firm administers.
More than half of Baby Boomers polled expressed uncertainty about how much money they will need in retirement. According to the Wells Fargo Millennial Survey, 54% say they “can’t estimate” how much they will need in retirement. Twelve percent say they will need $500,000 to $1 million, and another 12% say $1 million to $2 million.
Millennials Learned Lesson About Saving
A majority (80%) of Millennial Americans say the recession of 2008 taught them they have to save “now” to “survive” economic problems down the road. More than half (55%) are saving for retirement; however, 45% are not, according to the Wells Fargo Millennial Survey. Of those Millennials who have started saving, nearly half (46%) are saving between 1% and 5% of their income for retirement; 31% are saving 6% to 10%; and 18% are saving more than 10%.
Buyer's Market
Joni Andrioff has joined Steptoe & Johnson LLP as a partner in the Tax and ERISA, Labor & Employment Groups. Andrioff, who will work in the firm’s Chicago and Washington, D.C., offices brings more than 25 years of experience in the areas of employee benefits and executive compensation.
Industry Voices
Industry Voice: The Digital Frontier for Participant Engagement
There should be little argument that digital and the internet have remade the broader financial industry over the past decade. People have become comfortable handling investments, moving money and paying bills online. PLANSPONSOR magazine’s recent participant survey showed 24% rely on the plan website as their primary source of information when analyzing investments—more than three times those who said employer workshops/meetings were their primary source. Corporate Insight’s own surveys have shown Millennials in particular have a strong propensity towards using the digital channel and this group will be plan sponsors’ major concern in the years to come.
Economic Events
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $530.6 billion at the end of April, up 1.1% from the revised March level and up 6.7% from the April 2013 level, the Census Bureau reported.  The March preliminary estimate was revised downward $0.1 billion. April inventories of durable goods were up 0.9% from March and were up 6.6% from a year ago. Inventories of electrical and electronic goods were up 2.8% from March and inventories of metals and minerals, except petroleum were up 2.5%. Inventories of nondurable goods were up 1.4% from March and were up 6.8% from last April. Inventories of drugs and druggists’ sundries were up 2.6% from March and inventories of paper and paper products were up 2.3%.
Market Mirror
Major U.S. stock indices were little moved Tuesday, with the Down eking out a 2.82 gain (0.02%) to finish at 16,945.92. The NASDAQ increased by 1.75 (0.04%) to 4,338.00, and the S&P 500 decreased by 0.48 (0.02%) to 1,950.79. The Russell 2000 slipped 3.17 points (0.27%) to 1,172.71, and the Wilshire 5000 closed 11.46 points (0.06%) lower at 20,686.14. 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 1.2 to 1 ratio of decliners to advancers. The price of the 10-year Treasury note was down 11/32, bringing its yield up to 2.644%. The price of the 30-year Treasury bond fell 23/32, increasing its yield to 3.480%.
Rules & Regulators
Nonprofit Allowed to Exit Kentucky Retirement System
A ruling by a federal bankruptcy court may set a precedent for various agencies to exit the Kentucky Retirement System (KRS), news reports speculate. The U.S. Bankruptcy Court for the Western District of Kentucky recently ruled that Seven Counties Services, a community mental health center serving Louisville, Kentucky, is permitted to leave the KRS due to rising pension costs, which the court deemed as an unsustainable financial burden for Seven Counties.
IRS to Discuss Retirement Plans and Same-Gender Marriages
An upcoming phone forum hosted by the Internal Revenue Service (IRS) will cover updates to retirement plans to reflect the agency’s guidance regarding same-gender marriages. In April and May, the IRS issued guidance issued a notice providing further instruction for qualified retirement plans about the implications of the U.S. Supreme Court’s decision in United States v. Windsor and announced safe harbor retirement plans can be amended mid-year for changes relating to language about same-gender marriages.
Financial Sense
A report about the funding of state and local pensions notes 2014 could be a pivotal year. The Issue Brief, “The Funding of State and Local Pensions: 2013-2017,” from the Center for Retirement Research at Boston College points out that under the old Governmental Accounting Standards Board (GASB) accounting standards, the disastrous stock market performance of 2009 rotates out of public defined benefit plans’ smoothing calculations. In addition, under new GASB standards, assets will be reported at current market value rather than being actuarially smoothed. In 2013, market assets surpassed actuarial assets and are projected to continue to outpace actuarial assets in 2014, so the use of market assets should help funded ratios, the report notes.
The World at Large
More than half of employers and trustees in the UK think the government’s promised guidance guarantee needs to be offered five to seven years before retirement, according to research from Mercer.
Small Talk
Dads Would Earn $24K for Household Duties
A father’s stereotypical jobs around the house are worth $24,103 this year, up slightly from 2013. also finds finds dinner is the number one Father’s Day gift pick among fathers this year.
ON THIS DATE:  In 1776, the Continental Congress selected Thomas Jefferson of Virginia, John Adams of Massachusetts, Benjamin Franklin of Pennsylvania, Roger Sherman of Connecticut and Robert R. Livingston of New York to draft a declaration of independence. In 1936, the Presbyterian Church of America was formed in Philadelphia, Pennsylvania. In 1949, Hank Williams, Sr., made his Grand Ole Opry debut. In 1963, facing federalized Alabama National Guard troops, Alabama Governor George Wallace ended his blockade of the University of Alabama in Tuscaloosa and allowed two African American students to enroll. In 1979, John Wayne, an iconic American film actor famous for starring in countless westerns, died at age 72 after battling cancer.   WEDNESDAY WISDOM: “Middle age is when a guy keeps turning off lights for economical rather than romantic reasons.”—Lillian Gordy Carter, mother of former President of the United States Jimmy Carter
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IRS Notice Defines Retirement Plan Tax Distribution Exceptions
ERISA Advisory Council Explores Annuity Default Options in DC Plans
Legislation to Overturn Fiduciary Rule Advances Through House Committee

Editorial: Alison Cooke Mintzer


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