Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 11th, 2015
Benefits & Administration
Public Policy, Individual Action
Can public policy and the private sector come together to build a better retirement for American workers? As part of the CEO Speaker Series from the Council on Foreign Relations, Roger W. Ferguson Jr., President and CEO of TIAA-CREF, responded to questions about the adequacy of the retirement system today. For one thing, within the next 20 years, the Trustees expect that Social Security will be unable to cover roughly 25% of expected payouts. “The good news is most economists would share a consensus about how to fix Social Security,” Ferguson said. The bad news: “Our politicians are having trouble reaching that consensus.”Read more >
Just over one in 10 401(k) plan sponsors (11%) plan to replace their recordkeeper over the next 12 months, on par with the 11% who had the same strategy in 2014, according to Cogent Reports. The primary reasons why they plan on making a recordkeeping change are plan fees and investment options.Read more >
Sponsors Appear Eager to Tackle Plan Problems
The 2015 edition of Vanguard’s “How America Saves” study shows retirement plan sponsors continue to aggressively evolve and refine the defined contribution (DC) workplace savings model. At year-end 2014, 36% of Vanguard plans had implemented auto-enrollment, a 50% increase since 2009. Today, approximately 60% of newly hired employees participating in Vanguard 401(k) plans were automatically enrolled. “Moreover, although this feature was traditionally used only with newly hired employees, sponsors of half of Vanguard plans have now chosen to apply it to eligible nonparticipants,” the firm explains. “In addition, seven in 10 auto-enrollment plans have implemented automatic annual deferral-rate increases.”Read more >
A proposed settlement to resolve litigation over Rhode Island’s public pension system reform was approved by a judge. The Associated Press reports that Superior Court Judge Sarah Taft-Carter overruled objections to the settlement, putting an end to nearly all the lawsuits by public-sector unions and retirees against the state over the 2011 reform. Lawmakers must also approve the settlement.Read more >
Products, Deals & People
Franklin Templeton Investments has expanded its retirement target fund lineup for U.S. investors with the introduction of Franklin LifeSmart 2055 Retirement Target Fund.Read more >
MOST READ ARTICLES
1
Another Schlichter Suit Targets Sponsor and Providers
2
2020 Recordkeeping Survey
3
Participants Are Saving More With ‘TDF-Plus’ Strategies
4
The NQDC Market
5
2020 Best in Class DC Providers
Economic Events
In March, private employers spent an average of $31.65 on compensation, according to the Bureau of Labor Statistics. Health insurance was the largest individual employer benefit cost at $2.43, accounting for 7.7% of total compensation costs. Retirement and savings benefits averaged $1.31 (4.1%).
Market Mirror

Wednesday, the Dow gained 236.36 points (1.33%) to finish at 18,000.40, the NASDAQ closed 62.82 points (1.25%) higher at 5,076.69, and the S&P 500 increased 24.73 points (1.19%) to 2,104.88. The Russell 2000 climbed 17.25 points (1.38%) to 1,266.91, and the Wilshire 5000 was up 252.64 points (1.15%) at 22,267.24.

On the NYSE, 3.2 billion shares traded, and on the NASDAQ, nearly 2.8 billion shares changed hands, with 2.6 advancing issues for every declining issue on both exchanges.

The price of the 10-year Treasury note decreased 13/32, bringing its yield up to 2.486%. The price of the 30-year Treasury bond fell 27/32, increasing its yield to 3.214%.

Compliance
Court Revives Case Over Transfers to Cash Balance
The 4th U.S. Circuit Court of Appeals has determined that participants in Bank of America’s cash balance plan still have a claim for relief for illegal transfers of their 401(k) account balances to the cash balance plan. The appellate court first determined that the plaintiffs had standing to sue under Employee Retirement Income Security Act (ERISA) Section 502(a)(3), which provides that a plan beneficiary may obtain “appropriate equitable relief” to redress “any act or practice which violates” ERISA provisions contained in a certain subchapter of the United States Code. The court found that the transfers violated ERISA’s anti-cutback provisions, as determined by the Internal Revenue Service (IRS) during a plan audit, and that the relief the plaintiffs are seeking—the profits Bank of America made from the assets transferred—is “appropriate equitable relief.”Read more >
The U.S. Department of Labor (DOL) is suing Gruber Systems Inc. and its CEO to recover more than $2.6 million in losses suffered within the company’s employee stock ownership plan (ESOP). The DOL alleges the manufacturer knowingly bought over-valued company stock within the ESOP—and that the firm’s CEO, John Hoskinson, drove money into the ESOP not for the exclusive economic benefit of plan participants, but instead to support the stock price of the financially distressed company.Read more >
From the Magazine
Insights: Conflicted
The Department of Labor (DOL)’s new “conflict of interest” rule—or, more colloquially, its fiduciary redefinition—is finally out. That the rule is five years in the making—the DOL first proposed a change to the fiduciary definition in 2010—should have given me ample time to determine what side of the fence I’d be on, so to speak. Although I know my position generally, as I continue to read and reread the rule text, I find it has many nuances on which I’ve yet to figure out my stance—which makes me wonder how others are so completely for or completely against the proposal.Read more >
Barry’s Pickings: Your Conflict, My Synergy
The Department of Labor (DOL)’s “conflicted advice” regulation reminds me of the federal government’s antitrust crusades against Microsoft and IBM. One view of business is that every firm wants to create a monopoly—otherwise known as a competitive advantage. I like Warren Buffett’s phrase: Firms strive to create “economic moats.” This idea goes back to economist Joseph Schumpeter. Sometimes, the federal government—egged on by the moat-creators’ competitors—believes it’s necessary and even virtuous to attack these moats.Read more >
Small Talk
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 1949, Hank Williams, Sr., made his Grand Ole Opry debut. In 1979, John Wayne, an iconic American film actor famous for starring in countless westerns, died at age 72 after battling cancer for more than a decade.
SURVEY SAYS: We recently covered a Virgin Pulse survey that indicated the majority of employers include a financial component in their workplace wellness programs. This week, I’d like to know, does your firm provide employees with overall financial education, how is it provided and what do employees need most? You may respond to this survey by 6 p.m. Pacific time today.Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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