Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 16th, 2014
Benefit Briefs
Who Will Come Up Short in Retirement?
New modeling from the Employee Benefit Research Institute (EBRI) confirms a straightforward truth—workers in the lowest income brackets are least likely to achieve lifetime retirement income adequacy. The EBRI report “Short Falls: Who’s Most Likely to Come up Short in Retirement, and When?” suggests many low-income workers could face income hardships starting in the very first year of retirement. But EBRI also finds that workers in all income brackets—including the highest—may run short on income at some point during their retirement if aggressive steps are not taken to secure lifetime income streams.
Despite the ubiquity of target-date funds (TDFs) in defined contribution (DC) plans, particularly in the wake of the Pension Protection Act of 2006 (PPA), custom target-date funds (CTDFs) have been slow to catch on, with adoption at just 11% of all plans since 2010. There are pockets of the DC plan market, though, where CTDF adoption has taken hold.
Developing an Online Benefits Communications Strategy
Employers need to create a strategy for online benefits communications and determine what channels work best for their employees. “Your strategy will let you focus on specific and measurable behaviors, and will also help to push people to online resources and tools,” said Jennifer Benz, CEO of Benz Communications, during a webinar. Employers should look at all the data they have available when developing a communication strategy and when establishing ongoing assessments of their efforts, she added. The first step is getting material online.
Factoring Health Care Costs into Retirement Planning
Health care costs cannot be ignored as a factor in retirement planning and saving. A white paper from HealthView Services, “Addressing the Retirement Health Care Cost Crisis: Cost Management Strategies,” finds that retirement health care costs are going to be a significant burden for future retirees and one that most of them have not planned for. The paper notes that for employees who do not plan for these costs, retirement will be an even greater financial challenge for them. However, those participating in defined contribution retirement plans, such as 401(k)s, are at somewhat of an advantage for dealing with these challenges, says Ron Mastrogiovanni, founder and CEO of HealthView Services.
Buyer's Market
Independent retirement plan administration firm TriStar Pension Consulting launched a new website featuring improved functionality and navigation for plan sponsors, advisers and participants. The website update brings a more modern retirement plan support and administration interface to TriStar clients, the firm says.
Economic Events
The Producer Price Index (PPI) for final demand fell 0.2% in May, the Bureau of Labor Statistics reported. This decline followed increases of 0.6% in April and 0.5% in March. In May, the indexes for final demand services and final demand goods both declined 0.2%. THE ECONOMIC WEEK AHEAD: Tomorrow, the Census Bureau will report about housing starts for May and the Bureau of Labor Statistics will reveal the consumer price index (CPI) for May. Thursday, the Labor Department will issue its initial claims report.
Market Mirror
Friday, the Dow closed 41.55 points (0.25%) higher at 16,775.74, the NASDAQ increased 13.02 points (0.30%) to 4,310.65, and the S&P 500 gained 6/05 points (0.31%) to finish at 1,936.16. The Russell 2000 added 3.28 points (0.28%) to close at 1,162.68, and the Wilshire 5000 was up 63.12 points (0.31%) at 20,532.98. On the NYSE, 3.2 billion shares traded, with nearly 1.3 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares changed hands, with a nearly even split between advancers and decliners. The price of the 10-year Treasury note was down 2/32, bringing its yield up to 2.605%. The price of the 30-year Treasury bond decreased 4/32, increasing its yield to 3.417%. WEEK’S WORTH: For the week ending June 13, the Dow fell 0.88%, the NASDAQ decreased 0.25%, and the S&P 500 closed (0.68%) lower. The Russell 2000 was down 0.22%, and the Wilshire 5000 lost 0.62%.
Rules & Regulators
SCOTUS: Inherited IRAs Not Exempt in Bankruptcy
The Supreme Court of the United States (SCOTUS) upheld a lower court’s determination that inherited individual retirement accounts (IRAs) do not share the same bankruptcy protections as self-funded IRAs. The Supreme Court ruled nearly a decade ago that self-funded IRAs—i.e., IRAs established and funded by an individual for the exclusive purpose of generating income after retirement—are to be considered exempt assets during bankruptcy proceedings. The current decision draws a distinction between self-funded and inherited IRAs, ruling that inherited IRAs are not “retirement funds” as defined by Section 522(b)(3)(c) of the U.S. Code, so they cannot be exempted during a bankruptcy.
Financial Sense
Fixed Income Strategies with Flexibility
Bonds have offered many benefits to the defined contribution (DC) portfolio: returns from income and price gains; diversification against moves in the equity market; and, thanks to their low volatility, a means for managing overall portfolio risk. “Going forward, bonds will still provide diversification,” says Chip Castille, head of the defined contribution retirement group at BlackRock Inc. in New York City. “But return from conventional strategies is going to be harder to come by,” he adds, “and people may find that bonds are riskier than they remember.”
Small Talk
ON THIS DATE:  In 1884, the first roller coaster in America opened at Coney Island, in Brooklyn, New York. In 1897, the U.S. government signed a treaty of annexation with Hawaii. In 1952, “Anne Frank: Diary of a Young Girl” was published in the United States. In 1963, aboard Vostok 6, Soviet Cosmonaut Valentina Tereshkova became the first woman to travel into space. In 1968, golfer Lee Trevino won the U.S. Open at the Oak Hill Country Club in Rochester, New York. His score of 275 for 72 holes tied a U.S. Open record. In 1981, the Chicago Tribune purchased the Chicago Cubs baseball team from the P.K. Wrigley Chewing Gum Company for $20.5 million. In 1999, the U.S. Circuit Court of Appeals said a 1992 federal music piracy law does not prohibit a palm-sized device that can download high-quality digital music files from the Internet and play them at home. In 2008, California began issuing marriage licenses to same-gender couples.
SURVEY SAYS: Which TV Dad Do You Have?
For Father’s Day this year, I asked NewsDash readers, “Which TV dad is your dad most like?” The most popular choice from the list of TV dads (16.7%) was Dr. Cliff Huxtable from “The Cosby Show,” followed by Archie Bunker from “All in the Family” (9.5%) and John Walton from “The Waltons” (7.1%). Nearly 12% indicated their dads were not like any of the dads on the list. Percentages were similar for other TV dads on the list. Nineteen percent of responding readers entered “other” choices, which included Tim Taylor from “Home Improvement,” James Evans from “Good Times,” John Travolta’s character in the movie “Wild Hogs,” Leroy Jethro Gibbs from “NCIS” and Mike Brady from “The Brady Bunch.” Readers shared the personality traits that made them select the TV dad they chose. And from verbatim responses, Editor’s Choice goes to the reader who said: “If you have a great dad, give him a hug and let him know how you feel. Be thankful that you had a good dad. There are some who had no dad or were not blessed with a good dad and have no idea what a dad’s love feels like.” A big thank you to everyone who participated in our survey!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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