NewsDash – June 23, 2014

June 23rd, 2014

Benefit Briefs

Unbundled TDFs Attract Plan Sponsor Attention

There is something of a contradiction at the heart of many prepackaged target-date fund (TDF) solutions, says Tara Mashack-Behney, partner and president of Conrad Siegel Investment Advisors. Prepackaged TDFs are often added to retirement plan menus as the qualified default investment alternative (QDIA)—as one of the prudent safe harbor investment options mentioned specifically in the Pension Protection Act of 2006. The products tend to have well-designed asset-allocation glide paths and are overseen by skilled portfolio managers benefiting from economies of scale and powerful analytics, Mashack-Behney explains, giving sponsors a sense of protection and paternalism behind the TDF. While the advantages of prepackaged TDFs are generally understood by sponsors, most overlook an important potential drag on proprietary TDF performance, she says.

Women are narrowing the gap between their financial literacy and that of their male counterparts, Financial Finesse finds. The financial education provider recently released “Gender Gap in Financial Literacy,” which suggests women have made progress in four distinct areas of financial literacy—cash flow, debt management, retirement planning and investment—compared with their male counterparts.

Defined Contribution Plan Predictions

Looking several years down the line, the biggest change to defined contribution (DC) plans will be that they will become more individualized, participant by participant, says Fred Reish, chair of the Financial Services ERISA team at the law firm of Drinker Biddle & Reath LLP. In most cases, every employee now receives the same information at enrollment; everyone gets the same communications materials about the investments; everyone gets the same asset allocation in his “portfolio investments.”

Buyer's Market

Genstar Capital Acquires Asset International

Asset International, the parent company of PLANSPONSOR and PLANADVISER, has been acquired by middle market private equity firm Genstar Capital.

Industry Voices

Industry Voice: Effective Retirement Plans for Small Businesses

How can the retirement plan industry and small business community work together to help workers achieve a secure retirement? The answer may be multiple employer plans (MEPs) and multi-employer plans. Replicating these structures with key design elements could drive coverage and savings rates.

Economic Events

THE ECONOMIC WEEK AHEAD: Today, the National Association of Realtors will report about existing home sales for May. Tomorrow, the Census Bureau will report about new home sales for May and the Conference Board will release its Consumer Confidence Index for June. Wednesday, the Census Bureau will issue a report about durable goods orders, and Thursday, the Labor Department will issue its initial claims report.

Market Mirror

Friday, the Dow was up 25.62 points (0.15%) at 16,947.08, the NASDAQ closed 8.71 points (0.20%) higher at 4,368.04, and the S&P 500 added 3.39 points (0.17%) to finish at 1,962.87. The Russell 2000 climbed 4.39 points (0.37%) to 1,188.42, and the Wilshire 5000 increased 38.27 points (0.18%) to 20,834.76. On the NYSE, 3.2 billion shares traded, and on the NASDAQ, 2.7 billion shares changed hands, with 1.3 advancing issues for every declining issue on both exchanges. The price of the 10-year Treasury note was up 3/32, bringing its yield down to 2.610%. The price of the 30-year Treasury bond increased 19/32, decreasing its yield to 3.436%. WEEK’S WORTH: For the week ending June 20, the Dow was up 1.02%, the NASDAQ increased 1.33%, and the S&P 500 finished 1.38% higher. The Russell 2000 climbed 2.21%, and the Wilshire 5000 gained 1.47%.

Rules & Regulators

Our 403(b) experts answer questions about state fiduciary laws, retirement incentives, and required minimum distribution (RMD) transactions.

Council Examining Practices for Outsourcing Plan Services

The Department of Labor’s (DOL) ERISA Advisory Council is examining practices for outsourcing employee benefit plan services. According to the council, outsourcing plan services presents questions about the allocation of legal responsibilities and risk for activities of service providers on behalf of plans, including responsibilities imposed by the Employee Retirement Income Security Act (ERISA) and responsibilities allocated and risks assumed service contracts. The council contends the allocation of responsibilities and risk is not always well understood by plan sponsors and other employer fiduciaries and they may misunderstand what their legal responsibilities continue to be when services are outsourced. The council intends to draft recommendations to the Secretary of Labor for consideration.

Financial Sense

New Jersey’s Public Employees’ Retirement System (PERS) has decided to take the state’s governor to court to stop reductions in pension payments. The board overseeing PERS voted this week to initiate a lawsuit against New Jersey Governor Chris Christie over his plan to take $2.4 billion, meant for the pension system, over two years, according to a news report in The Star-Ledger of Newark. The lawsuit is meant to compel Christie to make $3.8 billion in payments to the pension system over two years, instead of the $1.38 billion Christie is proposing as way of dealing with the state’s budget crisis.

The funded status of the largest defined benefit (DB) plans in the United States decreased in May, according to data from consulting and actuarial from Milliman, Inc. The firm’s Pension Funding Index (PFI), which consists of the 100 largest U.S. DB plans (i.e., the Milliman 100), reveals that these plans experienced a $10 billion increase in pension liabilities during the month. The $268 billion deficit at the end of May is primarily due to a drop in the benchmark corporate bond interest rates used to value pension liabilities. Investment gains helped to partially offset the full extent of liability increases, but the funded ratio fell to 84.3% from 84.7% at the end of April.

The World at Large

What is the UK doing about the increase in older workers wanting to stay in the workforce?

Small Talk

ON THIS DATE: In 1860, the U.S. Secret Service was created to arrest counterfeiters. In 1947, the U.S. Senate joined the House in overriding President Truman’s veto of the Taft-Hartley Act. In 1972, President Richard Nixon signed into law the Higher Education Act, which included Title IX legislation, barring discrimination in higher education programs, including funding for sports and other extracurricular activities. As a result, women’s participation in team sports, particularly in collegiate athletics, surged. In 1992, mafia boss John Gotti, who was nicknamed the “Teflon Don” after escaping unscathed from several trials during the 1980s, was sentenced to life in prison after being found guilty on 14 accounts of conspiracy to commit murder and racketeering. In 2005, film critic Roger Ebert received a star on the Hollywood Walk of Fame. In 2013, 34-year-old aerialist Nik Wallenda became the first person to walk a high wire across the Little Colorado River Gorge near Grand Canyon National Park in Arizona.

SURVEY SAYS: Industry Conferences

Last week, I asked NewsDash readers, “Have you attended industry conferences during your career with workplace retirement plans?” and “What has been the biggest benefit of attending?” Nearly four in ten (37.8%) indicated they have attended more than 10 industry conferences during their careers working with workplace retirement plans, while 13% said they have not attended any. The rest attended some number in between. When asked what has been the biggest benefit they’ve received from attending industry conferences, the number one answer, selected by 28.1% of readers, was “keeping abreast of regulations related to our plan type(s).” Nearly 19% said the biggest benefit has been keeping abreast of trends and best practices related to their plan type(s), and 15.6% chose “getting continuing education credit to keep my certifications/designations.” In verbatim responses, readers shared specific conferences they enjoy or think are best and why. Several readers noted that the benefit received from attending conferences changes over one’s career in the retirement industry, with learning a bigger benefit earlier in one’s career and interaction a bigger benefit later in one’s career. That is also a factor in which conferences readers feel are best to attend, as they noted some conferences offer more entry level information, while others offer more detailed and technical sessions. Editor’s Choice goes to the reader who said: “All of the reasons above are important reasons to attend. When we insulate ourselves in our job and don’t keep up with what is happening with our peers and the industry, we limit our effectiveness.” Thanks to everyone who participated in our survey!

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