Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 24th, 2014
Benefit Briefs
Help Participants Be Better Investors
Plan sponsors should understand how investor risk tolerance is affected by market performance, and help participants focus on the long-term goals of investing, a paper says. A study comparing investors’ risk tolerance with the Consumer Sentiment Index (CSI)—a measure of the consumer outlook on the U.S. economy, including employment and inflation predictions—found that risk tolerance and the CSI are positively correlated. Investors’ risk tolerance decreased as the stock market faltered. In other words, as the outlook on the economy improves, investors are more risk tolerant, and as the economic outlook appears grim, risk tolerance decreases, according to “Do Large Swings in Equity Values Change Risk Tolerance?”
Edward Jones surveyed adults on the planning activities they spend the most time on: retirement, vacation, higher education or making a big purchase like a new home or a car. Nearly one-third, 28%, said they spend the most time thinking about a vacation, while 25% said they spend the most time planning for retirement, and 22% said they think about the cost of higher education. However, as people get older, they think more about retirement.
EBRI Puts a Number on Plan Leakage Damage
A new analysis from the Employee Benefit Research Institute (EBRI) shows preretirement 401(k) account withdrawals often have a negative impact on long-term wealth accumulation. Utilizing the institute’s proprietary Retirement Income Projection Security Model (RSPM), EBRI researchers show that the combined impact of the three primary types of 401(k) leakage reduces the probability of an individual reaching an 80% real income replacement rate (including Social Security benefits) by 8.8% for the lowest-income quartile and 7.0% for those in the highest-income quartile.
Lincoln Financial Group’s Measuring Optimism, Outlook and Direction (MOOD) of America survey finds nearly three-quarters (71%) of respondents in 2014 believe they are in control of their finances, their health and their overall lives, compared with 68% in 2013 and 66% in 2011. In addition, those who believe they are in control when it comes to their financial future are more likely to prioritize saving for retirement (69% in 2014 compared with 62% in 2013) and actively protect their wealth, assets and savings.
Buyer's Market
Transamerica Launches Retirement Plan Exchange
The new Retirement Plan Exchange, a fiduciary service from Transamerica, is designed to reduce administrative burdens on plan sponsors. It covers a wide range of tasks, including developing an investment policy statement, selecting and monitoring investments, filing Form 5500 with the Department of Labor and other regulatory reports, non-discrimination testing, contribution limits tracking, distributions and hardship requests.
Economic Events
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 4.9% to a seasonally adjusted annual rate of 4.89 million in May from an upwardly-revised 4.66 million in April, but remain 5.0% below the 5.15 million-unit level in May 2013, according to the National Association of Realtors. The 4.9% month-over-month gain in May was the highest monthly rise since August 2011 (5.5%).
Market Mirror
Yesterday, the Dow slipped 9.82 points (0.06%) to 16,937.26, the NASDAQ increased by 0.64 (0.01%) to 4,368.68, and the S&P 500 decreased by 0.26 (0.01%) to 1,962.61. The Russell 2000 fell 3.48 points (0.29%) at 1,184.95, and the Wilshire 5000 closed 2.76 points (0.01%) higher at 20,837.52. On the NYSE, 3.2 billion shares traded, with a slight lead for decliners. On the NASDAQ, 2.7 billion shares changed hands, with 1.3 declining issues for every advancing issue. The price of the 10-year Treasury note was down 6/32, bringing its yield up to 2.628%. The price of the 30-year Treasury bond fell 13/32, increasing its yield to 3.458%.
Rules & Regulators
DOL Considers Changing FMLA to Reflect DOMA Ruling
The Department of Labor (DOL) is looking at expanding the protections of the Family and Medical Leave Act (FMLA) to cover eligible employees in same-gender marriages. The DOL plans to publish a Notice of Proposed Rulemaking that would revise the definition of spouse under the FMLA to better conform with the U.S. Supreme Court decision in United States v. Windsor.
TL Ventures Inc. has settled with the Securities and Exchange Commission (SEC) in a case involving pay-to-play rules for investment advisers. The SEC had alleged that the Philadelphia-area private equity firm had violated pay-to-play rules by continuing to receive advisory fees from city and state pension funds following campaign contributions made by an associate in 2011 to the governor of Pennsylvania and a candidate for mayor of Philadelphia. The firm will pay nearly $300,000 to settle the charges.
Proposed Fee Disclosure Guide: Where Will It Lead?
Stephen M. Saxon, a partner with the Washington, D.C.-based Groom Law Group, discusses details of the proposed 408(b)(2) fee disclosure guide.
Sponsored message from Great-West
PLANSPONSOR interviews Charles Nelson.
PLANSPONSOR Stephen Moylan, SVP for PLANSPONSOR, interviews Charles P. Nelson, President of Retirement Services for Great-West Financial. Click here to watch the full interview.
Small Talk
ON THIS DATE:  In 1664, New Jersey, named after the Isle of Jersey, was founded. In 1844, Charles Goodyear was granted U.S. patent #3,633 for vulcanized rubber. In 1901, the first major exhibition of Pablo Picasso’s artwork opened at a gallery on Paris’ rue Lafitte. The 19-year-old Spaniard was at the time a relative unknown outside Barcelona, but he had already produced hundreds of paintings. In 1922, the American Professional Football Association took the name of The National Football League. In 1966, the United States Senate voted 76-0 for the passage of what became the National Traffic and Motor Vehicle Safety Act. Signed into law by President Lyndon B. Johnson the following September, the act created the nation’s first mandatory federal safety standards for motor vehicles. In 1982, the U.S. Supreme Court ruled 5-4 that no president could be sued for damages connected with actions taken while serving as President of the United States. In 1997, U.S. Air Force officials released a 231-page report dismissing long-standing claims of an alien spacecraft crash in Roswell, New Mexico, almost exactly 50 years earlier. In 2002, the U.S. Supreme Court ruled that juries, not judges, must make the decision to give a convicted killer the death penalty.
TRIVIAL PURSUITS REWIND: When Secretariat was euthanized in 1989 (he was suffering from a painful and often incurable hoof condition), a part of his anatomy was the largest ever recorded for a racehorse – what was it?
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Data and Research
Student Loan Repayments Expected to Derail Employees’ Retirement Savings
Social Security Administration Cannot Calculate 2024 COLA if Government Shuts Down
Senate Committee Passes Bill Permitting Marijuana Industry Employers to Sponsor Retirement Plans

Editorial: Alison Cooke Mintzer


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