Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 25th, 2014
Benefit Briefs
Benchmarking a Recordkeeper’s Fees
What is reasonable? This is the question about recordkeeper fees that plan sponsors have to answer, with the help of 408(b)(2) fee disclosures. Sponsors knew they needed to ensure that they received the enhanced fee disclosures, but fewer realized they then needed a process for analyzing that information to decide if fees were reasonable, says Rich Lynch, president of fi360 Inc., a provider of fiduciary training and tools, in Bridgeville, Pennsylvania. “I think it’s something they’re trying to figure out now,” he says. “Our sense is that sponsors probably have been doing this in an informal way. But the regulations require them to take that a step farther and make their analysis more robust.”
A new study of 401(k) plans shows that more than 50,000 of them failed nondiscrimination testing for the 2012 plan year. “The issuance of corrective distributions should serve as a red flag to plan sponsors. It means that the plan has highly compensated employees who were unable to save as much for their retirements with pre-tax income as they would like. It may also mean that the plan is not designed to encourage workers to contribute sufficiently. Plan sponsors can utilize this information by introducing retirement education programs and suggesting better 401(k) savings methods to participants,” says Eric Ryles, managing director of Judy Diamond Associates, based in Washington D.C.
Educators Need Education About Retirement
Presenting at the 2014 National Tax-Deferred Savings Association (NTSA) 403(b) Summit in Washington, D.C., Lisa Greenwald Schneider, research director at Greenwald & Associates, said contrary to the image the younger generations have of being very connected to the Internet and mobile products, the survey found Gens X and Y respondents regardless of career prefer to get advice in person. But, an oversample of nearly six in 10 (58%) Gens X and Y educators reported they prefer to learn about financial planning issues at work, rather than on their own. The study shows there’s much Gens X and Y educators need to learn; only 23% have tried to calculate how much they need to save for retirement.
A new report finds that Pension Benefit Guaranty Corporation (PBGC) premium increases would negatively impact the defined benefit (DB) pension system. “Further PBGC Premium Increases Pose Greatest Threat to Pension System,” recently released by the American Benefits Council, finds that PBGC premiums are disproportionately high already and that further increases could force employers out of the DB plan system and erode the PBGC’s premium base.
Buyer's Market
PLANSPONSOR’s 2014 Recordkeeping Survey
Now in its 16th year, PLANSPONSOR’s annual Recordkeeping Survey is, as always, an exercise in ascertaining broad views of trends as well as detailed insight into specific providers in the U.S. defined contribution (DC) market. From the broad perspective, the “forest” continues to expand at a fast clip: The 75 recordkeeping providers in this year’s survey represent a total of $5.59 trillion in defined contribution plan assets as of December 31, 2013, a more than $1 trillion (22.5%) increase over the prior year.
Industry Voices
Industry Voice: The Power of “10”
From 10 Downing Street, the official home to the British Prime Minister, to David Letterman’s “Top 10” on the “Late Show,” the number ten has played an important role in the world lexicon. Can it do the same to help resolve the retirement savings crisis?
Economic Events
Sales of new single-family houses in May were at a seasonally adjusted annual rate of 504,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 18.6% above the revised April rate of 425,000 and is 16.9% above the May 2013 estimate of 431,000. The Conference Board Consumer Confidence Index, which had increased in May, improved again in June. The Index now stands at 85.2 (1985=100), up from 82.2 in May. The Present Situation Index increased to 85.1 from 80.3, while the Expectations Index rose to 85.2 from 83.5 in May. Says Lynn Franco, director of Economic Indicators at The Conference Board: “Consumer confidence continues to advance and the index is now at its highest level since January 2008 (87.3).”
Market Mirror
Tuesday, the Dow fell 119.13 points (0.70%) to 16,818.13, the NASDAQ decreased 18.32 points (0.42%) to 4,350.36, and the S&P 500 lost 12.63 points (0.64%) to finish at 1,949.98. The Russell 2000 closed 11.02 points (0.99%) lower at 1,173.16, and the Wilshire 5000 was down 142.58 points (0.68%) at 20,694.94. On the NYSE, 3.2 billion shares traded, with 1.7 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares changed hands, with a 2.5 to 1 ratio of decliners to advancers. The price of the 10-year Treasury note was up 13/32, bringing its yield down to 2.580%. The price of the 30-year Treasury bond increased 1 4/32, decreasing its yield to 3.398%.
Rules & Regulators
Michael Barry, president of the Plan Advisory Services Group, questions whether Republicans have lost interest in the retirement-savings project.
Financial Sense
Saving for Retirement and Paying for College
One lesson Stuart Ritter, of T. Rowe Price Investment Services, strives to impress on the public is that $25,000 saved and $25,000 borrowed are far from equivalent. Ritter says one of the most common questions he fields from financial advisers and human resources staffers alike is how to help individuals meet the challenge of achieving adequate retirement savings while also planning for nearer-term expenses, especially higher education costs for children. “These individuals often feel that, if they can’t save in advance, they’ll just borrow the money later,” Ritter tells PLANSPONSOR. “They think about it as a one-for-one tradeoff, save a dollar now or borrow a dollar later, it’s all the same in the end. But that’s not the case, not even close.”
The World at Large
Three-quarters of savers in the UK plan to spend one-third of their defined contribution accounts immediately at retirement, research indicates.
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Small Talk
Not What I Signed Up For
A new survey by CareerBuilder shows a quick way for a boss to lose an employee’s trust is by assigning the employee tasks far outside his or her job description. Twenty-two percent of employees who responded to the survey say their current boss asks them do things unrelated to their jobs, some of which included finding out how to obtain a death certificate for the boss’ deceased ex-husband and commiserating with the boss’ daughter-in-law about the death of her cat.
ON THIS DATE:  In 1788, Virginia ratified the U.S. Constitution and became the 10th state of the United States. In 1868, the U.S. Congress enacted legislation granting an eight-hour day to workers employed by the federal government. In 1876, Native American forces led by Chiefs Crazy Horse and Sitting Bull defeated the U.S. Army troops of Lieutenant Colonel George Armstrong Custer in a bloody battle near southern Montana’s Little Bighorn River. In 1942, following his arrival in London, Major General Dwight D. Eisenhower took command of U.S. forces in Europe. In 1950, armed forces from communist North Korea smashed into South Korea, setting off the Korean War. In 1962, the U.S. Supreme Court ruled that the use of unofficial non-denominational prayer in public schools was unconstitutional. In 1990, the U.S. Supreme Court upheld the right of an individual, whose wishes are clearly made, to refuse life-sustaining medical treatment, in the Curzan vs. Missouri case. In 2009, Michael Jackson, one of the most commercially successful entertainers in history, died at the age of 50 at his home in Los Angeles, California, after suffering from cardiac arrest caused by a fatal combination of drugs.    WEDNESDAY WISDOM: “A good example is far better than a good precept.”—Dwight L. Moody, evangelist and publisher     Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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