Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 3rd, 2014
Benefit Briefs
PSNC 2014: CEO Roundtable
The industry faces challenges from several directions, and retirement plan executives discussed ways to address them, such as income replacement, plan design and how to target specific participant demographics. “The biggest challenges for the retirement plan industry are tax reform, leakage, people not saving enough and health care, health care, health care,” said David Musto, chief executive officer, retirement plan services at J.P. Morgan Asset Management, speaking at the PLANSPONSOR National Conference in Chicago.
Do You Practice Good Plan Marketing?
With so much regulatory complexity surrounding defined contribution (DC) retirement plans, it is not unusual for plan sponsors to overlook the more obvious considerations, says BlackRock’s Laraine McKinnon. McKinnon, who serves as director of defined contribution for BlackRock, argued the point during the “DC plan boot camp” seminar that kicked off the 2014 PLANSPONSOR National Conference in Chicago. She says it’s common for the potentially overwhelming pressures of the Employee Retirement Income Security Act (ERISA), along with perennial scrutiny from the Department of Labor and the Internal Revenue Service, to dominate plan sponsor thinking and decisionmaking. But compliance, while absolutely critical, is only one aspect of DC plan success, McKinnon warns, and a compliant plan will by no means guarantee successful participant outcomes. Equally important are considerations around what she calls “plan marketing,” or the effort of the plan sponsor to educate and enroll participants.
The governor of Oklahoma, Mary Fallin, has signed legislation ending traditional pension retirement system for new state employees in favor of a 401(k)-style plan. House Bill 2630 moves future state employees from a defined benefit plan to a defined contribution plan similar to private sector plans, says an Associated Press news report. It exempts teachers as well as state workers who are designated “hazardous duty,” including firefighters and law enforcement officers.
PSNC 2014: Setting a Goal
On the first day of the PLANSPONSOR National Conference (PSNC) in Chicago, current and former PLANSPONSOR of the Year winners and finalists shared how they define success for their employee base and the challenges they have in working towards their retirement plan benchmarks. In this very regulated industry and with plan sponsors often playing multiple roles, at times sponsors are simply reacting  to regulations rather than looking ahead,  but these plan sponsors have the drive to continually try to move their plans forward. Plan sponsors on the panel believe in helping participants with financial literacy, and they do not focus on teaching about the nuance of investing participants’ retirement savings.
Buyer's Market
BMO Global Asset Management is now offering retirement share classes for four BMO Funds. The new R6 and R3 share classes will be available through defined contribution plans. These additional share classes provide clients, including plan sponsors, retirement plan platforms and the advisers that serve them, with greater flexibility with respect to pricing structures and include a lower cost option that meets the growing demand for transparency.
SPARK Releases New RFP Guide
The SPARK Institute Business Ideas Exchange Committee has released its new “RFP Guide for Selecting Defined Contribution Service Providers.” The SPARK Institute originally issued an RFP guide in 1997 and made minor changes to it over the years. However, the most-recent guide incorporates a number of significant improvements.
Jon Hale has been named the director of North American manager research for Morningstar Inc. Hale will oversee the team’s operations, thought leadership and manager research through active, passive, fund-of-fund and alternative investment strategies, leading a team of approximately 60 manager research analysts. He will report to Scott Burns, global director of manager research.
Corporations and nonprofits, as well as their advisers, in San Antonio, Texas, now have a new resource for fiduciary services. Luci Harty, a fiduciary services professional, recently opened Fiduciary Doctors of San Antonio, an independent firm working closely with retirement plan sponsors to elevate the level of service provided to their participants.
Economic Events
The U.S. Census Bureau of the Department of Commerce announced that construction spending during April was estimated at a seasonally adjusted annual rate of $953.5 billion, 0.2% above the revised March estimate of $951.6 billion. The April figure is 8.6% above the April 2013 estimate of $878.4 billion. During the first four months of this year, construction spending amounted to $274.5 billion, 8.9% above the $252.1 billion for the same period in 2013. New orders for manufactured durable goods in April increased $1.9 billion or 0.8% to $239.9 billion, the U.S. Census Bureau announced. This increase, up three consecutive months, followed a 3.6% March increase. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders decreased 0.8%. Transportation equipment, also up three consecutive months, led the increase, $1.7 billion or 2.3% to $76.9 billion.
Market Mirror
Yesterday, the Dow was up 26.46 points (0.16%) at 16,743.63, the NASDAQ slipped 5.42 points (0.13%) to 4,237.20, and the S&P 500 increased 1.40 points (0.07%) to 1,924.97. The Russell 2000 fell 5.60 points (0.49%) to 1,128.90, and the Wilshire 5000 inched up 12.68 points (0.06%) to 20,361.03. On the NYSE, 3.2 billion shares traded, with a slight lead for decliners. On the NASDAQ, 2.7 billion shares changed hands, with 1.6 declining issues for every advancing issue. The price of the 10-year Treasury note decreased 15/32, increasing its yield to 2.530%. The price of the 30-year Treasury bond fell 27/32, bringing its yield up to 3.371%.
Rules & Regulators
There’s Hope for Retirement Security Policies from Congress
“I think the retirement crisis is beyond a crisis,” says U.S. Representative Reid Ribble (R-Wisconsin). Ribble painted a picture of what drives Congress’ thoughts about solutions to retirement security. The reason there’s a chance of getting meaningful retirement savings policy done, according to Ribble, is about one-third of Congress has been in Congress four years or less. “There are a lot of newcomers,” he said, adding that, “There are legitimate, substantive conversations going on with members of congress.”
DOL Again Seeks Comments on TDFs
The Employee Benefits Security Administration (EBSA), a DOL division, is reopening the period for public comment on proposed regulatory amendments on disclosures for target date or similar investments, originally proposed in 2010.
Small Talk
ON THIS DATE:  In 1539, Hernando De Soto claimed Florida for Spain. In 1621, the Dutch West India Company received a charter for New Netherlands (now known as New York). In 1784, the U.S. Congress formally created the United States Army to replace the disbanded Continental Army. In 1800, John Adams, the second president of the United States, became the first president to reside in Washington, D.C., when he took up residence at Union Tavern in Georgetown. In 1916, United States President Woodrow Wilson signed into law the National Defense Act, which expanded the size and scope of the National Guard—the network of states’ militias that had been developing steadily since colonial times—and guaranteed its status as the nation’s permanent reserve force. In 1965, 120 miles above the earth, Major Edward H. White II opened the hatch of the Gemini 4 and stepped out of the capsule, becoming the first American astronaut to walk in space. Attached to the craft by a 25-foot tether and controlling his movements with a hand-held oxygen jet-propulsion gun, White remained outside the capsule for just over 20 minutes.   TUESDAY TRIVIA: Not this week. TRIVIAL PURSUITS: Not this week.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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