Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 4th, 2014
Second Opinions
SECOND OPINIONS: ACA Final Waiting Period Rules
The Patient Protection and Affordable Care Act (ACA) requires that, for plan years on or after 1/1/14, group health plans may not impose a waiting period of more than 90 days.  Treasury, Health and Human Services (HHS), and the Department of Labor (DOL) had issued proposed rules in March 2013 and issued final rules earlier this year. Experts from Groom Law Group address questions concerning the waiting period requirements and, in particular, how these rules interact with the ACA shared responsibility rules under Internal Revenue Code section 4980H, effective for most plans as of 1/1/15.
Benefit Briefs
PSNC 2014: Success Is in the Eye of the Beholder
Dallas Salisbury fields a lot of questions about how to define retirement plan success in his role as president and CEO of the Employee Benefits Research Institute (EBRI). One of the most common questions, in Salisbury’s view, is also the most problematic: “What’s the number?” Plan sponsors, providers and policymakers alike come to EBRI wondering what lump sum retirement plan participants must reach to be adequately prepared for retirement, he explains, or they ask for the average salary deferral percentage or income replacement ratio that’s going to guarantee plan success. Yet, as Salisbury stressed during the keynote address of the 2014 PLANSPONSOR National Conference, plan success is the result of myriad factors inside and outside a plan and can seldom be captured in a single metric.
The results of The Business of Healthy Employees 2014: A Survey of Workplace Health Priorities, released by Virgin Pulse finds while employees are taking advantage of current wellness program offerings, they still want to see more. They are most interested in access to physical activity programs (72.4%), healthy food choices (65.5%) and onsite gym facilities or fitness classes (62.3%). In each of these areas, the survey found significant gaps in what employers are offering and what employees want.
403(b)s Simplifying Investment Menus
Non-profit organizations that sponsor 403(b) plans are simplifying investment platforms by streamlining the options available for participants. 403(b) plan sponsors offered an average of 26 investment options in 2013, down from 31 in 2012; edging closer to the average of 19 investment options in 401(k) plans, according to the 2014 Plan Sponsor Council of America (PSCA) 403(b) Plan Survey. The survey found 403(b)s with the highest average participation rate (72.2%) are those with between 15 and 20 investment options.
Confidence about retirement preparations is greater with men (43%) than women (32%), a survey reveals. OneAmerica finds a realistic knowledge of how much retirement income they will need contributes to individuals’ confidence. Confident retirement plan participants are more likely to have calculated their retirement income needs (55%) or worked with a financial adviser (35%).
PSNC 2014: One Size Fits All?
At the PLANSPONSOR National Conference in Chicago, four leading experts debated the merits of target-date funds (TDFs) versus target-risk funds (TRFs) and managed accounts. These experts started with the question of what is the best way to deliver asset-allocation options to participants. “It’s important to make sure they are used effectively by participants, which means adopting the best practices of pension plans,” said Scott Brooks, managing director of the institutional group at SEI Investments.
Buyer's Market
Vanguard’s new “Enroll Now” process simplifies retirement plan enrollment and potentially increases the savings of participants. According to the investment management firm, nearly six in 10 of the employees who joined their company’s 401(k) plan during pilot research on the new online Enroll Now process also chose to automatically increase their savings by a modest amount each year.
The Employee Benefit Research Institute (EBRI) rolled out a new mobile app, offering its research for download.
Industry Voices
The effective result of the transition from defined benefit (DB) to defined contribution (DC) plans is that individual savings accounts, originally intended to supplement DB plans, have ended up supplanting them.  This has rendered the question of optimizing returns from investments a cornerstone of the retirement plan debate, as these returns now directly dictate an employees’ eventual retirement income. This in turn has been a factor behind the rise of the multi-managed fund model. The shift to DC has fragmented the retirement savings market, which alongside increased demand has led to an influx of service providers across the value chain. In combination with increasingly difficult market conditions, this has made the hunt for yield ever-more-difficult for individual funds. Funds are having to go further afield to generate the returns their members need.  It is now the norm for pension funds to ‘farm out’ their portfolios to a zoo of specialist ‘best of breed’ sub-funds in order to achieve their participants’ objectives. For all the benefits of the multi-managed approach, it has also created a problem.
Market Mirror
Tuesday, the Dow was down 21.29 points (0.13%) at 16,722.34, the NASDAQ slipped 3.12 points (0.07%) to 4,234.08, and the S&P 500 decreased by 0.73 (0.04%) to 1,924.24. The Russell 2000 fell 2.75 points (0.24%) to 1,126.15, and the Wilshire 5000 closed 13.48 points (0.07%) lower at 20,347.55. On the NYSE, 3.2 billion shares changed hands, and on the NASDAQ, 2.7 billion shares traded, with 1.6 declining issues for every advancing issue on both exchanges. The price of the 10-year Treasury note decreased 21/32, increasing its yield to 2.602%. The price of the 30-year Treasury bond fell 1 11/32, bringing its yield up to 3.441%.
Rules & Regulators
The Department of Labor (DOL) will hold a seminar in Santa Fe, New Mexico, about complying with health benefits law.
Small Talk
Job Hopping Has Lost Its Stigma
The practice of job-hopping carries less of a stigma with employers than it used to. Results of a survey by CareerBuilder show employers are less concerned about job-hopping (i.e., working for various employers for a short period of time), with 55% saying they have hired a job-hopper and 32% saying they now expect workers to job-hop.
ON THIS DATE:  In 1896, in the shed behind his home on Bagley Avenue in Detroit, Henry Ford unveiled the “Quadricycle,” the first automobile he ever designed or drove. In 1919, the 19th Amendment to the U.S. Constitution, guaranteeing women the right to vote, was passed by Congress and sent to the states for ratification. In 1942, the Battle of Midway—one of the most decisive U.S. victories against Japan during World War II—began.   WEDNESDAY WISDOM: “Step by step and the thing is done.”—Charles Atlas, bodybuilder
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Editorial: Alison Cooke Mintzer


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