Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
June 5th, 2014
Benefit Briefs
PSNC 2014: Proper Investment Committee Governance
An investment committee must focus on fiduciary considerations at all times. Care, diligence, prudence and paying reasonable expenses should constantly be invoked by its members. “If your investment committee is not constantly talking about fiduciary duties and writing it into an investment policy, I think you are all failing and opening yourself up to liability,” Joshua A. Sutin, shareholder at Cox Smith Matthews Incorporated, warned attendees of the PLANSPONSOR National Conference.
PSNC 2014: The RFP from Start to Finish
The most robust way for a plan sponsor to review their vendors is through a rigorous RFP process, Michael Kozemchak, managing director at Institutional Investment Consulting, said during a panel discussion at the PLANSPONSOR National Conference. “RFPs are periodically necessary because of litigation,” Vincent Morris, president of Bukaty Companies, added.
PSNC 2014: Financial Wellness in the Workplace
When it comes to financial matters, employers should assume procrastination, inertia and a real lack of knowledge from employees, according to Janet Ganong, a financial consultant at the Kieckhefer Group. Incorporating automatic features into retirement plan design sets participants on a better path for financial security in retirement and frees plan sponsors and advisers up to talk about other subjects to help improve overall financial success for employees, Ganong said, speaking to attendees of the 2014 PLANSPONSOR National Conference in Chicago. Matt Gulseth, a partner at Channel Financial, added that when it comes to financial wellness education, plan sponsors should think about what they remember from high school biology—it’s probably not much. They should determine how to deliver “just-in-time” messages—for example, a seminar about mortgages for participants who are ready to get a mortgage.
PSNC 2014: Moving the Needle
According to David Gray, vice president of Client Experience at Charles Schwab, there are three main strategies for moving the needle on participants’ retirement readiness. “For the past 30 years we have spent untold millions of dollars trying to educate accidental investors into individuals who can decide how much to invest, how to invest, how often to reallocate,” he told attendees of the 2014 PLANSPONSOR National Conference. “We would have been better off just giving people the money we spent on education because it didn’t work. Accidental investors don’t want education, they want solutions.” Gray said to move the needle, plan sponsors need to drive down investment expenses; give participants investment help; and press the reset button in the plan.
PSNC 2014: Plan Health and Retirement Readiness
The concept of “retirement plan health” means different things for plan sponsors and participants, but well-run plans can meet both sponsor and participant needs. For participants, retirement plan health can be understood as a function of the plan’s ability to replace income in retirement, says Stephen Jenks, head of defined contribution product and marketing for Putnam Investments. There are many factors involved in a participant’s ability to retire comfortably beyond income replacement ratios, he admits, but it’s a sensible place to start building a meaningful benchmark for participant success.
PSNC 2014: Investment Diversification
Amid the discussion of industry best practices at the 2014 PLANSPONSOR National Conference, the question of the retirement plan investment menu and how it has or should evolve came up continuously. Industry experts and attending sponsors alike questioned whether a lineup of traditional mutual funds should still make up the core retirement plan menu, and whether alternatives should be added. Others asked about the ideal number of funds to include on a plan menu, and whether prepackaged investment solutions make sense for all employees.
Market Mirror
Wednesday, the Dow was up 15.19 points (0.09%) at 16,737.53, the NASDAQ climbed 17.56 points (0.41%) to 4,251.64, and the S&P 500 increased 3.64 points (0.19%) to 1,927.88. The Russell 2000 gained 5.07 points (0.45%) to finish at 1,131.22, and the Wilshire 5000 closed 52.14 points (0.26%) higher at 20,399.69. On the NYSE, 3.2 billion shares traded, with a slight lead for advancers. On the NASDAQ, 2.7 billion shares changed hands, with 1.2 advancing issues for every declining issue. The price of the 10-year Treasury bond was up 4/32, bringing its yield down to 2.589%. The price of the 30-year Treasury bond increased 10/32, decreasing its yield to 3.425%.
Financial Sense
PSNC 2014: Fixed Income and Stable Value
The stable value market has changed significantly post financial crisis, says Josh Kruk, head of stable value portfolio management at Dwight Asset Management, and the evolution is ongoing. This means plan sponsors, who are bound by a fiduciary duty to regularly monitor and adjust their plan’s investment menu, must identify and respond to new emerging risks and opportunities in stable value offerings and fixed-income portfolios more generally. The matter is complicated by the expectation that interest rates may rise in the short or medium term, Kruk says, presenting a new and increasingly complex picture for sponsors and workplace retirement investors.
Sponsored message from PNC
PLANSPONSOR interviews Jim Sandidge of PNC
PLANSPONSOR Editor-in-Chief Alison Cooke-Mintzer sits down with Jim Sandidge, Product Director of Retirement Products at PNC Bank. Click here to watch the full interview.
Small Talk
ON THIS DATE:  In 1888, President Grover Cleveland vetoed a bill that would have given a pension to war widow Johanna Loewinger, whose husband died 14 years after being discharged from the army. In 1933, the United States went off the gold standard, a monetary system in which currency was backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. In 1968, Senator Robert Kennedy was shot at the Ambassador Hotel in Los Angeles after winning the California presidential primary. In 2004, Ronald Wilson Reagan, the 40th president of the United States, died, after a long struggle with Alzheimer’s disease. In 2012, one of the preeminent science fiction authors of the 20th century, Ray Bradbury, whose books include “The Martian Chronicles,” “Fahrenheit 451” and “Something Wicked This Way Comes,” died at age 91 in Los Angeles.   SURVEY SAYS: Not this week.
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