Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 11th, 2014
Benefit Briefs
Plan Committee Meeting Agendas: Part II
Fred Reish, chair of the Financial Services ERISA team at the law firm of Drinker, Biddle & Reath LLP, continues his list of recommended agenda items for plan committee meetings.
The Patient Protection and Affordable Care Act (or ACA) is beginning to have more of an impact when it comes to employee benefits, according to a recent report. With ACA deadlines occurring in 2014 and 2015, “The Prudential Insurance Company of America’s (Prudential’s) Eighth Annual Study of Employee Benefits: Today & Beyond,” finds that nearly half (49%) of employers report they are extremely or very likely to make a high-deductible health plan their only health insurance option in the foreseeable future.
Retirement readiness improved for Baby Boomers and Generation X households during 2013, says a new report. A new report released by the Employee Benefit Research Institute (EBRI), “What Causes EBRI Retirement Readiness Ratings to Vary: Results from the 2014 Retirement Security Projection Model,” reveals that overall retirement income adequacy has improved in recent years and fewer households are likely to run short of money during retirement. However, factors such as age, income and access to an employer-sponsored 401(k)-type retirement plan can still produce substantial individual differences in readiness.
More Guidance About Brokerage Windows May Be Coming
In May 2012, the Department of Labor (DOL) stated in a Q-and-A that an administrator of a participant-directed individual account plan may need to treat an investment alternative through a brokerage window as a “designated investment alternative” and therefore provide certain disclosures regarding the investment alternative—if a “significant number of participants and beneficiaries” invested in it. Also stated in DOL Field Assistance Bulletin (FAB) 2012-02 Q-and-A 30: “Unless participants and beneficiaries are financially sophisticated, many of them may need guidance when choosing their own investments from among a large number of alternatives” and the suggestion that plan fiduciaries may have a duty to “designate a manageable number of investment alternatives.”
More than one-third of employees are not prepared for retirement, says a new survey. Franklin Templeton Investments released the findings of its 2014 Retirement Income Strategies and Expectations (RISE) Survey, which reveals 39% of preretirees have not yet started saving for retirement. The annual survey also shows 92% of preretirees anticipate their retirement expenses will be similar to or less than their preretirement spending. “Americans have long struggled with preparing for the realities of retirement,” says Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments, based in San Mateo, California. “The survey uncovered several contradictions related to the degree of understanding and often divergent approaches to retirement.” As to what plan sponsors can do to help improve the retirement readiness of their participants, Doshier tells PLANSPONSOR there are three areas of focus—plan design, investment choices and participant support.
Buyer's Market
J.P. Morgan Revamps Participant Engagement Program
With the second release of its Audience of One program, J.P. Morgan Retirement Plan Services hopes to deepen engagement with participants through tailored messaging and robust data technology support. The financial services firm says the re-launched Audience of One program is designed to be more interactive, personal and easy for participants to use. In adopting the program, plan advisers and sponsors will benefit from tools that provide tailored messaging, interactive online games, video content and other services designed as a “call to action” for employees to save and invest more effectively.
What’s Wrong with Benchmarking?
The focus on comparison rather than outcomes is misguided, and comparing one retirement plan to another can be pointless, says Josh Itzoe, partner and managing director of Greenspring Wealth Management. First-generation benchmarking solutions have a major weakness, according to Itzoe, who manages the institutional client group of the firm, in Towson, Maryland. “These tools are primarily comparison-focused rather than improvement-focused,” he tells PLANSPONSOR. “As an industry, I think we’ve misled plan sponsors into thinking that the only thing that really matters is whether their plan compares favorably to other plans.” The problem with this logic is the “curse of the comparison mindset,” Itzoe says. “Imagine if I benchmark Plan A, which is dreadful, against Plan B, which is really dreadful. The fiduciaries of Plan A will probably feel pretty happy with themselves, because in the land of dreadfulness their plan reigns supreme.” A favorable comparison can make plan sponsors feel good, Itzoe says, but he asks whether benchmarking in the traditional sense—that is, the simple comparison of one plan to other plans—really makes any difference for the company and for the lives of its workers.
Market Mirror
Yesterday, the Dow slipped 34.04 points (0.21%) to 16,418.68, the NASDAQ decreased by 1.77 (0.04%) to 4,334.45, and the S&P 500 slipped 0.87 (0.05%) to 1,877.17. The Russell 2000 closed 2.78 points (0.23%) lower at 1,200.54, and the Wilshire 5000 was down 21.82 points (0.11%) at 20,133.07. On the NYSE, 3.2 billion shares traded, with 1.3 declining issues for every advancing issue. On the NASDAQ, 2.6 billion shares changed hands, with a 1.2 to 1 ratio of decliners to advancers. The yields for the 10-year Treasury note and 30-year Treasury bond were 2.781% and 3.725%, respectively.
Rules & Regulators
PBGC Finalizes Premium Changes
The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule implementing changes to premium due dates and calculations. In July 2013, PBGC proposed rules to simplify due dates, coordinate the due date for terminating plans with the termination process, make conforming and clarifying changes to the variable-rate premium rules, give small plans more time to value benefits, and provide for relief from penalties, as well as other changes. In January 2014, the agency issued a final rule moving the flat-rate premium due date for large plans to later in the premium payment year. The current rule finalizes all other items in the proposal.
The Internal Revenue Service (IRS) is encouraging small employers that provide health insurance coverage to their employees to check out the Small Business Health Care Tax Credit. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for this credit. The IRS offers resources to help employers see if they qualify and estimate the credit.
Sponsored message from PLANSPONSOR
PLANSPONSOR speaks with Elaine Sarsynksi from MassMutual Retirement Services about  what the industry took away from 2013, and what plan sponsors can look forward to in 2014.
Small Talk
ON THIS DATE:  In 1818, “Frankenstein; or, The Modern Prometheus,” a book by 21-year-old Mary Wollstonecraft Shelley, was published. In 1861, in Montgomery, Alabama, delegates from South Carolina, Mississippi, Florida, Alabama, Georgia, Louisiana, and Texas adopted the Permanent Constitution of the Confederate States of America. In 1918, just before breakfast on the morning of March 11, Private Albert Gitchell of the U.S. Army reported to the hospital at Fort Riley, Kansas, complaining of the cold-like symptoms of sore throat, fever and headache. By noon, more than 100 of his fellow soldiers had reported similar symptoms, marking what are believed to be the first cases in the historic influenza epidemic of 1918. The flu would eventually kill 675,000 Americans and more than 20 million people (some believe the total may be closer to 40 million) around the world. In 1941, President Franklin D. Roosevelt’s Lend-Lease program—devised by Roosevelt as a means of aiding Great Britain in its war effort against the Germans by giving the chief executive the power to “sell, transfer title to, exchange, lease, lend, or otherwise dispose of” any military resources the president deemed ultimately in the interest of the defense of the United States—went into effect. In 1989, “COPS,” a documentary-style television series that follows police officers and sheriff’s deputies as they go about their jobs, debuted on Fox. In 1997, Paul McCartney, a former member of The Beatles, was knighted by Queen Elizabeth II for his “services to music.”   TUESDAY TRIVIA: Martin Van Buren was the first president born in the United States. All previous presidents were born were in places that would later be a part of the United States, but were born before the United States became country.
TRIVIAL PURSUITS: What American slang term, spelled with only initials, was popularized by Martin Van Buren’s campaign for president?
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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