Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 14th, 2014
Industry Insights
Opinion: Public Pension Plan CSI
In case you have not noticed, there appears to be a full court press underway to kill public sector defined benefit retirement plans. In any crime scene investigation, clues may appear regarding the likely culprit(s) when motives surface.  Was it Professor Plum in the library with a candlestick? Or was it professors in Ivy League halls with computers and mined data?  While these latter suspects are probably complicit, high on the list of primary suspects are corporate CEOs in executive suits with checkbooks. Following the money (or money laundering) is a real challenge in this investigation since the professors and belief tanks that are ginning out so called research reports in remarkable volume have generally managed to shield the deep pockets behind them from transparency.
Benefit Briefs
There are many elements that make up an effective financial wellness program for a company, according speakers during a recent webinar. One element is to understand the psychology behind such a program, says presenter Linda Robertson, a certified financial planner with Financial Finesse in El Segundo, California. “In order to help instill positive financial habits, employers need to understand some of how behavioral finance works. Something like a rewards systems, where participants enjoy the competition and the thrill of the hunt,” she says. Robertson points to examples of this dynamic in the retail world, such as frequent flyer programs and coupons.
In a reversal of the past four months, participants of defined contribution (DC) retirement plans favored fixed income investments in February, according to Aon Hewitt’s 401(k) Index. Findings from the index show that 10 of the 19 trading days last month saw fixed income receive transfer inflows. Overall, net transfer activity for February moved slightly away from diversified equities (equity assets excluding company stock) of $21 million (0.01%).
Buyer's Market
Fidelity Releases NetBenefits App for iPad
Fidelity Investments has now made its workplace benefits application, NetBenefits, available to iPad and iPad Mini mobile tablet users. The iPad app offers a peer comparison capability that enables users to evaluate aspects of their portfolio (such as savings rate, account balance and rate of return) in relation to people in similar cohorts, such as age or region.
Economic Events
In the week ending March 8, the advance figure for seasonally adjusted initial claims for unemployment insurance was 315,000, a decrease of 9,000 from the previous week’s revised figure of 324,000, the Labor Department reported. The four-week moving average was 330,500, a decrease of 6,250 from the previous week’s revised average of 336,750. The U.S. Census Bureau announced that the combined value of distributive trade sales and manufacturers’ shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,302.9 billion, down 0.9% from December 2013, but were up 2.5% from January 2013. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,715.1 billion, up 0.4% from December 2013 and up 3.9% from January 2013. Advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $427.2 billion, an increase of 0.3% from the previous month, and 1.5% above February 2013. Total sales for the December 2013 through February 2014 period were up 2.3% from the same period a year ago. The December 2013 to January 2014 percent change was revised from -0.4% to -0.6%. The average interest rate for a 30-year fixed-rate loan is 4.37%, up from 4.28% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.38%, up from 3.32% one week ago.
Market Mirror
Thursday, the Dow plummeted 231.19 points (1.41%) to 16,108.89, the NASDAQ took a 62.91-points (1.46%) tumble to 4,2,60.42, and the S&P 500 fell 21.86 points (1.17%) to 1,846.34. The Russell 2000 lost 14.63 points (1.23%) to finish at 1,176.74, and the Wilshire 5000 closed 237.79 points (1.19%) lower at 19,797.02. On the NYSE, 3.2 billion shares traded, with declining issues outnumbering advancing issues more than 2 to 1. On the NASDAQ, 2.6 billion shares changed hands, with a more than 3 to 1 lead for decliners. The yields for the 10-year Treasury note and 30-year Treasury bond were 2.646% and 3.592%, respectively.
Financial Sense
Teachers Union Lists Anti-Pension Asset Managers
The American Federation of Teachers (AFT) has issued its second list of assets managers it says “have directly backed initiatives that the harm the retirement security of [public pension] plan participants, to whom trustees have a fiduciary duty.” Twenty-nine asset managers are named by AFT.
The funded status of pension plans showed an improvement in February, compared with figures from January, says a new analysis from Russell Investments. Following a decrease in funded status during the first month of 2014, representative open and frozen pension plans increased funding by 1.6% and 1.1% respectively, according to the February installment of “The Russell LDI Update.”
Rules & Regulators
Streamlined Fee Data May Have a Hitch
The Department of Labor’s (DOL) fee data proposal is a good idea, but with one possible difficulty, says Bruce Ashton, a partner in Drinker Biddle & Reath’s Los Angeles office. When they are adopted, these guide requirements should make it easier for plan sponsors to find the information they need to assess whether a service arrangement and the compensation are reasonable, Ashton says. However, covered service providers will have to furnish a separate document that details where the plan sponsor can find required information—“and plan sponsors must know they are supposed to receive this document,” Ashton tells PLANSPONSOR.
A group of 26 members of the U.S. House of Representatives, known as the Congressional Hispanic Caucus, threw its support behind expanded fiduciary rules pending from the Department of Labor (DOL). The caucus expresses a strong interest in the upcoming fiduciary redefinition in an open letter sent to U.S. Secretary of Labor Thomas Perez, which reminds the DOL many of the retirement-readiness challenges impacting workers in the U.S. hit the Hispanic community especially hard.
Bridging the Retirement Savings Gap
Sometimes overlooked in the national discussion about the retirement readiness crisis are employees who simply have no access to a workplace retirement plan. Politicians and various think tanks regularly put forward proposals about how to deal with this segment.
Small Talk
ON THIS DATE:  In 1879, Albert Einstein was born, the son of a Jewish electrical engineer in Ulm, Germany. In 1950, the Federal Bureau of Investigation instituted the “Ten Most Wanted Fugitives” list in an effort to publicize particularly dangerous fugitives. In 1958, the Recording Industry Association of America (RIAA) awarded its first official Gold Record to Perry Como for his smash-hit single “Catch A Falling Star.” In 1964, Jack Ruby, the Dallas nightclub owner who killed Lee Harvey Oswald—the accused assassin of President John F. Kennedy—was found guilty of the “murder with malice” of Oswald and sentenced to die in the electric chair. It was the first courtroom verdict to be televised in U.S. history.   And now it’s time for FRIDAY FILES!
Take a look at the new “Cowasaki” motorcycle, manufactured by a Florida man using—animal bones.
Meet boarzilla.
In New York City, police arrived at a Flushing, Queens apartment after a neighbor complained about loud noise. They were surprised when the resident greeted them with a marij.uana pipe in his hand, the New York Times reports. “Oh, that’s weed,” the man said when asked about the odor emanating from the flat. That was reason enough for the officers to write up a summons. But the resident first had to gather his ID and invited officers inside, where they found five pounds of her.oin resting on the kitchen table. In Blekinge, Sweden, a man was looking through a window and saw a couple in the most intimate act. Upset, he contacted police to report the couple for se.xual hara.ssment. Police dismissed the case when they found out the man was peeping into the couple’s window, and the couple was having se.x in their own home.
Why do we yawn?
This guy lost a bet with his brother, but instead of being embarrassed, he ended up having a good time and making new friends. Dancin’… dancin’ in the streets…
Have a wonderful weekend!
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