| Industry Insights | Paying Active Fees for Passive Management? | Active share helps plan fiduciaries see how
active their managers really are. Identifying truly active managers is a
constant challenge for plan sponsors. The market downturn of 2007-2008 sent
most managers running for the cover of their benchmarks. Many never left—they
still tout an active approach, but never stray too far from the index. So how
can plan sponsors, charged with a duty to ensure plan assets are diversified
and investment fees are justified, ferret out these closet indexers? Enter a
very handy tool called “active share.” | | Benefit Briefs | Same-gender couples need to become aware of the
many workplace benefits and financial planning strategies that are now
available, says James Mahaney of Prudential. “Financial Planning Considerations
for Same-Sex Couples after Windsor,” a white paper by Mahaney, vice president
of strategic initiatives at Prudential, examines key financial planning
considerations for same-gender couples in the wake of the U.S. Supreme Court’s
decision in United States v. Windsor
that a section in the Defense of Marriage Act (DOMA)—stating the federal
government will not recognize same-gender marriages performed in states where
it is legal—is unconstitutional. | Not Surprised Doesn’t Mean Prepared | Since the Department of Labor (DOL) proposed
including lifetime income illustrations on retirement plan participant statements,
no doubt most in the industry have assumed the information would come as a
shock to participants. However, as part of the Employee Benefit Research
Institute’s (EBRI) 2014 Retirement Confidence Survey (RCS), using data given by
respondents, the monthly income available at their stated retirement age was
estimated based on the methodology described in the DOL’s Advanced Notice of
Proposed Rulemaking (ANPRM) about lifetime illustrations. More than half (58%)
thought the amount calculated was about what they had expected. So, does the
lack of surprise by participants mean the retirement “crisis” is not as bad as
we think? Are participants more prepared than media reports and other surveys
suggest? “The fact that it’s what was expected doesn’t mean it’s enough,” says
Nevin Adams, director of Education and External Relations at EBRI, noting that
the survey only gauged participant reaction to the projection, not that the
projection calculated is enough to live on in retirement. | | Buyer's Market | America’s Best 401k, a retirement services
provider specializing in the small and mid-sized market segments, engaged
investment advice provider Jemstep to bring online advice solutions to plan
clients. The partnership will allow America’s Best 401k plan participants to
use Jemstep’s online investing guidance and asset-allocation analysis to
identify funds and investment strategies that fit their personal financial
situation. | Shane E. Conlon has joined Sibson Consulting as
a vice president and senior retirement consultant. Conlon has nearly two
decades of experience as a human resources and retirement consultant, and has
worked with major law firms, professional sports organizations and higher
education institutions designing and implementing benefits, rewards and
retention and retirement incentive programs that align financial and people
strategies. | | Market Mirror | The Dow took a dive Wednesday and lost
114.02 points (0.70%) to finish at 16,222.17. The NASDAQ was down 25.71 points
(0.59%) at 4,307.60, and the S&P 500 closed 11.48 points (0.61%) lower at
1,860.77. The Russell 2000 fell 9.38 points (0.78%) to 1,195.66, and the
Wilshire 5000 decreased 130.37 points (0.65%) to 19,971.01.
On the NYSE, 3.2 billion shares changed
hands, with declining issues outnumbering advancing issues nearly 3 to 1. On the
NASDAQ, 2.7 billion shares traded, with a near 2 to 1 lead for decliners.
The price of the 10-year Treasury note fell 27/32,
increasing its yield to 2.771%. The price of the 30-year Treasury bond
decreased 25/32, bringing its yield up to 3.657%.
| | Financial Sense | Overlay Strategy Keeps DB Investments on Target | Even the best laid plans can go off track, and
this is true for defined benefit plan portfolios. Plan sponsors and their
consultants may spend considerable time designing strategic asset-allocation
strategies, but “through the course of time, due to market movements and cash
flows in or out due to contributions and distributions, target allocations may
get out of balance,” explains Brian Roberts, senior consultant at NEPC, LLC in
Boston. An NEPC paper written by Roberts says derivative overlay strategies
offer an array of benefits, which can include securitizing idle cash,
maintaining policy target exposures and managing transitions within the
portfolio. An overlay solution can also help manage risk related to currency exposure,
equity beta or, particularly for corporate pension plans, interest rates. | Looking Ahead Responsibly | Ask Adam Strauss, a portfolio manager at the
Chicago-based Appleseed Fund, to describe the way he evaluates and selects
investments, and he will give an answer similar to that of many active managers.
“We’re stock pickers, so what we’re looking for is to invest in high-quality
companies with stocks that are significantly undervalued,” Strauss says. “And
we look very closely at balance sheets. If a company experiences a temporary
problem in the business but the balance sheet is strong, you’ve got lots of
time on your side to turn things around. If it’s weak, then that’s working
against you.” It is only after discussing pricing power and competitive
advantage that he brings up the term “sustainability” or “ESG,” short for
environmental, social and governance. | | The World at Large | The UK government made defined contribution (DC)
plans the keynote of its budget, with a bid to push more savers into taking
cash, rather than annuities at retirement. From next April all DC plan members
will be able to take their pension from age 55, as an annuity or the whole pot
as cash, taxed at the marginal rate after the first 25%. Chancellor of the
Exchequer George Osborne said the end of the annuity requirement was designed
to show “trust” in savers. He also announced DC savers would all receive “free
impartial advice” on their options, when they reach retirement. | | Rules & Regulators | Could You Supply an Outdated Plan Document? | To what extent are a company and its qualified
retirement plan liable, under the Employee Retirement Income Security Act
(ERISA), for failing to promptly supply outdated plan documents requested by a
pension plan participant’s surviving spouse? Also, does delay amount to neglect
of fiduciary duties, and if so, what is sufficient redress? | | Small Talk | ON THIS DATE: In 1852,
Harriet Beecher Stowe’s anti-slavery novel, “Uncle Tom’s Cabin,” was published.
In 1854, in Ripon, Wisconsin, former
members of the Whig Party met to establish a new party to oppose the spread of
slavery into the western territories—the Republican Party.
In 1934, Mildrid “Babe”
Didrikson pitched one inning of exhibition baseball for the Philadelphia
Athletics in a game against the Brooklyn Dodgers. She started the first inning,
and allowed just one walk and no hits. Though Didrickson was not the first
woman to play baseball with major league ballplayers, she had attained
national-hero status with an unprecedented performance at the 1932 Olympics. In
1948, the 20th annual Academy Awards
ceremony took place at the Shrine Civic Auditorium in Los Angeles, California. In
1965, President Lyndon B. Johnson
notified Alabama’s Governor George Wallace that he would use federal authority
to call up the Alabama National Guard in order to supervise a planned civil
rights march from Selma to Montgomery. In 1982, Joan Jett topped the pop charts
with “I Love Rock ‘n’ Roll.” | SURVEY SAYS: Does
your company make available saving and investing advice to retirement plan
participants? Have you used the offering(s) yourself? | Share the good news with a friend! Pass the Dash along – and tell your
friends/associates they can sign up for their own copy. | News from PLANSPONSOR.com
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