Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 24th, 2014
Industry Insights
A Lesson About Investment Disclosures
A recent case, Bidwell vs. University Medical Center, details the obligations of disclosure on investment lineups, particularly qualified default investment alternatives (QDIAs) for defined contribution plans. The University Medical Center selected a conservative stable value fund to be the default fund for its 403(b) plan. If plan participants did not make any choices for their retirement plan, they were defaulted into the stable value option. However, participants could also choose to actively invest their assets into the same stable value fund. This is what appears to have started the confusion when University Medical Center changed their default fund and elected the safe harbor provisions under a QDIA.
Benefit Briefs
Retiree Confidence Boosts Wells Fargo/Gallup Index
In just three months, the retirees in the Wells Fargo/Gallup Investor and Retirement Optimism Index survey went from +6 to +41 in the index, which Joe Ready, director of Wells Fargo institutional retirement and trust, calls a surprise—and one that obviously drove a big part of the overall increase in optimism. Ready says two key points in the survey are of particular interest to plan sponsors. First, investors really value the pre-tax savings and the savings habits created by the workplace retirement plan. “An overwhelming majority (91%) said they would favor an increase in the amount they can defer above today’s limits,” he says.
Economic Events
THE ECONOMIC WEEK AHEAD: Tomorrow, the Conference Board will release its Consumer Confidence Index for March, and the Census Bureau will report about new home sales for February. Wednesday, the Census Bureau will report about durable goods orders for February, and Thursday, the Labor Department will issue its initial claims report.
Market Mirror
Friday, the Dow slipped 28.35 points (0.17%) to 16,302.70, the NASDAQ fell 42.50 points (0.98%) to 4,276.79, and the S&P 500 was down 5.61 points (0.30%) at 1,866.40. The Russell 2000 closed 5.53 points (0.46%) lower at 1,193.47, and the Wilshire 5000 decreased 63.39 points (0.32%) to 20,007.07.   On the NYSE, 3.2 billion shares traded, with 1.4 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares traded, with a 1.4 to 1 ratio of decliners to advancers.   The price of the 10-year Treasury note was up 9/32, bringing its yield down to 2.743%. The price of the 30-year Treasury bond increased 31/32, decreasing its yield to 3.612%.   WEEK’S WORTH: For the week ending March 21, the Dow climbed 1.48%, the NASDAQ was up 0.74%, and the S&P 500 gained 1.37%. The Russell 2000 increased 1.02%, and the Wilshire 5000 finished 1.20% higher.
Financial Sense
The Dietrich Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, remained basically unchanged through February and into March. As of March 1, the index sits at 95.27, falling slightly due to continued slides in interest rates. The index’s annuity discount rate proxy of 3.12% lost six basis points from the previous month.
The California Public Employees’ Retirement System (CalPERS) will allocate additional money to its emerging manager program in the private equity asset class, using a new fund-of-funds to deploy the capital. “This new $200 million allocation is a reflection of CalPERS ongoing commitment to emerging and diverse managers,” says Ted Eliopoulos, CalPERS’ interim chief investment officer, based in Sacramento, California. “Our goal is to generate appropriate, risk-adjusted investment returns by identifying early stage funds with strong potential for success.”
The World at Large
This week’s UK budget announcement lifting the punitive tax regime on accessing whole defined contribution (DC) pension pots at retirement will take a significant bite out of an annuities market worth more than £10 billion in annual new business to its largest participants.
Rules & Regulators
Retirement Plans Need Access to Death Master File
A group of retirement industry representatives recently sent a comment letter to the National Technical Information Service (NTIS) emphasizing the need for uninterrupted access to the Social Security Administration’s Death Master File (DMF). The NTIS, a federal agency under the Department of Commerce, recently released a request for information (RFI) about the establishment of a certification program by the agency to ensure DMF information is requested by appropriate parties for valid reasons during the three-calendar-year period following a person’s death. Investigating the establishment of such a certification program was prompted by the passing of the Bipartisan Budget Act of 2013, which prohibits the disclosure of DMF information during the three-calendar-year period following death unless the requesting party is certified under a program established by the Department of Commerce.
Judge Rejects Immediate Appeal for Church Plan Case
A federal court judge has denied a motion for immediate review by an appellate panel of one of the ongoing “church plan” cases. Judge Thelton E. Henderson of the U.S. District Court for the Northern District of California previously ruled that Dignity Health’s retirement plan was not a “church plan” as defined by the Employee Retirement Income Security Act (ERISA). Dignity’s proposed interlocutory appeal challenges the court’s interpretation of the portions of the ERISA statute governing the church plan exemption.
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
March Madness Not the Only Thing Workers Bet On
The annual NCAA Basketball tournament (a.k.a., March Madness) is underway and many U.S. employees are filling out brackets and competing for accuracy. A CareerBuilder survey finds one in five (19%) employees say they have participated in a March Madness office pool in the past, while 11% say they plan to do so this year. But, survey respondents shared the NCAA tournament is not the only opportunity to make friendly wagers.
ON THIS DATE:  In 1603, after 44 years of rule, Queen Elizabeth I of England died, and King James VI of Scotland ascended to the throne, uniting England and Scotland under a single British monarch. In 1955, Tennessee Williams’ play “Cat on a Hot Tin Roof” opened in New York, two days before his 44th birthday. The play would win Williams his second Pulitzer Prize. In 1989, the worst oil spill in U.S. territory began when the supertanker Exxon Valdez, owned and operated by the Exxon Corporation, ran aground on a reef in Prince William Sound in southern Alaska. An estimated 11 million gallons of oil eventually spilled into the water. In 2002, at the 74th annual Academy Awards ceremony at the Kodak Theatre in Los Angeles, Halle Berry was presented with the Academy Award for Best Actress for her performance as the wife of a death row inmate in “Monster’s Ball.” Berry was the first African-American performer to win in the Best Actress category and only the second African-American actress ever to be honored by the Academy. Denzel Washington became only the second African-American man to win in the Best Actor category, accepting the statuette for his role as a corrupt Los Angeles police officer in “Training Day.”
SURVEY SAYS: Offering Participants Advice
Last week, I asked NewsDash readers if their companies make available saving and investing advice to retirement plan participants. Three-quarters of respondents are plan sponsors, while 17% are TPAs/recordkeepers/investment managers and the rest fall in the “other” category.  The vast majority of readers who responded (82.9%) reported that their firms do make advice available to participants. When asked how this advice is made available, nearly all (93.3%) said through the use of online tools and calculators, while two-thirds (66.7%) reported it is available during seminars and group meetings. Sixty percent each indicated their firms made advice available through managed investment accounts and one-on-one meetings. Nearly half of respondents (47.1%) reported they have used the advice offering(s) made available by their companies. One in three (29.4%) have not, and nearly 6% said they use the advice offering(s) regularly. Nearly 18% of respondents indicated they would use the advice offering(s) if provided by their companies. The consensus among those making verbatim comments is advice should be offered and is needed, but most participants don’t use it. Some contend other efforts by plan sponsors are more important to participant outcomes, such as automatic plan features. Editor’s Choice goes to the reader who said: “Advice only goes so far. Auto-enrollment and escalation are much more effective features. After all, you can lead a horse to water but you can’t make him save for retirement.”  A big thank you to everyone who participated in the survey!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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