Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 25th, 2014
Benefit Briefs
Stronger Education, Stronger Outcomes
It’s a phenomenon unique to the retirement planning advice industry that even those participants who make good investment decisions often don’t know they’re making good decisions. And those who make bad investment decisions in employer sponsored plans are in a similar, if somewhat more precarious position, says Stig Nybo, president of pension sales and distribution at Transamerica Retirement Solutions. In other words, there are substantial hurdles to overcome in terms of basic financial literacy among participants in defined contribution retirement plans before advisers can ensure workers accrue adequate assets for retirement.
No Shortage of Challenges or Chances
Issues confronting retirement plan sponsors and others providing financial services to workers and retirees range from mushrooming “retirement crisis deniers” to a new federal focus on tax treatment of 401(k) plans, says Brian Graff, executive director of the National Association of Plan Advisers (NAPA). Should sponsors and the various industry groups that lobby for their interests fail to act and influence lawmakers, Graff warns, the results could be disastrous for both the industry and the tens of millions of workers who invest and save through workplace retirement plans. Graff sounded the familiar-but-dire warning at the opening of the 2014 NAPA 401(k) Summit, hosted by the National Associate of Plan Advisors (NAPA), in New Orleans. He wasted no time at the start of the annual conference in attacking some specific proposals floated in recent months by various parties in the federal government, as well as the Obama administration.
Alternative Investments of Growing Interest to DC Plans
Alternative assets have been granted a crucial role in the portfolio strategies of defined benefit (DB) pension plans over the last 15 to 20 years, as plan sponsors have called on the higher returns and diversification potential of commercial real estate, private equity and hedge funds to meet their long-term obligations to participants. Greenwich Associates’ tally of public sector defined benefit plans for 2012—the firm’s most recent such tally—showed a total of 18% of aggregate assets devoted to these asset classes. In the defined contribution (DC) world, however, even though the benefit liabilities are much the same, alternatives have not gained much traction. But fund managers have been adapting alternatives to a defined contribution format, so interest from sponsors and participants may not be far behind.
Market Mirror
Yesterday, the Dow slipped 26.08 points (0.16%) to 16,276.69, the NASDAQ fell 50.40 points (1.18%) to 4,226.39, and the S&P 500 was down 9.08 points (0.49%) at 1,857.44. The Russell 2000 lost 15.50 points (1.30%) to finish at 1,178.23, and the Wilshire 5000 closed 128.75 points (0.64%) lower at 19,878.32. On the NYSE, 3.2 billion shares traded, with 1.7 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares changed hands with a nearly 3 to 1 lead for decliners. The price of the 10-year Treasury note was down 2/32, bringing its yield up to 2.736%. The price of the 30-year Treasury bond decreased 3/32, increasing its yield to 3.567%.
Financial Sense
According to a recent news report from The Detroit News, the funded status of the Detroit Police and Fire Retirement System decreased from 96.1% to 89% as of June 30, 2013. Similarly, the funded status of the Detroit General Retirement System declined from 78% to 70% in 2013. These declines in funding appear to be the result of millions of dollars in unpaid employer contributions from the city. While the city goes through its bankruptcy proceedings, it will not be able to make its contributions to the plans, according to the news report.
Rules & Regulators
Reporting and Disclosure Requirements for Non-ERISA Plans
Financial and retirement services provider Prudential has created its Compliance Checklist 2014 for qualified governmental and nonelecting church plans, non-ERISA 403(b) plans, 457 plans and nonqualified executive benefit plans that are not subject to ERISA. The checklist offers sponsors of non-ERISA plans information about the materials that need to be filed, as well as filing due dates and the agencies to which these materials need to be routed.
Richard Sippola, the fiduciary of the Cleveland-based Carnegie Body Company 401(k) Retirement Plan, has agreed to restore losses to participants in the amount of $9,396.03—the full amount of unremitted contributions and loan repayments for the March 13, 2009 to January 10, 2010.
How to Avoid (or Survive) a Plan Audit
Aggregate qualified retirement plan audit data from the Department of Labor (DOL) shows that, of the 3,677 investigations closed in 2013, violations were found nearly 73% of the time. Beyond plan violations, DOL investigators closed some 320 criminal investigations in 2013, with 88 indictments and 70 guilty pleas or convictions. Taken together, plan sponsors paid a collective $1.7 billion in plan reimbursements and fines to settle the criminal cases and violations last year alone. Bruce Ashton, an attorney with the law firm of Drinker Biddle & Reath LLP, says those numbers contain a clear message for plan fiduciaries and financial advisers working with retirement plans—the best way to survive an audit unscathed is to avoid an audit in the first place.
Small Talk
ON THIS DATE:  In 1634, the first colonists to Maryland arrived at St. Clement’s Island on Maryland’s western shore and found the settlement of St. Mary’s. In 1911, the Triangle Shirtwaist Company factory in New York City burned down, killing 145 workers. The tragedy led to the development of a series of laws and regulations that better protected the safety of factory workers. In 1933, President Herbert Hoover accepted the newly commissioned USS Sequoia as the official presidential yacht. For 44 years, the Sequoia served as an occasional venue for recreation and official gatherings for eight U.S. presidents. In 1957, France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg signed a treaty in Rome establishing the European Economic Community (EEC), also known as the Common Market. The EEC, which came into operation in January 1958, was a major step in Europe’s movement toward economic and political union. In 1958, Sugar Ray Robinson defeated Carmen Basilio to regain the middleweight championship. It was the fifth and final title of his career.   TUESDAY TRIVIA: Upon learning the name given to his reality TV series, the star of Duck Dynasty said, “That sounds like a Chinese food place.”
TRIVIAL PURSUITS: The elephant is the mascot of the Republican Party. The donkey is the mascot of the Democratic Party. What animal became the mascot of the Prohibition Party in 1908?
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   Copyright © Asset International, Inc., 2014. All rights reserved.  No reproduction without prior authorization.
Humana Inc. Defeats Class Action Claims of Excessive 401(k) Fees
Rhode Island Becomes 20th State to Pass Retirement Savings Program
Wells Fargo Targeted in New 401(k) Forfeiture Lawsuit

Editorial: Alison Cooke Mintzer


Subscribe to NEWSDash, click here .

To unsubscribe, click here.

BrightScope / CIO / FWW / Investor Economics / LiquidMetrix / Market Metrics / Matrix Solutions / PLANADVISER / Plan For Life / PLANSPONSOR / Simfund