Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 26th, 2014
Benefit Briefs
Is 3% in Retirement Plan Fees Reasonable?
A new survey questions whether small businesses are paying too much when it comes to 401(k) plan fees. Despite the industry’s efforts to make 401(k) plans more transparent, accessible and low cost, a national survey by ShareBuilder 401k found that on average, small business owners who read fee disclosure statements still consider 3% a reasonable price to pay. ShareBuilder 401k advocates that no plan charge employees more than 1% in fees and investment expenses.
Vanguard Sees Increase in Use of Index Funds
The use of low-cost index funds by participants in Vanguard 401(k) plans increased noticeably between 2004 and 2012. The average participant now invests 60% of his or her account balance in index funds, according to a Vanguard study. “Behavioral Effects and Indexing in DC Participant Accounts 2004–2012” indicates this percentage has doubled from 30% in 2004, largely as a result of the growing popularity of index-based target-date funds.
Buyer's Market
The bagnall company has launched COBRAssist, a service geared towards employers who have individuals on a COBRA plan and would like to offer the beneficiaries a cost-effective solution. This service may save hundreds of dollars for those employees looking for an alternative. “This is also a win for the employer as it can improve an employer’s medical loss ratio by reducing medical claim utilization, which is tied to yearly medical renewal increases,” says Cynthia Walter, RHU, REBC, vice president – account management & COO at the bagnall company.
ASPPA to Launch Enhanced Website
The American Society of Pension Professionals & Actuaries (ASPPA) will be launching an enhanced version of its website on April 7. Inspired by the success of NAPA Net, a content-focused web portal for all 401(k) advisers, ASPPA is launching a portal of its own, and the National Tax-deferred Savings Association (NTSA) will also be getting a portal of its own.
Consulting firm Mercer has enhanced its Mercer Marketplace private exchange. The Mercer Marketplace will now have an option to offer easy access to individual medical plans both outside of and on the public exchanges for their employees and retirees who do not qualify for sponsored plans.
Economic Events
The Conference Board Consumer Confidence Index, which had decreased in February, improved in March. The Index now stands at 82.3 (1985=100), up from 78.3 in February. The Present Situation Index edged down to 80.4 from 81.0, while the Expectations Index increased to 83.5 from 76.5. Sales of new single-family houses in February 2014 were at a seasonally adjusted annual rate of 440,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.3% below the revised January rate of 455,000, and is 1.1% below the February 2013 estimate of 445,000.
Market Mirror
Tuesday, the Dow was up 91.19 points (0.56%) at 16,367.88, the NASDAQ added 7.88 points (0.19%) to finish at 4,234.27, and the S&P 500 increased 8.18 points (0.44%) to 1,865.62. The Russell 2000 decreased by 0.19 (0.02%) to 1,178.05, and the Wilshire 5000 closed 59.90 points (0.30%) higher at 19,938.22. On the NYSE, 3.2 billion shares traded, with 1.4 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares changed hands, with a nearly even split between advancers and decliners. The price of the 10-year Treasury note was down 5/32, bringing its yield up to 2.747%. The price of the 30-year Treasury bond fell 17/32, increasing its yield to 3.592%.
Financial Sense
In 2013, a solid majority of multiemployer pension plans (59%) were in the green zone as defined by the Pension Protection Act of 2006 (PPA). This represents a slight decline from the 60% in 2012, according to Segal Consulting’s Survey of Plans’ 2013 Zone Status. Despite the slight change, the average PPA’06 funded percentage for all surveyed plans was 84% in 2013, the same percentage as in 2012.
The World at Large
The UK’s National Employment Savings Trust (NEST) is planning an overhaul of its investment strategy for the years before retirement, following the government’s budget changes to annuity rules last week.
Rules & Regulators
GASB Will Not Delay Pension Reporting Standards
The Governmental Accounting Standards Board (GASB) voted unanimously not to delay the implementation date of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. Certain stakeholder groups asserted that a delay is necessary until related auditing procedures have been implemented for a sufficient period. The concern was expressed that governments in multiple-employer pension plans will receive a modified audit opinion on their financial statements in the interim. However, GASB said, other individuals, organizations, and stakeholder groups wrote to the board requesting that the implementation date of Statement No. 68 not be changed.
Washington Update
Summaries of the latest from Washington and the courts—what’s coming, what’s contemplated and what’s critical to plan sponsors.
Small Talk
CFOs Unconcerned About Retiring Baby Boomers
Only about one-third (31%) of chief financial officers (CFOs) are concerned about losing Baby Boomer employees to retirement over the next few years. A recent survey by staffing firm Robert Half finds that 63% of financial executives report being unconcerned with Boomer employees retiring, this despite the fact that figures from the Bureau of Labor Statistics show one-fifth of the U.S. work force has either passed or is nearing retirement age.
ON THIS DATE:  In 1776, the Provincial Congress of South Carolina approved a new constitution and government. In 1941, Italy attacked the British fleet at Suda Bay, Crete, using detachable warheads to sink a British cruiser. This was the first time manned torpedoes had been employed in naval warfare, adding a new weapon to the world’s naval arsenals. In 1953, American medical researcher Dr. Jonas Salk announced on a national radio show that he successfully tested a vaccine against poliomyelitis, the virus that causes the crippling disease of polio. In 1979, in a ceremony at the White House, Egyptian President Anwar el-Sadat and Israeli Prime Minister Menachem Begin signed an historic peace agreement, ending three decades of hostilities between Egypt and Israel and establishing diplomatic and commercial ties. In 1997, following an anonymous tip, police entered a mansion in Rancho Santa Fe, an exclusive suburb of San Diego, California, and discovered 39 victims of a mass suicide. The deceased—21 women and 18 men of varying ages—were all found lying peaceably in matching dark clothes and Nike sneakers and had no noticeable signs of blood or trauma. It was later revealed that the men and women were members of the “Heaven’s Gate” religious cult, whose leaders preached that suicide would allow them to leave their bodily “containers” and enter an alien spacecraft hidden behind the Hale-Bopp comet.   WEDNESDAY WISDOM: “In the Spring, I have counted 136 different kinds of weather inside of 24 hours.”—Mark Twain   Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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