Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 28th, 2014
Benefit Briefs
Can You Really Set It and Forget It?
In the two decades since target-date funds (TDFs) first entered plan investment menus, they’ve gained a reputation as a set-it-and-forget-it strategy that many experts oppose. It’s true that TDFs are powerful tools to help plan participants automatically maintain age-appropriate asset allocations over time. But it is dangerous to propagate the idea that a participant or his investment adviser should not regularly review the performance of target-date investments, says Scott Matheson, a senior director at CAPTRUST. This is true for a variety of reasons, he explains, but perhaps the most important is that all TDFs are not created equal so, like other investment options, they must be regularly reviewed for solid performance relative to similar offerings.
A survey from Pentegra Retirement Services finds that among U.S. adults who are employed and enrolled in a 401(k) plan, 65% do not believe or are unsure that their plan will provide enough money for them to retire when they want to or plan to. Nonetheless, 75% of 401(k) participants still think that 401(k) plans are the most important source of a person’s retirement income.
Tips for Promoting Employee Financial Literacy
Promoting financial literacy among employees can help create a more productive and focused workplace, according to a group promoting Financial Literacy Month in April. “Most employers don’t think their workers have serious financial problems—after all, they have jobs,” says Chris Viale, president and CEO of Cambridge Credit Counseling, a member of the Association of Credit Counseling Professionals (ACCPros) in Falmouth, Maine. “But we know that the opposite is true,” he says. “Even people who are holding down good jobs can have financial difficulty, and that makes for distracted, unproductive workers.” Sorensen and her colleagues offer employers five strategies to better the financial lives of their employees.
ACA Compliance Requires Cooperation
Speakers for a webinar hosted by ADP reminded plan sponsors that complying with the Patient Protection and Affordable Care Act (or ACA) is no simple task and requires coordination among a number of stakeholders. According to John Haslinger, vice president of Benefits, Outsourcing and Consulting for ADP in Alpharetta, Georgia, the ACA will ultimately impact nearly one-quarter (20%) of the U.S. economy, ranging from employers and employees to health care providers and insurance companies. Haslinger says in order to incorporate changes needed for the ACA, several different specialty areas—both inside and outside of a company—will need to work together.
Buyer's Market
Global markets are well past the point where investors can ignore the sustainability profile of the stocks and bonds they’re holding, says Gerrit Heyns of Osmosis Investment Management. Heyns is a founding partner at the UK-based Osmosis Investment Management LLC. His firm partnered recently with Calvert Investments to develop the “Calvert–Osmosis Model of Resource Efficiency World Strategy,” which leverages a unique quantitative methodology within institutional client portfolios and separately managed accounts to identify and select sustainably run companies for purchase.
Economic Events
In the week ending March 22, the advance figure for seasonally adjusted initial claims for unemployment insurance was 311,000, a decrease of 10,000 from the previous week’s revised figure of 321,000, the Labor Department reported. The four-week moving average was 317,750, a decrease of 9,500 from the previous week’s revised average of 327,250. The average interest rate for a 30-year fixed-rate mortgage is 4.40%, up from 4.32% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.42%, up from 3.32%.
Market Mirror
Thursday, the Dow decreased by 4.76 points (0.03%) to 16,264.23, the NASDAQ was down 22.35 points (0.54%) at 4,151.23, and the S&P 500 slipped 3.52 points (0.19%) to 1,849.04. The Russell 2000 closed 4.05 points (0.35%) lower at 1,151.44, and the Wilshire 5000 lost 32.95 points (0.17%) to close at 19,726.03. On the NYSE, 3.2 billion shares traded, with a slight lead for advancers. On the NASDAQ, 2.7 billion shares changed hands, with 1.6 declining issues for every advancing issue. The price of the 10-year Treasury note was up 3/32, bringing its yield down to 2.683%. The price of the 30-year Treasury bond increased 8/32, decreasing its yield to 3.528%.
Financial Sense
Importance of Setting Funded Status Goals for DBs
Setting specific funded status goals for defined benefit (DB) plans can help sponsors and investment committees improve performance, says a new research paper from Russell Investments. The paper, “What Is Your Funded Status Goal?” points out that given the number of different funded status measures that can be calculated for a DB pension plan, sponsors may not be totally clear on what their funded status goal is or what funded level they should try to achieve. But clarity on these points can help sponsors and investment committees make better funding and investment policy decisions that are critical to effectively managing a pension plan, says the paper’s author, James Gannon, who is director of asset allocation and risk management for Russell Investments. “Having goals also helps plan sponsors to know not only the amount needed to fund the plan right now, but the amount that may be needed in the future. It shows plan sponsors how much work there is still left to do to reach that future amount,” Gannon says.
A resurgent construction industry, the U.S. energy renaissance, the evolution of technology and a second iteration of health care reform are likely to create opportunities for investors in 2014, according to a recent analysis by the U.S. Small Cap Growth Team for The Boston Company Asset Management (TBC), which is BNY Mellon’s Boston-based equity specialist. In addition to the four themes related to energy, construction, technology and health care, the TBC team also foresees investment themes related to manufacturing and the rotation of funds into U.S. equity markets.
The New Diversification: Adding Alternatives
In prior decades, international and emerging market stocks were good investments to get diversification for a retirement plan portfolio, but things have changed. According to Mark Peterson, director of investment education at BlackRock, speaking for a webinar hosted by Envestnet, traditional diversification vehicles underperformed when the return environment changed. Traditional stocks and bonds worked well until the 2000s. While bonds have done well since, equities have been volatile. And, now bonds will become a challenge with rising interest rates.
Small Talk
ON THIS DATE:  In 1776, Juan Bautista de Anza, one of the great western pathfinders of the 18th century, arrived at the future site of San Francisco with 247 colonists. In 1834, President Andrew Jackson was censured by Congress for refusing to turn over documents. Jackson was the first president to suffer this formal disapproval from Congress. In 1958, W.C. Handy, who proclaimed himself “Father of the Blues” in his memoir, died in New York City. In 1969, Dwight D. Eisenhower, the 34th president of the United States and one of the most highly regarded American generals of World War II, died in Washington, D.C., at the age of 78. In 1979, the worst accident in the history of the U.S. nuclear power industry began when a pressure valve in the Unit-2 reactor at Three Mile Island in Pennsylvania failed to close. Cooling water, contaminated with radiation, drained from the open valve into adjoining buildings, and the core began to dangerously overheat. In 1984, Bob Irsay (1923-1997), owner of the once-mighty Baltimore Colts, moved the team to Indianapolis. Without any sort of public announcement, Irsay hired movers to pack up the team’s offices in Owings Mills, Maryland, in the middle of the night, while the city of Baltimore slept.   And now it’s time for FRIDAY FILES!
This baby has a very promising career as a maestro.
In Duluth, Minnesota, a 27-year-old man was arrested for driving while impaired—driving a stolen Caterpillar excavator—on a sidewalk—with a blood alcho.hol level twice the legal limit.
Provo-Orem, Utah, has the highest Well-Being Index score (71.4) in the U.S. across 189 communities Gallup and Healthways surveyed in 2012-2013. The Gallup-Healthways Well-Being Index score is an average of six sub-indexes, which individually examine life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities. The overall score and each of the six sub-index scores are calculated on a scale from 0 to 100, where a score of 100 represents the ideal. Gallup and Healthways have been tracking these measures daily since January 2008. See how your community fares.
In Washington, D.C., a woman had symptoms she thought indicated she was having a stroke, so she called 911. However, when the paramedics got her into the ambulance and fitted with oxygen, they began to have a heated argument. The woman said she became uncomfortable with the situation and did not feel safe having them transport her, so she left the ambulance before they started driving, according to the local NBC station. The woman said the paramedics didn’t seem to care she was leaving and didn’t ask her to sign a patient refusal, which is standard. She took the Metro to the VA hospital.
In Bacau, Romania, a man was rushed to a hospital complaining of an uncomfortable feeling in his esophagus. When they x-rayed him and found a fork lodged in his throat, he admitted he had made a drun.ken bet with this friend he could swallow the fork without getting hurt. UK’s Metro reports the man was discharged without undergoing an emergency operation after doctors told him to wait and see if the fork comes out naturally. “I have to come back in a few days to see if the fork has moved. If it reaches my stomach and looks like it could pierce the lining I will need an operation,” he said. The man added: “I realize now it was a very stupid thing to do. I don’t think I will be taking part in any bets for a while.”
In Baytown, Texas, a 14-year-old became upset when she spotted a patrol car at her apartment complex parked on a curb that was painted red and was designated as a “no parking” zone. So, she decided to give the officer a “ticket” by leaving him a note on the car that he was in violation for parking in a fire lane, parking on a curb and for backing into the spot. According to KPRC in Houston, the apartment complex requires all residents to pull “head first” into spots when parking, a rule that is clearly stated all over the property. The teenager asked the officer to pay a $10 fine to the manager of the complex. The officer decided to pay up by giving the teenager a $20 gift card to Toys “R” Us, and when the store heard the story they decided to match it, so she received a $40 gift card. In Indianapolis, Indiana, police spotted a vehicle blocking traffic and found a 24-year-old into.xicated man passed out at the wheel. An officer said the man was wearing a t-shirt underwear and one sock. According to The Smoking Gun, the officer added that the man “did have pants on, but they were on his arms. Both arms were inserted into the legs of his jeans.” The man was arrested for public into.xication and obstructing traffic. Have a great weekend, everyone!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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