Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 31st, 2015
2015 Plan Sponsors of the Year
Plan Sponsor of the Year Profile: McCain Foods USA, Inc.
From their first day on the job, all employees at McCain Foods USA, Inc., see total contributions into their 401(k) account equal to 12% of their pay; they also, as of 10 years ago, make a mandatory 3% contribution, which the company, headquartered in Lisle, Illinois, matches 100%. The $389.4 million plan has 3,859 active participants and, obviously, a 100% participation rate. Participants defer an average of 9%, plus the company’s 6% contribution, for an average of 15% of pay going into their 401(k) accounts.Read more >
Plan Sponsor of the Year Profile: Credit Suisse
Retirement plan participant inertia is commonly viewed by plan sponsors as a top challenge. Credit Suisse sees things somewhat differently. For years, employee engagement was a primary goal of the retirement plan strategy, says Joseph Huber, managing director and chairman of Credit Suisse’s pension investment committee. Over time, though, the company came to recognize it is difficult to engage workers—especially young ones—even when the plan committee invests serious time and energy. “We realized that this inertia we were constantly fighting against could actually be a tremendous asset in improving the retirement outlook for our workers,” says Joseph Huber, managing director and chairman of Credit Suisse’s pension investment committee.Read more >
Benefits & Administration
Americans do appear to have a fair understanding of certain personal finance concepts, and both workers and retirees agreed that they place a high degree of importance on taking key steps to save and plan for retirement, according to findings of the Voya Retire Ready Index. However, when asked to identify the financial planning activities they had already taken, only a minority reported completing some of the primary measures that can lead to improved retirement outcomes.Read more >
According to the recent “Generational Planning Study” released by Genworth, nearly half (46%) of American adults give themselves a poor or failing grade when it comes to their retirement account contributions. Americans are also somewhat pessimistic about other critical topics, including long term care arrangements and the cost of other health care.Read more >
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Voya Identifies Role Models for Retirement Readiness
The Voya Retire Ready Index shows Americans are generally behind in their retirement readiness. Workers surveyed by Voya averaged an overall score of 4.1 out of 10, while retirees averaged a 5.5 score. However, the highest-scoring workers—identified by Voya as role models—received a combined average score of 7.0. The findings show that this group was more likely to own a wide range of products and view their employer-sponsored savings plan as a major source of income in retirement.Read more >
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PLANSPONSOR Research
Executive Benefit Program Usage Dipped in 2014
Companies report a slight 3% drop in plan participation rates from 2013 to 2014, according to the MullinTBG/PLANSPONSOR Executive Benefits Survey. Survey respondents ranked quality plan education and communication as the most important feature when deciding to enroll in a non-qualified program. “Clear communication of plan features and education about the benefits of deferring compensation to meet financial planning goals are key drivers of plan participation and satisfaction for both participants and plan sponsors,” says James McInnes, senior vice president for total retirement solutions at Prudential Retirement.Read more >
Market Mirror

U.S. stock indexes closed higher following encouraging news on consumer spending and home sales, according to the Associated Press. The Dow climbed 263.65 points (1.49%) to 17,976.31, the NASDAQ was up 56.22 points (1.15%) at 4,947.44, and the S&P 500 increased 25.22 points (1.22%) to 2,086.24. The Russell 2000 gained 17.39 points (1.40%) to finish at 1,257.80, and the Wilshire 5000 closed 267.77 points (1.23%) higher at 22,114.56.

On the NYSE, 3.2 billion shares traded, with advancing issues outnumbering declining issues nearly 3 to 1. On the NASDAQ, 2.8 billion shares changed hands, with a 2 to 1 lead for advancers.

The price of the 10-year Treasury note was up 2/32, bringing its yield down to 1.956%. The price of the 30-year Treasury bond decreased 11/32, increasing its yield to 2.554%.

Compliance
New Interpretation of Plan Provisions Violates ERISA
The 3rd U.S. Circuit Court of Appeals ruled a pension plan administrator may not apply amended plan terms to participants whose benefits vested under pre-amendment plan documents. According to the appellate court’s opinion, John Cottillion worked at United Refining Company for 29 years, from 1960 until 1989, and his benefits had vested under “the 1980 Plan,” which is the version of United’s Pension Plan for Salaried Employees that applies to people whose benefits vested after 1980 but before 1987. United amended the plan in 2002, backdated to January 1, 1995, to state that the benefits of terminated, vested participants who begin receiving plan payments before age 65 would be “actuarially reduced to reflect the earlier starting date.” The court determined that if the administrator applied the plan amendment to Cottillion it would be a violation of the Employee Retirement Income Security Act’s (ERISA’s) anti-cutback rule, which prohibits employers from amending a retirement plan in a way that reduces benefits already accrued under the plan.Read more >
Investing
Growth in CIT Use Driven by Familiar Market Factors
Despite a 75-year track record as an investment vehicle, some plan sponsors lack awareness of collective investment trusts and their reputation for low fees. As explained by Gary Kleinschmidt, head of DCIO sales at Legg Mason, collective investment trusts are an increasingly popular investment vehicle available to institutional investors—namely defined contribution and defined benefit retirement plans. He tells PLANSPONSOR there is relatively little user-facing difference between a mutual fund and a collective investment trust (CIT), especially from the ground-level perspective of the plan participant. Today the CIT structure is increasingly deployed in defined contribution plans with a target-date fund (TDF) overlay—often in an open-architecture approach giving plan sponsors a means of creating custom glide paths for their participant population at an affordable price.Read more >
Small Talk

ON THIS DATE: In 1889, the Eiffel Tower was dedicated in Paris in a ceremony presided over by Gustave Eiffel, the tower’s designer. In 1917, the U.S. purchased the Danish West Indies for $25 million and renamed them the Virgin Islands. In 1943, “Oklahoma!” debuted on Broadway. In 1965, the U.S. ordered the first combat troops to Vietnam.

 

TUESDAY TRIVIA: The lowest temperature ever recorded in the U.S. was -62C (-80F) in Prospect Creek, Alaska, on January 23, 1971.

TRIVIAL PURSUITS: Some of you have experienced some late snowfalls recently where you live. But, this is by far not the latest date snowfall was ever recorded in the U.S. Do you know when the latest snowfall ever recorded occurred?Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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