Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 4th, 2014
Benefit Briefs
Sponsors See Success Boosting Employer Matches
A new analysis from investment intelligence firm Strategic Insight shows plan sponsors have enhanced key features and processes within their retirement plans over the last several years. Strategic Insight, an Asset International company, examined plan sponsor survey results from collected by PLANSPONSOR magazine over years 2009 through 2013. The analysis focused on identifying plan design features that saw aggregate improvements or declines, especially employer matching contributions, formulas used to calculate matches, payment schedules and vesting practices. In all, the analysis identified a positive trend across the defined contribution (DC) investing landscape in terms of these features.
Why Plan Sponsors Like DC Plans—and How to Improve Them
Employers favor defined contribution (DC) retirement plans over defined benefit (DB) plans for reasons such as cost, predictability and simplicity, says a recent analysis by Russell Investments. “In theory, a DC plan can cost the plan sponsor any amount (subject to IRS limits), but in practice, contribution levels are set to make DC plans cheaper for the sponsor,” Bob Collie, chief research strategist at Russell Investments, tells PLANSPONSOR. “On predictability, the DB plan cost to the sponsor is highly variable and unpredictable. One reason so much information needs to be supplied for DB plans is to allow investors to assess the possible impact on future company results. DC plan costs, by contrast, are stable and predictable.”
Buyer's Market
Jim Brockelman will rejoin John Hancock Retirement Plan Services as national director, mid-market. Brockelman will report to Bob Carroll, national sales manager, Retirement Plan Services, as he leads the company’s expansion into the 401(k) mid-market sector.
BPAS Launches Plan Health Assessment Tool
BPAS, a provider of retirement plan administration services, launched the “On Track” report to help its clients assess the overall health of their retirement plans. BPAS says the tool will help plan sponsors and plan advisers rate the overall health of their plan by evaluating the “on track” status of individual participants and the plan as a whole. The report is run monthly for all plan types and delivered online.
Consulting firm Mercer announced plans to purchase Transition Assist, a retiree exchange specializing in helping retirees in employer-sponsored plans select Medicare supplemental health care insurance. Transition Assist, which offers health care solutions through a licensed call center and professionally-trained benefits counselors, will become part of the full suite of solutions offered by Mercer Marketplace.
Economic Events
Spending on private construction was at a seasonally adjusted annual rate of $670.8 billion, 0.5% above the revised December estimate of $667.5 billion. Residential construction was at a seasonally adjusted annual rate of $359.9 billion in January, 1.1% above the revised December estimate of $356.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $310.9 billion in January, 0.2% below the revised December estimate of $311.5 billion.
Market Mirror
Major U.S. stock indices took a tumble Monday, with the Dow falling 153.68 points (0.94%) to 16,168.03. The NASDAQ lost 30.82 points (0.72%) to finish at 4,277.30, and the S&P 500 closed 13.72 points (0.74%) lower at 1,845.73. The Russell 2000 decreased 6.69 points (0.57%) to 1,176.34, and the Wilshire 5000 was down 136.11 points (0.68%) at 19,810.73. On the NYSE, 3.2 billion shares changed hands, with a 2 to 1 lead for decliners. On the NASDAQ, 2.7 billion shares traded, with 1.8 declining issues for every advancing issue. The price of the 10-year Treasury note was up 14/32, bringing its yield down to 2.599%. The price of the 30-year Treasury bond increased 16/32, decreasing its yield to 3.555%.
Financial Sense
The Dietrich Pension Risk Transfer Index fell nearly three points in February to 95.33. The index, which tracks the relative attractiveness of annuitizing pension liabilities, also saw the annuity discount rate proxy of 3.18% fall 19 basis points from the previous month. In addition, plan funding levels dropped 4% on average in January, giving back nearly 25% of their 2013 gains as a result of underperforming assets and declining interest rates.
The World at Large
There is a disconnect between “aspiration and reality” among the 25% of UK employers who think their defined contribution (DC) plans will provide an adequate retirement for staff, according to Towers Watson.
Rules & Regulators
The U.S. Equal Employment Opportunity Commission (EEOC) has filed an age discrimination lawsuit against a utility provider in Memphis, Tennessee. The suit alleges Memphis Light, Gas and Water (MLGW) violated the Age Discrimination in Employment Act (ADEA) when it refused to promote Carlos Phifer to the position of computer operations specialist because of his age, then 57.
Contributions Could Be Capped in 2015 Budget
The White House proposed budget for 2015, slated for release March 4, again wants to cap the amount of tax-deferred retirement contributions. President Barack Obama again proposes a limit on the value of all tax deductions, defined contribution exclusions and individual retirement account (IRA) deductions to 28% of income. The budget also proposes an overall cap of the amount that could be held in tax-deferred accounts, of $3.4 million, an amount that would theoretically provide an annual retirement income of $205,000 using a formula based on current interest rates. The amount could be lowered if interest rates rise.
Sponsored message from PLANSPONSOR
PLANSPONSOR Plan Sponsors of the Year – Corporate 401(k) – >$1B
Finalists include Eastman Chemical Company, Google, Inc. and Microsoft Corporation. Winners in each category will be announced in February and recognized at the Awards for Excellence dinner. View other categories.
Small Talk
ON THIS DATE:  In 1789, the first session of the U.S. Congress was held in New York City as the U.S. Constitution took effect. In 1861, Abraham Lincoln became the 16th president of the United States. In 1913, with trouble brewing between the great nations of Europe, Thomas Woodrow Wilson took office as the 28th president of the United States. In 1933, at the height of the Great Depression, Franklin Delano Roosevelt was inaugurated as the 32nd president of the United States. In 1995, comedic star John Candy died suddenly of a heart attack in Mexico.   TUESDAY TRIVIA: The first microwave oven, the Radarange, weighed 750 pounds, was 5 1/2 feet tall, and cost about $5,000.
TRIVIAL PURSUITS: From what did the idea for inventing the microwave oven come?
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FEATURED
2014 PLANSPONSOR National Conference
Now in its ninth year, the PLANSPONSOR National Conference (PSNC) remains a unique collaboration of plan sponsors, retirement plan advisers and providers who are focused on understanding and applying the most innovative investment options, employee education and engagement ideas, and plan design solutions. The conference also brings a plan sponsor perspective to many sessions, as panelists share experiences of what has worked—or not—at their companies. This year’s keynote speaker is Dallas L. Salisbury, president and CEO of the Employee Benefit Research Institute (EBRI) in Washington, D.C.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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