Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 4th, 2015
Benefits & Administration
Addressing Each Generation’s Financial Weaknesses
Holistic financial education can help different generations in the work force address their unique vulnerabilities that can derail plans for retirement. Millennials, Generation X and Baby Boomers each have distinct strengths and weaknesses when it comes to managing and saving money, research from Financial Finesse shows. While Millennial employees (younger than age 30) tend to have the lowest average financial wellness scores as a whole, they continue to slightly edge out Generation X in several areas of money management, Financial Finesse found. However, Millennials may have been the most impacted psychologically from the Great Recession. From the way they manage their money to the way they invest, the focus is more on not losing money than growing their wealth for the long term.Read more >
In its nine-part educational series for plan sponsors, BMO shines a light on retirement plan issues including plan design and operational efficiency. The series is designed to assist plan sponsors cost-effectively help participants gain the most from their 401(k) plans. The third paper in the last section, just released, deals with participant utilization and addresses plan leakage and ways plan sponsors can stanch outflows.Read more >
Managing the Big Spend on Pharmacy Benefits
A survey from Buck Consultants indicates how employers can look to spend their pharmacy dollars more effectively. More than three-fourths (77%) of respondents to Buck Consultants’ Prescription Drug Benefit Survey reported spending 16% or more of their health benefit cost on pharmacy benefits, up from 72% in the previous year. Buck notes that many plan sponsors are concerned that their pharmacy benefit program is not maximized or as cost-effective as it could be. There is an array of cost and quality-control strategies—coverage rules and clinical programs—to consider when building a pharmacy benefit program.Read more >
According to the BNY Mellon Investment Strategy and Solutions Group (ISSG), the funded status of the typical U.S. corporate pension plan increased 5.1 percentage points in February, reaching 87.5%. It was the best monthly gain since January 2011. Equity markets bolstered assets and rising interest rates created lower liabilities, resulting in February’s gains offsetting January’s declines.Read more >
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Largest Pensions Troubled by Longer Life Spans
The United States’ 19 largest pension funds hold roughly 40% of the nation’s pension obligations, according to Russell Investments, so it’s no big surprise they are struggling with longevity trends. An assessment of Russell Investments’ “$20 Billion Club,” an index tracking the largest private U.S. pension funds, finds “actuarial losses” had the most significant impact on pension performance during the last year. Russell defines actuarial losses as those pinned to interest rates and mortality assumptions, among other factors.Read more >
The National Institute on Retirement Security (NIRS)’s sixth annual national retirement security poll shows many Americans would be willing to take lower salary increases in exchange for a pension benefit in retirement. Nearly 75% of Americans are concerned about their ability to achieve a secure retirement, NIRS says, and support for steady and reliable retirement income from pensions and annuities is growing. Some 82% of Americans say a pension is worth having because it provides steady income that won’t run out.Read more >
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Market Mirror
Tuesday the Dow closed 85.26 points (0.47%) lower at 18,203.37, the NASDAQ lost 28.20 points (0.56%) to finish at 4,979.90, and the S&P 500 decreased 9.64 points (0.46%) to 2,107.75. The Russell 2000 fell 7.85 points (0.63%) to 1,234.77, and the Wilshire 5000 was down 90.45 points (0.40%) at 22,255.79.   On the NYSE, 3.2 billion shares changed hands, with 1.4 declining issues for every advancing issue. On the NASDAQ, 2.8 billion shares traded, with a near 2 to 1 lead for decliners.   The price of the 10-year Treasury note was down 10/32, bringing its yield up to 2.122%. The price of the 30-year Treasury bond decreased 21/32, increasing its yield to 2.718%. Read more >
Compliance
Nonqualified Plan Beneficiary Not Determined by Qualified Plan
A decision from The 9th U.S. Circuit Court of Appeals confirms a lower court ruling that a retirement plan membership letter and beneficiary designation form for a nonqualified plan “did not clearly and unequivocally incorporate by reference the entirety” of the terms of a plan sponsor’s qualified retirement plan. For this reason, the terms of the qualified plan cannot determine a beneficiary under the nonqualified plan, the court ruled.Read more >
Sanofi Potentially Faces Stock Drop Lawsuit
An investigation of Sanofi’s U.S. Group Savings Plan is underway, in light of possible violations of the Employee Retirement Income Security Act (ERISA), according to employee stock drop case litigator Jake Zamansky, leader of Zamansky LLC. Zamansky says his firm has commenced an investigation to determine if fiduciary duties to prudently manage and invest plan assets were violated by Sanofi, which continued offering its company stock while it allegedly knew it was violating federal anti-kickback laws.Read more >
From the Magazine
CalPERS Hedge Fund Exit
In terms of investment returns, participants in defined contribution (DC) plans have long been at a disadvantage compared with those in defined benefit (DB) plans. Consultant Callan Associates, in San Francisco, has tracked the performance difference since 2006 and found a persistent 1% annual shortfall for defined contribution plan returns. Callan’s most recent measure, for third quarter 2013, reported an admirable 5.45% aggregate return for its research universe—covering 80 defined contribution plans with assets of $100 billion—but still observed a deficit of about 1% compared with defined benefit plans. One factor behind DB’s long-term outperformance is its broader range of asset classes, which extends to alternative assets such as private equity, hedge funds and real estate.Read more >
Small Talk
ON THIS DATE: In 1791, Vermont was admitted as the 14th U.S. state. In 1861, Abraham Lincoln became the 16th president of the United States. In 1877, Emile Berliner invented the microphone. In 1902, the American Automobile Association was founded in Chicago. In 1925, Calvin Coolidge took the oath of office in Washington, D.C. The presidential inauguration was broadcast on radio for the first time. In 1933, Franklin Delano Roosevelt was inaugurated as the 32nd president of the United States. In 1950, Walt Disney’s “Cinderella” was released across the U.S. In 1954, in Boston, Peter Bent Brigham Hospital reported the first successful kidney transplant. In 1974, “People” magazine was available for the first time. In 1995, comedic star John Candy died suddenly of a heart attack at the age of 43. In 1997, U.S. President Clinton barred federal spending on human cloning. In 1998, the U.S. Supreme Court said that federal law banned on-the-job se.xual harassment even when both parties are the same se.x.
WEDNESDAY WISDOM: “Everything that irritates us about others can lead us to an understanding of ourselves.” —Carl Jung, Swiss psychiatrist
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