Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 6th, 2014
Benefit Briefs
Which States Have Fiduciary Laws for 403(b)s?
“I realize that fiduciary responsibility is quite clear in 403(b) plans that are subject to the Employee Retirement Income Security Act (ERISA). But what about plans that are not subject to ERISA, such as those for public school districts and churches? I hear that some states have fiduciary laws of their own, but which states and how many?”
Fourth quarter 2013 data for defined contribution (DC) plans administered by MassMutual shows savings and investing improved for different demographic groups. For MassMutual, 58.4% of total DC participants are in the Gen X and Gen Y cohort (born between 1965 and 1995), and are continuing to gain on numbers of Baby Boomers who now account for just 38.5% of participants on MassMutual’s platform. For 2013, the percentage of combined assets controlled by Gen X and Gen Y (34.2%) is still below that of Baby Boomers (60.2%), but that gap is gradually closing. At year-end 2012, Gen X/Gen Y held 31.9% of defined contribution assets compared to Baby Boomers at 60%.
States with Strong 401(k) Plans
Connecticut has the highest concentration of strong 401(k) plans, according to an analysis by Judy Diamond Associates. “The analysis looks at all the Form 5500 data in the country, identifying 401(k) plans that are performing well and are designed well,” Eric Ryles, managing director of Judy Diamond Associates, tells PLANSPONSOR. “These plans are evaluated using seven metrics, which include a plan’s rate of return, participation rate, participant loans as a percentage of plan assets, average participant contributions, change in average participant contributions, average employer contributions per participant and change in average employer contributions.” According to Ryles, “Plan participation is definitely the driver of producing successful retirement incomes. Plan design by itself is useless unless there are an adequate number of employees participating in a 401(k) plan.”
Buyer's Market
John Hancock Expands Solution for Fair Plan Expenses
John Hancock Retirement Plan Services (JH RPS) is implementing a new way of pricing its 401(k) plan services that will help plan sponsors address the issue of fairness in allocating plan expenses among participants. JH Signature 2.0, effective in May 2014, not only expands its revenue-sharing allocation solution to plans from startups to those with $10 million in assets, but it uses John Hancock’s “required revenue” concept to establish pricing for a particular plan based on just what is needed for that plan, independent from a plan sponsor’s fund lineup or what participants invest in, Peter Gordon, president at John Hancock Retirement Plan Services in Boston, tells PLANSPONSOR.
ESOP Consultant Names Director of Plan Administration
Blue Ridge ESOP Associates has named Kevin T. Rusch as the firm’s director of plan administration. He will provide employee stock ownership plan (ESOP) design and consulting services, plan administration support and compliance services.
Market Mirror
Wednesday, the Dow slipped 35.70 points (0.22%) to 16,360.18, the NASDAQ ticked up 6.00 points (0.14%) to 4,357.97, and the S&P 500 decreased by 0.10 points (0.01%) to 1,873.81. The Russell 2000 was down 2.74 points (0.23%) at 1,205.91, and the Wilshire 5000 closed 1.63 points (0.01%) lower at 20,131.39.   On the NYSE, 3.2 billion shares changed hands, and on the NASDAQ, 2.6 billion shares traded, with a slight lead for declining issues on both exchanges.   The price of the 10-year Treasury note was down 1/32, bringing its yield up to 2.703%. The price of the 30-year Treasury bond was up 1/32, bringing its yield down to 3.646%.
Financial Sense
“The Wilshire 2014 Report on State Retirement Systems: Funding Levels and Asset Allocation,” released by institutional investment advisory firm Wilshire Consulting, shows that the ratio of pension assets to liabilities, or funding level, for all of the plans included in the study was 75% in 2013, up from 72% in 2012. “Global stock markets rallied strongly over the 12 months ended June 30, 2013, offsetting weaker performance by global fixed income and allowing pension asset growth to outdistance the growth in pension liabilities over fiscal 2013,” says Russ Walker, a vice president at Wilshire Associates and an author of the report.
The funded status of the typical U.S. corporate pension plan improved 1.7% in February to reach 92.6%, as most asset classes gained during the month. The BNY Mellon Investment Strategy & Solutions Group (ISSG) notes that for February the gains in asset values outpaced the rise in liabilities, which resulted from falling interest rates. Year to date, the funded status of the corporate plans is down 2.6%, according to ISSG’s Institutional Scorecard.
Rules & Regulators
IRS Summarizes Voluntary Correction Choices for 457s
Some plan sponsors, under limited circumstances, may submit requests for voluntary correction to the Internal Revenue Service (IRS) for their Code Section 457(b) retirement plans. The IRS updated and expanded its Employee Plans Compliance Resolution System (EPCRS) in Revenue Procedure 2013-12; however, the IRS’s Employee Plans Voluntary Compliance (VC) team will consider requests on a provisional basis outside of the Employee Plans Compliance Resolution System (EPCRS). The agency notes governmental plan sponsors do not have to make a submission to VC to voluntarily fix problems with their 457(b) plans.
Small Talk
ON THIS DATE:  In 1820, President James Monroe signed the Missouri Compromise, also known as the Compromise Bill of 1820, into law. The bill attempted to equalize the number of slave-holding states and free states in the country, allowing Missouri into the Union as a slave state while Maine joined as a free state. In 1899, the Imperial Patent Office in Berlin registered Aspirin, the brand name for acetylsalicylic acid, on behalf of the German pharmaceutical company Friedrich Bayer & Co. In 2001, after a string of adverse legal decisions, music download website Napster Inc. began its death spiral when it began complying with a Federal court order to block the transfer of copyrighted material over its peer-to-peer network.
SURVEY SAYS: At the end of February, U.S. House Ways and Means Committee Chairman Dave Camp introduced a sweeping tax reform bill that has many in the retirement industry alarmed about its proposals concerning retirement plans. See “Industry Groups Raising Alarms About Tax Reform” on This week, I’d like to know if you think the retirement-plan related proposals will hurt, help or not affect Americans retirement savings. You may respond to this survey by 6 p.m. Pacific time today.
Sponsored message from PLANSPONSOR
PLANSPONSOR Plan Sponsors of the Year – 403(b) Finalists include Gilman School, Moffitt Cancer Center, Texas Association of School Boards, Inc., and Washington State Board for Community & Technical Colleges. Winners in each category will be announced in February and recognized at the Awards for Excellence dinner. View other categories.  
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