Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
March 7th, 2014
Benefit Briefs
Addressing the Retirement Security Risks of Women
For many reasons, women may be at a greater risk than men of not achieving a secure retirement. “The key thing is women have made so much progress in the workforce and their careers, but their retirement outlook is still not catching up,” Catherine Collinson, president of the Transamerica Center for Retirement Studies in Los Angeles, tells PLANSPONSOR. “Only 7% of women are ‘very confident’ in their ability to fully retire with a comfortable lifestyle. We can do better than that.” Based on select findings from the 14th Annual Transamerica Retirement Survey of Workers, the Center came up with “Fourteen Facts” that highlight specific areas of opportunity for women to improve their retirement outlooks. It also outlines some of the underlying reasons women are at greater risk than men of not achieving a secure retirement.
A bill recently submitted to the Kentucky state legislature would enact several reforms on the state’s pension systems. House Bill 546, sponsored by state Representative Jim Wayne (D-Louisville), would set competitive bidding rules and ban use of third-party placement agents for the Kentucky Retirement Systems (KRS), the Kentucky Teachers’ Retirement System (KTRS) and the Kentucky Judicial Form Retirement System, which includes judges and state legislators.
For Retirement Security, Is It Better to Be Married?
A report shows that over the last 50 years, the composition and work patterns of Americans have changed dramatically, with the number of unmarried individuals steadily increasing. “Retirement Security: Trends in Marriage and Work Patterns May Increase Economic Vulnerability for Some Retirees,” released by the U.S. Government Accountability Office (GAO), highlights factors contributing to the potential economic vulnerability of single retirees. First, single retirees living alone do not benefit from sharing the cost of living expenses and caregiving. Second, unmarried individuals are more vulnerable to economic shocks, such as job loss, than their married counterparts. Third, the unmarried, especially single parents, tend to have fewer resources available to save for retirement during their working years, noting that figures from 2009 show that among women ages 35 to 54, unmarried women with children had the lowest level of pension plan participation among all family types.
The cost of providing employer-sponsored health care benefits will increase slightly this year (4.4%), compared with 2013, when cost increases fell to a 15-year low, a survey finds. In addition, the vast majority of employers say they remain committed to providing benefits to active employees, but say moderate to significant changes to their plans are in store over the next few years, according to the joint survey by global professional services firm Towers Watson and the National Business Group on Health (NBGH), which queried 595 large U.S. employers.
Buyer's Market
Fidelity Emphasizes Outcomes with New Suite
Inspired partly by the way Amazon understands and uses customer behaviors, Fidelity Investments rolled out a suite of tools and technologies with a heightened focus on outcomes. Simply providing average account balances and basic metrics are no longer enough to help employers gain insight into improving the plan, says James MacDonald, president of workplace investing at Fidelity Investments. “Employers want meaningful, detailed data that can help them analyze the performance of their savings plan and help ensure their workforce is making the right decisions.”
The portfolio consulting group of Envestnet Inc. launched a new multi-manager portfolio series called the Liquid Endowment Portfolios, designed to address rising correlations across asset classes. Envestnet PMC, a unit of Envestnet Inc. that develops and delivers investment and portfolio solutions, says increased correlation across asset classes has become a significant concern for investors of all sizes since 2000, and especially since the financial crisis in 2008. To address this, the firm says it has released a liquid portfolio series that uses the latest thinking on asset allocation to more effectively combine asset classes in an effort to build wealth.
Evidence Suggests Private Exchanges Are a Win-Win
Data from enrollment in the Aon Active Health Exchange shows employees “get it, engage and like it,” Mike Christie, Aon Hewitt’s senior vice president of health exchange sales in Chicago, tells PLANSPONSOR. The private exchange can also save employers money. The Aon Active Health Exchange, launched in the fall of 2012 (see “Aon Hewitt Launches Corporate Health Care Exchange”), is a private exchange for large employers that offers fully insured group health plans from multiple insurance companies. More than 150,000 employees and their families from several large employers enrolled in health benefits for the 2013 calendar year. The average cost increase in fully insured premiums for these three companies returning to the private exchange in 2014 was 5.1%, including the reinsurance fees levied on all group health plans under the Patient Protection and Affordable Care Act. Comparatively, Aon Hewitt’s estimates and other industry reports show that average health care cost increases for large U.S. employers are likely to be approximately 6% to 7% in 2014, before employers make changes in deductibles and copays.
Actionable Information Motivates Higher Retirement Savings
Four years after the launch of its Lifetime Income Analysis experience, participants in Putnam Investments-administered 401(k) plans continue to take significant steps forward in increasing their level of retirement preparedness. During 2013, Putnam found that of the participants who used the firm’s proprietary Lifetime Income Analysis Tool (see “Putnam Introduces Retirement Income Calculator”), 35% made deferral changes, and of those, 76% chose to increase their savings rate by an average of 25%. “This data tells plan sponsors that deferral rates can be improved if we move beyond the traditional view of participant balances and investments, Edmund F. Murphy III, head of Defined Contribution at Putnam Investments, tells PLANSPONSOR.
Economic Events
New orders for manufactured goods in January, down three of the last four months, decreased $ 3.3 billion or 0.7% to $483.0 billion, the U.S. Census Bureau reported. This followed a 2.0% December decrease. Excluding transportation, new orders increased 0.2%. In the week ending March 1, the advance figure for seasonally adjusted initial claims for unemployment insurance was 323,000, a decrease of 26,000 from the previous week’s revised figure of 349,000, the Labor Department reported. The four-week moving average was 336,500, a decrease of 2,000 from the previous week’s revised average of 338,500. The average interest rate for a 30-year fixed-rate mortgage is 4.28%, down from 4.37% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.32%, down from 3.39%.
Market Mirror
Thursday, the Dow was up 61.71 points (0.38%) at 16,421.89, the NASDAQ slipped 5.85 points (0.13%) to 4,352.13, and the S&P 500 ticked up 3.22 points (0.17%) to 1,877.03. The Russell 2000 decreased by 1.36 (0.11%) to 1,204.54, and the Wilshire 5000 closed 25.30 points (0.13%) higher at 20,156.69. On the NYSE, 3.2 billion shares traded, with 1.3 advancing issues for every declining issue. On the NASDAQ, 2.7 billion shares changed hands, with a slight lead for advancers. The price of the 10-year Treasury note was up 1/32, bringing its yield down to 2.736%. The price of the 30-year Treasury bond increased 3/32, decreasing its yield to 3.687%.
The World at Large
A cap on fees could kill innovation in investment strategies for defined contribution (DC) schemes, according to James Churcher, pensions manager at Abbot Laboratories.
Rules & Regulators
The Department of Labor (DOL) is seeking to recover pension plan assets on behalf of retirement plan participants of a construction company based in Radford, Virginia. The lawsuit claims Mark Kinser, sole owner and CEO of Unlimited Construction Inc., as well as a plan trustee, withdrew $491,000 from the plan’s investment account, which was deposited into a personal banking account in Kinser’s name.
The Department of Labor (DOL) has obtained authorization to appoint a new fiduciary for the retirement plan of a Syracuse, New York, construction firm. According to an investigation by the DOL’s Employee Benefits Security Administration (EBSA), the retirement plan was created in July 1992 by the Hardy Construction Company, which went out of business in June 2008. Since 2008, no individual has come forth to assume fiduciary responsibility for the plan or to distribute the plan’s assets to participants.
Small Talk
ON THIS DATE:  In 1876, 29-year-old Alexander Graham Bell received a patent for the telephone. In 2010, Kathryn Bigelow became the first woman to win an Academy Award for best director, for her movie “The Hurt Locker,” about an American bomb squad that disables explosives in Iraq in 2004.   And now it’s time for FRIDAY FILES!
A third grader sings the snow day blues. Very cute.
Take this test to see if you are right-brained or left-brained, and what that means.
In Hobe Sound, Florida, an officer noticed a sport utility vehicle speeding on U.S. 1, according to records. Police stopped the driver and reported he smelled of booze, appeared to have glassy eyes and slurred his speech. He told one officer he was coming from home and had “a couple” of drinks. He said he was en route to a bar for “a few” more. Moore told another officer he got in an argument with his wife and left for a drive. “He also told me that his wife told him that he (had) been drinking too much so he decided to go out and ‘drive it off,'” an arrest affidavit states. In Darwin, Australia, the resident of an eight-hectare (one hectare equals 10,000 spare meters) block in Darwin’s rural area says that after he had a few beers he thought he saw a dingo. He says he followed the animal into bushland behind his residence because he was concerned about his pets, according to ABC in Australia. But he got lost on his own property and tried to find his house for about an hour. He used his mobile phone to call police, and with the help of a neighbor, they found the man safe and well about 300 meters from his house.
Being a news reporter this winter can get very dangerous.
In Spartanburg, South Carolina, while many hotels suffer from stolen towels, linens and occasionally, TVs, the USA Economy Lodge on Asheville Highway called deputies after an employee checking a room noticed something missing from the bathroom—the toilet. In Delhi, India, police have failed to act on hundreds of corruption complaints due to what one officer called a “technical problem,” according to the Indian Express newspaper. It seems for eight years no one knew the password to the online portal holding complaints from India’s anti-corruption agency, called the Central Vigilance Commission (CVC). Two senior police officers have now been trained for the system, and can access the 667 cases that have piled up since the portal launched. In Midwest City, Oklahoma, a man went into a bank to rob it by handing a teller a personal check of his mother’s with a note on it. Paranoid that he tripped an alarm, he left. Although, he had scratched out his mother’s information on the check, the FBI was able to figure it out and caught up with him. He told the FBI he believed his body was in the bank, but his mind was not, according to KOCO in Oklahoma City. He said he had been up for four days using metham.phetamine. He admitted to stealing the check from his mom.
In Gilman, Minnesota, a farmer decided to pile up the snow covering his land and make a 50-foot-high snowman nicknamed “Granddaddy.”  Granddaddy took nearly five weeks and hundreds of hours of labor to complete. Novak took advantage of snowpiles caused by a roof collapse of one of his greenhouses on his vegetable farm. He used skid loaders to pile snow and a silage blower to direct snow into stacked cylinders. Friends and family pitched in to help.
Have a great weekend, everyone!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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