Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 1st, 2014
Benefit Briefs
Work Will Be Ongoing Part of Boomers’ Lives
Work will be a part of Baby Boomers’ lives even into their retirement years, a survey finds. The 15th Annual Transamerica Retirement Survey, released by the Transamerica Center for Retirement Studies, finds 65% of Boomers (born between 1946 and 1964) plan to either work past the age of 65 or not retire at all. Most Boomers (52%) say they expect to continue working, at least part-time (42%), when then they do retire. In addition, most who plan to continue working say it is because of the need for either income or health benefits. The multigenerational survey also finds 52% of members of Generation X (born between 1965 and 1968) expect to self-fund their retirement with 401(k) plans, 403(b) plans or individual retirement accounts (IRAs).
Buyer's Market
Stranded Retirement Accounts a Growing Problem
Abandoned 401(k) accounts don’t do anyone any good, and they just may be hitting critical mass, according to the Retirement Clearinghouse. Given the energy and focus on participant outcomes, and the collective wisdom around defined contribution (DC) plans, Spencer Williams, CEO of the Retirement Clearinghouse, says it is puzzling why retirement savings have become so fragmented. Optimizing asset allocation and maximizing participation are two frequently cited tactics for improving participant retirement outcomes, Williams tells PLANSPONSOR, but he feels an overlooked issue is account consolidation.
MassMutual Retirement Services appointed Steven Mendelsohn as national practice leader for the firm’s defined benefit (DB) actuarial consulting practice. Mendelsohn takes on leadership of three actuarial and data teams that help manage 1,300 defined benefit and cash balance plans covering 800,000 participants and $16 billion in assets.
Firms Offer Uncashed Checks Services
Matrix Financial Solutions selected Risk Compliance Performance Solutions (RCP) to provide uncashed check mitigation services to its qualified retirement plan clients. RCP’s Retirement Plan Management Services division helps plan sponsors, recordkeepers and custodians mitigate risks such as missing participants in active, frozen, closed and terminating defined contribution (DC) and defined benefit (DB) plans.
Market Mirror
Wednesday, the Dow was up 45.47 points (0.28%) at 16,580.84, the NASDAQ increased 11.01 points (0.27%) to 4,114.56, and the S&P 500 closed 5.62 points (0.30%) higher at 1,883.95. The Russell 2000 climbed 6.02 points (0.54%) to 1,126.86, and the Wilshire 5000 gained 67.70 points (0.34%) to finish at 19,959.84.   On the NYSE, 3.2 billion shares changed hands, with advancing issues outnumbering declining issues by 2 to 1. On the NASDAQ, 2.7 billion shares traded, with 1.3 advancers for every decliner.   The price of the 10-year Treasury note was up 13/32, bringing its yield down to 2.647%. The price of the 30-year Treasury bond increased 18/32, decreasing its yield to 3.460%.
Rules & Regulators
Same-Gender Marriage Rules and Non-ERISA Plans
“I work with a public school district and our 403(b) plan is not subject to ERISA. Is there any impact on the federal recognition of same-gender marriage to our 403(b)?”  
What Will the IRS Be Looking into Next?
In 2010, the Internal Revenue Service (IRS) launched a large compliance project, the 401(k) Questionnaire. In its initial report from the project results, the agency said it will use information gathered from the 401(k) Questionnaire, in conjunction with other data, to assess the need for further formal guidance and define some upcoming projects and enforcement activities, among other things. One area of concern to the IRS from the results of the project is defaulted participant loans, according to Jalena Baumgardner, Employee Plans Examination Group Manager of agents in Charlotte and Greensboro, North Carolina. The agency is initiating a defaulted loan project under its Learn/Educate/Self-Correct/Enforce (LESE) program due to this concern.
Financial Sense
The attractiveness of pension annuitization, as tracked by Dietrich & Associates’ Pension Risk Transfer Index, is relatively unchanged from March. As of April 1, the index reached 95.55, increasing slightly over last month. Modest gains in the annuity discount rate proxy (3.17%) and plan funding levels have helped turn the index around.  
MAP-21 Funding Relief Benefitted DB Plans
The flexibility offered by the Moving Ahead for Progress in the 21st Century Act (MAP-21) benefited defined benefit (DB) plans, an analysis shows. The bill expanded the period used for determining interest rates for calculating pension liabilities to 25 years—for 2012 the interest rates were required to be within 10% of the average of benchmark bond rates for the 25-year-preceding period. The provision helped plan sponsors because interest rates were much higher before the 2008 financial crisis, and the use of higher interest rates lowers pension liability calculations. According to an analysis by the Society of Actuaries (SOA), the category of plans most affected by the MAP-21 provisions in 2012, those receiving the minimum contribution amounts required by the amended law, included plans in a variety of funded positions, and not just plans with relatively low funded ratios.
Data about organizations’ searches for investment managers reflects a shift toward non-traditional asset mandates. According to Mercer’s “2013 Global Manager Search Trends” report, in the U.S., the decline in manager searches continued across defined benefit (DB) and defined contribution (DC) mandates. In the DB space, equity and bond searches declined whereas interest in alternatives grew. Emerging market equities was the most popular search category, but U.S. fixed income had the largest share of assets placed.
The World at Large
In the U.K., human resources (HR) professionals are less prepared for retirement than transport workers, lawyers and people working in the media. Despite being the profession responsible for communicating the benefits of auto-enrollment and long-term savings, the HR profession was ranked behind 14 other industries in a poll by insurer Aegon.
Small Talk
More Americans realize they aren’t on track to meet retirement income needs, according to Northwestern Mutual, but the country as a whole is struggling to address longevity risk. A recent study from the firm shows a large slice of the U.S. work force has serious doubts about achieving financial preparedness for the long-term future. For example, about one in four working adults age 25 and older (26%) do not believe they will be financially prepared to live to the relatively young age of 75 without finding supplemental income beyond personal savings.
ON THIS DATE:  In 1926, Ford Motor Company became one of the first companies in America to adopt a five-day, 40-hour week for workers in its automotive factories. In 1931, President Herbert Hoover officially dedicated New York City’s Empire State Building, by pressing a button from the White House that turned on the building’s lights. In 1958, President Eisenhower proclaimed Law Day to honor the role of law in the creation of the United States of America. Three years later, Congress followed suit by passing a joint resolution establishing May 1 as Law Day. In 1963, James Whittaker of Redmond, Washington, became the first American to reach the summit of Mt. Everest. In 2003, a record-breaking wave of tornadoes began across the southern and midwestern United States. By the time the wave was over, more than 500 tornadoes were recorded for the month, shattering the previous record by more than 100.
SURVEY SAYS: I was encouraged by results of a survey of individuals who have reached age 100 that we covered this week. The survey found 9% of Centenarians express the most fondness for ages 70 and up, and 3% say the best time in their life is now. Both Centenarians and Baby Boomers feel younger than their age. This week, I’d like to know, how old is the oldest person you know or have known, and what lessons have you learned from them about aging and retirement? You may respond to this week’s survey by 6 p.m. Pacific time today.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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