Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 2nd, 2014
Benefit Briefs
Small Businesses Increasing Retirement Savings Efforts
The smallest of employers are gaining enough confidence in the economic growth of their businesses to increase efforts to help employees save for retirement. Fidelity Investments latest Small Business Retirement Savings Analysis reveals increases in average balances and contributions in small businesses’ retirement benefits plans for the third consecutive year. According to the analysis, average balances in Simplified Employee Pension Plans (SEP-IRAs) increased by 92% to $84,410 from 2008 to 2013. Average balances in Savings Incentive Match Plans for Employees (SIMPLE-IRAs) increased 100.8% to $36,235. In addition to contributing to their own retirement, small business owners are contributing more to employees’ accounts, Brian Hogan, director of small business retirement products at Fidelity in Smithfield, Rhode Island, tells PLANSPONSOR.
Buyer's Market
MullinTBG Introduces Plan Sponsor Reporting Center
MullinTBG, a provider of non-qualified executive benefits, has created a Plan Sponsor Reporting Center. The solution will offer plan sponsors more options, flexibility and convenience for accessing the plan- and participant-related information they need, the company says. Plan sponsors can run 22 new standard reports for balances, elections, transactions and enrollment, as well as customize, save and schedule a variety of reports to run on-demand.
Invesco PowerShares Capital Management has launched the PowerShares Variable Rate Preferred Portfolio (VRP). The aim of this portfolio will be to provide income-seeking investors with efficient exposure to a portfolio of variable-rate preferred securities. “We see strong demand for variable-rate preferred securities that offer the potential for high income and less interest rate risk than fixed-rate preferred securities in this current market rate environment,” says Dan Draper, Invesco PowerShares managing director of global exchange-traded funds (ETFs).
USRP Acquires CPI Common Remitter Business
U.S. Retirement Partners (USRP), through its U.S. Employee Benefits Services Group (USEBSG) division, has acquired the Common Remitter Services business of CPI Qualified Plan Consultants, Inc. Plan administration for 403(b) and 457(b) services will be transitioned to The OMNI Group, a member of USEBSG. This acquisition will add more than 1,000 new school districts to The OMNI Group.
Envestnet, Inc. has enhanced the capabilities of its Impact Investing Solutions platform, through which retirement plan clients can develop socially responsible investing (SRI) programs. This new impact investing program provides financial advisers and institutions with access to a comprehensive set of model portfolios, specialist advice and digital SRI portfolio-building tools.
UBS Offers Equtiy Comp. Participants Education and Advice
UBS Wealth Management Americas launched an online portal that provides education about equity awards and access to financial planning advice for equity compensation plan participants. The Knowledge Center is a portal for corporate employees in the United States and other countries throughout the world who participate in equity compensation plans. The center contains a broad range of materials tailored to individual needs. The information is personalized to each participant by award type, experience with awards, level of financial knowledge, life stage and financial concerns.
Economic Events
The U.S. Census Bureau of the Department of Commerce announced that construction spending during March was estimated at a seasonally adjusted annual rate of $942.5 billion, 0.2% above the revised February estimate of $940.8 billion. The March figure is 8.4% above the March 2013 estimate of $869.2 billion. During the first three months of this year, construction spending amounted to $196.6 billion, 8.3% above the $181.6 billion for the same period in 2013. In the week ending April 26, the advance figure for seasonally adjusted initial claims for unemployment insurance was 344,000, an increase of 14,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 329,000 to 330,000. The four-week moving average was 320,000, an increase of 3,000 from the previous week’s revised average. The average interest rate for a 30-year fixed-rate mortgage is 4.29%, down from 4.33% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.38%, down from 3.39%.
Market Mirror
Yesterday, the Dow slipped 21.97 points (0.13%) to 16,558.87, the NASDAQ increased 12.90 points (0.31%) to 4,127.45, and the S&P 500 decreased by 0.27 (0.01%) to 1,883.68. The Russell 2000 decreased by 0.89 (0.08%) to 1,125.97, and the Wilshire 5000 was up 16.70 points (0.08%) at 19,976.54. 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 decliners. The price of the 10-year Treasury note was up 9/32, bringing its yield down to 2.615%. The price of the 30-year Treasury bond increased 1 0/32, decreasing its yield to 3.407%.
Rules & Regulators
Meeting Expectations of the DOL
There are four main fiduciary duties the Department of Labor (DOL) expects from plan sponsors. According to Jennifer Del Nero, assistant regional director for the DOL’s Employee Benefits Security Administration (EBSA) in Atlanta, they are: Act solely in the interests of the participants and their beneficiaries, be prudent, pay only reasonable and necessary expenses for the plan, and follow the terms of the plan. Del Nero explained to attendees of the Retirement & Benefits Management Seminar, hosted by the University of South Carolina Darla Moore School of Business, and co-sponsored by PLANSPONSOR, that expenses are reasonable only if they are necessary for the operation of the plan, and are not excessive for the service received. “The main thing to remember about ensuring reasonable expenses is document, document, document,” she said.
Financial Sense
Retiree Health Benefit Changes Affect Company Reporting
As companies make changes to retiree health care benefits offerings, they should consider the related accounting implications. An Insights report from PwC’s Human Resources Services says companies are likely to continue to shift away from employer-sponsored plans or move to private exchanges for retiree benefits, similar to the shift over the last decade from defined benefit pension arrangements to defined contribution plans. Many employers that shift benefits from traditional employer-sponsored group health plans to the private exchanges will continue to provide some sort of subsidy to their retirees, often a fixed annual amount in a retiree health reimbursement account (HRA). PwC says some judgment may be required in assessing whether this is more akin to a plan amendment or to an actuarial gain/loss.
The World at Large
The Pensions Regulator and Institute of Chartered Accountants for England & Wales have published a set of standards for master trust governance, effective immediately. Last October the bodies published for consultation 43 master trust “control objectives” which it has pared down to 38. The rules are voluntary, although the regulator has already recommended employers do not use master trusts which do not agree to abide by them.
Small Talk
ON THIS DATE:  In 1885, the magazine “Good Housekeeping” was first published. In 1933, the modern legend of the Loch Ness Monster was born when a sighting made local news. In 1939, New York Yankees first baseman Lou Gehrig benched himself for poor play and ended his streak of consecutive games played at 2,130. “The Iron Horse” was suffering at the time from amyotrophic lateral sclerosis (ALS), now known as “Lou Gehrig’s Disease.” In 1972, after nearly five decades as director of the Federal Bureau of Investigation (FBI), J. Edgar Hoover died, leaving the agency without the administrator who had been largely responsible for its existence and structure. In 2011, Osama bin Laden, the mastermind behind the September 11, 2001, terrorist attacks in the United States, was killed by U.S. forces during a raid on his compound hideout in Pakistan.   And now it’s time for FRIDAY FILES!
If you fall asleep at work, you could mess up your “do”.
Somewhere in the UK, a couple has passed up naming their baby the winning suggestion by Reddit users. The dad had set up a website and asked all 2.89 million Reddit users to name the newborn, according to Huffington Post UK. The winning first and middle name were Cthulhu All-Spark, but the couple has decided to go with Amelia Savannah Joy as first and middle names. However, the new mom recognized the winning entry in a Facebook post that said: “All bow down to the great and powerful Cthulhu.” In Shanghai, China, a man named Xiang who quit his job at a man named Bing’s company three years ago and had a labor dispute has exacted revenge on Bing. Before leaving, Xiang claimed he was owed 3,000 RMB in wages, but Bing insisted he had already paid Xiang off. According to the Shanghaiist, Xiang continued to claim he never got his money. So recently, he ordered 1,130 baby ducks from a farmer named Chen, and asked Chen to send all the ducks to his boss’s place. When Chen asked Xiang for the duck payment, Xiang forwarded him on to Bing since Bing hadn’t paid his 3,000 RMB wage yet. For the sake of the ducks, Chen called the police to act as an intermediary. Finally, they reached an agreement with the police’s help: Bing had to compensate for all the fees of transporting the ducks and the loss of a few ducks. Police suggested Xiang and Bing go to the relevant authority to settle their wage dispute.
Maybe this reporter should have chosen a different place on the boat to interview the mayor.
In Foristell, Missouri, police spotted a swerving truck and proceeded to pull it over, thinking it was a dru.nk driver. However, they found the dru.nk was in the passenger’s seat—and he had his 13-year-old son driving him home after he had too much to drink at the son’s baseball game, according to St. Louis’ FOX News station. In Anchorage, Alaska, an Anchorage airport police training failed when a rental car with a small quantity of explosives attached to it went missing because the rental company inadvertently allowed the car to be rented out, authorities said. The Anchorage Daily News says it took a few hours for police to track down the car and recover the explosives, which had been placed on the vehicle for a routine K-9 training. The driver of the rental was never in danger, said Jesse Davis, chief of Airport Police and Fire at Ted Stevens Anchorage International Airport, but the episode was a lesson in accountability for authorities who were supposed to keep track of the vehicle. “It was embarrassing for the officer,” Davis said. In New York, New York, a former police officer is facing two years of prison for fraudulently claiming disability. He claimed he was unable to perform his police duties because of a work-related injury from June 2010 until March 2012, filing for disability while continuing to collect his $90,000 annual salary, according to court documents. Reuters reports the officer claimed he hurt his right arm in an on-the-job injury that caused excruciating pain and loss of mobility. However, he was caught and filmed performing as the lead singer of a heavy metal band “Cousin Sleaze,” slashing the air with his well-toned right arm while gripping a microphone.
In Pensacola, Florida, two anglers who had hoped to avoid publicity after catching a giant mako shark from the beach might have succeeded had they not stopped for gas on the way home. The enormous shark was spilling from the bed of their pickup truck. GrindTV reports that a passerby sent a photo of the shark to the Pensacola News-Journal. The newspaper tracked down one of the anglers and, a day later, reported that the catch could set a world record for shore-based fishing. The shark, reeled in with heavy tackle after an hour-long struggle, weighed 805 pounds and measured 11 feet. The anglers explained that they kept the shark because it had become so weary during the fight, they did not think it could swim back to sea.
In Bohemia, Czech Republic, police received an emergency call from parents saying a man was wedged in a climbing frame at a playground, said a fire brigade spokesman. “When our men arrived only his head and shoulders were sticking out. He had fallen asleep in the meantime and had sobered up a bit – and was rather embarrassed,” he added, according to the Metro. The man said he had been abandoned by his friends who were with him when he got stuck. Firefighters dislodged him. In Deerfield Beach, Florida, a family hid a man’s birthday cake on a washing machine in the laundry closet in their apartment. They lit the candles and closed the door, ready to surprise him. However, when they opened the door, they were met with a barrage of water from the sprinkler that had gone off. The apartment below was flooded from the incident, according to the Sun-Sentinel. In South Brunswick, New Jersey, a 40-year-old woman who received her driver’s license just weeks ago led police on a chase for more than a mile. The woman went through a stop sign, nearly caused a collision and drove at night with her headlights off, police said, according to nj.com. She was arrested at her home. She told police she didn’t know she had to stop for police and just wanted to get home.   Have a great weekend, everyone!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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