Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 20th, 2015
Benefits & Administration
Education Key to Prompting Participants to Save
When retirement plan providers take the time to educate participants about the importance of saving for retirement, this builds a level of trust that results in higher savings rates and the use of retirement planning tools, according to the National Association of Retirement Plan Participants’ (NARPP) second annual Retirement Plan Participant Financial Empowerment, Literacy and Trust (FELT) Study. The data shows that a provider’s education program and levels of trust are closely intertwined, says Laurie Rowley, NARPP’s co-founder and president. Education can create the necessary trust that encourages people to participate in the plan, increase their deferral rates, and use retirement planning tools and calculators, she says.Read more >
Failed Testing an Opportunity to Improve Retirement Plan
Failed nondiscrimination testing may mean a retirement plan is not designed to encourage workers to save enough. “The issuance of corrective distributions … means that the plan has highly compensated employees who were unable to save as much for their retirements with pre-tax income as they would like. It may also mean that the plan is not designed to encourage workers to contribute sufficiently,” says Eric Ryles, managing director of ALM Financial Intelligence.Read more >
Ask the Experts
“I am a benefits manager who recently became employed at a large nonprofit after having been in the corporate world. One of my first responsibilities was to review our existing vendor contracts. Much to my surprise, when it came time to review our Employee Retirement Income Security Act (ERISA) 403(b) plan, our vendor indicated that such contracts didn’t exist! They indicated that they have contracts with the plan participants, but not the employer. Could this be possible? For my prior employer’s 401(k) plan, we had a trust agreement, recordkeeping agreement and service agreement. It strikes me as odd that a 403(b) plan would have none of those things. Am I being unreasonable in my expectations?”Read more >
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Sponsored message from Vanguard
Maximizing the match in DC plans
In this new research note, Vanguard examines the effect of plan design on participants’ decision to maximize employer matching contributions.Read more >
Economic Events
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,135,000, according to the Census Bureau. This is 20.2% above the revised March estimate of 944,000 and is 9.2% above the April 2014 rate of 1,039,000. Single-family housing starts in April were at a rate of 733,000; this is 16.7% above the revised March figure of 628,000. The April rate for units in buildings with five units or more was 389,000.
Market Mirror

U.S. stocks drifted mostly lower, led by declines in energy stocks as the price of oil dropped, according to the Associated Press. The Dow was up 13.51 points (0.07%) at 18,312.39, the NASDAQ lost 8.41 points (0.17%) to finish at 5,070.03, and the S&P 500 decreased 1.49 points (0.07%) to 2,127.71. The Russell 2000 closed 1.87 points (0.15%) lower at 1,255.65, and the Wilshire 5000 was down 25.05 points (0.11%) at 22,466.96.

On the NYSE, 3.2 billion shares changed hands, with 1.5 declining issues for every advancing issue. On the NASDAQ, 2.8 billion shares traded, with a 1.3 to 1 ratio of decliners to advancers.

The price of the 10-year Treasury note was down 14/32, increasing its yield to 2.285%. The price of the 30-year Treasury bond decreased 27/32, bringing its yield up to 3.077%.

Compliance
Council Urges Repeal of ACA Excise Tax
The American Benefits Council submitted a very extensive written comment to the Department of Treasury and the Internal Revenue Service (IRS) in response to regulators’ solicitation of input about possible approaches for implementing the 40% excise tax on “high cost” employer-sponsored health  coverage mandated by the Patient Protection and Affordable Care Act (ACA). “The health care law was expressly designed to build upon the employer-sponsored benefits system, which provides great value to American workers and families. But this tax would wreak havoc on the employer coverage that over 150 million Americans have and want to keep,” said American Benefits Council President James A. Klein.Read more >
Considerations for Plan Sponsors After Tibble Ruling
Jesse Gelsomini, a partner in Haynes and Boone LLP, who specializes in employee benefits, feels the Supreme Court decision in Tibble v. Edison has strengthened the ongoing duty to monitor investments under the Employee Retirement Income Security Act (ERISA). “What this means is that an employer or other responsible fiduciary will not avoid potential liability if it selects an imprudent investment alternative for the 401(k) plan, but then successfully waits out the six-year ERISA limitations period,” Gelsomini suggests.Read more >
From the Magazine
Contemplating Freezing Your DB Plan?
Freezing a defined benefit (DB) plan is a de-risking strategy and, as such, can be part of a continuum of steps an employer may decide to take to reduce its liability. A retirement plan committee contemplating the freezing of its defined benefit plan may want to put into place a glide path investment strategy where the allocation to fixed income is increased as the plan’s funded status improves.Read more >
Investing
Net new flows to stock and bond funds totaled $28 billion in April, according to Strategic Insight, an Asset International company. Net investment to equity funds totaled $14.4 billion during the month, driven by a $43.4 billion inflow to international equity. U.S. equity funds shed $29.1 billion during the month, with outflows originating from both active mutual funds and index ETFs alike.Read more >
Small Talk
Fifty-two percent of employers use social networking sites to research job candidates, up from 43% last year and 39% in 2013, according to CareerBuilder. Six in ten (60%) are “looking for information that supports their qualifications for the job.” For some occupations, this could include a professional portfolio, CareerBuilder says. Fifty-six percent of recruiters want to see if the candidate has a professional online persona, 37% want to see what other people are posting about the candidate, and 21% admit they’re looking for reasons not to hire the candidate.Read more >

ON THIS DATE: In 1506, Italian explorer Christopher Columbus died in Valladolid, Spain. In 1775, North Carolina became the first colony to declare its independence. In 1830, the fountain pen was patented by H.D. Hyde. In 1862, the Union Congress passed the Homestead Act, allowing an adult older than 21, male or female, to claim 160 acres of land from the public domain. Eligible persons had to cultivate the land and improve it by building a barn or house, and live on the claim for five years, at which time the land became theirs with a $10 filing fee. In 1873, San Francisco businessman Levi Strauss and Reno, Nevada, tailor Jacob Davis were given a patent to create work pants reinforced with metal rivets, marking the birth of one of the world’s most famous garments: blue jeans. In 1927, at 7:52 a.m., American aviator Charles A. Lindbergh took off from Roosevelt Field on Long Island, New York, on the world’s first solo, nonstop flight across the Atlantic Ocean and the first ever nonstop flight between New York and Paris. In 1956, the United States conducted the first airborne test of an improved hydrogen bomb, dropping it from a plane over the tiny island of Namu in the Bikini Atoll in the Pacific Ocean.

 

WEDNESDAY WISDOM: “Lost time is never found again.” —Benjamin Franklin

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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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