Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 21st, 2014
Benefit Briefs
How Employee Retirement Outcomes Affect Businesses
Employees being unable to retire is a poor scenario for them and their employers. “The long and short of it is that it’s very expensive for employers: everything from workers’ compensation to health care costs to absences from work,” says E. Heather Smiley, chief marketing officer at MassMutual Retirement Services. Some employers may hesitate to spend money on features such as a generous match, even though these could increase employees’ odds of retiring on time. But employers feel the cost when people cannot retire, too. “You’re going to pay for it—one way or the other,” she says.
Frequent Participant Trading Elicits Fund Provider Response
Frequent trading by some 401(k) participants is eliciting a response from fund providers such as Vanguard and T. Rowe Price. Though the instances reported in the media have been about airlines’ employees, fund companies may institute these restrictions when employees of any industry frequently trade within their employer-sponsored retirement plans. Vanguard has only given warnings to employees of Southwest Airlines. But, when asked if there was a regulation requiring them to halt such trading, Linda S. Wolohan, a Vanguard spokesperson, told PLANSPONSOR, “It’s not primarily a regulatory situation. The prospectus for our funds gives Vanguard the authority to take action if there’s frequent trading or purchases by any type of investor, whether or not through a retirement plan, that we determine to be harmful to a fund.”
Buyer's Market
Insurance provider Unum is offering tools to help employers examine the pros and cons of offering health care coverage versus paying penalties for not offering such coverage. The tools include a pay or play interactive tool; a pay or play decision tree; and an employer responsibility timeline.
The Retirement Advantage, Inc. (TRA), a third-party administrator, is restructuring how it serves clients. As part of its enhanced focus on client relationships, a dedicated client relationship manager is being assigned to each plan, in addition to being supported by TRA’s full plan administration team. TRA has also hired additional staff to manage the restructured department.
Industry Voices
Industry Voice: How Do We Think Differently?
While we have known for some time that Americans are clearly not saving enough for retirement, there’s now a growing consciousness that participant outcomes shouldn’t just be a focus, but rather the focus. That’s not to say that topics like fiduciary liability mitigation are any less important. It is, however, a very strong and important statement about what matters most—getting everyday Americans ready for retirement. Everything else is noise. Intuitively, we all know this and have for some time, but it sure is pretty cool to see an industry come together and get its focus right.
Market Mirror
Yesterday, the Dow tumbled 137.55 points (0.83%) to 16,374.31, the NASDAQ decreased 28.92 points (0.70%) to 4,096.89, and the S&P 500 was down 12.25 points (0.65%) at 1,872.83. The Russell 2000 fell 16.55 points (1.48%) to 1,097.88, and the Wilshire 5000 closed 148.64 points (0.74%) lower at 19,805.74. On the NYSE, 3.2 billion shares traded, with 2.4 declining issues for every advancing issue. On the NASDAQ, 2.7 billion shares changed hands, with a more than 3 to 1 lead for decliners. The price of the 10-year Treasury note increased 9/32, decreasing its yield to 2.513%. The price of the 30-year Treasury bond was up 3/32, bringing its yield down to 3.381%.
Rules & Regulators
IRS OKs Mid-Year Safe Harbor Plan Windsor Updates
The Internal Revenue Service (IRS) announced safe harbor retirement plans can be amended mid-year for changes relating to language about same-gender marriages. Following the Supreme Court’s Windsor case decision, plans need to be amended if, for example, they define the term “spouse” as only a person of the opposite sex. A plan must also be amended if the plan sponsor chooses to reflect the outcome of Windsor for periods prior to the date Windsor was decided.
The DOL’s Employee Benefits Security Administration will be hosting the “Health Benefits Laws Compliance Assistance Webcast: The Affordable Care Act, the Mental Health Parity and Addiction Equity Act and More” Thursday, May 29, from 2:00 to 3:00 p.m. Eastern Time.
Case Shows Importance of Using Caveats
Caveats included in pension benefit statements provided by Ford Motor Company saved the company from liability in a recent court case. U.S. District Judge James S. Gwin of the U.S. District Court for the Northern District of Ohio found the evidence shows Thomas Spiewacki’s reliance on an early retirement benefits representation sent to him was unreasonable. He noted that the retirement packet Spiewacki received in response to his retirement query three times said the benefits quoted in the packet were only estimates.
The Internal Revenue Service (IRS) has issued final regulations about the taxation of retirement plan payments for accident, health and disability insurance. The final regulations state that payments from a qualified defined contribution plan to pay a participant’s accident and health insurance premiums are taxable distributions to the participant unless a statutory exception applies. Payments from a qualified defined contribution plan to pay a participant’s disability insurance premiums are not taxable distributions if they meet certain conditions.
IRS Finds Widespread Final Form 5500 Errors
The majority of final Form 5500s reviewed during a recent Internal Revenue Service (IRS) compliance assessment contained errors, many related to undistributed assets. The IRS’s Employee Plans Compliance Unit (EPCU) conducted a series of Form 5500 reviews as part of its Final Return with Assets project. EPCU auditors looked at plan sponsors who filed a Form 5500-series return marked “the final return/report” but listed assets at the end of the plan year to see if they had completed all the steps in terminating their plans.
Financial Sense
For first quarter 2014, target-date funds were muted in terms of performance amid healthy cash flows into the funds, says Ibbotson Associates Inc. According to its “Quarterly Target-Date Fund Report,” the average target-date fund gained 1.5% in the first quarter of 2014, falling slightly below the returns of the S&P 500 and the Barclays U.S. Aggregate Bond Indexes. As target-date funds typically comprise both equity and fixed income, the report notes that it is uncommon to see their performance fall below the two indexes.
The World at Large
In the UK, nearly half of people on a retirement income of more than £15,000 regard themselves as “financially comfortable”, according to research from the National Employment Savings Trust (NEST).
Small Talk
Financial Stress Makes Summer a Bummer
While summer has traditionally been associated with rest and relaxation, many Americans now equate summer with financial stress, a survey finds. Nearly six in 10 (59%) respondents to the survey from the American Institute of Certified Public Accountants (AICPA) say their financial stress during the summer matches or exceeds levels experienced during the year-end holiday season.
ON THIS DATE:  In 1832, in the U.S., the Democratic Party held its first national convention.In 1881, in Washington, D.C., humanitarians Clara Barton and Adolphus Solomons founded the American National Red Cross. In 1901, Connecticut became the first state to pass a law regulating motor vehicles, limiting their speed to 12 mph in cities and 15 mph on country roads. In 1932, five years to the day that American aviator Charles Lindbergh became the first pilot to accomplish a solo, nonstop flight across the Atlantic Ocean, female aviator Amelia Earhart became the first pilot to repeat the feat, landing her plane in Ireland after flying across the North Atlantic.   WEDNESDAY WISDOM: “The most important thing in communication is hearing what isn’t said.”— Peter Drucker, management consultant, educator and author     Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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