Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 22nd, 2014
Benefit Briefs
Employers Recognizing Need for Financial Education
More employers are recognizing employees need financial education programs to help them deal with financial challenges. A survey of North American plan sponsors by the International Foundation of Employee Benefit Plans (IFEBP) revealed nearly two in five respondents feel a responsibility to educate employees about pension and benefit options, encourage retirement savings and help participants/employees become financially literate managers of their money. Half of all organizations offer benefits literacy education, nearly half offer retirement security education, and about one-quarter offer financial literacy education.
Oklahoma Bill Seeks Transition to DC Plan
A bill that allows new state workers to be enrolled in a 401(k)-style retirement plan was approved by the Oklahoma House of Representatives, the Associated Press reports. If passed by the state Senate and signed into law by the governor, House Bill 2630 would create a new defined contribution (DC) retirement system for state workers, beginning in November 2015. Workers hired before that time and retirees would keep their current defined benefit (DB) pension plan.
Geography Provides Insight for Targeted Communication
Geographic trends can tell 401(k) plan sponsors where, and how, to target their messaging. San Jose, California, took the top spot for highest rate of employee contributions (11%) as well as the highest total savings rate (15%), including employee deferral rate plus employer contributions in the 401(k) Geographic Trends from Fidelity Investments. It’s great that San Jose is doing so well, but it is important to look at trends and participant patterns of success across the country, Meghan Murphy, director of thought leadership at Fidelity, tells PLANSPONSOR. “A lot of employers have employees spread across the country,” Murphy says. Geographic trends can tell a plan sponsor where the firm needs to ramp up messaging and engage participants so they can reach retirement goals.
Many Workers Say Saving for Retirement Impossible
About one-quarter of working Americans have a nest egg balance of zero, according to a survey from COUNTRY Financial, due in large part to stagnant wage growth. Sluggish wage growth and relatively high unemployment have put many Americans in a defensive financial posture and made it more difficult to meet short-term spending needs, according to the COUNTRY Financial Security Index survey. The research shows nearly four in 10 (38%) workers older than age 40 say they regret decisions they have made with respect to retirement savings, namely not starting to save early enough to ensure positive outcomes. Nearly half of workers say it is not possible for a typical middle-income family to save for a secure retirement.
Retirement Readiness Not Accurately Gauged
American’s retirement-readiness levels are not as bad as some predictions make them out to be, according to a Towers Watson report. The analysis, “Retirement Security: Helping Workers Set Realistic Savings Goals,” examines workers’ income, consumption and savings patterns over their lifetime, revealing “undue overestimates of earnings to be replaced in retirement and misperceptions about workers’ own responsibility for securing their retirement prospects.” The authors of the analysis, Gaobo Pang and Sylvester J. Schieber, believe American workers are “generally better equipped for retirement than depicted in some studies.” Pang and Schieber say recent assessments of workers’ retirement readiness are inaccurate because they do not recognize the fact that workers’ patterns of income, consumption and savings are not consistent throughout their careers.
Engaging Asset Managers to Educate Participants
Investment managers don’t just provide a product—increasingly they provide communication and expertise to help plan sponsors engage participants, says Jim Danaher of Northern Trust. Investments are an essential component of any retirement plan. A growing trend in the defined contribution (DC) world, according to Danaher, senior vice president and managing director of defined contribution solutions at Northern Trust Asset Management, is the collaboration between investment manager and plan sponsor.
Market Mirror
Major U.S. stock indices rebounded yesterday, with the Dow up 158.75 points (0.97%) at 16,533.06. The NASDAQ gained 34.65 points (0.85%) to finish at 4,131.54, and the S&P 500 closed 15.20 points (0.81%) higher at 1,888.03. The Russell 2000 increased 5.73 points (0.52%) to 1,103.63, and the Wilshire 5000 climbed 151.61 points (0.77%) to 19,957.35.   On the NYSE, 3.2 billion shares traded, with a near 2 to 1 lead for advancers. On the NASDAQ, 2.7 billion shares changed hands, with 1.5 advancing issues for every declining issue.   The price of the 10-year Treasury note was down 6/32, bringing its yield up to 2.534%. The price of the 30-year Treasury bond fell 20/32, increasing its yield to 3.416%.
Sponsored message from PNC
PLANSPONSOR interviews Jim Sandidge of PNC PLANSPONSOR Editor-in-Chief Alison Cooke-Mintzer sits down with Jim Sandidge, Product Director of Retirement Products at PNC Bank. Click here to watch the full interview.  
Small Talk
ON THIS DATE:  In 1802, President George Washington’s widow and the nation’s first First Lady, Martha Dandridge Custis Washington, died at her Mt. Vernon home. In 1841, Henry Kennedy received a patent for the first reclining chair. In 1843, a massive wagon train, made up of 1,000 settlers and 1,000 head of cattle, set off down the Oregon Trail from Independence, Missouri—an event known as the “Great Emigration.” In 1849, Abraham Lincoln received a patent for the floating dry dock. In 1868, near Marshfield, Indiana, the “Great Train Robbery” took place. The robbery was worth $96,000 in cash, gold and bonds to the seven members of the Reno gang. In 1900, the Associated Press was incorporated as a nonprofit news cooperative in New York. In 1967, “Mister Rogers’ Neighborhood” premiered on PBS. In 1992, Johnny Carson hosted NBC’s “Tonight Show” for the last time. He had been host for 30 years. In 2003, golfer Annika Sorenstam became the first woman to play in a PGA tour event since Babe Didrikson 58 years earlier, after receiving a sponsor’s exemption to compete in the Bank of America Colonial in Fort Worth, Texas.
SURVEY SAYS: Summer is upon us! While many look forward to summer for the warmer weather, vacations, or more activities, a survey we recently covered revealed some feel more financial stress due to those vacations and added day care expenses or other children’s activities. Vacations can get expensive. This week, I’d like to know, is financial stress affecting your vacation plans, and what are you doing to reduce that expense? You may respond to this week’s survey by 6 p.m. Pacific time today.
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