Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 28th, 2014
Benefit Briefs
ACA Not the Reason for Increase in Number of Part-Timers
An increase in the number of employers hiring part-time workers rather than full-time workers is more likely be due to economic reasons than legislative ones. A report from the Employee Benefit Research Institute (EBRI) also indicates the likely reasons for any future shift to part-timers will be due to the economy or unemployment rates. While some are asking if the Patient Protection and Affordable Care Act (ACA) is the cause for the increase in number of part-time workers, the report reveals the shift was already underway prior to the enactment of the ACA.
ERISA Offers Best Practices for K-12 403(b)s
Emulating fiduciary principles of the Employee Retirement Income Security Act (ERISA) can help K-12 public school retirement plan sponsors improve outcomes for participants. Because public K-12 403(b) plans are exempted from ERISA, vendors are in many cases unregulated in key cost, investment and fiduciary areas of plan management, according to “Emulating ERISA: Providing a safety net for public K-12 educators,” a white paper from TIAA-CREF. “This leaves them in many unfortunate circumstances free to market questionable products on educators, in some cases with hidden and hefty fees,” the paper says. “The most important single element is to get the advice piece right,” Bruce Corcoran, managing director and head of the K-12 segment at TIAA-CREF in Charlotte, North Carolina, tells PLANSPONSOR.
Longer-Term View Needed for TDFs
Target-date funds (TDFs) for retirement plan participants need to consider a longer investment time horizon, a paper from Fidelity contends. Fidelity finds the wealth accumulated by a hypothetical investor at an assumed retirement age of 65 following a longer, “through-retirement” TDF glide path was greater than the wealth generated by a “to-retirement” glide path in 90% of simulated macroeconomic scenarios. Through-retirement investment programs generated more wealth when examining most historical scenarios, Fidelity says.
Easier Enrollment Leads to Better Participation
Simplifying the 401(k) plan enrollment process may help employees save more effectively for retirement, says a recent paper from Bank of America Merrill Lynch. According to the paper, “Simplifying the Path to Financial Wellness: Four Strategies to Help Increase 401(k) Participation,” plan sponsors should consider reducing the number of upfront decisions employees are required to make during enrollment. They should also present employees with a limited number of contribution rate choices and investment funds to further simplify decision making.
Buyer's Market
Financial technology provider RiskFirst, formerly PensionsFirst, has expanded the focus of its pension risk analytics software for wider application in multi-asset portfolio management and compliance settings. The firm will continue to offer the PFaroe risk management platform to defined benefit (DB) pension plans, but moving forward, it will adapt PFaroe to meet demand from other industries for this type of technology, especially insurers and other buy-side risk managers requiring sophisticated analytics to manage complex portfolios and to master regulatory complexity.
Industry Voices
Plan sponsors invest significant resources to determine the optimal strategic allocation of plan assets across various style mandates and then select the best managers to implement those mandates. Staying true to those mandates, which are typically benchmarked to an appropriate index, is important in order to maintain the ongoing diversification of the plan assets. Fortunately, active share analysis gives plan sponsors a very effective tool to evaluate and document manager style drift and/or manager conviction to their mandate over time.
Economic Events
New orders for manufactured durable goods in April increased $1.9 billion or 0.8% to $239.9 billion, the U.S. Census Bureau announced. This increase, up three consecutive months, followed a 3.6% March increase. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders decreased 0.8%. Transportation equipment, also up three consecutive months, led the increase, $1.7 billion or 2.3% to $76.9 billion.  The Conference Board Consumer Confidence Index, which had decreased in April, improved moderately in May. The Index now stands at 83.0 (1985=100), up from 81.7 in April. The Present Situation Index increased to 80.4 from 78.5, while the Expectations Index edged up to 84.8 from 83.9 in April.
Market Mirror
Tuesday, the Dow was up 69.23 points (0.42%) at 16,675.50, the NASDAQ climbed 51.26 points (1.22%) to 4,237.07, and the S&P 500 increased 11.38 points (0.60%) to 1,911.91. The Russell 2000 gained 16.01 points (1.42%) to finish at 1,142.20, and the Wilshire 5000 closed 135.32 points (0.67%) higher at 20,258.82. On the NYSE, 3.2 billion shares traded, with advancing issues outnumbering declining issues more than 2 to 1. On the NASDAQ, 2.7 billion shares changed hands, with a near 3 to 1 lead for advancers. The price of the 10-year Treasury note was up 6/32, bringing its yield down to 2.516%. The price of the 30-year Treasury bond decreased 22/32, increasing its yield to 3.362%.
Rules & Regulators
DOL Delays Fiduciary Redefinition Proposal Again
The Department of Labor (DOL) is now saying its re-proposal of what it calls “Conflict of Interest Rule-Investment Advice” will be issued in January 2015. Also in January 2015, the DOL expects to issue notices of proposed rulemaking about the safe harbor for the selection of annuity providers for individual account plans, as well as including lifetime income estimates on participants’ defined contribution account statements.
Small Talk
Desk or No Desk: Perks and Downsides
Workers in desk jobs and non-desk jobs were equally likely to report being happy in their current roles (76%); however, a survey from CareerBuilder finds workers in desk jobs were more likely to have complaints about their work environment. Opportunity to build closer relationships with company leaders and peers was reported as an advantage by 25% of those with desk jobs, while 56% said a disadvantage is not enough physical activity. Variety in their workday was cited as an advantage by 54% of those with non-desk jobs, while 17% said they are less recognized for their efforts.
The Department of Labor has issued a summer reading list from its Books that Shaped Work in America initiative, launched in 2013.
ON THIS DATE:  In 1754, 22-year-old lieutenant colonel of the Virginia militia George Washington successfully defeated a party of French and Indian scouts in southwest Pennsylvania as Virginia attempted to lay claim to the territory for its own settlers. The action started the Seven Years’ War. In 1937, the government of Germany—then under the control of Adolf Hitler of the National Socialist (Nazi) Party—formed a new state-owned automobile company, then known as Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH. Later that year, it was renamed simply Volkswagenwerk, or “The People’s Car Company.” In 1957, National League baseball team owners voted unanimously to allow the New York Giants and Brooklyn Dodgers to move to San Francisco and Los Angeles, respectively, at the mid-season owner’s meeting in Chicago, Illinois. In 1983, Irene Cara’s song “Flashdance (What a Feeling)”, from the Flashdance movie soundtrack, went to the top of the U.S. pop charts. In 1998, the comedian and actor Phil Hartman, famous for his work on Saturday Night Live and NewsRadio, was shot to death by his troubled wife, Brynn, in a murder-suicide. He was 49.   WEDNESDAY WISDOM: “No one is useless in this world who lightens the burden of it to anyone else.”—Charles Dickens, writer
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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