Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 6th, 2015
Webcast Event
Effectively educating participants cannot be narrowly defined as “retirement education,” but must be viewed more comprehensively—call it “financial wellness education.” Armed with basic financial skills, most employees are better prepared to take on the multifaceted challenges of achieving retirement success. The path to retirement readiness is one best followed in incremental steps that build knowledge and confidence over time, accommodating each participant’s level of sophistication and desired learning pace, as well as every phase of a person’s life. In this webcast, our speakers will analyze the employee education landscape, discuss the impact of financial wellness education on retirement readiness, and share best practices for creating an end-to-end education strategy.Read more >
Benefits & Administration
DC Plans Important to Retirement Income Strategies
Some financial professionals suggest individuals set up different ‘buckets’ for retirement income, and defined contribution (DC) retirement plan sponsors can help them do so. Harold Evensky, chairman, Evensky & Katz/Foldes Financial in Coral Gables, Florida, says one “bucket” strategy is based on time or age: individuals would have a “bucket” of assets to use from age 65 to 75, another to use from age 75 to 85, and another for after age 85, for example. The bucket approach Evensky has suggested since the 1980s is a split between a cash flow reserve and an investment component. Some of an investor’s portfolio needs to be invested over a long time horizon to maximize risk, he explains. But, for income needed in the short term, investors need to minimize risk. DC retirement plans can offer options to help participants with these ‘bucket’ strategies.Read more >
Due to a decrease in liability values and flat asset values, the aggregate funded ratio for U.S. corporate pension plans increased 2.2% for the month of April. According to Wilshire Consulting, the funded ratio for April was 83.8%, up from 81.6% in March.Read more >
Data and Research
Early Withdrawals Found to Exacerbate 401(k) Account Disparities Across Race, Gender
Final Fiduciary Rule Expected Soon
Ask the Experts
Are Roth Excess Deferrals Taxed Twice?
Investment Committee Solutions for Small Plans
According to professionals in the retirement industry, most new sponsors of small or micro plans are unaware of the duties of prudence, loyalty and diversification of investments that a fiduciary to a plan assumes—or that the Employee Retirement Income Security Act (ERISA) decrees they are a fiduciary. And, surveys have shown many small-plan sponsors are confused about their fiduciary role. Many are also unclear that, while they have no investment committee—the individual making plan-level decisions, in essence, is that committee and must perform much the same functions the committee of a mega plan does. For the unwary plan sponsor, this disconnect could be costly, says Jim Philips, president of Retirement Resources.Read more >
Rather than making changes that diminish defined benefit (DB) pensions, a report by the National Conference on Public Employee Retirement Systems (NCPERS) advises closing tax loopholes. Data at the national level showed that a trend of converting DB plans into defined contribution (DC) plans exacerbated income inequality in the U.S.Read more >
Sponsored message from SageView, Vanguard and Ayco
Building a Stronger Retirement Plan for Cabot Corporation
See how SageView, Vanguard, and Ayco helped their client Cabot Corporation redefine their retirement plan and push participation rates to 94%.Read more >
Ask the Experts
“I read with great interest your recent Ask the Experts column about a benefits manager who worked with consultants to put together investment information for an ERISA plan’s fiduciary committee concerned about his/her fiduciary status. Were you saying that the individual in question was NOT a fiduciary? It sounded to me as if the individual could certainly be a fiduciary, even though that was clearly not his/her employer’s intent as was stated.”Read more >
Products, Deals & People
A new version of the SmartPlan retirement educational program purports to be the first solution of its kind tailored specifically to the Spanish-speaking community. SmartPlan Spanish supports users with a culture-conscious approach to retirement education, according to vWise Inc., the financial software and solutions provider behind SmartPlan. The firm hopes the SmartPlan Spanish product will enhance employee engagement and enrollment through interactive training sessions, similar to its original counterpart.Read more >
Market Mirror

U.S. stocks ended lower Tuesday as crude oil climbed above $60 a barrel for the first time this year, raising expectations for rising inflation and interest rates, and Greece’s government remained in a standoff with its European creditors as a debt payment looms next week, according to the Associated Press. The Dow was down 142.20 points (0.79%) at 17,928.20, the NASDAQ fell 77.60 points (1.55%) to 4,939.33, and the S&P 500 decreased 25.03 points (1.18%) to 2,089.46. The Russell 2000 lost 17.80 points (1.44%) to finish at 1,215.42, and the Wilshire 5000 closed 268.01 points (1.20%) lower at 22,045.89.

On the NYSE, 3.2 billion shares traded, with declining issues outnumbering advancing issues nearly 4 to 1. On the NASDAQ, 2.8 billion shares changed hands, with a more than 3 to 1 lead for decliners.

The price of the 10-year Treasury note was down 12/32, increasing its yield to 2.189%. The price of the 30-year Treasury bond decreased 25/32, bringing its yield up to 2.919%.

Plan Sponsors Eye Company Stock with Care
Last year’s unanimous Supreme Court decision in Fifth Third Bancorp v. Dudenhoeffer held that fiduciaries of employee stock ownership plans (ESOPs) are subject to the same duty of prudence that applies to fiduciaries in general per Section 1104(a)(1)(B) of the Employee Retirement Income Security Act (ERISA), except that they need not diversify the fund’s assets, per Section 1104(a)(2). According to Towers Watson’s recent survey of employers with company stock in their defined contribution (DC) plans, new “stock drop” complaints are still being filed, and several courts have refused to dismiss these suits in light of the Dudenhoeffer decision. In March, for example, an investigation was launched into possible ERISA violations by a multinational pharmaceutical company. Many employers are reviewing the status of company stock as an investment option in their DC plans.Read more >
Fidelity Wants Clarification About Loan and Hardship Records
Fidelity is taking issue with a recent Internal Revenue Service (IRS) reminder to retirement plan sponsors about their duties to track participant loans and hardship withdrawals. The IRS recently published a newsletter article indicating that documentation must be created and maintained by plan sponsors related to hardship distributions and loans—and that electronic self-certification is not sufficient to substantiate a participant’s hardship. Fidelity feels some information contained in the article is “contrary to recent indications from IRS representatives.”Read more >
From the Magazine
Optimizing Retirement Plan Committee Decisions
When it comes to evaluating their plan committee’s effectiveness, sponsors need to form their own decisions about best practices. The Employee Retirement Income Security Act (ERISA) does not tell sponsors specifically who should make up their plan committee or what training committee members should receive, says Eric Altholz, a partner at law firm Verrill Dana LLP in Portland, Maine. “It really is left up to the sponsors to decide,” he says. But, as always, the principle of acting prudently applies.Read more >
Small Talk

ON THIS DATE: In 1851, the mechanical refrigerator was patented by Dr. John Gorrie. In 1933, President Franklin D. Roosevelt signed an executive order creating the Works Progress Administration (WPA). The WPA was just one of many Great Depression relief programs created under the auspices of the Emergency Relief Appropriations Act, which Roosevelt had signed the month before. In 1937, the German airship Hindenburg, the largest dirigible ever built, exploded as it arrived in Lakehurst, New Jersey. Thirty-six people died in the fiery accident that has since become iconic, in part because of the live radio broadcast of the disaster. In 1940, John Steinbeck was awarded the Pulitzer Prize for his novel “The Grapes of Wrath.” In 1960, U.S. President Eisenhower signed the Civil Rights Act of 1960.


WEDNESDAY WISDOM: “Thinking will not overcome fear, but action will.”—W. Clement Stone, businessman and self-help book author

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Copyright © Asset International, Inc., 2015.

All rights reserved.  No reproduction without prior authorization.

Editorial: Alison Cooke Mintzer


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