Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 10th, 2014
Benefit Briefs
Regulations Could Calm Fears About Income Solutions
With the aging and impending retirement of the Baby Boomers—basically the first generation to work something like a full career under the defined contribution (DC) system—the retirement plan industry’s attention is shifting from accumulation to decumulation. “This all comes out of the fact that the number one question and fear for a lot of people is, ‘Am I going to have enough money in the 401(k) to support myself for a lengthy retirement?’” explains Tim McCabe with Stadion Money Management. “Both for in-plan and out-of-plan lifetime income products, we’re seeing tremendous interest from literally all of the major providers in the industry, certainly all the partners we work with.” Importantly, McCabe adds, as of yet, there is little consensus on the best way to do lifetime income both inside and outside the plan environment. This makes it difficult for participants to get affordable lifetime income, or even to get sound guidance about some reasonable income strategies, he says.Read more >
Buyer's Market
Small and mid-size businesses have a new nonqualified deferred compensation (NQDC) plan option from The Principal Financial Group. The new Modified Cash Surrender Value rider, available with Executive Variable Universal Life II (Executive VUL II), brings new choice and flexibility for employers looking to informally finance their NQDC plans, according to the company.Read more >
Lincoln Financial Unveils Secured Income Product
Lincoln Financial Group’s retirement plan services business launched the Lincoln Secured Retirement Income investment option, a guaranteed withdrawal benefit (GWB) designed to provide guaranteed income for life. Lincoln says the product is designed to protect retirement plan participants’ savings from market declines while also allowing for gains from rising markets. The investment option is available as a qualified default investment alternative (QDIA), taking the form of a custom target-date solution within Lincoln’s LifeSpan administrative platform or as a standalone investment.Read more >
Economic Events
The Census Bureau announced that total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $538.0 billion at the end of August, up 0.7% from the revised July level and up 7.9% from the August 2013 level. The July preliminary estimate was revised upward $0.7 billion or 0.1%. August inventories of durable goods were up 0.8% from last month and were up 8.5% from a year ago. Inventories of computer and computer peripheral equipment and software were up 4.5% from last month and inventories of lumber and other construction materials were up 1.5%. Inventories of nondurable goods were up 0.5% from July and up 6.9% from last August. Inventories of drugs and druggists’ sundries were up 1.6% from last month. In the week ending October 4, the advance figure for seasonally adjusted initial claims for unemployment insurance was 287,000, a decrease of 1,000 from the previous week’s revised level, the Labor Department reported. The four-week moving average was 287,750, a decrease of 7,250 from the previous week’s revised average. This is the lowest level for this average since February 4, 2006, when it was 286,500. The average interest rate for a 30-year fixed-rate mortgage is 4.12%, down from 4.19% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.30%, down from 3.36%.
Market Mirror
On Thursday, major U.S. stock indices wiped out any gains made Wednesday, as the Dow fell 334.97 points (1.97%) to 16,659.25. The NASDAQ dropped 90.26 points (2.02%) to 4,378.34, and the S&P 500 lost 40.68 points (2.07%) to finish at 1,928.21. The Russell 2000 closed 29.13 points (2.66%) lower at 1,067.99, and the Wilshire 5000 plummeted 442.68 points (2.14%) to 20,234.90. On the NYSE, 3.2 billion shares changed hands, with declining issues outnumbering advancing issues more than 7 to 1. On the NASDAQ, 2.7 billion shares traded, with a more than 6 to 1 lead for decliners. The price of the 10-year Treasury note slipped 1/32, bringing its yield up to 2.327%. The price of the 30-year Treasury bond was unchanged, with its yield at 3.060%.
Rules & Regulators
Regulators Issue Final Rules for ACA Excepted Benefits
The Departments of Health and Human Services (HHS), Labor (DOL) and the Treasury have issued final rules about benefits that may be exempt from certain health reform requirements. The final rules provide guidance about when certain dental, vision and long-term care benefits are considered excepted benefits, and thus, not subject to the Patient Protection and Affordable Care Act (ACA) insurance market reforms. They also provide guidance about conditions under which Employee Assistance Programs (EAPs) qualify as excepted benefits.Read more >
Court Moves Forward Citigroup 401(k) Excessive Fee Suit
Participants in the Citigroup 401(k) plan can move forward with their claims that plan fiduciaries violated the Employee Retirement Income Security Act (ERISA) by offering affiliated funds in the plan that charged excessive fees. U.S. District Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York found the participants’ claims were not filed outside ERISA’s statute of limitations. The Citigroup defendants point to documents distributed to participants listing the fees and effectively disclosing the affiliated status of the funds as evidence the participants had “actual knowledge” of the alleged breach. However, Stein found the defendants presented no evidence that participants knew that the affiliated funds’ fees were higher than alternatives with comparable performance.Read more >
Financial Sense
Too Early to Hit the PIMCO Panic Button
Plan sponsors should not be upset by outflows from the Total Return Fund and the abrupt departure of Bill Gross, PIMCO’s lead portfolio manager, sources say. Ebola is a bigger threat to the market right now than Bill Gross, according to Robert C. Lawton, president of Lawton Retirement Plan Consultants LLC in Milwaukee. First, Lawton tells PLANSPONSOR, the months of outflows from PIMCO in no way resemble a run on an individual bank, and the situation differs greatly from previous examples wherein the falling out of an investment manager and his employer caused significant disruptions in firm operations.Read more >
The Feeling’s Mutual
Goldman Sachs Asset Management (GSAM) says it has strengthened its fixed income fund platform through changes to the Goldman Sachs Core Plus Fixed Income Fund. The fund has been rebranded into the Goldman Sachs Bond Fund and is available in multiple share classes, including lower-priced institutional classes. The fund offers investors a globally diversified approach to fixed income, according to GSAM.Read more >
Small Talk
ON THIS DATE:  In 1845, the United States Naval Academy opened in Annapolis, Maryland. In 1886, the tuxedo dinner jacket made its U.S. debut in New York City. In 1887, Thomas Edison organized the Edison Phonograph Company. In 1977, Joe Namath played the last game of his National Football League (NFL) career. In 1978, the U.S. bill authorizing the Susan B. Anthony dollar was signed by President Jimmy Carter.   And now it’s time for FRIDAY FILES!
Ever have one of those days when things just feel off kilter? This truck driver certainly has.Read more >
What news anchors do during commercial breaks.Read more >
In Detroit, Michigan, a homeowner is offering to trade his home for an iPhone 6. The man’s real estate broker told the local Fox News station, “My client is overseas and he told me he would be willing to trade the property for an iPhone 6. It sounds to me like he wants the (iPhone 6+) version, but I think he’s willing to negotiate.” The house—a definite fixer-upper—is currently on the market for $3,000, and there’s an additional $6,000 of back taxes owed on the home. The broker added that the homeowner would even be open to trading the house for a 32 gigabyte iPad. In Oconto County, Wisconsin, a man and woman were taken into custody by Sheriff’s deputies after their car was spotted drifting into oncoming traffic. Both admitted they had been drinking and two open cans of be.er were found on the car’s floorboard. According to The Smoking Gun, both were placed in the back of an officer’s car, but while transporting the suspects, the deputy heard moaning and saw questionable activity in the rear view mirror. The officer stopped the cruiser, opened the rear door, and confirmed what he thought they were doing. Both were charged with lewd and las.civious conduct in addition to their other charges.
In London, England, a tractor trailer truck got stock under a bridge. Not noteworthy news—except for the irony of the company logo printed on the back.Read more >
In New York, New York, federal agents received information that a mail deliverer had undelivered mail in his personal vehicle. When he was confronted, the man told agents he had been keeping undelivered mail in his car for the past six months, noting that “on some days he did not deliver the mail intended for his route for various personal reasons,” The Smoking Gun reports. According to a U.S. District Court criminal complaint, the man consented to a search of his car, locker, and home. Agents recovered “approximately 2,500 pounds of U.S. mail, some postmarked as early as 2005.” The man is charged with felony mail hoarding. In Columbus, Ohio, a woman was so upset about an unflattering mug shot posted on Facebook, she called the police department and demanded it be taken down. The mug shot was part of a weekly roundup called “Warrant Wednesday” the Columbus Police Department posts on its Facebook page. The woman was wanted for robbing an acquaintance at gu.npoint. The Huffington Post reports the woman contacted the detective listed on the post and said she wanted her picture down. The detective told her to come to the station so they could talk about it, which she did—and was arrested. In Glastonbury, Connecticut, a 43-year-old woman was finally arrested after police say she called 911 162 times since 2007, including 24 times this year alone. According to the local NBC station, police said they warned her multiple times to stop calling about non-emergencies, but that she didn’t listen. She was arrested and charged with misuse of 911 and falsely reporting an incident. She called once to complain her CDs were scratched and another time saying her phone was being monitored. Have a great weekend, everyone!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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