Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 15th, 2014
Benefit Briefs
Retirement Planning Becoming More Difficult
Three in five U.S. households say retirement planning, including how much to save for retirement, is more difficult in 2014 than in the past. This is a new high and a 10-percentage-point jump from 2012, according to the study, “Engaging Investors: Reasons for Seeking Help and Taking Action,” by Hearts & Wallets. In 2014, nearly two-thirds (64%) of the 90 million U.S. households of investors ages 21 to 64 who do not plan to retire within five years, or Accumulators, said they have difficulty with retirement planning. The most difficult task for Accumulators is “identifying what year I might stop working” (61%).Read more >
Ask the Experts – What Is a Fidelity Bond?
 “I am in the process of filing our retirement plan 5500s and a question regarding fidelity bond coverage is listed. I am confused—is this the same as our fiduciary liability coverage? Or something different?”Read more >
A Well-Drafted IPS Can Protect Against Litigation
With the U.S. Supreme Court set to review a case about retirement plan investment selection, it may be a good time for plan sponsors and their advisers to discuss investment policy statements (IPSs). The document can address a range of investment concerns, Linda Boone, founder, president and chief compliance officer of Lubitz Financial Group, said in a recent webinar sponsored by fi360 and IPS AdvisorPro, an fi360 unit. The document is a useful component in an institutional retirement plan, where it can offer a solution to a number of issues in the current environment, Boone said, from greater regulation to fiduciary standards to the demand for more transparency. She pointed out that this written document—a guide to how to handle money—is not a contract but a directive from the client to the adviser, which documents the understandings and agreements.Read more >
Buyer's Market
ADP Retirement Services is providing plan sponsors with a self-directed brokerage account (SDBA) option they can offer to their plan participants. Via a new business relationship with TD Ameritrade, this option will be made available starting immediately, ADP said.Read more >
Americans Not Investing Properly for the Long Term
Investors of all ages have an improper allocation to equities in their portfolios, a new study contends. FeeX, a service that helps investors find and reduce hidden fees within investment and retirement accounts, found that three-quarters of people ready to retire are dangerously exposed to the stock market. “We looked at 10,000 users of our product that we believe are representative of the U.S. market,” Erik Laurence, vice president of marketing and business development at FeeX in New York City, tells PLANSPONSOR. Specifically, the study found 82% of investors ages 60 to 65 are improperly exposed to stocks at this critical time in their lives. Three-quarters have too much of their assets riding on the stock market, while only about 7% have gone too conservative at this stage in their lives.Read more >
Sage Advisory Services and July Business Services launched a full-service packaged solution for cash balance plans. The Web-based service, Cash Balance Complete, introduces institutional cash balance expertise to small and mid-sized businesses.Read more >
Pentegra Retirement Services launched a new website providing industry expertise and tools for plan sponsors and other fiduciaries. According to Rich Rausser, senior vice president of client services at Pentegra, the new website is meant to reposition and expand Pentegra’s products and services for retirement plan clients.Read more >
Industry Voices
Industry Voice: To Choose or Not to Choose
The transition from defined benefit (DB) retirement plans to a retirement plan landscape in which employees are responsible for their own investment decisions has not been without stress for both employers and employees. One part of this stress is the choice of investments made available to employees. The Employee Retirement Income Security Act (ERISA) governs certain retirement plans such as 401(k)s and 403(b)s, and it sets forth the prudent-man rules that regulate how plan sponsors should manage such plans. Plan sponsors select the investment options available to retirement plan participants. Since this is an ERISA fiduciary duty of plan sponsors, the individual investment decisions that employees make can lead to additional legal risk for sponsors. To relieve some of this fiduciary liability, ERISA provided a measure of safety for sponsors in Section 404(c).Read more >
Market Mirror
Yesterday, the Dow slipped 5.88 points (0.04%) to 16,315.19, the NASDAQ was up 13.52 points (0.32%) at 4,227.17, and the S&P 500 ticked up 2.99 points (0.16%) to 1,877.72. The Russell 2000 climbed 12.24 points (1.17%) to 1,061.54, and the Wilshire 5000 closed 55.61 points (0.28%) higher at 19,717.63.   On the NYSE, 3.2 billion shares changed hands, with 1.5 advancing issues for every declining issue. On the NASDAQ, 2.8 billion shares traded, with a 1.6 to 1 ratio of advancers to decliners.   The price of the 10-year Treasury note was up 23/32, bringing its yield down to 2.202%. The price of the 30-year Treasury bond increased 1 7/32, decreasing its yield to 2.956%.
Financial Sense
Listed Equity REITs Have Been a Boost for Pensions
Performance data from more than 300 U.S. pension funds show listed equity real estate investment trusts (REITs) have been a top-performing asset class across recent market cycles. The study by CEM Benchmarking Inc., an independent provider of cost and performance analysis for pension funds and other institutional investors, and the National Association of Real Estate Investment Trusts (NAREIT), which represents REIT providers and publicly traded real estate companies with an interest in U.S. markets, suggests concern about volatility and the adequacy of pension funding has focused a great deal of attention on investment performance and fees, leading to enthusiasm about new asset classes and styles of investing. Alexander Beath, a CEM analyst and author of the study, says the data underscores that investment costs and allocation decisions matter hugely when it comes to long-term net returns. The study looks at the performance of trillions of dollars in pension investments between 1998 and 2011, a time during which fundamental changes occurred in the defined benefit (DB) market. During this period, Beath explains, many pension funds increased their investments in alternative assets.Read more >
Sponsored message from Vanguard
How America Saves Jean Young, Senior Research Analyst at the Vanguard Center for Retirement Research, shares insights into a report on Vanguard 2013 defined contribution (DC) plan data. Read more >
Small Talk
Small Talk: Answers to Questions You Never Asked
Ever wondered if owning a cat is hazardous to your mental health? Well, wonder no more; winners of a 2014 Ig Nobel prize have answered that question. This year’s Public Health Prize was awarded to a group of researchers who investigated whether it is mentally hazardous for a human being to own a cat. The Ig Nobel Prizes are intended to celebrate the unusual, honor the imaginative—and spur people’s interest in science, medicine and technology. Next time you take your dog out to potty, take a compass and notice its position. This year’s Ig Nobel Biology Prize went to researchers who carefully documented that when dogs defe.cate and ur.inate, they prefer to align their body axis with Earth’s north-south geomagnetic field lines.Read more >
ON THIS DATE: In 1939, New York Municipal Airport was dedicated. The name was later changed to La Guardia Airport. In 1951, “I Love Lucy” premiered on CBS-TV. In 1966, U.S. President Lyndon B. Johnson signed a bill creating the Department of Transportation. In 1984, the Freedom of Information Act was passed. In 1989, during a game against his old team, the Edmonton Oilers, Wayne Gretzky broke Gordie Howe’s National Hockey League career scoring record of 1,850 points. In 1990, Soviet leader Mikhail Gorbachev won the Nobel Peace Prize for his work in ending Cold War tensions. In 1993, South Africa’s President F.W. de Klerk and African National Congress President Nelson Mandela were named winners of the Nobel Peace Prize for their efforts to end the apartheid system in South Africa.
WEDNESDAY WISDOM: “There is only one success—to be able to spend your life in your own way.” —Christopher Morley, American writer
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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