Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 2nd, 2014
Benefit Briefs
Loans May Have Ripple Effect on Retirement Savings
Taking a retirement plan loan can have a big impact on a participant’s retirement income, especially if the participant does not pay the loan back or stops contributing to the plan at the same time. “The number of investors borrowing from their 401(k) has trended upwards in recent years, with more than 2 million investors now having an outstanding loan,” says Doug Fisher, senior vice president of thought leadership and policy development for Fidelity Investments. “Fidelity’s top concern is that within five years of taking a loan, 40% of borrowers decrease their savings rate, and more than a third of those stop saving altogether. Reducing your savings rate today could significantly reduce your account balance upon reaching retirement and therefore your monthly income in retirement.” Fidelity conducted a hypothetical analysis showing the impact of this ripple effect of taking a plan loan.Read more >
Self-Funding Health Benefits Another Cost-Saving Strategy
Employers are looking at several strategies to reduce health care benefit costs, but many are sheepish about offering a self-insured health plan to employees. “Self-insured” means employers pay health care claims of employees out of their own pockets rather than paying premiums for “fully insured” plans offered by insurance companies. David Ross, executive vice president and director of Underwriting Services at Hays Companies in Minneapolis, Minnesota, tells PLANSPONSOR there are actually few employers that go completely self-insured; most buy some insurance for very high-risk, or high-cost, employees. Ross used to be a strategist for a health insurance provider, so he has the inside scoop about why offering a fully insured health benefit program may be more costly to employers. “The reason employers may want to partially self-insure is it costs less on average over time,” Ross says. He stresses that “on average over time” is important for employers to understand.Read more >
Buyer's Market
A report from the Kaiser Family Foundation offers a profile of private exchanges for health care offered to employers. The foundation notes that surveys indicate 20% to 33% of employers will use a private exchange for health benefits over the next three to five years. The foundation identified more than 20 private exchange platforms currently in the market, and for the report, it profiled 10 of them.Read more >
Schwab Introduces Low-Fee, Passive TDFs
Charles Schwab Bank launched the passive Schwab Indexed Retirement Trust Funds (SIRT Funds), featuring an institutional share class with a 0.08% expense ratio and a $100 million minimum investment. Schwab says it expects the low-fee SIRT Funds to “have an interesting impact on the competitive landscape for target-date funds [TDFs] within 401(k) plans.”Read more >
Economic Events
The U.S. Census Bureau of the Department of Commerce announced that construction spending during August was estimated at a seasonally adjusted annual rate of $961.0 billion, 0.8% below the revised July estimate of $968.8 billion. The August figure is 5.0% above the August 2013 estimate of $915.3 billion. During the first eight months of this year, construction spending amounted to $623.1 billion, 6.8% above the $583.2 billion for the same period in 2013.
Market Mirror
Yesterday, the Dow fell 238.19 points (1.40%) to 16,804.71, the NASDAQ plummeted 71.30 points (1.59%) to 4,422.09, and the S&P 500 closed 26.13 points (1.32%) lower at 1,946.16. The Russell 2000 tumbled 16.27 points (1.48%) to 1,085.41, and the Wilshire 5000 lost 283.92 points (1.37%) to finish at 20,476.54. On the NYSE, 3.3 billion shares traded, with a 3 to 1 lead for decliners. On the NASDAQ, 2.8 billion shares changed hands, with 3.6 declining issues for every advancing issue. The price of the 10-year Treasury note was up 30/32, bringing its yield down to 2.386%. The price of the 30-year Treasury bond increased 2 3/32, decreasing its yield to 3.091%.
Rules & Regulators
Final Rules Issued About Filing Returns on Magnetic Media
The Internal Revenue Service (IRS) issued final regulations relating to the requirements for filing certain employee retirement benefit plan statements, returns, and reports on magnetic media. These regulations provide that a plan administrator (or, in certain situations, an employer maintaining a plan) required by the Internal Revenue Code (IRC) or regulations to file at least 250 returns during the calendar year that includes the first day of the plan year must use magnetic media to file certain statements, returns, and reports under IRC sections 6057, 6058, and 6059.Read more >
Financial Sense
Bristol-Myers Squibb Company announced it will settle $1.4 billion in pension obligations through the purchase of a group annuity contract from The Prudential Insurance Company of America. The move affects approximately 8,000 U.S. retirees and their beneficiaries who started receiving their monthly retirement benefit payments on or before June 1.Read more >
Millennials Warming to Market Risk
Millennials are famous for being highly risk-averse investors, but new research from Hearts & Wallets LLC suggests the youngest investing cohort is ready for more risk. The new “Hearts & Wallets Investor Mindset Study” shows Millennial investors are growing more eager to pursue growth in the ongoing bull market cycle. Having experienced the first positive market cycle of their adult lifetime, many young investors now view missing out on investment growth opportunity as a negative, and more than half of investors in their 20s and early 30s say they worry more about missing opportunity than the potential to lose money in the markets.Read more >
Small Talk
ON THIS DATE: In 1919, President Woodrow Wilson, who had just cut short a tour of the country to promote the formation of the League of Nations, suffered a stroke. In 1950, “Peanuts,” the comic strip created by Charles M. Schulz, was published for the first time in seven newspapers. In 1967, Chief Justice Earl Warren swore in Thurgood Marshall, the first black justice of the U.S. Supreme Court. In 1971, Rod Stewart earned his first No. 1 hit with “Maggie May.” In 1985, actor Rock Hudson, 59, became the first major U.S. celebrity to die of complications from AIDS.
SURVEY SAYS: Retirement plan designs to encourage people to save for retirement are getting a lot of attention, but is there an age at which it is just too late? This week, I’d like to know, do you think there is an age at which it is too late for individuals to start saving for retirement? Do you have any tips for strategies late savers can use to try to “catch up” on retirement savings? You may respond to this week’s survey by 6 p.m. Pacific time today.Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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