Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 29th, 2014
Benefit Briefs
Adult Children May Undermine Parents’ Retirement Security
Six in 10 American parents support their adult children financially, according to a study from the LIMRA Secure Retirement Institute. Parents with Millennial children most often help to pay for cell phones and mobile service, college expenses and loans, rent or mortgage payments, and even entertainment costs, such as for movies or sporting events. “Parents of Millennials, even those over the age of 22, are providing considerable support to their children at a time in their lives when saving from retirement should be a priority,” says Deb Dupont, associate managing director, LIMRA Secure Retirement Institute.Read more >
Buyer's Market
Pershing LLC, a BNY Mellon company, added new advisory and institutional share classes from nine fund families to its FundVest mutual fund platform. Pershing says it is responding to client and investor demand for more choice and lower fees by adding 271 advisory and institutional class funds to FundVest.Read more >
Industry Voices
Industry Voice: Premiums for Underfunding Are Tripling
The Pension Benefit Guaranty Corporation (PBGC) charges pension plans a portion of their underfunding each year. Through 2013, the charge was 0.9% of the underfunding. By 2016, that rate will triple to approximately 2.9%. For example, a plan that is $20 million underfunded will be charged a premium of $580,000 per year. How can plan sponsors handle this? Options are somewhat limited. PBGC rules offer a choice of two calculation methods, and that can offer occasional relief. But, plan assets and liabilities are largely at the mercy of market forces. The most straightforward answer is to contribute cash into the pension plan.Read more >
Economic Events
New orders for manufactured durable goods in September decreased $3.2 billion or 1.3% to $241.6 billion, the U.S. Census Bureau announced. This decrease, down two consecutive months, followed an 18.3% August decrease. Excluding transportation, new orders decreased 0.2%. Excluding defense, new orders decreased 1.5%.  Transportation equipment, also down two consecutive months, led the decrease, $2.8 billion or 3.7% to $73.4 billion. The Conference Board Consumer Confidence Index, which had decreased in September, rebounded in October. The Index now stands at 94.5 (1985=100), up from 89.0 in September. The Present Situation Index edged up from 93.0 to 93.7, while the Expectations Index increased sharply to 95.0 from 86.4 in September.
Market Mirror
Tuesday, the Dow topped 17,000 again, rising 187.81 points (1.12%) to 17,005.75. The NASDAQ climbed 78.36 points (1.75%) to 4,564.29, and the S&P 500 increased 23.42 points (1.19%) to 1,985.05. The Russell 2000 gained 31.98 points (2.86%) to finish at 1,149.45, and the Wilshire 5000 closed 274.65 points (1.33%) higher at 20,928.81. On the NYSE, 3.3 billion shares traded, with advancing issues outnumbering declining issues more than 5 to 1. On the NASDAQ, 2.8 billion shares changed hands, with a more than 4 to 1 lead for advancers. The price of the 10-year Treasury note and the price of the 30-year Treasury bond each inched up 1/32, bringing their yields down to 2.295% and 3.067%, respectively.
Rules & Regulators
Even a Small Deferral Limit Increase Is Important
A $500 increase in the annual elective deferral maximum for defined contribution retirement plans may seem small, but one expert sees important implications in the increase. Kevin Crain is a 30-year veteran of the financial services industry, currently serving as a senior relationship executive for Bank of America Merrill Lynch. Crain says the relatively small increase in maximum deferrals on the defined contribution (DC) side is important for several reasons.Read more >
PBGC Assists Struggling Multiemployer Plans
The Pension Benefit Guaranty Corporation (PBGC) has sent an initial installment of more than $284,000 to cover benefits for 365 people in two insolvent multiemployer plans in New York. The agency sent about $108,100 to pay benefits for 184 current and retired transportation workers covered under the Teamsters Local 531 Pension Plan based in Brooklyn.Read more >
Summaries of the latest from Washington and the courts—what’s coming, what’s contemplated and what’s critical to plan sponsors.Read more >
Attorney Explains TDF Annuity Rule
What does the new guidance about annuity investments in target-date funds (TDFs) mean for retirement plan sponsors and participants? While at the 2014 America Society of Pension Professionals and Actuaries (ASPPA) Annual Conference, S. Derrin Watson, an attorney with SunGard spoke with PLANSPONSOR about what exactly the guidance allows and how annuities in TDFs will work for participants. Watson notes the IRS is trying to find ways to provide for at least part of participants’ retirement savings to be invested in annuities that will provide them with lifetime income.Read more >
Editor’s Note: We have made a correction to information about the new TDF annuity rule in an article included in yesterday’s NewsDash. You may view the corrected article here.Read more >
Small Talk
ON THIS DATE: In 1652, the Massachusetts Bay Colony proclaimed itself to be an independent commonwealth. In 1682, William Penn landed at what is now Chester, Pennsylvania. He was the founder of Pennsylvania. In 1863, the International Committee of the Red Cross was founded. In 1929, Black Tuesday hit Wall Street as investors traded 16,410,030 shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading. In the aftermath of Black Tuesday, America and the rest of the industrialized world spiraled downward into the Great Depression. In 1945, the first ballpoint pens to be made commercially went on sale at Gimbels Department Store in New York at the price of $12.50 each. In 1960, Muhammad Ali (Cassius Clay) won his first professional fight. In 1966, the National Organization for Women was founded. In 1969, the U.S. Supreme Court ordered an immediate end to all school segregation. In 1966, “96 Tears” became a No. 1 hit for ? and the Mysterians. In 1974, U.S. President Gerald Ford signed a new law forbidding discrimination in credit applications on the basis of se.x or marital status. In 1995, Jerry Rice of the San Francisco 49ers became the NFL’s career leader in receiving yards with 14,040 yards. In 1998, nearly four decades after he became the first American to orbit the Earth, Senator John Hershel Glenn, Jr., was launched into space again as a payload specialist aboard the space shuttle Discovery. At 77 years of age, Glenn was the oldest human ever to travel in space.   WEDNESDAY WISDOM: “Beware of false knowledge; it is more dangerous than ignorance.”—George Bernard Shaw, Irish playwright and a co-founder of the London School of Economics
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