Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
September 11th, 2014
Benefit Briefs
Are Health Care Exchanges the Answer for Employers?
Retail health insurance marketplaces, known as exchanges, are dramatically changing the employer benefits environment, according to a report from PwC’s Health Research Institute (HRI). Employers faced with rising costs and regulatory demands are moving away from the benefit business, pushing individual consumers to take on new responsibility for their own health insurance, HRI says. This will fuel significant growth of health exchanges over the next decade. “Employers are expressing significant interest in private exchanges, but taking the time to evaluate the various exchange offerings,” says Barbara Gniewek, principal, PwC’s Human Resource Services practice. The report offers considerations for employers.Read more >
When 401(k) plan participants traded their investments in August, they favored fixed income funds over equity funds for 65% of the trading days, according to Aon Hewitt. This was a reversal from July when more trading days favored equity funds, but consistent with the rest of 2014. Aon Hewitt’s 401(k) Index showed transfer activity moved away from diversified equities (equity assets excluding company stock) by $78 million (0.05%) in August. Stable value/GIC funds received the most inflows with $61 million (28%), while bond funds took in $40 million (19%) and money market funds received $32 million (15%).Read more >
Buyer's Market
Murphy to Lead Retirement at Great-West
Edmund F. Murphy III has been named president of Great-West Financial’s combined retirement organization, integrating the businesses of Great-West Financial, Putnam Investments and J.P. Morgan Retirement Plan Services. Earlier this year, Great-West announced it would be consolidating the retirement plan business of Putnam and Great-West, and then acquired the J.P. Morgan Retirement Plan Services large-market recordkeeping business. Murphy, who was most recently head of Defined Contribution at Putnam, is now based in Denver and reports to Robert L. Reynolds, president and chief executive officer of Great-West Financial.Read more >
Invesco PowerShares Capital Management, LLC listed the PowerShares LadderRite 0-5 Year Corporate Bond Portfolio (LDRI) on the NASDAQ. “In today’s low-rate environment, investors continue to be wary of interest rate risk in their pursuit of investment income,” says Dan Draper, Invesco PowerShares’ global head of ETFs. ”LDRI provides what we view as a more intelligent solution to help investors address this ongoing challenge compared to many existing fixed-income solutions in the marketplace.”Read more >
USI Offers Planning with Guaranteed Income Solution
The retirement and benefit consulting firm USI Consulting Group has begun offering retirement planning and consulting services that include guaranteed lifetime income solutions for defined contribution (DC) plan participants. USI Consulting Group teamed with Ash Brokerage, a national wholesaler of financial products and services, to offer the Direct Solutions program and USI Annuity retirement solutions, which the firm says will help plan participants improve retirement income planning. The USI Annuity program provides advanced planning, personalized support, customized solutions and access to financial products to address the lifetime income needs of retiring participants.Read more >
Economic Events
The U.S. Census Bureau announced that July sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $458.6 billion, up 0.7% from the revised June level and up 7.5% from the July 2013 level. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $533.8 billion at the end of July, up 0.1% from the revised June level and up 7.9% from the July 2013 level. Private industry employers spent an average of $30.11 per hour worked for employee compensation in June, according to the Bureau of Labor Statistics. Wages and salaries averaged $21.02 and benefits averaged $9.09, of which retirement and savings plans averaged $1.23 per hour worked.
Market Mirror
The Dow was up 54.84 points (0.32%) Wednesday at 17,068.71, while the NASDAQ climbed 34.24 points (0.75%) to 4,586.52, and the S&P 500 increased 7.25 points (0.36%) to 1,995.69. The Russell 2000 gained 6.49 points (0.56%) to finish at 1,164.99, and the Wilshire 5000 closed 76.52 points (0.36%) higher at 21,151.84. On the NYSE, 3.2 billion shares traded, with a slight lead for advancers. On the NASDAQ, 2.8 billion shares changed hands, with 1.5 advancing issues for every declining issue. The price of the 10-year Treasury note was down 10/32, bringing its yield up to 2.541%. The price of the 30-year Treasury bond fell 23/32, increasing its yield to 3.273%.
Financial Sense
Regulations Hindering Wider Use of Alternatives
Regulation may be slowing the push for alternative investments by retirement plans and other institutional investors, Cerulli Associates finds. According to Cerulli’s September 2014 issue of “The Cerulli Edge – U.S. Edition,” increased allocations in institutional channels such as defined benefit (DB) pension plans and endowments, expectations for greater use among financial advisers, and interest within defined contribution (DC) plans are increasing the role of alternative investments. However, Michele Guiditta, associate director at Cerulli, says, “The percentage of managers that rate revenue potential as a driver of interest in alternative assets dropped to 83% in 2014 from 93% in 2013. This decline can partially be attributed to heightened regulation in increasing barriers to entry.”Read more >
Lower-Rated Bonds May Improve LDI Strategy
BBB-rated corporate credits may provide diversification, incrementally improved returns and other benefits to U.S. corporate defined benefit (DB) plans that typically invest in A and higher-rated securities in their LDI strategies, according to a white paper from Standish Mellon Asset Management Company LLC, fixed income specialist for BNY Mellon. “BBBs are still investment-grade securities, for those concerned about credit quality,” Andrew Catalan, managing director and senior portfolio manager for Standish in Boston, and an author of the report, tells PLANSPONSOR. “As you move down the rating scale, the increase in the spread over Treasuries, or overall yield, is itself enticing, but we recognize there is concern about additional risk,” he says. “If you can select BBBs by analyzing the company and coming up with the conclusion the investments will remain investment grade or even be upgraded, you have a chance to harvest the returns which will be higher now than that of higher rated corporate bonds.”Read more >
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Small Talk
ON THIS DATE: In 1609, explorer Henry Hudson sailed into New York harbor and discovered Manhattan Island and the Hudson River. In 1789, Alexander Hamilton was appointed by U.S. President George Washington to be the first secretary of the treasury. In 1936, Boulder Dam in Nevada was dedicated by U.S. President Franklin D. Roosevelt by turning on the dam’s first hydroelectric generator. The dam is now called Hoover Dam. In 1954, the Miss America beauty pageant made its network TV debut on ABC. Miss California, Lee Ann Meriwether, was the winner. In 1967, the Carol Burnett Show premiered on CBS. In 1974, “Little House On The Prairie” made its television debut. In 1971, Donny Osmond had the No. 1 hit on the U.S. pop charts with “Go Away Little Girl” In 1985, Cincinnati Reds player-manager Pete Rose made the 4,192nd hit of his career, breaking Ty Cobb’s major league record for career hits. In 1997, John Lee Hooker received a star on the Hollywood Walk of Fame. In 2001, in the U.S., four airliners were hijacked and were intentionally crashed. Two airliners hit the World Trade Center, which collapsed shortly after, in New York City. One airliner hit the Pentagon in Arlington, Virginia. Another airliner crashed into a field in Pennsylvania. About 3,000 people were killed.
SURVEY SAYS: There have been many news reports lately about hackers obtaining personal information from store systems or from the “Cloud.” Data breaches can occur by theft or loss of files or laptops, hackers, or data accidentally made public. I have been a victim once of a data breach against my health plan provider. This week, I’d like to know, have you been the victim of a data breach, and what activities do you do online or via your mobile phone? You may respond to this week’s survey by 6 p.m. Pacific time today.Read more >
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Final Fiduciary Rule Expected Soon

Editorial: Alison Cooke Mintzer


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