Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
September 17th, 2014
Benefit Briefs
New DC Thinking Based on DB Best Practices
Defined contribution (DC) plan sponsors are already adopting defined benefit (DB) best practices in plan design, but plans could benefit from more DB-like investing and communication. Improvements that can be made in the defined contribution system include higher expected returns on investment for the same risk, Robert C. Merton told attendees of the Plan Sponsor Council of America (PSCA)’s 2014 National Conference. “We can’t dictate this, but we need to make sure investments in DC plans are at least as effective as investments in DB plans,” he said. “When choosing investments, plan sponsors should use the lens of, ‘How will this produce similar rates of return and risk as we enjoyed in DB plans?’”Read more >
2014 PLANSPONSOR National Conference Highlights
The 2014 PLANSPONSOR National Conference (PSNC), held in Chicago in June, was three jam-packed days of information-sharing via speakers and panel discussions, all aimed at helping attendees set goals for their retirement plan and their participants. Topics ran the gamut from plan diversification to plan decumulation, investment committee governance and outsourcing fiduciary status, not to mention possible new regulations to watch for. While the conference focused on the challenges facing defined contribution (DC) plan sponsors, we also included sessions on defined benefit (DB) plan management and investing, health insurance concerns and nonqualified plan innovations. Here are highlights from just a few of the thought-provoking sessions.Read more >
Buyer's Market
Another Private Health Exchange Introduced
A new private exchange from Independence Blue Cross offers coverage options for midsized and large employers. Beginning October 1, employers in the Philadelphia five-county area with more than 100 employees will be able to use the exchange marketplace from Independence Blue Cross. The private exchange will offer medical, pharmacy, dental and vision coverage, all effective on or after January 1, 2015.Read more >
Industry Voices
Industry Voices: Helping Employees Balance Benefits Spending
Recently we sat down with Jillian, a new college graduate just launching her career and planning on starting a family, who wanted our team to assist her in establishing a budget. Jillian had the idea that we would tell her to stop eating out, stop using her credit card, and begin turning the lights off in every room of her house when she walked out the door. Much to her surprise, we focused our initial efforts on reviewing the way that Jillian was spending her hard earned dollars at work. In other words, we wanted to take an in-depth look at the insurance, retirement and supplemental benefit offerings available through her employer to help make sure she was using her dollars wisely. As we explained to her, being a good steward of her discretionary income is important, but we often find that employees tend to waste money on the wrong benefits or on benefits they don’t even need.Read more >
Economic Events
The Producer Price Index (PPI) for final demand was unchanged in August, according to the Bureau of Labor Statistics. Final demand prices advanced 0.1% in July and 0.4% in June. In August, a 0.3% rise in prices for final demand services offset a 0.3% decrease in the index for final demand goods.
Market Mirror
Tuesday, the Dow gained 100.83 points (0.59%) to finish at 17,131.97, the NASDAQ climbed 33.86 points (0.75%) to 4,552.76, and the S&P 500 closed 14.85 points (0.75%) higher at 1,998.98. The Russell 2000 increased 4.45 points (0.39%) to 1,150.97, and the Wilshire 5000 was up 149.85 points (0.71%) at 21,128.77. On the NYSE, 3.2 billion shares traded, with advancing issues outnumbering declining issues by nearly 2 to 1. On the NASDAQ, 2.8 billion shares changed hands, with a slight lead for advancers. The price of the 10-year Treasury note was virtually unchanged, with its yield at 2.591%. The price of the 30-year Treasury bond fell 8/32, increasing its yield to 3.361%.
Rules & Regulators
Treasury Official Discusses Options for Improving DC Plans
The U.S. retirement plan landscape has moved from defined benefit (DB) to defined contribution (DC), and now to an undefined contribution system, one Treasury official contends. Speaking to attendees of the Plan Sponsor Council of America (PSCA)’s 2014 Annual Conference, Mark Iwry, senior advisor to the Secretary of the Treasury, and deputy assistant secretary of Retirement and Health Policy at the U.S. Treasury, explained that, in the age of 401(k)s and 403(b)s, rather than straight profit-sharing plans, the contribution is unknown. It is whatever the participant decides to put into the plan, and the company match depends on that. “We need to restructure the retirement system so that retirement income can be defined,” he said. “There are things that can be done without the government passing more regulations.”Read more >
Financial Sense
CalPERS Eliminates Hedge Fund Program
As part of an ongoing effort to reduce complexity and costs in its investment program, the California Public Employees’ (CaIPERS), the largest public pension fund in the U.S., will eliminate its hedge fund program. According to CaIPERS Interim Chief Investment Officer (CIO), “Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CaIPERS’ size, the ARS [Absolute Return Strategies] program [CaIPERS’ internal name for hedge funds] is no longer warranted.”Read more >
Sponsored message from Vanguard
Myths and misconceptions about indexing
In this research note, authors Christopher Philips and Josh Hirt of Vanguard Investment Strategy Group address many of indexing’s criticisms and provide historical evidence to suggest that indexing remains an appealing strategy across different asset classes and market environments.Read more >
Small Talk
How Does Your State Rank in Driver Rudeness?
What do Idaho, the nation’s capital and New York State all have in common?  The rudest drivers in the country, according to a survey from Insure.com. Cutting in ahead of the rest were Wyoming, Massachusetts, Delaware and Vermont (tied for sixth), New Jersey, Nevada and Utah. Insure.com also rated “the biggest haters,” counting how many other states got states riled on the road. The winner was California, which hated not only the drivers from nearby states—Nevada, Arizona, Oregon—but also, Colorado, Utah, Texas, Arkansas, New York and Vermont.Read more >
ON THIS DATE:  In 1787, the Constitution of the United States of America was signed by 38 of 41 delegates present at the conclusion of the Constitutional Convention in Philadelphia. In 1862, Confederate and Union troops in the Civil War clashed near Maryland’s Antietam Creek in the bloodiest one-day battle in American history. In 1920, the American Professional Football Association was formed in Canton, Ohio. It was the precursor to the National Football League (NFL). In 1937, at Mount Rushmore, Abraham Lincoln’s face was dedicated. In 1964, “Bewitched” premiered on ABC-TV. In 1972, “M*A*S*H” premiered on CBS-TV. In 1976, NASA publicly unveiled its first space shuttle, the Enterprise, during a ceremony in Palmdale, California. In 1983, 20-year-old Vanessa Williams became the first African American to win the Miss America crown.   WEDNESDAY WISDOM: “Knowledge is power only if man knows what facts not to bother with.”—Robert Staughton Lynd, American sociologist and professor at Columbia University
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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