Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
September 22nd, 2014
Benefit Briefs
Some Participants View Recordkeeper as Adviser
Research from financial analytics firm Cerulli Associates shows more than one-fourth of 401(k) participants look to their plan’s recordkeeper as their primary source of retirement advice. Strikingly, the group of plan participants turning to a recordkeeper for advice (at 28.2%) is significantly larger than the group consulting a professional financial adviser (16.3%). Cerulli suggests that, while independent advisers are probably the best-positioned to provide unbiased retirement planning advice for workplace investors, it’s encouraging that multiple avenues of advice exist for a segment of savers often lacking in financial sophistication.Read more >
Retirement Plan Considerations in M&As
The complexity of retirement plan laws and the volume of plan assets demand that more attention be given to retirement plans in company mergers and acquisitions (M&As), says Richard P. McHugh, an attorney with Porter Wright Morris & Arthur LLP. Retirement plan issues should be looked at early in the transaction, McHugh said during the 2014 Plan Sponsor Council of America (PSCA) Annual Conference. “Far too often they come up later in the transaction, at times after the contract is drafted—considerations of whether assets will be transferred or whether plans will be terminated. A review of retirement plan issues can lead to significant contract provisions.” He added that if buyers and sellers do not solve issues early, it can lead to more costs later.Read more >
Maximizing the Value of DC Plans for Participants
Plan sponsors can only do so much with plan design to maximize the value of their defined contribution (DC) plans. If a plan sponsor offers the ultimate defined contribution plan—one with immediate eligibility, allowing deferrals up to federal limits, matching at least dollar-for-dollar up to 6% of salary, with streamlined, low-cost investments, advice and a guaranteed income option for participants—the plan sponsor might “expect” that employees would join immediately and defer slightly more than 6%, and with investment returns, end up with an account balance of $2.5 million for retirement, explained Virginia Maguire, director of Retirement Product and Strategy at Aon Hewitt. But, that’s not how things happen in reality, and the difference is participant behavior, she told attendees of the 2014 Plan Sponsor Council of America (PSCA) Annual Conference.Read more >
Industry Voices
Industry Voice: Pension Information Security
A rapidly growing contingent of pension consultants and larger plan sponsors are abandoning spreadsheet- and paper-based reporting in favor of Web–based analytics systems. However, it is vital that information security is not overlooked in the transition.Read more >
Economic Events
THE ECONOMIC WEEK AHEAD: Today, the National Association of Realtors will report about existing home sales for August. Wednesday, the Census Bureau will report about new home sales for August. Thursday, the Labor Department will issue its initial claims report, and the Census Bureau will release a report of durable goods orders for August.
Market Mirror
Friday, the Dow ticked up 13.75 points (0.08%) to 17,279.74, the NASDAQ was down 13.74 points (0.30%) at 4,579.79, and the S&P 500 decreased by 0.96 (0.05%) to 2,010.40. The Russell 2000 fell 12.36 points (1.07%) to 1,146.92, and the Wilshire 5000 closed 33.70 points (0.16%) lower at 21,220.31. On the NYSE, 3.2 billion shares traded, with 1.5 declining issues for every advancing issue. On the NASDAQ, 2.8 billion shares changed hands, with a more than 2 to 1 lead for decliners. The price of the 10-year Treasury note was up 11/32, bringing its yield down to 2.578%. The price of the 30-year Treasury bond increased 1 4/32, decreasing its yield to 3.288%. WEEK’S WORTH: For the week ending September 19, the Dow gained 1.72%, the NASDAQ was up 0.27%, and the S&P 500 climbed 1.25%. The Russell 2000 fell 1.18%, and the Wilshire 5000 finished 0.85% higher.
Rules & Regulators
IRS Issues Final Rules for Hybrid Retirement Plans
The Internal Revenue Service (IRS) has issued final regulations for hybrid retirement plans. The 2010 final regulations provide that certain rules otherwise applicable to benefits under a defined benefit plan are not violated in a cash balance or pension equity plan design. The new final regulations expand the hybrid plan formulas to which this relief applies. The final regulations also include special rules with respect to variable interest crediting rates and special age discrimination rules.Read more >
Hearing Witnesses Address Retirement System Fixes
Witnesses for a U.S. Senate Finance Committee hearing, titled “Retirement Savings 2.0: Updating Savings Policy for the Modern Economy,” defended many aspects of the current voluntary retirement system, acknowledged some improvements are needed, and cautioned lawmakers against heeding impassioned rhetoric aimed at tearing the defined contribution (DC) retirement plan system down. “Americans do not face a retirement crisis,” stressed Andrew Biggs, resident scholar at American Enterprise Institute (AEI), during his testimony. “But that does not mean we have nothing to worry about.” Biggs sought to refute recent research showing a dire outlook for workplace retirement savers, including a study from the New America Foundation that claims individual retirement accounts (IRAs) and 401(k) plans produce little in the way of sustainable retirement income.Read more >
Guidance Issued for Allocating After-Tax Amounts to Rollovers
The Internal Revenue Service (IRS) has provided rules for allocating pre-tax and after-tax amounts among distributions that are made to multiple destinations from a qualified plan described in Section 401(a) of the Internal Revenue Code. According to Notice 2014-54, the rules also apply to distributions from a Section 403(b) plan or a Section 457(b) plan maintained by a governmental employer. In conjunction with the guidance, the IRS issued proposed regulations that would limit the applicability of the rule regarding the allocation of after-tax amounts when distributions are made to multiple destinations so the allocation rule applies only to distributions made before the earlier of January 1, 2015, or on or after September 19, 2014.Read more >
Sponsored message from MetLife
De-Risking Actions for Defined Benefit Pension Plans
There are several actions plan sponsors can take to de-risk their plans. View our short video to see how these actions may help you.Read more >
Small Talk
ON THIS DATE:  In 1862, President Abraham Lincoln issued a preliminary Emancipation Proclamation, setting a date for the freedom of more than three million slaves in the United States and recasting the Civil War as a fight against slavery. In 1961, President John F. Kennedy signed legislation establishing the Peace Corps as a permanent government agency. In 1975, Sarah Jane Moore aimed a g.un at President Gerald Ford as he left the Saint Francis Hotel in San Francisco, California. The attempt on the president’s life came only 17 days after another woman had tried to assa.ssinate Ford while he was on his way to give a speech to the California legislature in Sacramento. In 1994, the television sitcom “Friends” debuted on NBC.
SURVEY SAYS REWIND: Along the lines of last week’s SURVEY SAYS, here are responses from 2006, when we asked NewsDash readers, “How secure is your participant data?”Read more >
Share the good news with a friend! Pass the Dash along – and tell your friends/associates they can sign up for their own copy.Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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