Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
September 9th, 2014
Benefit Briefs
Which Findings About Retirement Readiness Are Right?
An optimistic view of U.S. retirement preparedness depends crucially on assumptions about behavior that may not reflect real world activity or consumption patterns that are unsustainable in the long run, researchers suggest. In “Are Retirees Falling Short? Reconciling the Conflicting Evidence,” researchers from the Center for Retirement Research (CRR) at Boston College compare studies that found about half of pre-retirees are not on track to maintain their consumption in retirement to studies that found the majority of retirees have adequate resources. The researchers conclude that many retirees will fall increasingly short during their retirement.Read more >
Ownership of retirement accounts fell in 2013, but median and mean values of retirement accounts rose substantially, according to a Federal Reserve Bulletin. Based on its Survey of Consumer Finances (SCF), the Federal Reserve said ownership of retirement accounts—including individual retirement accounts (IRAs), Keogh accounts, and employer-sponsored defined contribution (DC) and defined benefit (DB) accounts—fell below 50% in 2013, continuing the downward trend also observed between the 2007 and 2010 surveys. The conditional median value of retirement accounts rose 25%, from $47,200 in 2010, to $59,000 in 2013, and the mean value rose 10%, from $183,400 in 2010 to $201,300 in 2013. The Federal Reserve attributes this growth to a combination of resurgent stock markets and increased contributions by retirement plan participants.Read more >
Gens X and Y Need Retirement Savings End Goal
Two-thirds (66%) of Generations X and Y have not calculated how much they need to save for retirement—and only 19% work with a financial adviser. It’s more than a lack of direction that is hurting Americans born between 1965 and 1992, according to a study by Security Benefit. A significant percentage believe saving for retirement is becoming more difficult, with two-thirds (65%) saying it’s harder for their generation to save for retirement than it was for previous generations. Additionally, half (48%) of respondents believe they are behind on saving for retirement while just 43% said they were satisfied with their current financial situation.Read more >
Buyer's Market
Aspire Financial Services launched an enhanced 403(b) enrollment and client service portal. The 403(b) enrollment portal will provide quick and simple navigation for 403(b) participants and advisers to access enrollment materials and plan information, the firm says.Read more >
Mercer Investments is adding four senior investment professionals to its staff, to provide additional client support across the firm’s North America regions. Rich Nuzum, head of Mercer Investments in North America, says the firm is building additional delivery capacity ahead of anticipated growth in its investment consulting and fiduciary management business.Read more >
Market Mirror
Yesterday, the Dow slipped 25.94 points (0.15%) to 17,111.42, the NASDAQ ticked up 9.39 points (0.20%) to 4,592.29, and the S&P 500 closed 6.17 points (0.31%) lower at 2,001.54. The Russell 2000 increased 2.18 points (0.19%) to 1,172.31, and the Wilshire 5000 was down 48.36 points (0.23%) at 21,221.96. On the NYSE, 3.2 billion shares changed hands, with 1.6 declining issues for every advancing issue. On the NASDAQ, 2.8 billion shares traded, with a 1.2 to 1 ratio of advancers to decliners. The price of the 10-year Treasury note slipped 3/32, bringing its yield up to 2.470%. The price of the 30-year Treasury bond increased 4/32, decreasing its yield to 3.223%.
Rules & Regulators
IRS to Discuss DB Plan Updates
The Internal Revenue Service (IRS) will host a webinar about defined benefit (DB) plan issues on September 18. Topics for discussion include recent legislation, recent and pending regulatory guidance, current developments in determination letter and Employee Plans Compliance Resolution System cases, and common plan examination issues.Read more >
Financial Sense
Pension Fund Sues Banks for Rate-Rigging
The Alaska Electrical Pension Fund has accused 13 banks of manipulating an interest rate benchmark used to price certain derivatives instruments. The complaint accuses the banks and defendant ICAP of entering into a secret conspiracy to fix the ISDAfix rate at artificial levels. The lawsuit explains that the ISDAfix is a key interest rate for a broad range of interest rate derivatives and other financial instruments. For USD swap rates, ISDAfix was administered by ICAP and was based on the submissions of the defendant banks.Read more >
New Jersey is asking a court to dismiss lawsuits brought by unions challenging Governor Chris Christie’s decision to reduce the state’s contribution to its pension fund this year. According to a court filing by Acting Attorney General of New Jersey John J. Hoffman, the 2011 pension reform that Governor Christie signed into law violated the state’s constitution by mandating certain contribution amounts by the state. Hoffman says the contractual right in the pension reform violates the debt limitation and appropriation clauses of the state’s constitution and detracts the governor’s constitutional veto power.Read more >
Rethinking Risk and Return in Equity Portfolios
Retirement plan sponsors and participants and other long-term investors should favor low-volatility stocks over riskier equities, according to a new analysis from Research Affiliates LLC. In a new paper, “True Grit: The Durable Low Volatility Effect,” analysts from Research Affiliates question the tautology that riskier portfolios have higher expected returns over long-term investment horizons than do low-risk portfolios. It’s a piece of reasoning underlying much of the investment advice given to retirement plan participants: Riskier portfolios may suffer when the markets fall, but in the long run any losses will be more than compensated by the strong growth risky portfolios make possible. However, the paper argues that as the investment management industry learns more about behavioral finance and becomes more willing to question whether markets truly turn on rational, utility-maximizing behavior, the traditional axioms of risk and return will increasingly come into question.Read more >
Small Talk
ON THIS DATE:  In 1776, the Continental Congress formally declared the name of the new nation to be the “United States” of America. This replaced the term “United Colonies,” which had been in general use. In 1850, California became the 31st state in the union. In 1926, the National Broadcasting Company (NBC) was created by the Radio Corporation of America (RCA). In 1965, Los Angeles Dodgers pitcher Sandy Koufax pitched the eighth perfect game in major league history. In 1966, President Lyndon Johnson signed the National Traffic and Motor Vehicle Safety Act into law. Immediately afterward, he signed the Highway Safety Act. The two bills made the federal government responsible for setting and enforcing safety standards for cars and roads. In 1979, Tracy Austin, at 16, became the youngest player to win the U.S. Open women’s tennis title. In 1986, Ted Turner presented the first of his colorized films on WTBS. In 1994, the space shuttle Discovery blasted off on an 11-day mission. In 1999, the Sega Dreamcast game system went on sale. By 1:00pm all Toys R Us locations in the U.S. had sold out.   TUESDAY TRIVIA: The National Football League (NFL) team Green Bay Packers was named Packers because it was initially sponsored by the Indian Packing Co. Co-founder Earl “Curly” Lambeau worked for the Indian Packing Co. at the time the team was formed.
TRIVIAL PURSUITS: How did the NFL team Cleveland Browns get its name?Read more >
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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