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Insight on Plan Design & Investment Strategy
- Retirement Industry People Moves
published on Wed, 22 Nov 2017 17:28:33 +0000
New president for Ivy Distributors Inc. As Thomas Butch steps down as executive vice president and chief marketing officer of Waddell & Reed Financial Inc., and as president of Waddell & Reed Inc. (WRI) and Ivy Distributors Inc. (IDI), the company announced the appointment of Nikki Newton as the new president of IDI.IDI is a subsidiary that supports the distribution of the Ivy Funds. Newton, who has 25 years of industry experience and has been with the company since January 1998, currently serves as head of global relationship management for IDI, covering national accounts and consultant relationships, as well as institutional sales.In the new role, Newton will lead wholesale and institutional distribution, and sales and product development, as well as manage strategic relationships.Also effective immediately, Shawn Mihal will become president of WRI, a registered broker/dealer subsidiary that offers securities and insurance products and investment advisory services through financial advisers located throughout the U.S. Mihal currently serves as chief operating officer of WRI, after joining the company in March 2015 as chief regulatory officer and chief compliance officer. Mihal has 18 years of industry experience and will be responsible for all aspects of the company’s broker/dealer operations.In conjunction with these appointments, the company announced several additional changes to its executive team: Brent Bloss is promoted to the role of chief operating officer, and Benjamin Clouse will be appointed chief financial officer to succeed Bloss in 2018.John Hancock Retirement Plan Services creates large plan teamJohn Hancock Retirement Plan Services (JHRPS) announced the formation of a cross-functional leadership team charged with enhancing the delivery of customized retirement plans that meet the unique needs of clients in the large plan market.The team includes Thomas Shanley, divisional vice president, strategic relationship management and large market segment lead; Christopher Messina, vice president of institutional sales; and Willson Moore III “Chip,” national consultant relations.According to the firm, coordination among the team, which had occurred informally prior to the announcement, serves to provide a more seamless experience for advisers and consultants. The structure will deliver “on-point business strategy and service to clients that have a large participant base, multiple plan types, along with operational, risk mitigation, and fiduciary challenges.”Each member of the new team brings decades of experience. Shanley is responsible for formally establishing John Hancock RPS large plan segment’s strategic direction and overseeing execution of the comprehensive service model. Previously, he served as vice president, relationship manager both at JHRPS and New York Life Retirement Plan Services. Shanley has more than 22 years of experience in the financial services industry with an emphasis on corporate retirement plans. He holds a bachelor’s degree from Rhode Island College, holds a FINRA Accredited Retirement Plan Consultant (ARPC) designation and maintains his FINRA Series 7 and 63 registrations.With more than 20 years’ experience in the retirement services industry, including more than 17 years in implementation, new business, and sales, Messina is responsible for facilitating the development of strategic partnerships with intermediaries and new clients dedicated to the large plan market. He received a bachelor’s degree in economics from the University of Massachusetts at Lowell and a master’s in business administration from the F.W. Olin Graduate School of Business at Babson College. In addition, he maintains FINRA Series 6 and 63 registrations and a Massachusetts life insurance registration.Moore, who joined the organization in 2016 with more than 30 years of retirement plan industry experience, is focused on building and engaging relationships with the top-tier U.S. national and regionally oriented retirement plan consultants and investment advisers serving the large and mega plan market segment. He received a bachelor’s degree in political science from Ripon College, and maintains both FINRA Series 7 and 63 registrations.The post Retirement Industry People Moves appeared first on PLANSPONSOR.
- Wells Fargo 401(k) Participant Files Excessive Fee, Self-Dealing Suit
published on Wed, 22 Nov 2017 16:50:31 +0000
On the heels of a win for Wells Fargo in a lawsuit accusing it of self-dealing and imprudent investing of its own 401(k) plan’s assets by funneling billions of dollars of those assets into Wells Fargo’s proprietary target-date funds (TDFs), another participant has filed an excessive fee and self-dealing lawsuit.The new lawsuit claims the plan’s fiduciaries breached their duties of loyalty and prudence to the plan and its participants by failing to establish and use a systematic and unbiased review process to evaluate the performance and cost, regardless of their affiliation to Wells Fargo, of the investment options in the plan’s portfolio. Throughout the complaint, the plaintiff alleges that the plan’s fiduciaries’ lack of a systematic and unbiased review process caused plan participants to pay an unnecessarily high expense ratio for investments, not just for Wells Fargo proprietary funds, but for the nonproprietary funds which comprised the proprietary funds, as well as other nonproprietary funds.According to the complaint, as a result of plan fiduciaries’ breaches of duty under the Employee Retirement Income Security Act (ERISA), participants paid higher than necessary fees for both Wells Fargo-branded and managed investment options and certain non-proprietary investment options for years.The lawsuit says defendants’ lack of a systematic and unbiased review of the plan’s investment options resulted in: including higher cost and poorly performing proprietary investment options in the plan to the detriment of plan participants, failing to use the plan’s enormous size (between $22.8 billion and $39.4 billion in assets to negotiate lower fees for both proprietary and non-proprietary investment options included in the plan, maintaining a proprietary money market fund alongside a better performing and significantly cheaper stable value fund, and failing to switch higher cost and poorly performing investment options for cheaper and better performing options available in the market.“Even though the Plan is and has been one of the largest in the country, Defendants maintained investment options that charged Plan participants fees that were significantly higher than were available to a plan of its size. Moreover, Defendants engaged in self-dealing by selecting and maintaining proprietary investment options that both cost more than and underperformed other mutual funds available in the market, which cost Plan participants millions of dollars in excessive fees and poor performance,” the complaint says.The suit questions the use of actively managed versus passively managed funds. It also suggests that collective trusts and separate accounts are better vehicles than mutual funds for retirement plans.The complaint also says, “for both the proprietary and nonproprietary investment options, the expense ratios Plan participants paid did not meaningfully decline, if at all, even though the Plan’s assets substantially increased throughout the Class Period. Accordingly, the fees paid by Plan participants were excessive and unreasonable. Moreover, the high fees of the proprietary investment options and the sheer size of the assets Plan participants maintained in the proprietary funds guaranteed Wells Fargo and its affiliates tens of millions in profits from fees.”The post Wells Fargo 401(k) Participant Files Excessive Fee, Self-Dealing Suit appeared first on PLANSPONSOR.
- Public Pensions Have Been Able to Pay Promised Benefits
published on Tue, 21 Nov 2017 18:15:15 +0000
Some policymakers want to close participation in a public pension plan to all new hires, cut benefits and increase employee contributions, or convert defined benefit (DB) plans pensions into defined contribution (DC) plans. They usually cite the underfunding of public pension plans as the reason for these ideas.New research shows that funding status has little correlation with a pension fund’s ability to pay its promised benefits. Michael Kahn, director of research for the National Conference on Public Employee Retirement Systems (NCPERS) used data from the annual survey of public pensions by the U.S. Census Bureau for 1993 to 2016 and other data and found that during the last quarter century or so, state and local pension plans have always been able to meet their benefit and other payment obligations.In four years (2002, 2008, 2009 and 2012), income from contributions and investment earnings was less than benefit obligations, but in the remaining 20 years, when income from contributions and investment earnings was more than benefit obligations, pension funds were building up a cushion that enabled them to weather the 2001 recession, the Great Recession of 2008, and other economic downturns. Today, state and local pension funds have about $3.9 trillion that will provide a cushion during future economic recessions, the NCPERS analysis says.While assets have grown, so have pension obligations. During 2012 to 2016, state pension obligations grew from $3.52 trillion to $4.19 trillion. Other sources of data show that pension obligations have steadily grown since 2000, when plans were almost 100% funded. NCPERS analysis shows that despite rising liabilities during the last quarter century, pension plans have been able to meet their annual benefit payments from contributions and investment income due to the cushion they built up in good years.The analysis shows four states—Illinois, Kentucky, New Jersey, and Connecticut—had pension funds whose liabilities were more than twice their assets (that is, they were less than 50% funded) in 2016. On the other end of the funding spectrum are New York, Tennessee, South Dakota, and Wisconsin, which were all more than 94% funded. The majority of states’ pension plans were more than 70% funded. Twenty-eight out of 50 states (56%) had pension funding levels that were 70% or above. Overall, the 299 state plans had total assets of $3.05 trillion and pension obligations of $4.2 trillion—which translates into a funding level of 72.6%. However, using quarterly earnings data for 2016, the assets for the 299 state plans were $3.26 trillion, which results in a funding level of 77.6%.According to the analysis, states in both top- and bottom-funded groups on average experienced situations in which contributions and investment income was not enough to meet annual benefit obligations about six out of 24 years during 1993 to 2016. The cash flow shortfalls were caused by the 2001 and 2008 recessions as well as other economic downturns. But both types of funds—partially and almost fully funded public pension plans—had adequate cushions to cover the cash flow shortfall.The experience of the last quarter century suggests that state and local pension funds will face economic recessions in the next quarter century and beyond. To strengthen the ability of these pension funds to weather future recessions, NCPERS suggests state and local policymakers may consider the following policy options:Stop dismantling public pensions because they aren’t 100% funded;Strengthen funding mechanisms by adhering to principles that help determine the appropriate levels of required employer contributions;Establish a pension stabilization fund that can set aside money from a certain revenue stream to be used in special circumstances such as a recession; andImplement a mechanism to ensure that full employer contributions are made on a timely basis, perhaps by making employer contributions a nondiscretionary part of the budget.“Our analysis demonstrates that pension plans can tolerate ups and downs in the markets and still meet their current obligations,” says Hank H. Kim, NCPERS’ executive director and counsel. “While funding ratios are an important actuarial tool, they are not a proxy for a plan’s ability to pay benefits here and now.”Critics of public pensions often cite funding ratios of less than 100% as evidence of pressing financial problems, but this is faulty logic, Kim says. Contributions and earnings continue to flow into plans even as benefits are being paid out, he notes. “Shutting down a pension plan because it is not fully funded is … an incredibly short-sighted action that destabilizes workers and their communities, and we want it to stop,” Kim says.The post Public Pensions Have Been Able to Pay Promised Benefits appeared first on PLANSPONSOR.
- PBGC Asks Permission to Keep Collecting Information on Plan Terminations
published on Tue, 21 Nov 2017 16:52:08 +0000
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) approve a collection of information under its regulations on the disclosure of termination information for distress terminations, and for PBGC-initiated terminations of defined benefit (DB) plans.As background, Sections 4041 and 4042 of the Employee Retirement Income Security Act (ERISA) govern the termination of single-employer defined benefit pension plans that are subject to Title IV of ERISA. A plan administrator may initiate a distress termination undersection 4041(c), and the PBGC may itself initiate proceedings to terminate a pension plan under section 4042 if PBGC determines that certain conditions are present. Sections 4041 and 4042 of ERISA were amended by Section 506 of the Pension Protection Act (PPA) to require that, upon a request by an affected party, a plan administrator must disclose information it has submitted to the PBGC in connection with a distress termination filing, and a plan administrator or plan sponsor must disclose information it has submitted to the PBGC in connection with a PBGC-initiated termination. The PBGC is also required to disclose the administrative record relating to a PBGC-initiated termination upon request by an affected party.This collection of information was most recently approved by OMB, and the PBGC is requesting that OMB approve the collection of information for three years, without change.The agency is seeking public comments about its request. More information is here.The post PBGC Asks Permission to Keep Collecting Information on Plan Terminations appeared first on PLANSPONSOR.
- Less Than 1% of DC Plan Participants Took Hardships in the First Half of 2016
published on Tue, 21 Nov 2017 16:38:11 +0000
Few defined contribution (DC) plan participants took withdrawals from their plans in the first half of the year, the Investment Company Institute reports. Just 2.2% of participants took withdrawals, a mere blip from the 2.1% that did so in the first half of 2016. Only 0.9% of participants took hardship withdrawals, on par with 2016.In the first half of the year, 16.7% of participants had an outstanding loan from their DC plan, up only slightly from the 16.6% of participants who could say the same at the end of the first half of 2016. However, this is up from 15.3% at the end of 2008 and down slightly from the 18.5% at the end of 2011. Participants also remained committed to investing in their DC plan, with a mere 1.6% ceasing contributions, down from 1.9% in the first half of last year.Participants also displayed contentment with their investment choices, with only 6.8% reallocating their account balances and 4.3% directing new investments for their contributions. Account balance changes were on par with 2016 and contribution reallocations were slightly lower than in the first half of 2016, ICI says.“The withdrawal and contribution data indicate that, essentially, all [defined contribution] DC plan participants continued to save in their retirement plans at work,” ICI says in its report, “Defined Contribution Plan Participants’ Activities, First Half 2017,” based on data from recordkeepers.The post Less Than 1% of DC Plan Participants Took Hardships in the First Half of 2016 appeared first on PLANSPONSOR.
- DOL Provides Relief for Hurricane Maria, Wildfire Victims
published on Tue, 21 Nov 2017 15:59:28 +0000
Following the Internal Revenue Service’s (IRS’s) relaxation of loans and hardship withdrawals from 401(k) plans for victims of Hurricane Maria and the October wildfires in California, the Department of Labor (DOL) has issued guidance on how these plans can still remain in compliance with the Employee Retirement Income Security Act (ERISA). If a plan sponsor and participant comply with IRS Announcement 2017-15 on the relaxed verification procedures for loans or hardship withdrawals, DOL says they will not treat them as having violated Title I of ERISA. When repaying the loan, the DOL says that those payments constitute plan assets and that employers must forward the money “to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld [from a participant’s wages] by the employer.”However, the DOL “recognizes that some employers and service providers, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed time frame.” Instead, the DOL will expect those employers and service providers to forward the repayments “as soon as practical.” If any of the retirement plans in the affected areas are unable to receive investments, issue loans or issue other distributions within three business days, they will have fallen into a blackout period, DOL says. ERISA normally requires plans to issue 30 days’ notice to participants prior to a blackout period, but given the fact that Hurricane Maria is a natural disaster, plans affected by the hurricane fall under the regulation’s exception to the advance notice requirement, DOL says. With respect to health care for participants, beneficiaries and sponsors of plans affected by Hurricane Maria, DOL and IRS will be extending the deadlines for them to “make critical coverage and other decisions affecting benefits.” The deadlines will be published in the Federal Register on November 21. DOL also says that health care plans should accommodate participants and beneficiaries impacted by both Hurricane Maria and the California wildfires by minimizing the “possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” Likewise, the DOL says it will take into consideration whether the physical disruption of a service provider’s place of business renders them unable to process a claim.Further details on how employers and advisers can handle retirement and health care plans in areas affected by these and other disasters is available on this section of the DOL’s website. Workers and families can find additional information here. IRS guidance on its relief for victims of these disasters is available here.The post DOL Provides Relief for Hurricane Maria, Wildfire Victims appeared first on PLANSPONSOR.
- Regulators Announce Modifications to Form 5500
published on Tue, 21 Nov 2017 15:22:49 +0000
The U.S. Department of Labor’s (DOL)’s Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2017 Form 5500 annual return/report and related instructions. They are for informational purposes only and cannot be used to file a 2017 Form 5500 annual return/report. The “Changes to Note” section of the 2017 instructions highlight important modifications to the Form 5500 and Form 5500-SF and their schedules and instructions. Modifications include:IRS-Only Questions. IRS-only questions that filers were not required to complete on the 2016 Form 5500 have been removed from the Form 5500, Form 5500-SF and Schedules, including preparer information, trust information, Schedules H and I, lines 4o, and Schedule R, Part VII, regarding the IRS Compliance questions (Part IX of the 2016 Form 5500-SF).Authorized Service Provider Signatures. The instructions for authorized service provider signatures have been updated to reflect the ability for service providers to sign electronic filings on the plan sponsor and Direct Filing Entity (DFE) lines, where applicable, in addition to signing on behalf of plan administrators.Administrative Penalties. The instructions have been updated to reflect an increase in the maximum civil penalty amount assessable under the Employee Retirement Income Security Act section 502(c)(2) required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Department regulations published on January 18, 2017, increased the maximum penalty to $2,097 a day for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report. The increased penalty under section 502(c)(2) is applicable for civil penalties assessed after January 13, 2017, whose associated violation(s) occurred after November 2, 2015—the date of enactment of the 2015 Inflation Adjustment Act.Form 5500/5500-SF-Plan Name Change. Line 4 of the Form 5500 and Form 5500-SF have been changed to provide a field for filers to indicate the name of the plan has changed. The instructions for line 4 have been updated to reflect the change. The instructions for line 1a have also been updated to advise filers that if the plan changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.Schedule MB. The instructions for line 6c have been updated to add mortality codes for several variants of the RP-2014 mortality table and to add a description of the mortality projection technique and scale to the Schedule MB, line 6 – Statement of Actuarial Assumptions/Methods.Form 5500-SF-Line 6c. Line 6c has been modified to add a new question for defined benefit (DB) plans that answer “Yes” to the existing question about whether the plan is covered under the PBGC insurance program. The new question asks PBGC-covered plans to enter the confirmation number—generated in the “My Plan Administration Account system”—for the PBGC premium filing for the plan year to which the 5500-SF applies. For example, the confirmation number for the 2017 premium filing is reported on the 2017 Form 5500-SF. Filers should monitor the EFAST website for the availability of the official electronic versions for filing using EFAST-approved software or directly through the EFAST website.The post Regulators Announce Modifications to Form 5500 appeared first on PLANSPONSOR.
- (b)lines Ask the Experts – Change in Rules for Contract Exchanges
published on Tue, 21 Nov 2017 09:30:33 +0000
“I have an active employee who does not qualify for a distributable event from the plan. He wishes to transfer his account balance out of our plan to another 403(b) contract that does not appear to be connected to any 403(b) plan of another plan sponsor; and, at any rate, even if it were, our plan does not permit plan-to-plan transfers. “However, he was quite insistent that he was permitted to complete such a transfer under the law, and that he in fact, had completed an identical transfer a number of years ago. I am new to the church, so I cannot explain to him why he was able to complete such a transfer back then, but cannot do so now. Can the Experts assist? Thanks in advance!” Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer: The Experts can indeed assist, and, as is typically the case, we can turn to the regulatory guidance to address such an issue; in this case, the final 403(b) regulations issued by the IRS back in 2007. There is a section that specifically addresses this issue you are having, under the heading of Contract Exchanges: “Rev. Rul. 73-124, 1973-1 C.B. 200, and Rev. Rul. 90-24, 1990-1 C.B. 97, dealt with contract exchanges. Rev. Rul. 73-124 had allowed section 403(b) contracts to be exchanged, without income inclusion, if, pursuant to an agreement with the employer, the employee cashed in the first contract and immediately transmitted the cash proceeds for contribution to the successor contract to which all subsequent employer contributions would be made. This ruling was replaced by Rev. Rul. 90-24 which does not provide for the first contract to be cashed in but allows section 403(b) contracts to be exchanged, without income inclusion, so long as the successor contract includes distribution restrictions that are the same or more stringent than the distribution restrictions in the contract that is being exchanged.” Thus, for many years, there were relatively few restrictions on transfers between contracts, especially in plans that were not subject to the Employee Retirement Income Security Act (ERISA) such as your church plan (ERISA contains additional restrictions as to the movement of plan assets outside of a plan). At one time, a non-ERISA 403(b) plan participant could essentially choose his/her own investment provider by simply transferring his/her 403(b) contract to a contract with that provider, though this was later modified by Rev. Rul. 90-24, which did restrict transfers to contracts where the distribution restrictions were the same or more stringent than the prior contract. Other than that, however, there were little In the way of restrictions, which likely explains how your plan participant was able to complete his transfer a “number of years ago” without incident. However, the IRS began to realize that such transfers were problematic, as they further explain in the Contract Exchanges section of the final regulations: “……..where assets have been transferred to an insurance carrier or mutual fund that has no subsequent connection to the plan or the employer, IRS audits and related investigations have revealed that employers encounter substantial difficulty in demonstrating compliance with hardship withdrawal and loan rules. These problems are particularly acute when an individual’s benefits are held by numerous carriers. Such multiple contract issuers are commonly associated with plans in which Rev. Rul. 90-24 exchanges have occurred.” To solve the problem, the final regulations restricted contract exchanges to contracts within the plan, as follows: “(b) Contract exchanges and plan-to-plan transfers—(1) Contract exchanges and transfers—(i) General rule. If the conditions in paragraph (b)(2) of this section are met (Experts Note: “(b)(2) of this section” defines Contract Exchanges), a section 403(b) contract held under a section 403(b) plan is permitted to be exchanged for another section 403(b) contract held under that section 403(b) plan.” Thus, contract exchanges may only be made within a 403(b) plan. The regulations also permit plan-to-plan transfers, but, as you explained in your question, your plan does not allow for such transfers and, even if it did, the employee must be a current or former employee of the recipient plan sponsor in order for such a transfer to take place, which he was clearly not in the example you provided. (In fact, the experts would be surprised if the 403(b) vendor who is not part of the plan would actually take the transfer if requested.) Thus, you can simply inform the participant that the law changed since he was permitted to complete his transfer so long ago, and now such transfers are not permitted. Or you can provide him a copy of this column if you wish! NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.The post (b)lines Ask the Experts – Change in Rules for Contract Exchanges appeared first on PLANSPONSOR.
- Employers Working to Keep Health Costs for Employees Down
published on Mon, 20 Nov 2017 19:28:59 +0000
A strong majority of employees (77%) say they are satisfied with the health insurance plans and other health benefits available to them through work, according to the annual health care survey released by Transamerica Center for Health Studies (TCHS).Thirty-one percent of employers have made changes in the past 12 months to their health benefit offerings. Twenty-nine percent said they changed plan options, and 27% implemented a wellness program.More than three in four employers (76%) say their company is concerned about the affordability of health insurance, and of those, a majority (86%) are taking some action to combat cost. In particular, 30% of employers are creating an organizational culture that promotes health/wellness and the same percentage (30%) say their company is encouraging the use of generic medications.The survey also found that of those that offer health insurance to their employees, approximately six in 10 are working to keep costs constant for employees, including employees’ share of premiums (61%), deductibles (59%) and co-pays/co-insurance (60%). Meanwhile, only 59% of employees feel that their employer is concerned about the affordability of their health insurance.Employers most commonly offer preventive screenings and vaccinations (66%), exercise programs (65%), smoking cessation programs (61%), health risk appraisals (61%) and programs to monitor health goals/biometrics (61%.)According to the survey, most commonly, lack of participation is due to employees feeling they do not need these programs or lack interest in them. In addition, lack of time due to workload is noted by 21% of those who are offered but do not participate in health goals/biometric monitoring, and 19% of those are offered but do not participate in exercise programs. Meanwhile, 16% of those who are offered but do not participate in completing a health risk appraisal cite lack of an incentive to do so.Two-thirds of employers (66%) say their company is extremely/very aware of the potential changes to health care policy coming out of Washington D.C., and more than one-quarter (26%) of employers report that the most common fear among their employees is losing health care due to a pre-existing condition.When asked how they would like their employer to react if the health insurance mandate was removed by Congress and the President, the top responses were:Evaluate coverage options (22%);Not make any changes (21%); andIncrease coverage (19%).More than 1,500 employer decision-makers within the United States participated in this fifth annual survey. The survey report is here.The post Employers Working to Keep Health Costs for Employees Down appeared first on PLANSPONSOR.
- Twenty-One Percent of Investment Managers Plan to Lower Fees
published on Mon, 20 Nov 2017 18:22:51 +0000
Twenty-one percent of investment managers plan to lower their fees in 2017, the Callan Institute found in its 2017 Investment Management Fee Survey.Today, only 69% of assets in retirement plans are in actively managed funds, down significantly from 84% in 1996. The most common objection active investment managers hear from sponsors is whether they are providing the value-added services to justify their fees, cited by 49% of these investment managers. The median fee that retirement plans pay for investments is 38 basis points (bps). By asset class it is 21 bps for fixed income, 34 bps for U.S. equities, 45 bps for non-U.S./global equities and 90 bps for alternatives. U.S. equities and non-U.S./global equities had the most dramatic movements between 2014 and 2016, with U.S. equity fees dropping 4 bps and non-U.S./global equity fees increasing 5 bps. Investment managers are allocating a lower percentage of their revenue to bonuses: 18%, down from 24% in 2014. However, the amount of revenue allocated to cover the cost of operations increased from 42% to 60%. This may be why profit margin expressed as a percentage of revenue decreased from 34% in 2014 to 22% in 2016. The percentage of investment management firms that offered performance-based fees dropped from 75% in 2014 to 64% in 2016. The types of funds that always use performance-based fees are all alternatives: hedge funds (60%), private equity (54%), infrastructure (38%), real estate (29%), hedge funds-of-funds (20%) and high yield fixed income (8%). It is a common practice for investment managers to negotiate their fees, with 83% undertaking this practice, although this is down from 91% in 2014. Callan’s report is based on responses from 59 asset managers representing $1.1 trillion in assets. Survey results also incorporated responses from 279 investment management organizations, supplemented by Callan’s Investment Manager Database of more than 1,600 firms. The full report can be downloaded here.The post Twenty-One Percent of Investment Managers Plan to Lower Fees appeared first on PLANSPONSOR.
- NYU Participants File Second Excessive Fee Complaint
published on Mon, 20 Nov 2017 18:21:02 +0000
Participants in the New York University and related plans are making a second attempt to sue fiduciaries for excessive fees.After a federal district court judge found most claims in an earlier complaint were not plausibly alleged by the plaintiffs, they filed a second complaint in the U.S. District Court for the Southern District of New York. This case was filed against NYU Langone Hospitals, NYU Langone Health Systems, the retirement plan committee, and several named defendants.As with the first case, which included the university’s Faculty Plan, the participants allege that instead of using the plans’ bargaining power to reduce expenses and exercising independent judgment to determine what investments to include in the plans, the defendants squandered that leverage by allowing the plans’ conflicted third-party service providers—TIAA-CREF and Vanguard—to dictate the plans’ investment lineup, to link its recordkeeping services to the placement of investment products in the plans, and to collect unlimited asset-based compensation from their own proprietary products.In the new complaint, the plaintiffs attempted to offer more evidence that their claims were plausible.For example, previously, U.S. District Judge Katherine B. Forrest dismissed all of the plaintiffs’ loyalty claims, finding that the plaintiffs failed to plead sufficient facts to support the loyalty-based claims. “A plaintiff does not adequately plead a claim simply by making a conclusory assertion that a defendant failed to act ‘or the exclusive purpose of’ providing benefits to participants and defraying reasonable administration expenses; instead, to implicate the concept of ‘loyalty,’ a plaintiff must allege plausible facts supporting an inference that the defendant acted for the purpose of providing benefits to itself or someone else,” she wrote in her opinion.She noted that plaintiffs’ allegations are principally based on NYU purportedly allowing TIAA-CREF and Vanguard to include their proprietary investments in the plans without considering potential conflicts, which favored TIAA-CREF’s and Vanguard’s own interests through the provision of allegedly bundled services. “As pled, these allegations do not include facts suggesting that defendant entered into the transaction for the purpose of (rather than merely having the effect of) benefitting TIAA-CREF,” Forrest wrote in her opinion.Funds offered for the benefit of recordkeepersAs noted in both complaints, TIAA-CREF offered its products and services strictly on a bundled basis. If a plan offers the TIAA Traditional Annuity, TIAA-CREF required that the plan also offer the CREF Stock and Money Market account, and to also use TIAA as recordkeeper for its proprietary products. The new complaint says TIAA’s financial interests were also served insofar as TIAA was able to use its position as recordkeeper to obtain access to the plans’ participants, acquiring information about their ages, length of employment, contact information, the size of their accounts, and choices of investments, and then used this information for its benefit in marketing lucrative investment products and wealth management products to participants as they neared retirement and before retirement. For this argument, they cite multiple recent reports in the New York Times.In addition, the complaint states, “By allowing the Plans to enter such a bundled arrangement with TIAA-CREF, Defendants agreed to lock the Plans’ participants into funds which Defendants did not analyze. It can never be prudent to lock funds in a plan for the future and to keep them in because of recordkeeping. Defendants thus failed to discharge their duty to independently evaluate whether each investment option was prudent for the Plans, and to determine whether the use of TIAA as a plan recordkeeper was prudent, reasonably priced, and in the exclusive interest of participants. Instead of acting solely in the interest of participants, Defendants allowed TIAA’s financial interest to dictate the Plans’ investment selections and recordkeeping arrangement.”The plaintiffs also say that because the defendants allowed the CREF Stock to be locked into the plans, they could not satisfy their duty to remove investments that are no longer prudent within a reasonable time. “As a result of Defendants’ breach in allowing CREF Stock to be retained in the Plans because TIAA-CREF demanded it and not based on an independent and ongoing assessment of the merits of the option, the Plans suffered massive losses compared to prudent alternatives,” the lawsuit says.Plaintiffs also note the TIAA Traditional Annuity has severe restrictions and penalties for withdrawal if participants wish to change their investments in the plans. For example, some participants who invest in the TIAA Traditional Annuity must pay a 2.5% surrender charge if they withdraw their investment in a single lump sum within 120 days of termination of employment. The only way for these participants to withdraw or change their investment in the TIAA Traditional Annuity is to spread the withdrawal over a ten-year period, unless this substantial penalty is paid. Thus, any of these participants who wish to withdraw their savings without penalty can only do so over ten years.Plaintiffs also allege that some expenses charged to participants were not related to services provided by the recordkeepers and are unnecessary, such as the administrative fee assessed on each variable annuity option. It is charged as a percentage of assets, rather than a flat fee per participant. As a result, as the growth in the plans’ assets outpaced the growth in participants, the fees paid to TIAA-CREF likewise increased even though the services provided did not increase at the same rate, resulting in further unreasonable compensation.As another example, the plaintiffs say distribution expenses are charged for services performed for marketing and advertising of the account to potential investors. These services provide no benefit to plan participants and are wholly unnecessary, and being charged for these expenses causes a loss of retirement assets with no benefit.The recordkeeping arrangementsForrest also previously ruled that merely having a contractual arrangement for recordkeeping services does not, as a matter of law, constitute a breach of the duty of prudence—to support a claim on this basis, plaintiff must make a plausible factual allegation that the arrangement is otherwise infirm. The plaintiffs attempt to support their claim by adding a series of assertions that alternative recordkeepers—with whom NYU was allegedly precluded from contracting—could have provided “superior services at a lower cost.” But, Forrest said if this fact alone supported imprudence, the mere entry into the market of a lower-cost and superior provider would lead to a breach of fiduciary duty. “This is not the law,” she wrote.Related to this the complaint says the retirement committee’s own publicly-available admissions unequivocally concede that the plans’ structure was imprudent and caused plan losses. Specifically, in 2009, the retirement committee recognized that in order to leverage the plans’ $3 billion in assets, improve the plans’ administrative efficiency and reduce costs, and offer a “best in class fund lineup,” it “need[ed] to streamline and reduce the fund lineup and select one vendor as sole recordkeeper.” Moreover, the retirement committee readily acknowledged that an unbundled platform was preferable to the plans’ “bundled” arrangement. It also admitted that plan consolidation would enable the plans to obtain “better share classes yielding higher returns,” which would “result in significantly lower fee structures for the participant.”Yet, according to the complaint, more than seven years later, the defendants still have not taken the action it recognized was “needed” as of 2009. In an October 13, 2016, meeting regarding the plans—after the filing of the previous lawsuit that challenged the plans’ use of multiple recordkeepers and duplicative options—the retirement committee admitted it had still not met the goal of “reducing duplication and fees.”The complaint adds that experts in the recordkeeping industry with vast experience in requests for proposals and information for similar plans have determined the market rate that the plans likely would have been able to obtain had the fiduciaries put the plans’ recordkeeping services out for competitive bidding would be no more than $840,000 in the aggregate for both plans combined (a rate of no more than approximately $35 for each participant in the plans per year.Using lower-cost fund share classesForrest also previously said the plaintiffs’ identification of funds for which NYU included a higher-cost share class in the plans instead of an identified available lower-cost share class of the “exact same mutual fund option” does not constitute evidence of imprudence.The complaint says that because the only difference between the various share classes is fees, prudent fiduciaries view higher-cost share classes as imprudent, because using a higher-cost share class results in the plan paying wholly unnecessary fees. “Because there is no prudent reason to pay a higher cost when the same fund is available at a lower cost, prudent fiduciaries of multi-billion dollar defined contribution plans obtain the lowest-cost share class available to the plan,” the complaint says. It also cites an article written for PLANSPONSOR by attorney Fred Reish of Drinker, Biddle and Reath, that says, “The failure to understand the concepts and to know about the alternatives could be a costly fiduciary breach.”The complaint points out that given that defined contribution plan fiduciaries are held to the standard of a knowledgeable financial expert, if a service provider or consultant recommends a particular share class, a fiduciary cannot blindly accept that recommendation at face value, but instead must review the fund’s prospectus to determine if a lower-cost version of the same fund is available, to avoid saddling the plan with unnecessary fees.In addition, it notes that even if a jumbo plan does not meet the minimum investment thresholds for an institutional share class, fund companies will routinely waive those minimums for billion dollar plans if merely requested, particularly if the plan’s total investment in the investment provider’s platform is significant. “Therefore, Defendants knew or should have known that investment providers would have made lower-cost share classes available to the Plans if Defendants had asked,” the complaint states.“This demonstrates a sustained failure of process on the part of the Retirement Committee to ensure that each option in the Plans was prudent.”The post NYU Participants File Second Excessive Fee Complaint appeared first on PLANSPONSOR.
- AB Outlines Six Ways to Improve DC Plans Markedly
published on Mon, 20 Nov 2017 16:30:02 +0000
While some plan sponsors may be waiting for Washington to settle on new tax regulations for defined contribution (DC) plans, there are steps that they can be taking to improve their plans now, AB says in a new blog, “Six Steps to Take DC Plans to the Next Level.” The first step, AB says, is to replace proprietary target-date funds (TDFs) from recordkeepers as the qualified default investment alternative (QDIA) with TDFs that use open architecture, and, in some cases, lower cost collective investment trusts, customized glide paths and in-plan guaranteed lifetime income. If the plan is not already automatically enrolling participants and escalating their deferrals each year, AB says, it should be. Thirdly, sponsors should consider offering a financial wellness program to prompt their participants to become more engaged. While using a QDIA and automatic enrollment are beneficial, AB says, sponsors should also revisit their investment lineup for those participants who want to select their own investments. Fifth, sponsors should make sure that their retirement committees receive fiduciary training, and sixth, hire an adviser or consultant, if they aren’t already working with one. “This is especially important for plans with less than $50 million in assets,” AB says. “Smaller-size plans that employ a financial adviser fare much better than those that don’t—showing higher participation rates, higher average savings among participants and more participants improving their retirement readiness.”The post AB Outlines Six Ways to Improve DC Plans Markedly appeared first on PLANSPONSOR.
- DOL Reaches Triple Settlement With First Bankers Trust
published on Mon, 20 Nov 2017 16:15:34 +0000
The U.S. Department of Labor (DOL) has reached agreements to resolve three lawsuits with First Bankers Trust Services Inc. (FBTS), involving the approval of stock purchases for three ESOPs.According to DOL allegations, FBTS violated the Employee Retirement Income Security Act (ERISA) when it approved stock purchases by three employee stock ownership plans (ESOPs). As part of the agreements, FBTS will pay $15.75 million to the plans and reform its procedures for handling ESOP transactions.By way of background, the DOL initially filed suit against FBTS in 2012 in the U.S. District Courts for the Southern District of New York and the District of New Jersey. The lawsuits followed investigations by the New York office of the Department’s Employee Benefits Security Administration (EBSA) into the FBTS decisions to authorize ESOPs sponsored by Maran Inc., Rembar Co. Inc., and SJP Group, Inc., to purchase stock in their respective companies. FBTS will pay $8 million to the SJP ESOP; $6.6 million to the Maran ESOP; and $1.1 million to the Rembar ESOP.Jeffrey S. Rogoff, DOL regional solicitor of labor, says the settlements provide “not only for reimbursement to these ESOPs and their participants—they commit First Bankers Trust Services to clear procedures to enhance and ensure proper compliance in the future.”DOL reports FBTS served as a trustee and fiduciary of the ESOP in each of these three cases, charged under ERISA with ensuring that the ESOP paid no more than fair market value for the employer stock. The department alleged in all three cases that FBTS approved transactions without undertaking the due diligence required of an ERISA fiduciary, and ultimately caused the ESOPs to overpay by millions of dollars for the stock they purchased.The case involving the SJP ESOP resulted in a 17-day trial in district court in New Jersey, with the court reaching the determination that FBTS breached its duties of prudence and loyalty when it caused the ESOP to overpay for shares of SJP’s stock. The Maran case was the subject of a two-week trial before the New York district court in April 2017, but no judgment had been returned as the parties discussed settlement. The Rembar case was awaiting trial in New York.DOL explains that, as part of the settlement of the Maran case, FBTS also agreed to follow specific policies and procedures when it acts as a trustee or fiduciary to an ESOP that is purchasing, selling, or considering the purchase or sale of employer securities that are not publicly traded. These policies and procedures include “requirements for the selection and oversight of a valuation adviser, the analysis required as part of the fiduciary review process, and the documentation of the valuation analysis.”The post DOL Reaches Triple Settlement With First Bankers Trust appeared first on PLANSPONSOR.
- SeLFIES Can Improve the Nation’s Retirement Security
published on Mon, 20 Nov 2017 15:08:42 +0000
Last month, the Government Accountability Office (GAO) issued a stunning report, “The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to Better Promote Future Retirement Security” (GAO-18-11SP), on the U.S.’ retirement preparedness. In the report, it notes, “The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. … individuals are increasingly responsible for planning and managing their own retirement savings accounts … [M]any households are ill-equipped for this task and have little or no retirement savings.” The report ends with a very strong recommendation, or plea, that, “Congress should consider establishing an independent commission to comprehensively examine the U.S. retirement system and … improve how the nation promotes retirement security.” Coincidentally, the U.S. Treasury also issued a report, “A Financial System That Creates Economic Opportunities,” that makes the case for in-pension plan retirement income options and the importance of funding infrastructure. The U.S. government can have an immediate impact on the retirement challenge, create a liquid in-plan retirement income option, and raise funding for infrastructure by issuing a new type of long-term bond, one we call SeLFIES—Standard of Living indexed, Forward-starting, Income-only Securities. SeLFIES address many of the challenges raised in the GAO and U.S. Treasury reports and are also advantageous to the U.S. Treasury. Individuals seek a guaranteed, real income, ideally from retirement through death, and to lead a lifestyle comparable to pre-retirement. At the same time, the Treasury seeks to ensure that individuals can make independent, informed financial decisions and accumulate a retirement nest egg. The GAO notes three main challenges to achieving this goal: access to retirement plans; insufficient savings; and the complexity of investing and decumulating. Typically, low-income or part-time employees work for firms that neglect to offer retirement plans—and even if they do, many of these employees cannot participate for a host of reasons. A number of states, Oregon being the first, are stepping into the breach to create plans that offer access to uncovered private-sector workers. Inadequate savings disproportionately affects women and some minorities and is caused by insufficient real wage growth, high debt levels and increased longevity. Further, the complexity of retirement planning leaves many confused about what constitutes adequate savings. They are overwhelmed by the information provided and the absence of a robust and uniform method to calculate income replacement rates. The attempts by Richard Thaler, Ph.D., winner of this year’s Nobel Memorial Prize in Economic Sciences, to nudge individuals into pension plans and increase savings over time, via automatic enrollment and automatic escalation, help; however, they fail to address the “how much is adequate” question. Finally, there is uncertainty over what to invest in and how best to decumulate. Most adults can barely answer questions about compound interest, the effects of inflation or the benefit of diversification. The Department of Labor (DOL) provided safe harbor guidance about appropriate investments, but investing in existing assets is risky relative to the retirement objective, because these assets fail to provide a simple or low-cost cash-flow hedge against desired retirement income. Even a portfolio of traditional, “safe” government securities, unless heavily financially engineered—at some cost—would be risky because of the cash flow, and potential maturity, mismatch between traditional bonds and the desired retirement income stream. The Treasury report notes, “Because annuities are the only financial services product that can provide a guaranteed lifetime income stream … [they] are an important contributor to the Core Principle of empowering Americans to save for retirement.” However, many hesitate to buy annuities because they can be complex, opaque and illiquid; investors fear not being able to bequeath the annuities to heirs. SeLFIES address many of these issues. Governments could issue a new, low-cost, liquid and safe ultra-long bond instrument. SeLFIES start paying investors upon retirement and pay real coupons only—say, $5—indexed to aggregate per capita consumption—for a period equal to the average life expectancy at retirement, e.g., another 20 years. Instead of current bonds that index solely to inflation, SeLFIES cover both the risk of inflation and standard-of-living improvements. SeLFIES are designed to pay people when they need it and how they need it, and greatly simplify retirement investing. A 55-year-old today would buy the 2027 bond, which would start paying coupons when he turns 65, in 2027, and keep paying for 20 years, through 2047. In this way, even the most financially illiterate individual can be self-reliant with respect to retirement planning. For example, if investors want to guarantee $50,000 annually, risk-free for 20 years in retirement to maintain their current standard of living, they would need to buy 10,000 SeLFIES—i.e., $50,000 divided by $5—over their working life. The complex decisions of how much to save, how to invest, and how to draw down are simply folded into an easy calculation of how many bonds to buy. Besides being simple, liquid, easily traded at very low cost and with low credit risk, SeLFIES can be bequeathed to heirs. SeLFIES do not address all issues, including longevity, but go a long way toward improving retirement security. These securities are a good deal for governments, too. In fact, governments are the biggest beneficiaries. SeLFIES not only improve retirement outcomes for all defined contribution (DC) plans, but also have spill-over benefits for the current administration and future ones. First, cash flows from SeLFIES reflect synergistic cash flows for infrastructure spending: namely, large cash flows upfront for capital expenditure, followed by delayed, inflation-indexed revenues, once projects are online. Financing infrastructure has been a challenge and a priority for the current administration. Second, SeLFIES give governments a natural hedge of revenues against the bonds, through value-added taxes (VATs).The looming retirement crisis needs to be addressed by timely innovation, because the longer that governments wait, the higher the cost to the taxpayer. SeLFIES improve retirement security, fund infrastructure and can be created immediately, at low cost, without waiting for an independent commission or changing regulations! Robert C. Merton, Ph.D., recipient of the 1997 Alfred Nobel Memorial Prize in Economic Sciences, is the School of Management Distinguished Professor of Finance at the MIT Sloan School of Management. He is also Resident Scientist at Dimensional Fund Advisors, a global asset management firm headquartered in Texas, and University Professor Emeritus at Harvard University. Arun Muralidhar, Ph.D., is adjunct professor of finance at George Washington University, Academic Scholar Advisor at the Center for Retirement Initiatives at Georgetown University, as well as founder of Mcube Investment Technologies and AlphaEngine Global Investment Solutions. He has served as a consultant to Overture Financial (consultant to California’s Secure Choice Board) and has authored a new manuscript, “Fifty States of Grey: An Innovative Solution to the DC Retirement Crisis.” These are the personal views of the authors and do not reflect the views of any of the organizations or universities with which they are associated. This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Strategic Insight or its affiliates.The post SeLFIES Can Improve the Nation’s Retirement Security appeared first on PLANSPONSOR.
- SURVEY SAYS: Time Off for Thanksgiving 2017
published on Mon, 20 Nov 2017 09:30:31 +0000
Last week, I asked NewsDash readers, “What days off does your employer provide for Thanksgiving and are you asking for more?” More than half of responding readers (52.2%) said they get Thanksgiving Day and the day after off, while 21.1% get Thanksgiving Day only. Twenty percent reported they leave early the day before and get both Thanksgiving and the day after off, and 4.4% get Thanksgiving, the day before and the day after off. The same percentage 1.1% chose “Leave early the day before and Thanksgiving Day,” and “The whole week.” Most (55.6%) of respondents have not asked for any more days off for the Thanksgiving holiday. Slightly more than 12% have asked for the day before, 6.7% each chose “the day after” and “the day before and after,” and 11.1% have asked for the whole week off. Among the “other” responses, one reader said he/she gets Tuesday through Friday from the company, so he/she asks for Monday. Others said they ask for Tuesday and the day before Thanksgiving or they ask for the following Monday. In verbatim comments some said working the day after Thanksgiving is productive for them, while one said the opposite. One reader said everyone should get Thanksgiving and the day after. A few readers noted that even though they get the day off, they still work. Some readers explained that their reasons for taking an extra day were not just to have a day of rest or fun, like the reader who said children are out of school the day before. Editor’s Choice goes to the reader who said: “I can turn 3 days of PTO into 9 straight days of vacation with Thanksgiving and that Friday off. That’s a value play!” Thank you to everyone who participated in the survey! VerbatimOur company has offered both Thanksgiving and the day after as paid holidays since the 1970s. I take additional vacation days that week based on how much cooking I have to do!A flawed management: puts pressure on workers to come in even on holidays.It’s very nice having both Thanksgiving Day and the day after off. Who doesn’t like a four day weekend.I’ll be “on vacation” the day before and after. However, I’ll be working from home at least part of each day. But, the key there is I’ll be working “from home”. Happy Thanksgiving!It’s amazing to have 4 days off without needing to use time off. It’s like a mini vacation whether we travel or not.Not a whole lot of work gets done on the Friday after Thanksgiving despite people’s best efforts to “catch up” that day.I can turn 3 days of PTO into 9 straight days of vacation with Thanksgiving and that Friday off. That’s a value play!I have previously only had Thanksgiving off (financial world), but now working at a school I have Tuesday-Friday off. It’s like an early Christmas… and I’m very thankful!Thanksgiving is an awesome holiday. I love having the day after the holiday off as well. It allows for travel time, time to recover from cooking, guests, and cleaning.Best holiday. No decorating or gift buying, just good eats and get to sleep it off next day!I think that the Friday after should also be part of the holiday in a law firm.Everyone should get thanksgiving and the day after- But now we have retail which has EXPLODED Saturday could turn into black Friday and everyone could give Thanks that the early Americans were survivors!It’s great to have a 3 day work week!It there is to be a day off after a holiday, it makes more sense to me to have the day after Christmas rather than Thanksgiving.We had the day after as a paid day off because the building wouldn’t provide air for just our company. Then we were bought by a bank and the day off went away.My husband is a teacher and gets the whole week off, so I usually take Wednesday as a vacation day to supplement our company holidays of Thanksgiving and the day after.Black Friday should be a national holiday.Since I work for a Federal agency, I get Thanksgiving Day as a Federal holiday, but I must use 8 hours of annual leave (vacation time) to take off the day following.Daycare mirrors the public school holidays, so I also need off the day before.I really appreciate having a five day break at Thanksgiving. It is really a gift.Our families are scattered throughout the U.S., so my husband and I typically spend the Thanksgiving Holiday with each other or friends. Very low key!Day after Thanksgiving was traded for Columbus Day in collective bargaining agreementThe office is open on the day after Thanksgiving, and I hate using a vacation day for it. It’s so quiet and we usually get let go early. It’s not guaranteed though, as is leaving early the day before. Depends on which manager is here!We usually leave in early afternoon Wednesday and have Thursday and Friday off. Our company also provides two work days off for both Christmas and New Year’s. Most years we end up with two four-day weekends. It’s a nice perk and minimizes the vacation days needed to end up with a long break.I’m thankful for my days off!Since the stock market is open, our business must be open as well on the day after Thanksgiving. We do get to close early though!Even if you are “off”, you are expected to be “on”I like to travel to be with family on Thanksgiving, so I routinely request vacation for the day before and day after as well as the Monday after.I think the extra day off really is a great way for employers to get the most out of their employees. Family time is important and so is safe travel – the employers are putting their employees first!Appreciated.Our holidays follow the NYSE!In the past, at a different employer, I’ve had to work the day after Thanksgiving (in a rotation) to cover potential client calls. Not all departments with client contact had the same rule. I was one of only about four people on our floor of close to 100 people who worked that day, and I never received a client call. Most of the clients are probably taking the day off.Having Thanksgiving and the day after off is a nice mini-break.If the stock market closed the day after Thanksgiving we would also close.Thursday plus Friday has been typical at most of my employers. Some were Thursday only, but almost everyone used a vacation day on Friday. Current employer usually allows early dismissal on Wednesday, although I can’t recall if it happens every year.get a lot of negative employee response to not providing day after thanksgiving off.I love having the day after Thanksgiving off. I get a lot of shopping done.I am a contract employee and the employer I am working for has the leave early the day before (Noon or 3pm, not decided yet), Thanksgiving Day and the day after. Since I am contract, the company that I am contract through only does Thanksgiving Day. So I will not be paid for the leave early the day before and the day after, but I still get to have a nice amount of time off. I am also going to be representing the company I am working for in the Thanksgiving Day parade. What an honor!Sometimes, they do let us go an hour or two early the day before, but that’s not a given. One year, we were all given Apple pies that day!It’s a generous benefit to have the day-after Thanksgiving off, for which I am thankful. It probably has a benefit to the company also, that the employees return rested rather than tired and late from trying to squeeze in some shopping.There are so few people who report to work that without the customary distractions, I accomplish a week’s worth of work in a single day! I always work the following Friday –Although it’s not a written policy, we generally let employees leave early the day before Thanksgiving.This should be a day off as many families get together.The day after Thanksgiving is a holiday for us, but since the stock is open that day, we have minimal staff work that day.Employer is generous with time off. We get Thanksgiving and the day after. For the first time in my career, I work for a company that provides both President’s Day and Martin Luther King Jr. Day as well. Working in Finance, it is nice to have those two days off in the first quarter of the year.In Wisconsin a lot of employees have the entire week off. It is gun deer season and many save vacation for that week. 3 days of vacation get you the whole week off. NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.The post SURVEY SAYS: Time Off for Thanksgiving 2017 appeared first on PLANSPONSOR.
- Retirement Industry People Moves
published on Fri, 17 Nov 2017 18:37:25 +0000
Meeder Investment Management has announced that industry veteran Dan O’Toole has joined the firm as senior vice president and head of third-party distribution. O’Toole brings nearly 30 years of industry and investment management experience to Meeder, a tactical asset allocation strategist known for their suite of investment solutions and model-driven approach to investing.“We are very excited to have Dan join our leadership team. His experience working with sales and consulting teams who engage with institutions, advisers and clients provides the depth of leadership we need to ensure we can provide the right level of expertise, service and support today and in the future,” says Bob Meeder, president and CEO of Meeder Investment Management. “As we move forward in what has become a highly commoditized investment management world, financial intermediaries are trying to determine what types of investment strategies and solutions will help them address the challenges and opportunities of the current and future financial market environment. Dan’s leadership in these areas will position our firm well as we approach our 45th year in the industry.” O’Toole’s experience spans multiple organizations where he led national sales and consulting teams. Prior to joining Meeder, he served as senior managing director and head of national sales at Horizon Investments and was a senior vice president at AssetMark Investments.NEXT: PGIM Investments Appoints Chief Marketing Officer to Drive Global ExpansionPGIM Investments has named Sheri Taylor Gilchrist global chief marketing officer, charged with helping to drive the company’s strategy to expand globally. PGIM Investments is the global fund manufacturer of PGIM, the global investment businesses of U.S.-headquartered Prudential Financial.Gilchrist, former managing director and global head of marketing services at Bank of New York Mellon, is the company’s first-ever global CMO, hired to propel business strategy through initiatives that support its U.S. mutual fund and global UCITS platforms.At BNY Mellon, Gilchrist was the chief architect behind its marketing intelligence and automation platform, designed to improve the company’s relationship with customers. Earlier, she was global head of relationship marketing at Eaton Vance. She has also held marketing roles at Harte Hanks, Epsilon, Young & Rubicam and American Express.Gilchrist has a bachelor’s degree in international relations and economics from the University of Melbourne in Australia.NEXT: FS Investments Hires National Sales Manager to Oversee Sales ProfessionalsFS Investments has announced that it has hired Ryan Robertson as the firm’s national sales manager reporting directly to Steve DeAngelis, executive vice president and head of distribution. Based in St. Louis, Robertson will oversee all external and internal sales professionals across the firm’s growing distribution channels.“Ryan’s strong experience leading sales teams and robust relationships with both wire houses and regional broker dealers make him an ideal fit for our expanding distribution platform,” says DeAngelis. “He will guide our sales team’s efforts as we continue to rapidly broaden our product suite and concentrate more and more on the consultative, advisory side of the evolving distribution landscape.”Prior to joining FS Investments, Robertson was at Goldman Sachs Asset Management for eight years, most recently as a vice president and divisional sales manager for their wire house and regional broker dealer distribution channel. Prior to joining Goldman, Robertson served as a regional marketing director at Hartford Mutual Funds. Before beginning his career in financial services, Robertson was a professional basketball player both in the NBA where he played for the Sacramento Kings as well as in Europe.“I look forward to working with the FS sales team and enhancing our position as the industry’s leader in delivering the highest quality alternative investments to investors,” says Robertson. “FS is at an exciting inflection point in its trajectory and I’m eager to get started.”Robertson currently sits on the advisory board of the Fellowship of Christian Athletes, and previously was the chairman of St. Charles Community College and a board member of Chesterfield Day School. NEXT: P-Solve Adds Consultant and Analyst to U.S. Team Massachusetts Mutual Life Insurance Co., as part of its efforts to boost support of defined benefit (DB) pension plans, has appointed Ken Stapleton as senior institutional investment consultant to support DB plan sponsors.Stapleton, who has more than 20 years of experience in the financial industry, is responsible for providing investment expertise to MassMutual’s DB clients, including portfolio strategy, asset allocation, risk reduction, investment policy, product selection and day-to-day information and data sharing. He will support both plan sponsors and financial advisers who serve the DB marketplace.Stapleton is charged with both helping plan sponsors better manage their DB plans as well as helping financial advisers grow their business. In the process, Stapleton will work with plan sponsors and advisers to provide investment solutions tailored to meet sponsor’s specific goals for their plans.MassMutual is also expanding its support of the DB marketplace. Recently, the company introduced its PensionSmart Analysis tool, which provides insights into an employer’s issues and opportunities by examining the plan’s current status, funding level, and service structure. MassMutual’s pension experts can then assess the pension plan’s health and make recommendations to the sponsor about appropriate options.Prior to joining MassMutual, Stapleton worked at Keefe, Bruyette and Woods for 15 years as an institutional equity trader and research analyst. He also worked an investment banker with Ironwood Capital. NEXT: PSCA Joins Membership Division at ARA The Plan Sponsor Council of America (PSCA) will join the American Retirement Association (ARA), under the terms of a combination agreement signed by the board of directors of both organizations. Effective December 29, 2017, PSCA will become a membership division of the American Retirement Association, alongside the four other retirement organizations that currently comprise the American Retirement Association. These include the American Society of Pension Professionals & Actuaries (ASPPA), the ASPPA College of Pension Actuaries (ACOPA), the National Association of Plan Advisors (NAPA) and the National Tax-deferred Savings Association (NTSA). The American Retirement Association is currently comprised of more than 20,000 members, including business owners, service providers, recordkeepers, attorneys, accountants, actuaries, and retirement plan advisers. “PSCA has served plan sponsors since 1947, and that isn’t changing,” says Ken Raskin, chairman of PSCA’s board of directors. “We will continue to provide the same services to members and to be a voice for plan sponsors in Washington. Joining forces significantly improves our ability to elevate important retirement industry issues and better serve our members.” “The ARA had been exploring ways to do benefits and services for plan sponsors,” says Brian Graff, CEO of ARA. “Some of our organizations have plan sponsor members, but mostly due to our training programs. Adding voices of plan sponsors to our already loud voices representing the retirement industry will significantly enhance the advocacy efforts of ARA.”For PSCA, the move represents an opportunity to offer its members access to an expanded array of resources and educational services, while at the same time amplifying the long-standing independent voice of the plan sponsor alongside a wide array of retirement plan industry professions. For the American Retirement Association, the addition of PSCA adds the important voice of plan sponsors and strengthens the organization’s ability to advocate for the private, voluntary retirement system. “Throughout its half-century history, our associations have evolved along with America’s retirement system,” notes Graff. “With the addition of this key constituency, the American Retirement Association truly becomes the voice of the nation’s private retirement system.” Both PSCA and ARA have been features in this year’s “Who’s Working for You?” PLANSPONSOR series, highlighting industry groups who work with, help and protect retirement plan sponsors.NEXT: Account Development Director Joins Perspective Partners Terese Johnston joined Perspective Partners LLC as director of account development. An experienced health benefits executive, Johnston has worked multiple roles in her career, including member education, open enrollment, and enterprise-level lead generation and business development. She joined Perspective Partners committed to enhancing employee financial wellness. Johnston left her position as director of Enterprise Sales for HealthEquity and move to Perspective Partners.“In my experience, employers want to do what is best for their employees,” Johnston says. “Bringing retirement and health benefits together in one platform is a win-win for both employers and their employees.”Johnston will focus on the firm’s NestUp product line. NEXT: Lockton Adds Former Client Executive to Charlotte OfficeLockton’s retirement business has added another adviser to its ranks with the hire of 20-year industry veteran, Michelle Zevola, to its Charlotte, North Carolina, office. A former client executive at Transamerica, Zevola focused on the company’s largest and most complex retirement plans, and was recognized by independent rating services as one of the top relationship managers in the United States for five consecutive years. She has expertise consulting with employers on the complete spectrum of retirement benefits—defined contribution (DC), defined benefit (DB), and deferred compensation—and has done extensive work advising plan sponsors on the transition of benefits through mergers and acquisitions.NEXT: Transamerica Promotes Industry Veteran After Announcing Mega-Market ExpansionTransamerica has announced plans to expand its focus on mega-market retirement plans with more than $1 billion in plan assets. To support this effort, the firm promoted industry veteran Thomas Kelly to the new position of director of mega-market retirement plan sales. Kelly will report to Chad Brown, vice president and managing director of large and mega market retirement sales. In his new role, Kelly will work with Transamerica’s distribution team to apply best practices when helping prospective plan sponsor clients evaluate Transamerica’s retirement plan solutions. He will also work directly with prospective clients to help tailor a retirement plan platform that best fits their retirement program’s needs and goals. “Transamerica has a service model that works well with the customized details that mega-market plans require,” says Brown. “Tom Kelly has specialized in retirement plans for over two decades, and understands the high level of service these sponsors demand. Tom’s unique expertise will be a tremendous benefit to the clients we serve.” The post Retirement Industry People Moves appeared first on PLANSPONSOR.
- Report Highlights Dramatic Multiemployer Insurance Deficit
published on Fri, 17 Nov 2017 17:11:25 +0000
The Pension Benefit Guaranty Corporation’s (PBGC) Fiscal Year 2017 Annual Report shows that the deficit in its insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier.According to PBGC, the increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade.At the same time, PBGC’s single-employer insurance program continued to improve, as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities.PBGC Director Tom Reeder says his attention is focused on the “dire financial condition” of the multiemployer program.“We are engaged with trustees of troubled plans to help them protect benefits and extend plan solvency,” he explains. “We will continue to work with the Trump administration, Congress, and the multiemployer plan community to create solutions so that PBGC’s guarantee is one that workers and retirees can count on in the future. The longer the delay in making the changes needed to improve the solvency of the multiemployer program, the more disruptive and costly they will be for participants, plans and employers.”PBGC data shows the multiemployer program had liabilities of $67.3 billion and assets of $2.2 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $65.1 billion, up from $58.8 billion last year.“The increase of $6.3 billion results largely from 19 plans newly classified as probable claims because they either terminated or are expected to run out of money within the next decade, offset by the reclassification of one plan that is no longer a probable claim due to the implementation of benefit reductions under the Multiemployer Pension Reform Act of 2014,” Reeder explains.During FY 2017, PBGC reports, the agency provided $141 million in financial assistance to 72 insolvent multiemployer plans, up from the previous year’s payments of $113 million to 65 plans. In the coming years, the demand for financial assistance from PBGC will increase as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee level set by law. In the PBGC’s most recent projections, the agency estimated that, absent changes in law, its multiemployer program is likely to run out of money by the end of 2025, if not before.The outlook on the single employer side is much healthier. That program had liabilities of $117 billion and assets of $106 billion as of September 30, 2017. This resulted in a negative net position or “deficit” of $10.9 billion and reflects an improvement of $9.7 billion from $20.6 billion last year.For more information, visit www.PBGC.gov. The post Report Highlights Dramatic Multiemployer Insurance Deficit appeared first on PLANSPONSOR.
- Two-Thirds of Millennials Are Saving for Retirement
published on Fri, 17 Nov 2017 17:04:37 +0000
In a new report, “Breaking the Millennial Myth,” Natixis Global Asset Management examines the financial goals of Millennials, those born between 1980 and 2000. The oldest, Natixis says, are 37—raising families and buying homes. They are anything but the “slackers” other generations may think of when they hear the word Millennial.Natixis says that Millennials “are risk-conscious and have retirement in their sights, and when it comes to their finances, they are very much goals-focused.” Sixty-four percent say they have financial goals, and 59% have a financial plan in place to achieve them.However, some Millennials are too focused on the short term, with 64% saying the time horizon for their investments is five years or less and 87% saying it is less than 10. Natixis says “this likely reflects their current life stage in which anticipated events such as marriage or starting a new family, or significant purchases such as a new car or first home, may be only a few short years away.”Nonetheless, 66% of Millennials are saving for retirement. But they need help learning about how much they should save, as their average deferral rate is 10.9%, compared to 13.5% for Baby Boomers and 12.1% for Generation X.Fifty percent of Millennials say they need help understanding financial risk and 46% say they would like help with tax planning. Twenty-eight percent would like guidance on the financial basics of budgeting and managing debt. Surprisingly, the same percentage wants help with estate planning, even though they are only between the ages of 17 and 37.Only 64% of Millennials feel financially secure, compared to 70% of Boomers. However, 61% of Millennials say they are comfortable taking on some financial risks to boost performance. At the same time, 75% say that if they were forced to choose, they would select safety over investment performance, and 65% say market volatility interferes with their long-term goals.“In short,” Natixis says, “Millennials may have high hopes for returns on their investments, but in reality, many are not emotionally equipped to take on the added risk needed to pursue long-term return assumptions.”Asked when they plan to retire, on average, Millennials say at age 61. And they expect to live an average of 24 years in retirement. Sixty percent of Millennials believe Social Security will still be in existence when they retire, whereas 69% of Boomers believe this.Seventy-three percent of Millennials have tried to figure out how much they will need in retirement, but only 64% explored retirement income options. Fifty-one percent think their children will help them out in retirement.While 87% of Millennials trust themselves to make financial decisions, nearly as many, 86%, say they trust their financial professional as much as themselves. This trumps their reliance on family members, friends and co-workers (71%) and the financial media (58%).Natixis says that for all of the belief that Millennials are addicted to their cellphones and social media, only 39% say they trust social networks that cover finance, such as Twitter and Yahoo Finance. However, 44% say they would prefer digital advice to a face-to-face meeting.When asked about passive investing, 68% understood correctly that these types of funds track the markets, and 60% realize that they charge lower fees. However, 65% incorrectly said that passive investments are less risky than active investments, 66% think that they protect investors on the downside, and 62% think they offer access to the best investment opportunities.Natixis says that Millennials hold in high regard the concept of socially responsible investing. Eighty percent want to invest in companies that represent their social values, and 75% want their investments to do social good.“The financial industry would do well to recognize the social focus of these individuals if they are to earn their trust as investors and clients,” Natixis says.CoreData Research conducted the survey of 8,300 investors around the word in February and March for Natixis. Of the total surveyed, 2,434 were Millennials.The post Two-Thirds of Millennials Are Saving for Retirement appeared first on PLANSPONSOR.
- Leadership Forum Urges Update of Open MEPs
published on Fri, 17 Nov 2017 16:05:29 +0000
J.P. Morgan Asset Management this week hosted an informative video webcast on the topic of “Building a More Robust and Inclusive U.S. Retirement System Amid a Changing Economy.”PLANSPONSOR was invited to attend the live event and to speak afterwards with the presenters, who included Anne Lester, head of retirement solutions for J.P. Morgan Asset Management, as well as Ida Radamacher of The Aspen Institute Financial Security Program.Their presentation mainly focused on lessons learned from the April 2017 inaugural Aspen Leadership Forum on Retirement Savings, held in Middleburg, Virginia. The forum brought together roughly 60 senior leaders from industry, government, academia and the lobbying community to discuss “breakthrough solutions to one of the most critical financial challenges facing American households—the lack of adequate savings for retirement.”Reporting her experience at the forum, Radamacher said at least one thing is very clear: “Any large-scale action on retirement reform will require trust, a willingness to take risk and experiment, and a sense of the greater good.”Among the diverse stakeholders there was actually significant agreement on the challenges facing U.S. retirement savers—as well as those workers who aren’t saving at all. Radamacher ran through the list: “Millions of Americans have no easy way to save for retirement through work. While forum participants disagreed about the exact size of the gap and how best to measure it, most agreed that it was a fundamental shortcoming of the current system that not everyone has an opportunity to save at work. There was further widespread agreement about the challenge presented by increases in longevity. Even as workers face economic headwinds, they are generally enjoying longer lifespans—and thus longer and frankly more expensive retirements.”During the presentation both Lester and Radamacher repeatedly stressed the huge opportunity open multiple employer plans, or “open MEPs,” offer for broadly improving retirement readiness in the U.S. workforce. This approach would allow small employers to take advantage of the same economies of scale that make large 401(k) plans effective savings vehicles from both the perspective of the employer and the employee. Both speakers noted that the Pension Protection Act of 2006 has helped many employers implement increasingly successful individual retirement savings programs. In short, they argued, employers that are committed to automatically enrolling employees into a robust defined contribution (DC) plan that features automatically diversified and rebalanced portfolios are already seeing success in boosting retirement readiness among populations of workers not offered a traditional defined benefit pension plan.“It is simply common sense to open up this effective DC system to more workers through open MEPs,” Radamacher stated. “Open MEPs will take the pressure off of small employers while delivering professional management and support to individual savers.”Both Lester and Radamacher suggested they have seen an increasing number of members of Congress “become interested in the open-MEP issue as a way to solve one of our biggest challenges.” So far there is not quite enough political will to take up open-MEPs as a stand-alone issue, the pair agreed, but this could very soon change.“Although forecasting the future is a risky undertaking, there is no doubt that the retirement system will continue to undergo significant change for the next few decades,” Radamacher concluded. “The nature of the change, however, is not predetermined. Decisions made by those leaders today in government, business, academia and the non-profit sector, will shape the system the next generation inherits.”The post Leadership Forum Urges Update of Open MEPs appeared first on PLANSPONSOR.
- CRR Assesses Options for Helping Multiemployer Plans
published on Thu, 16 Nov 2017 19:40:23 +0000
Just as Democrats in Congress unveiled actions to save multiemployer pension plans, the Center for Retirement Research (CRR) at Boston College released an issue brief assessing options for helping these plans remain solvent.The brief notes that while most multiemployer plans have recovered from two financial crises since 2000, a substantial minority face serious funding problems. According to CRR researchers, in addition to being buffeted by financial crises, multiemployer plans generally face three major structural challenges. First, the lack of new entrants leads to a very high percentage of inactive members. Second, withdrawal liability—the payments required when an employer exits a plan—is often inadequate so that orphaned participants—workers left behind when employers exit—create a burden for remaining employers. Finally, the construction industry, which supports the largest component of multiemployer participants, is highly cyclical.The researchers estimate that “the hole” for plans in critical and declining status is $76 billion, based on the current view of funding that uses the market value of assets and values liabilities using a four-year average yield on 30-year Treasuries for the discount rate.The Multiemployer Pension Reform Act of 2014 (MPRA) allows multiemployer plans to request a partition from the Pension Benefit Guaranty Corporation (PBGC) and also allows plans in critical and declining status to apply to the U.S. Treasury for suspensions of benefits.Partitions have some evident appeal, the CRR researchers say, contending it has been clear for decades that the withdrawal liability procedure is flawed and bankrupt firms often pay little to nothing. While researchers found partitions would put tremendous cost on the PBGC—$35 billion for critical and declining plans—their analysis showed it would restore solvency to these plans.Subsidized loans and tax payer supportAccording to the issue brief, two organizations, United Parcel Service (UPS) and the International Brotherhood of Teamsters (IBT), have suggested subsidized loans as a way to address the financial challenges facing multiemployer plans. The main issue CRR researchers found with this proposal is the total amount of loans that would be needed and the costs they would incur.The issue brief notes that the PBGC’s multiemployer program is in a dire financial position. It argues that increasing PBGC premiums would not be a viable solution to the multiemployer plan crisis. The researchers’ analysis indicates that a premium of $156 per participant would eliminate the chance of multiemployer program insolvency. However, the issue brief says, “premiums of $156 could place a burden on severely underfunded plans where employers have already seen substantial contribution increases. Adding this increase to what employers are already paying for their rehabilitation plan may be enough to induce more employers to withdraw.”Regarding benefit suspensions or cuts, the researchers used as a base case the Central States, Southeast and Southwest Areas Pension Plan—the first plan to apply for, and be denied, suspension of benefits. They first observe that with the cuts, the expected present value of (mostly younger) retirees’ benefits declines substantially, while the present values of the lifetime benefits payable to current participants and new hires all increase. However, while retirees see their benefits decline in net present value terms, their welfare under a MPRA-type approach—in the aggregate—is essentially unchanged. The reason is that retirees receive smaller but steady benefits, which allows them to better smooth consumption over their lifetimes.Some have suggested taxpayer support for troubled multiemployer plans. One argument for tax revenue is that many of the retirees and inactive vested participants are orphans who worked for companies that are no longer in the plan, according to the CRR researchers. As a result, companies and workers still in the plan are being asked to pay not only their own costs but also the funding shortfalls of others. Employers in the most distressed plans have increased their contributions, but when orphans account for more than half of total participants—as is the case for the Central States plan—the burden can become intolerable and more employers may negotiate to leave, further eroding the contribution base and potentially creating additional orphans. “Thus, while increasing taxes is never popular, rationales exist for taxpayer money to be part of a broader solution that covers not only those classified as ‘critical and declining’ but also those heading for trouble,” the issue brief says.The Keep Our Pension Promises Act, a precursor to bills just introduced by Congressional Democrats, would involve shifting a portion of liability for the worst-off multiemployer plans to the Pension Benefit Guaranty Corporation, the issue brief notes. The legislation would establish a legacy fund within the PBGC to ensure that multiemployer pension plans can continue to provide pension benefits to every eligible American for decades to come.The post CRR Assesses Options for Helping Multiemployer Plans appeared first on PLANSPONSOR.