Financial News

Retirement Industry People Moves - Fri, 10/13/2017 - 18:35

LCG Associates Hires Atlanta Consultant 

National investment consulting firm LCG Associates has promoted Jonathan D. Lea to the role of consultant. He is based out of the Atlanta office.

Lea joined the firm in 2013 as an investment analyst. His responsibilities include developing investment strategy, managing due diligence, and conducting special research projects. He was previously a regional associate with Hatteras Funds. He started his career at AXA Advisors as a financial consultant for the Retirement Benefits Group. Lea’s responsibilities included conducting new-enrollment meetings, counselling plan participants, and providing client service to 403(b) plans in public school systems.

“Jonathan’s promotion is a reflection of his hard work and dedication to client service,” said Edward F. Johnsonpresident and CEO.

Lea is a chartered alternative investment analyst (CAIA), and a candidate for Level I of the chartered financial analyst (CFA) program.  He graduated from North Carolina State University with a bachelor’s degree in agricultural business management.

Capital Investment Companies Announces Collaboration

Independent broker-dealer Capital Investment Companies welcomes Monaghan Wealth Management of Wilson, North Carolina. (MWM). The firm includes the team of founder Scott Monaghan and Kaphie Skinner.

Both formerly worked with the Wells Fargo Advisors bank brokerage division and have a combined 63 years of experience in the financial services industry.

MWM offers various financial and wealth management services including retirement and estate planning. It also provides life and long-term care insurance, as well as plans for pre-retirement.

Capital Investment Companies is headquartered in Raleigh, North Carolina. Through the firm’s Ensemble Platform, Capital Investment Companies offers their representatives and clients numerous financial and investment services including money management, investment brokerage, insurance, retirement planning, trust services, and mortgages.

“After being in the securities industry for 20 years, it became very apparent that the best choice for my career going forward was to be an independent adviser,” says Monaghan. “After interviewing several broker dealers along with the fact that Richard Bryant [co-founder and CEO of Capital Investment Companies] and I have known each other for 17 years, it was an easy choice to align myself with Capital Investment Companies. I feel that Capital has dedicated employees with many years of experience under their belt, which differentiates them from a good deal of the industry.”

TRA Announces Leadership Expansion

The Retirement Advantage (TRA) has announced a series of additions and promotions within its leadership.

Charlie Pritzl has been promoted to the director of plan administration, a newly-created position. Emily Hooyman has been promoted to the organizational development manager. She will also be managing the Quality Control Department and overseeing the Acquisition Integration Team.  Carrie Bernier has been promoted to plan-installation manager.

Brady Onsager has been promoted from plan installation specialist into the position of plan installation team leader. In this role, he will be supporting the plan installation manager while working closely with internal and external partners to maintain production levels and provide customer service to new and existing clients of TRA.

Adrianne Kuchta has been promoted to processing manager and will now be directing a team of transaction coordinators accountable for providing timely and accurate service to clients. Luke Radimer has been promoted to the position of 3(16) specialist. He will be responsible for reviewing, updating and maintaining current 3(16) process and procedures utilized within TRA.

Ryan Labs Names President and CIO 

Ryan Labs Asset Management (Ryan Labs), a member of the Sun Life Investment Management group of companies, has appointed Richard Familetti as president and chief investment officer (CIO) of Ryan Labs.

Familetti joined Ryan Labs in 2009 as a portfolio manager specializing in corporate credit and fixed-income asset allocation before assuming the role of director of asset management in 2015. He has focused on investment strategies in all sectors of the fixed-income markets.

Familetti will also lead a newly-created committee comprised of Chris Adair, senior managing director, head of sales, client service, and strategy; and Tom Keresztes, COO. 

Sean McShea has stepped down as president of Ryan Labs and will remain as an adviser with the firm until the end of 2017.

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Categories: Financial News

Trump Eying Top Aide to Sen. Hatch for Lead EBSA Role - Fri, 10/13/2017 - 17:40

President Donald Trump has announced his intent to nominate Preston Rutledge as head or assistant secretary of labor for the Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA), according to an official release from the White House.

If appointed, he could heavily influence what happens to the DOL’s conflict of interest rule. The announcement comes on the same day a bill to repeal the fiduciary rule passed the House Financial Services Commission. That bill also aims to erase the impartial conduct standards of the rule which underwent implementation in June.  

The fiduciary rule is scheduled for complete implementation on January 1, 2018. However, EBSA has proposed to delay the rule and its accompanying exemptions until July 1, 2019. This could give the DOL more time to conduct its review of the rule under direction of President Trump.  

Rutledge currently serves as senior tax and benefits counsel on the Majority Tax Staff of the Senate Finance Committee, and as top aide to Sen. Orin Hatch of Utah.  

Prior to joining the Finance Committee, Rutledge had served as a senior technical reviewer in the Qualified Pension Plans Branch of the IRS Office of Chief Counsel. He has also worked in private law practice as an employee benefits counselor and ERISA (Employee Retirement Income Security Act) litigator.  

Rutledge played a role in designing retirement legislation sponsored by Sen. Hatch, including The Retirement Enhancement Savings Act (RESA), which some analysts say may provide language that could offer plan sponsors more fiduciary protection in offering in-plan lifetime income options

Rutledge earned a bachelor’s degree in business from the University of Idaho, and a J.D. from the George Washington University School of Law. 

Previous head of EBSA, Phyllis Borzi, was instrumental in birthing the rule under the previous Administration. 

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Categories: Financial News

The Social Security Administration Announces COLA for 2018 - Fri, 10/13/2017 - 15:05

The Social Security Administration announced today that monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase by 2%. The 2% cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than eight million SSI beneficiaries will begin on December 29, 2017.

This is the largest increase since 2012, but comes to only $25 a month for the average beneficiary. 2017 saw a slight rise of only 0.3%.  

The cost-of-living increase (COLA) is based on a broad measure of consumer prices generated by the Bureau of Labor Statistics (BLS).

The Consumer Price Index (CPI-W) rose this year, indicating that on average, prices for goods and services are more expensive. Since the CPI-W did rise, the law increases benefits to help offset inflation.

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700.

The earnings limit for workers who are younger than “full” retirement age (age 66 for those born from 1943 to 1954) will increase to $17,040. (The Social Security Administration deducts $1 from benefits for each $2 earned over $17,040.)

The earnings limit for people turning 66 in 2018 will increase to $45,360. ($1 from benefits are deducted for each $3 earned over $45,360, until the month the worker turns age 66.)

There is no limit on earnings for workers who are at the “full” retirement age or older for the entire year.

Read more about the COLA, tax, benefit and earning amounts for 2018.

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Categories: Financial News

Shift to Defined Contribution Plans Causes Concern Internationally - Fri, 10/13/2017 - 14:02

A recent survey from the American Academy of Actuaries, the U.K’s Institute and Faculty of Actuaries, and the Actuaries Institute of Australia found workers in the three countries have similar reasons for lamenting the shift from defined benefit (DB) pensions to defined contribution (DC) plans.


The report, which surveyed working-age respondents, ages 18 through 64, suggests a major factor contributing to this reaction is the growing demand on workers to individually manage the risks regarding their retirement. The step away from DB pension plans now requires these individuals to take greater responsibility in order to be financially secure in their retirement years.


Academy Senior Pension Fellow Ted Goldman says that, while many workers begin the process of planning for retirement, most have trouble following through due to uncertainties about what that entails—this then turns to procrastination and inertia, as the survey notes. Questions that respondents have include how much savings is needed for retirement, how do you afford a longer life than planned, and how do you handle unforeseen costs for health conditions in later years? Additionally, women revealed they are less prepared than men in all three countries.


To combat these uncertainties, the survey encourages education teaching financial literacy and retirement planning based on age, gender and income—for all three countries; development of projection tools for education; a wider use of default features in private retirement plans such as implemented default and automatic enrollment in the earliest stages of people’s careers; and  supportable and dependable public pension and insurance systems.


As to educational needs, the survey reports that, respondents, on average, said they are best prepared in “taking action to save, acquiring information, and in planning to return to work if retirement assets drop in value.”


“Understanding and managing complex retirement risks presents a societal challenge, not just a personal one,” says Goldman. “As a society, we need to be open to new retirement policy approaches and public education initiatives to help people evaluate and address the risks and achieve financial security in retirement.”


More information on the survey can be found here.

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Categories: Financial News

(b)lines Ask the Experts – Questions to Skip on Form 5500 - Fri, 10/13/2017 - 11:00

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:


Though it does indeed sound bizarre, your colleague is quite correct! In fact this is the second year in a row that there is a quirk in the Form 5500 filing that requires the filer to skip certain questions. The reason for this is that the Internal Revenue Service (IRS) added some questions that it later decided to essentially retract, but the questions still appear on the form. The list of questions that should be skipped is here, and you should confirm that such questions were skipped, since there is zero benefit to responding to such questions (and, indeed, it may be a detriment). Finally you should note that some of the skipped questions, though they relate to the same content as the 2015 filing are numbered slightly differently on the 2016 form, so be certain to examine your 5500 filing carefully to confirm that the proper questions were skipped.


In addition, here are some other last-minute 5500 filing tips from the Experts


Even if your form is “signature-ready,” this does NOT mean you should simply sign it without review—The Experts have encountered many example of errors on completed returns that were supposedly “signature-ready.” Thus, you should indeed conduct a line-by-line review of all of your 5500 filings to confirm that the information is complete and accurate, If you don’t understand an entry, contact your preparer for clarification. Particular attention should be paid to the following areas:


Participant counts;

  • Plan numbers and employer tax ID numbers;
  • Confirming that figures reconcile to the prior year filing, such as participant counts or plan asset figures;
  • Reporting all applicable service provider information on Schedule C, particularly inactive providers who are not grandfathered from 5500 disclosure and still receive compensation from plan assets; and
  • Making certain that all applicable completed schedules, are included, as well as the independent qualified public accountant’s opinion (more commonly known as the audit report). Fillings that are missing schedules or the audit report are essentially treated as if you failed to file, and the maximum penalties for failure to file have been increased, to a maximum of $2,063 per day (indexed) that the filing is outstanding after the due date.


Don’t forget From 8955-SSA— this form, which is completely separate from the Form 5500 and must be filed with the  IRS as opposed the Department of Labor (DOL), is used to report participants who have terminated employment and left assets on deposit in their employer’s retirement plan. These participants are reported to the Social Security Administration, which notifies the participants of the possible existence of such assets when they file for benefits. For filing details, see this page.


And finally, note that the filing deadline is NOT October 15, 2017, which would be the normal extended deadline, since October 15th falls on a Sunday. The actual deadline this year is October 16, 2017.


Best of luck with your 2016 5500 filing(s)!



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 with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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Categories: Financial News

ERIC Files Lawsuit Against Oregon Retirement Savings Board - Thu, 10/12/2017 - 20:39

The ERISA [Employee Retirement Income Security Act] Industry Committee (ERIC) today filed a complaint in the U.S. District Court for the District of Oregon against the Oregon Retirement Savings Board for obstruction of the Employee Retirement Income Security Act (ERISA). In the complaint, ERIC requests an injunction against the reporting requirement OregonSaves imposes on employers that provide a retirement plan.

OregonSaves is Oregon’s state-run retirement program, signed into law in June 2015. The Oregon Retirement Savings Board was implemented and tasked with creating a defined contribution (DC) retirement plan for private-sector employees. The result was OregonSaves.

The state started with a pilot program this July, and, beginning November 15, employers not involved with the pilot programs will be required to begin registering, based on their size.

In the lawsuit, ERIC argues that the ERISA pre-empts the reporting requirements in OregonSaves. The state law requires large employers that already provide a retirement plan to formally request an exemption, completing paperwork every three years to retain the exemption from the state mandate. But reporting on plan activities is a core ERISA function governed exclusively by federal law, ERIC says.

“Oregon is reaching beyond what the federal law allows by imposing a compliance burden on employers that voluntarily provide a retirement plan to their employees,” says Annette Guarisco Fildes, ERIC president and CEO. “This approach not only violates federal law, but is counterproductive as it will add unnecessary costs and burdens on employers that are doing exactly what policymakers across the country want them to do—helping their employees save for retirement with an employer-sponsored retirement plan.”

ERIC’s mission since 2015 has been to ensure that state and local laws do not adversely affect employers providing health and retirement benefits to participants and their families.

Why sue Oregon and not other states that have passed similar legislation? Oregon is the first to implement its state-run retirement program, and ERIC believes it is important to protect ERISA-qualified retirement plans. Oregon, due to the final rules the state implemented, provides the first opportunity to present such arguments regarding why states should not infringe on an employer’s ability to provide a retirement plan to employees—from both a legal and public policy perspective, the association explains.

To read ERIC’s complaint, click here.


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Categories: Financial News

Participants Fear Loss of Employer Mandate to Offer Health Care Coverage - Thu, 10/12/2017 - 18:25

An annual survey from the national nonprofit Transamerica Center for Health Studies (TCHS) shows that one of the three biggest fears of Americans aware of the health care debates in Washington, D.C., is the loss of employers’ mandate to offer health care coverage.

Perhaps the reason, the survey found, is that over two-thirds (67%) of Americans reported having at least one chronic health condition, and 19% cited managing a chronic illness or condition—e.g., heart disease, diabetes, high blood pressure—as one of their top two most important health-related priorities.

“Year after year, we have found that affordability is top of mind for Americans, plus a substantial proportion of employed adults are not sure they are taking advantage of the health care savings offered by their employer,” says Hector De La Torre, executive director of TCHS. “It is crucial that individuals understand their health care options.”

Some highlights of the employer-focused part of the survey include the following:

Lack of Mobility
Fifty-one percent of employed Americans feel they must stay at their current job because they need the health insurance; 24% said they had to leave a previous job because the company did not offer health insurance.

Role of Employers

A strong majority of employees (77%) said they are satisfied with the health insurance plans and other health benefits available to them through work. Most Americans feel that employers should try to improve their employees’ health and that this effort would likely strengthen worker commitment to their jobs.

Reported after salary as being very important to overall job satisfaction were health care benefits (60%), retirement benefits (56%) and financial strength/stability of the company (55%).


Less than half of employees are offered workplace wellness/health promotion programs, but most who have the option participate in some way. Two in five employees (40%) said their employer offers a workplace wellness/health promotion program, and, of those with access to such programs, 60% said they have participated within the last year.

More employees would like to be incentivized by receiving lower health insurance premiums if they participate in a workplace wellness program, and most are—although many are unclear as to whether those savings come through their employer.

Healthcare Consumers in a Time of Uncertainty is an online survey of more than 4,600 Americans, ages 18 through 64, that was conducted by Harris Poll on behalf of TCHS.

For further information on participant health care concerns, see the 2017 PLANSPONSOR Participant Survey.




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Categories: Financial News

Investment Products and Services Launches - Thu, 10/12/2017 - 17:39

Columbia Threadneedle Premieres Strategic Beta ETF 

The Columbia Diversified Fixed Income Allocation (DIAL) exchange-traded fund (ETF), recently launched by Columbia Threadneedle Investments, will track the Beta Advantage Multi-Sector Bond Index, which provides a rules-based approach to investing in six fixed-income sectors.

These sectors are U.S. Treasurys, global treasurys ex-U.S., U.S. investment-grade corporate bonds, U.S. mortgage-backed securities, U.S. high-yield corporate bonds and emerging market sovereign debt. DIAL’s rules-based, strategic beta investment approach aims to address investor concerns of having consistent income with downside protection, regardless of the interest rate environment.

“As the market enters a new rate regime, investors may need to adjust their fixed-income allocations and broaden their opportunity set,” notes Gene Tannuzzo, senior portfolio manager at Columbia Threadneedle. “Unlike traditional ETFs, strategic beta ETFs do more than track a benchmark. They incorporate active insights and are outcome-oriented.”

“DIAL’s disciplined process is designed to seek more sources of income and avoid the overconcentration found in traditional fixed-income benchmarks,” says Marc Zeitoun, head of strategic beta at the firm.

Columbia Threadneedle drew from its experience as a fixed-income manager to establish the strategic beta rules that are the foundation of the index, the firm says. The index is owned and calculated by Bloomberg Index Services Limited.

DIAL was launched today, October 12,  with a 90-day contractual management fee waiver and is thereafter priced at 28 basis points (bps). 

Change Finance Launches New Sustainable Investing ETF 

Asset manager Change Finance announced the release of its new exchange-traded fund (ETF). The Change Finance Diversified Impact U.S. Large Cap Fossil Fuel Free ETF (CHGX) uses diversified impact screens to invest in companies that engage in favorable business practices and socially responsible investing driven by environmental, social and governance (ESG) factors. 

CHGX’s methodology is informed by the United Nations’ sustainable development goals (SDGs), the firm reports, stating, “These standards seek to eradicate poverty, protect planetary life support, and achieve lasting peace and dignity for humanity.”

CHGX will track the performance of the Change Finance Diversified Impact U.S. Large Cap Fossil Fuel Free Index.

The index begins with the 1,000 largest U.S.-listed companies and applies a series of ESG screens to exclude companies deemed unfavorable. These include firms that operate in the oil, gas, coal or tobacco industries, among others, or that have engaged in any sort of business malpractice, according to the firm.

Donna Morton, Change Finance CEO, says, “Our investors want alignment with what they care about, without sacrificing performance. [The fund aims to steer away] from companies that are serious polluters, that have significant human or labor rights violations, and that fail to meet a variety of other social and environmental standards.” 

The fund has an expense ratio of 0.75%.

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Categories: Financial News

Savings Rates Drop in the U.S. - Thu, 10/12/2017 - 14:16

Savings rates in the U.S. have plummeted to a five-year low, according to the U.S. Bureau of Economic Analysis. A recent study by hybrid digital bank PurePoint Financial finds that Americans cite rising health care costs and living expenses as the main drivers of their financial pessimism. Moreover, 64% now define the American dream as not living paycheck to paycheck, and 75% believe it is harder to get ahead today than it was five years ago. Half don’t expect to feel better about their savings five years from now.

But despite concerns for their long-term finances, nearly half of respondents don’t save in a retirement plan, and one-third save 10% or less per paycheck in a savings account. Even though technological innovations have brought a wealth of digital financial planning tools into the market, only 7% of respondents said they use a savings-specific app.

“Sometimes in the face of uncertainty, people tend to freeze and not take any action at all,” says Pierre P. Habis, president of PurePoint. “The best advice I can give people is to always plan for tomorrow by saving what you can, ideally at least 10% of your income. But even if you can’t put that much aside, set up a system to save a set amount each month. Prioritizing saving on a regular basis can make all the difference.”

However, the survey also found that 20% qualified as “super savers” or “most likely to set aside a large portion of income regularly for savings and demonstrate consistent habits that help them successfully save.” Of these, 40% predetermine an amount that is automatically deposited into savings from each paycheck they receive.

These findings are from PurePoint’s State of Savings in America, an online survey of 6,001 adults at least 18 years of age, in the U.S. The research was commissioned by PurePoint Financial and produced by independent research firm Edelman Intelligence. It was collected between July 20 and August 3.

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Categories: Financial News

Federal Reserve Data Shows Strengthening Economy’s Impact on the DC Space - Wed, 10/11/2017 - 21:01

“The release of the Federal Reserve’s 2016 Survey of Consumer Finances (SCF) is a great opportunity to see how a strengthening economy, the continued maturation of the 401(k) system, and steady stock market returns have affected workers’ retirement wealth,” say researchers with the Center for Retirement Research (CRR) at Boston College.

According to CRR white paper “401(k)/IRA Holdings in 2016: An update from the SCF,” the big advantage of the survey is it provides information not only on 401(k) balances—much of which is available from financial services firms—but also on household holdings in individual retirement accounts (IRAs), which are largely rollovers from 401(k)s.

“Essentially, 401(k)s serve as the collection mechanism for retirement saving, and IRAs serve as the resting place,” the report explains.

The good news in the updated Federal Reserve data is a slight increase in participation rates and greater use of target-date funds; the bad news is flat total contribution rates, persistently high fees and significant leakage.

“The SCF shows, for households approaching retirement, an increase in 401(k) plan balances from $111,000 in 2013 to $135,000 in 2016,” CRR researchers . “But only about half of households have 401(k)/IRA balances, and, as defined benefit [DB] plans phase out in the private sector, the rest will have no source of retirement income other than Social Security.”

The analysis concludes that 401(k) plans “could work much better and balances would be higher if all plans were fully automatic.” Particularly important are mechanisms such as automatic enrollment—for both existing and new employees—and automatic escalation in the default contribution rate. Additionally, it would be helpful if “default contribution rates were set at realistic levels,” i.e., much higher.

Crucial to note, CRR says, is that participation rates in plans without auto-enrollment actually declined between 2013 and 2016. “To the extent that plans without auto-enrollment constitute a larger share of total participants than is often reported, the decline in their participation rate would noticeably slow the pace of improvement,” the CRR concludes.

Also troubling, average employee contribution rates declined between 2015 and 2016.

“The decline can be attributed mainly to auto-enrollment, which increases participation rates but has a depressing effect on contributions,” CRR notes. “The reason is that default contribution levels are often set at 3% or lower, and [as] less than 40% of plans with auto-enrollment have auto-escalation in the default contribution, many of those who are enrolled at low contribution rates remain at those rates. Employer contributions bring the total average deferral rate to around 11%.”

The full brief, including dataset, is available for download here

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Categories: Financial News

‘OOP’ Health Care Spending Chipping Away at Retirement Income - Wed, 10/11/2017 - 18:21

The high cost of Medicare is significantly reducing retirement income for a large portion of Americans, according to a study by the Center for Retirement Research (CRR) at Boston College. The organization found that, in 2014, average out-of-pocket (OOP) spending—excluding long-term care—was $4,274 per year. Approximately two-thirds of that, or $2,965, was spent on premiums. Thus, the average retiree had only 65.7% of his Social Security benefits remaining after OOP spending and only 82.2% of total income. In addition, nearly one-fifth (18%) of retirees were left with under 50% of their 2014 Social Security income after OOP spending; 6% fell below 50% of total income.

In its paper “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” the CRR also reports that women, retirees in poor health and those with traditional Medicare excluding supplemental coverage experienced the most increased cost. Across gender lines, the organization notes, the divide is driven by an unexpected cause. “For women, the post-OOP OASI [Old Age and Survivors Insurance] ratio is 62%, compared with 70% for men. Interestingly, the issue is not that woman pay substantially higher costs—they pay slightly lower premiums than men do (by just over $100 per year) and slightly higher other out-of-pocket costs (by about $80)—but, rather, that they have substantially lower OASI benefits ($12,900 vs. $16,600).”

The CRR warns that this issue could be exacerbated if projections of increasing Medicare costs hold true for the long term. The organization stated in the paper, “Medicare costs are expected to resume their decades-long increase after the recent pause, once the effects of the implementation of Part D and the Great Recession have worn off. These cost increases are expected to reduce the portion of Social Security benefits available for nonmedical spending by another few percentage points by 2026, and the Medicare Trustees Report (2017) suggests that medical costs will grow even faster than Social Security benefits in subsequent decades.”

Another important point, according to the paper, is these projections often exclude nursing home care. The CRR found that long-term care can range from $40,000 a year for health aides to more than $80,000 per year for nursing facilities.

The CRR concludes, “If costs resume their rise as expected, Social Security beneficiaries are likely to feel further pressure on their budgets.”

In fact, some studies suggest that Social Security is a bigger part of Boomers’ retirement income plans than previously thought, and the outlook for Social Security is faring no better in 2017. These findings elevate the importance of retirement income outside Social Security benefits such as savings from defined contribution (DC) plans. But the CRR has also outlined some proposals to shore up Social Security. Other organizations, too, have presented strategies for improving retirement outcomes considering low returns and longevity.

The full report “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” can be found at

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Categories: Financial News

Settlement Agreement Reached in Church Plan Challenge - Wed, 10/11/2017 - 17:09

A federal judge has preliminarily approved a settlement agreement between participants of the St. Joseph’s Hospital and Medical Center pension plan and St. Joseph’s Hospital.


As with many similar complaints, the lawsuit challenges whether the plan was really a “church” plan and not subject to Employee Retirement Income Security Act (ERISA) funding rules.


In the order for preliminary approval, a judge for the U.S. District Court for the District of New Jersey certified a class, or plaintiffs. The settlement agreement says, “Nothing herein shall be construed as an agreement that the Plan is not properly treated as a Church Plan or that the Plan is subject to ERISA.” In spite of this, the terms of the agreement include many ERISA-like provisions.


Under the terms of the agreement, the defendants are obligated to contribute an aggregate amount of $42.5 million to the plan no later than 60 days after the agreement is executed or at any time prior. They may contribute that sum either directly to the plan or to an escrow account and then transfer these proceeds—including interest—to the plan 45 days after the agreement becomes final.


Additionally, at their discretion, the defendants may make further contributions to the plan at any time.


If, during the seven years after the agreement becomes final, the plan’s trust fund becomes insufficient to pay benefits as they are due, the defendants will need to shore up the trust fund so the benefits can be paid. In the event of a plan change such as a merger or consolidation during that time, participants and beneficiaries will be protected by entitlement to the same, or greater, accrued benefits under the terms of the plan as before. St. Joseph’s may amend or terminate its plan at any time, provided this will not result in the reduction of any participant’s accrued benefits as determined by the plan document.


Should the plan at some point be determined to fall under ERISA, it will then need to comply with the act’s applicable provisions.


Plan Administration Terms


Contemporaneous with plan amendments that will close and freeze the plan on or before December 31, 2018, the plan administrator will need to establish procedures concerning plan administration and notices, as set forth in the settlement agreement. At the defendants’ sole discretion, any and all reporting and disclosure to plan participants and/or beneficiaries may be accomplished via electronic dissemination, by electronic posting on defendants’ intranet site or via hard copy. If a participant requests a disclosure by hard copy, the plan administration will provide it within a reasonable time.


The plan documents will need to add provisions for taking any of the following actions that the documents, as of yet, don’t include: designate a named fiduciary; describe the procedure for establishing and carrying out the current funding policy and method; describe a procedure for allocation of administration responsibilities; provide a procedure for plan amendments and identifying a person(s) with authority to make such amendments; specify the basis on which payments are made to and from the plan; and provide a joint and survivor annuity payment option for participants and their spouses.


In addition, by the close of 2018, the plan administrator or its designee will need to have prepared a summary plan description (SPD) comprehensible to the average participant. The settlement agreement spells out in detail what the SPD should include.


For current and former employees, the plan administrator will need to prepare pension benefit statements, as it does now, distributing those electronically or in hard copy, at least once every three years. Other participants and beneficiaries could make a written request for a copy of a pension benefit statement, to be provided within a reasonable time, in either format, at St. Joseph’s discretion.

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Categories: Financial News

The Thrust of Fiduciary Liability Insurance - Tue, 10/10/2017 - 20:56

As defined contribution (DC) plans become the main drivers of America’s retirement savings, a plan sponsor’s role as fiduciary is becoming highly scrutinized. Fiduciaries to a plan are legally liable to act in the best interests of plan participants and the Department of Labor (DOL)’s Conflict of Interest Rule is only expanding that role.

In recent years, the DC space has seen a wave of litigation surrounding the management of retirement plans. One common denominator in these cases is the argument over alleged excessive fees.

According to Groom Law Group, these cases raise “allegations against fiduciaries for breaching their obligations to the plan and its participants by charging or permitting excessive fees and expenses for plan services provided by third parties, such as investment management, recordkeeping, and asset custody.” Another common practice being challenged is the use of proprietary funds. Often times, fiduciaries are accused of offering investments from a financial institution sponsoring the plan or its affiliates for the sole purpose of benefiting the institution.

In either case, Groom Law Group suggests that the right kind of fiduciary liability insurance can mitigate the costs of fighting these claims. The firm warns that “Over the last 10 years, the scope of so-called 401(k) ‘excessive fee’ litigation — another staple of the plaintiffs’ bar — has expanded to the point where every plan sponsor and plan service provider dealing with a 401(k) plan of significant size should be on notice that it may be the next defendant in this type of ERISA class action.”

Of course, all fiduciary liability insurance policies define their unique terms, conditions and limitations. But most have a few key factors in common. For example, coverage kicks in when the insured is facing an actual claim for a wrongful act allegedly committed by the insured. Groom Law says “Generally, a claim may be a written demand for monetary damages or injunctive relief, a civil complaint, a formal administrative or regulatory proceeding commenced by the filing of a notice of charges or formal investigative order, or a written notice by DOL or the PBGC of an investigation against an insured for a wrongful act.”

However, this insurance can’t be used to restore losses to an employee benefit plan “when a plan sponsor or employer discovers that it made an error.” Fiduciary liability insurance can only defend against a claim and then “pay for any covered award entered against the insured up to the policy’s limit of liability.”

The firm adds that policy provisions “may be used to preclude coverage for indemnity payments that constitute benefits that are payable to participants or their beneficiaries under the terms of a plan, or that would have been payable under the terms of the plan had it complied with ERISA.”

But regardless of what protection a policy may offer, it is important to pay attention to who exactly is protected or defined as the insured. Groom Law points out that third-party providers such as investment advisers and investment managers are generally not protected by a plan sponsor’s fiduciary liability insurance. Even when relief sought is not a monetary loss, however, the insureds may still have coverage for defense costs.

Some policies have a duty-to-defend provision which allow insureds to select their own defense counsel. Groom Law notes that “due to the volume of the claims they handle, fiduciary liability insurance carriers commonly negotiate lower rates with the defense firms. The firm adds that “Fiduciary liability carriers also typically have litigation management guidelines in place that help to ensure that the costs of defense are reasonable and necessary. These defense provisions are important because fiduciary liability policies typically pay for defense costs within the limits of liability, meaning that every dollar spent by the carrier on defense costs erodes the available limit of liability by that same amount. These types of policies are commonly referred to as eroding limits policies.”

Groom Law Group’s report “Who May Sue You and Why: How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance” can be found at

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Categories: Financial News

Income Uncertainty Makes Women More Risk Averse - Tue, 10/10/2017 - 16:16

The reason why many women are more risk averse with investments than men is primarily due to income uncertainty, says Rui Yao, associate professor at the University of Missouri in Columbia, Missouri.

“The reason why men and women expect uncertain income is different,” she says. “Women are more likely to be caregivers to their parents or to raise children. Men are more likely to choose occupations with income uncertainty built in, such as becoming a car salesman. We found that income uncertainty reduced women’s willingness to take on risk—but that it increases men’s willingness to increase risk.”

More conservative portfolios can result in women not being adequately prepared for retirement, Yao says. This is particularly true for single women, who are less risk tolerant than single men or married couples, she says. Thus, Yao suggests that advisers ask their female clients if they expect to leave the workforce in order to look after their parents or raise a family. If that is the case, then, perhaps, a more conservative portfolio makes sense. However, if that is not the case, “then, advisers should say that the latest research shows that men and women don’t really differ in their need to take investment risk. Further, they should point out that women live longer and really need to take on a riskier portfolio allocation, including equities, to compensate for their longer life.”

According to 2015 data from the Census Bureau, the average life expectancy for women is 82, compared to only 78 for men, notes Robert Massa, director of retirement at Ascende in Houston. And, according to 2015 data from the Bureau of Labor Statistics, on average, women earn 79% of what men earn, he adds. “So, if women are going to make up for this disadvantage, a sound, customized investment strategy will be needed,” Massa says.

In Massa’s experience, women are more receptive to working with a financial adviser than men are, and once they do, they understand the importance of preparing adequately for retirement. “Women as investors tend to prefer more investment education from their advisers than their male counterparts,” Massa says. “They want an adviser who tries to provide education and speaks to them with respect. Once you’ve clearly laid out the unique challenges facing women as investors, you can explain why a more aggressive investment strategy is vital to their long-term success.”

Massa shows his female clients how combining a higher savings rate with a portfolio that has a higher level of equity exposure can result in much higher balances and better outcomes. By doing this, he says, “women will often be much more receptive to an equity-based investment strategy.”

Regardless of whether she is working with a man or a woman on the retirement portfolio, Lori Reay, a partner and retirement plan consultant at DWC in Salt Lake City, Utah, says she tries to conduct one-on-one meetings.

“I think all investment advisers are stepping up to help participants, and I don’t think it is gender-specific,” Reay says. “For anyone to be prepared for retirement, the adviser is going to be more successful if they are sitting down face-to-face for one-on-one meetings.” If the adviser takes this approach, “then, the more successful the retirement plan will be and the outcome for participants will be.”

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Categories: Financial News

(b)lines Ask the Experts – What Is an Annuity Contract? - Tue, 10/10/2017 - 11:00

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:


This is a good term to clarify, given some historic confusion about its use. At one time, when annuities were the exclusive investment available under 403(b) plans, 403(b)s were commonly known as “tax-deferred annuity” or “tax-sheltered annuity” accounts, and even to this day it is not unheard of for such terms to be used when referring to the 403(b) plan or account itself. (In fact, the title of section 403(b) is “Taxability of Beneficiary Under Annuity….”)


However, an annuity contract actually refers to a type of investment than can be offered within a 403(b) plan (note that 401(k) plans can offer annuity contracts as well, but their usage is far less prevalent there). The primary difference between an annuity contract and a mutual fund (which is the other common type of 403(b) plan investment and permitted since the passage of the Employee Retirement Income Security Act (ERISA)) is that an annuity is an insurance product, where the insurer provides a contractual promise to the contract holder (plan participant) to pay a specified amount at regular intervals over a specified period of time, which may be for the participant’s life or the joint life of the participant and a designated beneficiary, similar to a defined benefit plan (for example, X dollars a month over the participant’s lifetime). The insurance company is insuring that the participant will be paid such a benefit, which is why it is an insurance product. However, the participant does not necessarily need to choose the annuity option, and, in fact, many participants presently choose instead a lump-sum payment or installments at retirement or other employment termination.


There are generally two types of annuity contacts: fixed, or variable. A fixed annuity contract generally pays an interest rate stated by the insurer; there can be a minimum guaranteed interest rate for the life of the contract as well, and it is protected against loss of principal. A variable annuity contract can vary in return, since its underlying investments are similar to mutual funds. Since variable annuities fluctuate in value and can cause a contract holder to lose principal, some insurers provide an additional benefit with such annuities where the insurer will promise to pay a certain minimum death benefit (and, in rarer instances, a minimum benefit while living). Either might be converted to a lifetime annuity stream at retirement.


With interest rates having been so low for so long, few individuals who are invested in 403(b) annuities may actually avail themselves of the annuity benefits, so they may be paying for a benefit they will not use (annuities charge a fee that is built into the investment for providing the insurance element), so it is important that participants understand this distinction when choosing between annuities and mutual funds in their retirement plan, if they have a choice of investments.


Having said that, some participants value the protection of principal or having a lifetime income stream, and there are some insurers who provide annuity contracts that are cost-competitive with their mutual fund counterparts. Also, interest rates can change in the future. This is why it is important for participants to review their plan investments and the fees charged, including any charges that are used to provide an additional benefit (such as principal protection or a lifetime annuity benefit).



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 with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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Categories: Financial News

Good Judgment, Smart Design for the Global Pension Gap - Tue, 10/10/2017 - 09:00

Individuals are bearing an increasing share of the responsibility to fund their own retirement.


In such a world, it is more important than ever that people be given the help and tools they need to plan for, and achieve, long-term savings goals. A “financial fitness” revolution could be instrumental in helping individuals and societies meet those goals. But it could lead to the marketing of costly and poorly designed products—the equivalent of the fraudulent health and fitness equipment or fad diets featured in late-night infomercials—to the unsophisticated consumer.


Our view is that governments and employers have an important role to play in helping individuals recognize what “good” looks like when it comes to savings products, advice and decisions. Both governments and employers have responsibility to do this—and much greater capacity than do individuals to assess products, gather information and discriminate among financial intermediaries.


Many argue that financial wellness programs will reduce health care costs, improve productivity and reduce absenteeism. But such programs will be successful only if they are tailored to the needs of the particular employee base—which may be very different across and within companies—and are made engaging and easy for employees to adopt.


To gauge the potential productivity gains from placing greater focus on financial wellness programs, we considered how much time employees spend worrying about money at work. Through our Inside Employees’ Minds research, we found that, on average, people spend 13 hours per month worrying about money matters at work; the median is five hours, highlighting that some individuals spend much more time than others absorbed with financial issues.


Providing greater support to employees in making sound saving and investment choices will go a long way toward alleviating this worry and closing the long-term savings gap. However, given the many priorities competing for an individual’s paycheck and the primacy of the immediate over the future, voluntary contributions to long-term savings simply may not be enough.


Change is most likely to occur through small steps—that is, by making small financial decisions and building courage in financial decisionmaking gradually. Traditional approaches such as trying to build financial literacy by loading on information are less likely to promote financial wellness than simply providing employees with tools that help them make good decisions and take action—on their own—without needing advanced financial literacy.


A number of intelligent design-principles can be used to create the appropriate combination of growth and defensive investments to produce superior retirement outcomes. For example, the smartest of these products are designed to allow investments to keep growing during retirement. Rather than being fully invested in cash or de-risked on the day you retire, they look beyond your expected retirement date to ensure that savings can continue to accumulate even as being drawn down.


A New Take on Employment and Retirement


As societies age and the nature of work continues to evolve, it’s clear that old notions of employment and retirement will need to give way to a spectrum of new possibilities—for when and how to work and what it means to retire. Societies, employers and individuals will all benefit from greater acceptance of, and more accommodation for, working later into life. This may mean raising or even eliminating set retirement ages to reflect the fact that people live longer today than in the past.


The U.S., for example, faces a sizable long-term savings gap of U.S. $28 trillion that is projected to reach U.S. $137 trillion by 2050, according to the World Economic Forum, unless action is taken. The good news is that the U.S. has the levers it needs—wealth, moderate economic growth and an influx of immigrants adding to the work force and nudging up birth rates—to solve the problem.


At the other end of the economic spectrum, Denmark is considered a global leader, for the design of a long-term savings system capable of ensuring that its people have the income they need through old age. Given an “A” rating by the 2016 Melbourne Mercer Global Pension Index, Denmark’s multi-pillar pension system compels participation, encourages high savings rates, provides adequate replacement income to individuals and is sustainable.


Still, Denmark struggles, as do most countries, with the political reality of aligning long-term savings schemes with increased longevity. The country’s normal retirement age is scheduled to increase from the current 65 to 67 in 2022 and to 68 in 2030. It’s the sort of action that needs to be taken in more geographies—along with the bold commitment to helping people help themselves.  


Ultimately, a true revolution in financial fitness requires a “triple play”—that is, a combined approach between governments, employers and employees to mend the pension gap by taking action to support individuals building their long-term savings. Together, we can help these people secure their financial future, rather than fear it.



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.

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Categories: Financial News

Employees Need More Health Benefits Education - Mon, 10/09/2017 - 17:37

Benefits enrollment findings from the 2017 Aflac WorkForces Report, a national online survey of 5,000 U.S. workers, found that 67% said they are confident they understood everything they signed up for.


However, these results may indicate an underlying false sense of confidence. The survey, conducted between January 26 and February 17 by Lightspeed GMI and released by Aflac, also uncovered that 76% of workers make health benefits decisions without a complete knowledge of their health plan. When asked specifically about understanding its policies, such as concerning deductibles, co-pays and providers in their network, only 24% of these workers could respond that they understood everything. This result has been steadily declining since 2015, when nearly half (47%) believed they knew everything; in 2016,  39% believed they did.


“It’s counterintuitive to see that workers are reporting a positive benefits enrollment experience, but so many are still struggling with a good understanding of the various aspects of their health care coverage,” says Matthew Owenby, senior vice president, chief human resources (HR) officer at Aflac. “Benefits enrollment is one of the most important decisions a worker can make each year. Ensuring workers are more educated will require a sustained effort by employers and employees alike to better understand all aspects of benefits, including coverage options and costs.”


Aflac conducted a separate survey among 1,000 20- to 26-year-olds, employed either full or part time. The Aflac WorkForces Report First-Time Enrollees Survey was conducted from August 24 through 28 and found that more than half (51%) of young workers will choose their health care benefits for the first time this enrollment season. Yet only 19% feel confident, and just 31% say they feel prepared. Their biggest concern about choosing their own health insurance plan is cost (44%), followed by understanding how health insurance works (36%).


Of respondents currently on their parents’ plan (35%), more than half (54%) are leaving that coverage in the next year to purchase their own benefits for the first time. More than two-thirds (69%) of those on their parents’ plan are unaware how much their health insurance coverage even costs; however, 41% indicated they contribute financially to their parents’ plan.


“We know from our experience and past data that fewer people each year say they understand everything about their plans and their options, which means Americans are clearly hungry for answers to insurance questions,” Owenby says.

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Categories: Financial News

Tool Estimates Retirement Health Care Expenses - Mon, 10/09/2017 - 17:11

Independent investment adviser Financial Engines has launched a College Expense Planner and a Retirement Healthcare Expense Planner. Both utilize empirical forecasting methodologies to offer actionable information.

The Financial Engines Retirement Healthcare Expense Planner enables users to estimate what they might need to pay for Medicare premiums and out-of-pocket health care expenses once they stop working. The planner leverages Financial Engines’ partnership with HealthView, a provider of health care cost-projection software. With the planner, users receive a location-specific estimate for how much they can expect to pay for health care services in retirement. That estimate can then be integrated into their overall retirement income goal.

The Financial Engines College Expense Planner helps develop a saving and investing strategy to pay for college. It helps people estimate how much they will need to save for their children’s college expenses and gives them a sense of where they stand today in relation to their savings targets. The planner incorporates third-party tuition cost growth estimates for public and private colleges and a variety of portfolio forecasting options to estimate the savings users could have when their children are ready for college.

“Our new digital planners address key areas where people need help navigating unfamiliar systems, so they can develop smart saving and investment strategies,” explains Karen White, vice president of consumer products at Financial Engines. “By offering accessible, easy-to-use tools on topics that cause a lot of stress and uncertainty, we’re inviting more people into the financial planning conversation and are helping them connect the choices they make today with the options they’ll have tomorrow.”

The launch of the planners is a part of Financial Engines’ continued commitment to deliver holistic financial wellness solutions through digital tools, multi-channel communications and advisor interactions.

“These two new digital planners represent a reimagining of how we can help 401(k) participants achieve their goals,” says White. “Building on many years of success driving better retirement outcomes, we’re developing additional innovative digital tools to provide personalized help with the big and small financial challenges that can sometimes eclipse long-term planning. By engaging people throughout their journey, we can help them balance the now with the next, empowering them to make choices with confidence.”

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Categories: Financial News

Congress Adds to Relief for Hurricane Victims - Mon, 10/09/2017 - 16:19

Congress has passed legislation allowing participants in qualified defined contribution (DC) plans, including individual retirement accounts (IRAs), to get a distribution of up to $100,000, in aggregate, across all accounts and avoid tax penalties.


According to the bill, individuals who receive such distributions are allowed to pay them back within a three-year period, and the repayments are treated as rollovers to qualified employer-sponsored DC plans. Distributions are not subject to the 20% mandatory federal tax requirement or the 10% early withdrawal tax requirement. Participants may choose to pay all taxes on the distributions at once or spread the distributions as income for tax purposes over a three-year period.


A qualified hurricane distribution includes distributions taken after August 23 and before January 1, 2019, for victims of Hurricane Harvey. They include distributions taken after September 4 and before January 1, 2019, for victims of Hurricane Irma, and distributions taken after September 16 and prior to January 1, 2019, for victims of Hurricane Maria. The plan sponsor must decide if it will allow qualified hurricane distributions, and a plan amendment may be required.


The bill also increased the amount that qualified persons may take as a loan from their retirement plan accounts to $100,000, and the limit of 50% of the participant’s account balance does not apply. In addition, the start of loan repayments may be deferred for one year, and the maximum five-year loan amortization period for non-mortgage loans may be extended for one year.


Text of the bill is here.

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Categories: Financial News

Captain Contributor Rescues Open Enrollment - Mon, 10/09/2017 - 15:46

Datapath has created a virtual superhero to guide employees through their benefit programs to help them conquer personal challenges and achieve financial wellness.

Navigating the complexity of employer benefits can be challenging for many employees, but DataPath—a provider of financial and administrative technology—is sending a superhero to the rescue.

Captain Contributor, an interactive program starring a caped superhero, guides employees through their companies’ benefit programs while helping them achieve tax advantages. In the form of a virtual comic, workers can learn how to utilize their benefit accounts to achieve financial wellness. The firm says it launched its program after finding that superheroes and comics hold wide appeal among all demographics.

“We released Captain Contributor in early summer to allow plenty of time for adoption prior to enrollment season,” says Bo Armstrong, DataPath’s head of marketing. “But its popularity is already exceeding expectations. Due to demand, we had to accelerate our expansion timeline.”

Captain Contributor initially covered flexible spending accounts (FSAs) and health savings accounts (HSAs), but now it also offers education about health reimbursement accounts (HRAs), qualified small employer HRAs (QSEHRAs), and transit accounts.

the tool includes videos, comic books, fact sheets, communications templates, promotional items, and sales support accessories. Captain Contributor also updates his own website, weekly blog, and social media accounts across Facebook, Twitter, Instagram, and LinkedIn.

DataPath says its future expansion plans include adding additional characters to the Captain Contributor universe and creating new comic book editions for existing benefit account types. The firm is also developing materials regarding COBRA benefits.

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Categories: Financial News
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