Financial News

FASB Announces Changes to DB Plan Disclosure Requirements - Mon, 10/22/2018 - 17:27

The Financial Accounting Standards Board (FASB) is making changes to the disclosure requirements for defined benefit (DB) plans.

In Accounting Standards Update 2018-14, the FASB says the objective and primary focus of the changes are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles (GAAP) that is most important to users of each entity’s financial statements.

The following disclosure requirements are removed from Subtopic 715-20, Compensation—Retirement Benefits—Defined Benefit Plans—General:

  • The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.
  • The amount and timing of plan assets expected to be returned to the employer.
  • The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
  • Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.
  • For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.
  • For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

The following disclosure requirements are added to Subtopic 715-20:

  • The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.
  • An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments in the update also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

  • The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets
  • The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.
The amendments in the update are effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities. An entity should apply the amendments on a retrospective basis to all periods presented.

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Categories: Financial News

U.S. Retirement System Still Ranks Low, But Slightly Improved - Mon, 10/22/2018 - 15:50

Now in its tenth year, the Melbourne Mercer Global Pension Index (MMGPI) reveals how countries are doing to balance the twin goals of delivering financial security for their retirees that is both adequate for the individual and sustainable for the economy.

Measuring 34 pension systems, the index shows that the Netherlands and Denmark (with scores of 80.3 and 80.2 respectively) both offer A-Grade world class retirement income systems with good benefits. However, common across all results was the growing tension between adequacy and sustainability.

The Index uses three sub-indices—adequacy, sustainability and integrity—to measure each retirement income system against more than 40 indicators. This year, the U.S. scored a 58.8 overall, up from 57.8 in 2017. For each sub-index, the U.S. scored 59.1, 57.4 and 60.2, respectively.

According to the full report, the adequacy sub-index considers the benefits provided to the poor and the average-income earner as well as several design features and characteristics which enhance the efficacy of the overall retirement income system. The net household saving rate, the level of household debt and the home ownership rate are also included, because non-pension savings represent an important source of financial security during retirement.

The sustainability sub-index considers a number of indicators which influence the long-term sustainability of current retirement income systems. These include factors such as the economic importance of the private pension system, its level of funding, the length of expected retirement both now and in the future, the labor force participation rate of the older population, the current level of government debt and the level of real economic growth.

The integrity sub-index considers three broad areas of the pension system, namely regulation and governance; protection and communication for members; and costs. This sub-index asks a range of questions about the requirements that apply to the funded pension plans which normally exist in the private sector. Well-operated and successful private-sector plans are critical because without them the government becomes the only provider, which is not a desirable or sustainable long-term outcome.

A sub-report about the U.S. retirement system says the slight increase in the U.S.’s score was due to a number of small changes in the adequacy sub-index. It suggests the overall index value could be increased by:

  • raising the minimum pension for low-income pensioners;
  • adjusting the level of mandatory contributions to increase the net replacement for median-income earners;
  • improving the vesting of benefits for all plan members and maintaining the real value of retained benefits through to retirement;
  • reducing pre-retirement leakage by further limiting the access to funds before retirement;
  • introducing a requirement that part of the retirement benefit must be taken as an income stream;
  • increasing the funding level of the Social Security program;
  • raising the state pension age and the minimum access age to receive benefits from private pension plans;
  • providing incentives to delay retirement and increase labor force participation at older ages; and
  • providing access to retirement plans on an institutional group basis for workers who don’t have access to an employer sponsored plan.

“Ageing populations, high sovereign debt levels in some countries and the global competition to lower taxes constrain the ability of some jurisdictions to improve retirement income security. With a decade of unique data, the MMGPI and associated research can provide valuable global comparative insights to planners and policymakers on the way forward,” says Professor Deep Kapur, director of Australian Centre for Financial Studies.

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Categories: Financial News

DOL Seeks to Expand Access to ‘Association Retirement Plans’ - Mon, 10/22/2018 - 15:20

Under the direction of President Trump, the Department of Labor (DOL) is seeking to make it easier for small businesses to form association retirement plans, which permit them to join together to offer defined contribution (DC) plans within a single administrative framework.

To this end, the DOL has published a set of proposed regulations under Title 29 of the Code of Federal Regulations to expand access to retirement saving options by clarifying the circumstances under which an employer group, association, or professional employer organization (PEO) may sponsor a workplace retirement plan. In particular, the proposed regulation clarifies that employer groups or associations and PEOs can, when satisfying certain criteria, constitute “employers” within the meaning of Section 3(5) of the Employee Retirement Income Security Act (ERISA) for purposes of establishing or maintaining an individual account “employee pension benefit plan” within the meaning of ERISA Section 3(2).

As an “employer,” a group or association can sponsor a defined contribution retirement plan for its members, as can a PEO sponsor a plan for client employers (collectively referred to as “MEPs”). The proposed regulation would allow different businesses to join a MEP, either through a group or association or through a PEO. According to the DOL, PEOs will contractually assume administrative responsibilities for their client employers.

“President Donald J. Trump is moving to expand quality, affordable workplace retirement plan options for America’s small businesses and their employees,” said Secretary of Labor Alexander Acosta. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association retirement plans give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees. The proposed rule helps working Americans and their families take care of themselves in their retirement years.”

The DOL notes that 38 million Americans do not have access to workplace retirement plans. Association retirement plans would permit companies within a city, county, state or multi-state metropolitan area, or within a particular industry, to band together. Sole proprietors, as well as their families, would also be permitted to join such plans. According to the DOL, PEOs generally are going to be human resource specialist companies.  

DOL says that the proposal would enable small businesses to offer benefit packages comparable to those offered by large employers. DOL expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hands when negotiating with financial institutions and other providers.

Open MEPs have long been a focal point for the retirement plan industry, but the topic gained traction when, earlier this year, President Trump ordered the DOL to address this issue directly. Supporters say open MEPs are one of the primary ways to address the retirement plan coverage gap among employees of small businesses. This step comes after, earlier this month, the The Office of Management and Budget finished its review of DOL’s MEP proposal, calling it “major” and “economically significant.”  

Some experts have suggested, should the push to expand open multiple employer plans find success, this could result in many more small businesses offering MEPs—which will in turn open up new opportunities and challenges for advisers, as well as for their existing plan sponsor clients.

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Categories: Financial News

SURVEY SAYS: Halloween Parties - Mon, 10/22/2018 - 10:30

Last week, I asked NewsDash readers, “Is there a Halloween party on your schedule this year, and does it require dressing in costume?”


Apparently, Halloween parties are not in vogue among friends and families of responding readers as more than two-thirds (67.6%) said a Halloween party is not on their schedule. Nearly three percent are hosting one themselves, 23.5% said they are attending one hosted by someone else, and 11.8% are attending one at work.


For those planning to attend a Halloween party, 61.9% said dressing up in costume is not required. Only 14.3% said it is required, and the remaining said it is recommended, but not required.


Many of the readers who chose to leave comments share my view of not liking Halloween parties (or dressing up in costume). However, some felt otherwise. Some readers said Halloween was just for children, but offered ways they enjoy the ‘holiday’ as adults. Editor’s Choice goes to the reader who said: “For several years my costume has been stressed, overworked and underpaid TPA.”


Thanks to everyone who participated in the survey!



I have never been one to dress up I enjoyed it when my kids were small but now I try to avoid Halloween

Not too many have Halloween party’s for adults around here.

I love Halloween and costume parties. Sadly, my husband is the Halloween Scrooge. I was able to have fun with it when our kids were young, but those days are long gone.

No set parties, but I’m sure there will be events I will attend with my daughter. I usually will wear a low-key “costume” (i.e. cat ears or a tiara) to these events and work.

I am not a big Halloween celebrator. Parties are not always high on my list. It amazes me how much time and effort people spend in the office and at home decorating for Halloween. It seems to have taken over religious holidays when it comes to decorating, so I guess the marketers are doing their jobs very well! Our office has a large Halloween celebration – bigger than any other employer in my 25 year work history.

I am going as myself since I am rather unique. That way no one will be dressed as me.

I am much too old to dress up for trick or treat. I leave that to the little people.

Another excuse for adults to drink too much and act inappropriately.

Overall dressing up is fairly ridiculous but if you embrace it, it can be a lot of fun.

My husband used to host one every year. This year we are helping at a charity haunted hay ride.

I enjoy handing out candy and interacting with the kids and their families during trick or treat (we dress up the dog and sit on our front porch)…adult Halloween parties don’t rank very high on my list!

I enjoy Halloween from the perspective of the kids coming to the door all dressed up. Me dressing up? Not so much.

I’m a little self-conscious about dressing up — especially if I have to travel in costume! However, I enjoy seeing creative costumes on others and, once in a while, I have come up with some creative ideas for myself.

Our neighborhood has a party each year and the host house rotates. We dodged having to dress up by dressing up our pets.

The last time I attended a Halloween party was over 30 years ago. My husband and I dressed as the ‘generic’ couple wearing white jeans, white shirts and yes, we took a piece of white paper and wrote ‘beer’ on it and wrapped it around out beer cans. Tried to make our hair white by putting flour in it – didn’t work.

They are not my favorite either, but it is fun to see how creative everyone can be with costumes.

We are strongly encouraged to dress in costume at work. For several years my costume has been stressed, overworked and underpaid TPA. Heading to a friend’s house after work to watch kid friendly movies outside on the lawn to encourage kids to trick or treat at the house. I won’t be in costume for that.

I don’t think I’ve ever been invited to a Halloween party, at least since middle school… Thank goodness!!

Categories: Financial News

More Providers Offering Resources for National Retirement Security Week - Fri, 10/19/2018 - 19:12

National Retirement Security Week is October 21 through 27, and Mutual of America and TIAA have announced resources for plan sponsors to educate employees.

During and beyond the week, Mutual of America will conduct on-site group presentations for clients and their employees, highlighting the advantages of tax-deferred savings; importance of contributing and increasing contributions; value of employer-matched contributions; and convenience of saving through payroll deduction.

In addition, the company is highlighting a variety of resources and tools through its Facebook, LinkedIn and Twitter pages, and at, to help individuals prepare for financial health and security during retirement.

“The concept of retirement readiness is thrown around a lot these days, but actually taking action so you’re ready to retire is critical,” says William Rose, Mutual of America senior executive vice president and chief marketing officer. “To help our customers get there, our social media channels and website will offer valuable tools and resources—including retirement calculators and informative articles that give practical tips.”

TIAA is helping its plan sponsor clients create their own National Retirement Security Week campaigns with ready-to-use content found at, which features daily emails, newsletter articles and social media content.  

In addition, during the week, TIAA will direct plan participants to tools such as:

TIAA also has a full roster of live webinars with topics ranging from managing debt and income to social security basics to the new tax reform.

The National Association of Government Defined Contribution Administrators (NAGDCA) previously announced the availability of free, ready-to-use communication materials for plan sponsors to use with their employees.

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Categories: Financial News

Dignity Health ‘Church Plan’ Litigation Defeats Dismissal Motions - Fri, 10/19/2018 - 18:48

The U.S. District Court for the Northern District of California has denied most, but not all, of the defense’s motions for summary judgement in the case of Rollins v. Dignity Health.

The case of Rollins v. Dignity Health has a long-running and complicated procedural history stretching back years. In July 2014, the same court granted a motion for partial summary judgment against Dignity Health, finding its pension plan was not a “church plan” as defined under the Employee Retirement Income Security Act (ERISA). In its decision, the court took a step toward granting plaintiff Starla Rollins’ ultimate appeal for declaratory and injunctive relief directing Dignity Health to bring its pension plan into compliance with ERISA—including its reporting, vesting and funding requirements. The 9th U.S. Circuit Court of Appeals agreed with the district court’s findings.

Dignity Health then successfully petitioned the Supreme Court to weigh in on the case. Following oral arguments in March in the related cases of Advocate Health Care Network v. StapletonSt. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins, the U.S. Supreme Court ruled plans maintained by principal-purpose organizations can qualify as “church plans.” However, it did not rule that the hospitals in these cases were principal-purpose organizations.

Following all this, the Rollins case was effectively remanded back to the district court, and the plaintiffs filed an amended complaint on November 3, 2017. The defendants naturally moved for summary dismissal of the complaint, leading to the latest decision. In a phrase, the decision is a mixed bag that falls more in favor of the plaintiffs, but it by no means concludes the litigation—not least because the plaintiffs have already filed a second amended complaint that is still pending. 

Details From the District Court Decision

The first section of the new District Court decision dives into the issue of “judicial noticeability,” responding to the fact that the defense submitted copies of websites and public statements in an attempt to prove the hospital is a primarily a religiously focused institution. Here, the Court draws the conclusion that publicly available websites or records of private parties such as Dignity Health—as opposed to government documents—have “no imprimatur of reliability.”

“There are at least a trillion web pages on the Internet, and many of the documents within those pages are unsupported, poorly supported, or even false,” the decision states. “Of course, that does not make all of those documents inadmissible for all purposes. But they are not inherently reliable, and courts should be cautious before taking judicial notice [during summary judgement considerations] of documents simply because they were published on a website. That is particularly so when a party seeks to introduce documents it created and posted on its own website, as Dignity does here.”

After making this distinction, the court still agrees to take notice of some of the defense-provided documents. Among others, these include the “Amended and Restated Bylaws of Dignity Health; a copy of the Restated Articles of Incorporation of Catholic Healthcare West; a copy of the Catholic Healthcare West Retirement Plan as Amended & Restated January 1, 2005; a copy of the Memorandum regarding and Religious Directives for Catholic Health Care Services; and a copy of the Dignity Health Pension Plan Amended and Restated January 1, 2014.” As explained by the decision, the reason these are “noticed” is that more justification is given for their relevance than the simple fact of their being publicly available.

So, Is This a Church Plan? We Still Don’t Know 

According to the District Court, church-affiliated organizations can be exempt from ERISA’s requirements as long as they meet three conditions. First, the entity must be a “tax-exempt nonprofit organization associated with a church.” Second, the retirement plan must be maintained by a principal-purpose organization, meaning that the plan must be “maintained by an organization whose principal purpose is administering or funding a retirement plan for entity employees.” Third, the principal-purpose organization itself must be controlled by or associated with a church.

On the “maintenance” question, the District Court rules firmly that the plaintiffs’ arguments are supported by ordinary principles of statutory construction. 

“If Congress had not intended to attach any significance to the word ‘maintained,’ it could have simply required that a plan be ‘administered or funded’ by a principal-purpose organization, and not also ‘maintained’ by one,” the decision states. “It did not make that choice. … Plaintiffs’ construction of ‘maintain’ is also supported by the multiple uses of ‘establish’ and ‘maintain’ as paired terms in U.S.C. Section 1002, which suggest a degree of responsibility not found in the word ‘administer.’”

The District Court further rules that the plaintiffs plausibly allege that Dignity is not associated with a church. The successful arguments are based on the fact that Dignity does not impose any denominational requirement on its employees; has a practice of affiliating with hospitals that claim no religious affiliation; provides non-denominational chapels; and does not impose any denominational requirement on its patients.

Siding with defendants, the court grants the dismissal motion pertaining to claims about investment performance. However, all other claims are dismissed.

It should be noted that the District Court granted the plaintiffs room to amend their complaint “to cure the defects identified in the order.” The plaintiffs have already filed a new amended complaint, attempting to do so.

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Categories: Financial News

Retirement Industry People Moves - Fri, 10/19/2018 - 18:45

Rob Petree has joined HUB International as vice president of the Employee Benefits practice. His primary role with HUB will be the design, placement and maintenance of competitive health care programs and human resource solutions for midmarket and large companies. 

Petree has over 20 years of experience in providing employers with creative strategic approaches and funding alternatives to their employee benefits packages. Chip Stuart, chief sales officer for HUB California says, “Rob’s clients value his passion to provide education and consultation for their insurance needs rather than limiting their choices.  When one local non-profit client was asked why she chose to work with Rob, her response was, ‘I have been an HR director and consultant for 25 years and I learned more from you about benefits and our situation than I have ever learned working with any broker.'” 

Petree is a graduate of California Polytechnic San Luis Obispo, with a bachelor’s degree in Agribusiness Marketing.

Bernstein Adds Industry Executive to Philadelphia Region

William Dugdale has joined Bernstein Private Wealth Management (Bernstein) as vice president and financial adviser , in the Philadelphia office. In this role, he will serve clients in Delaware and parts of Southern Pennsylvania, and advise on a wide range of financial planning and investment matters, including sustainable investment solutions (ESG), retirement plans, estate planning, business transition, philanthropy and next generation education.

Dugdale brings over two decades of experience in the financial services industry. Prior to joining Bernstein, he was a partner, portfolio manager and head of business development for the Delaware office at Brown Advisory, where he provided investment solutions and advice to families, foundations and endowments. Previously, he was a partner and portfolio specialist at Friess Associates, an institutional money manager, for 18 years. Dugdale earned a bachelor’s in industrial and labor relations from Cornell University.

T. Rowe Price Appoints CIO to Head of Investment Strategy

T. Rowe Price
has appointed David Giroux, currently chief investment officer of U.S. Equity and Multi-Asset and portfolio manager of T. Rowe Price Capital Appreciation Fund, to the additional position of head of Investment Strategy, a new role at the firm.

In this new capacity, Giroux will lead investment research projects aimed at providing insight to benefit T. Rowe Price’s security selection process across asset classes. Over the years, Giroux has led several research projects of this type; his appointment as head of Investment Strategy formalizes a functional role he had already assumed.

To facilitate T. Rowe Price’s characteristic collaboration among investment professionals, Giroux will join the firm’s Equity Research Advisory Committee as co-chair.  A focus of this group will be to uncover areas of controversy or opportunity that the larger market is mispricing or misunderstanding. 

This appointment involves no reporting changes, and Giroux will have no direct reports in this role, according to T. Rowe Price.

“As the investment landscape evolves, the goal of uncovering investment insight remains central to our success as an asset manager.  David’s appointment as head of Investment Strategy is designed to help maximize the ability of our research platform to generate excess returns for investors,” says Eric Veiel, head of U.S. Equity, co-head of Global Equity. “He has a proven track record of success, not only as an analyst and a portfolio manager, but also as a leader of research initiatives that have benefited our clients.  David epitomizes our culture of collaboration-driven investment excellence and dedication to our clients.  He is uniquely qualified for this additional role.”

The Hilb Group Acquires Actuarial Consulting Firm


The Hilb Group, LLC has acquired Massachusetts-based DBR Group, Inc. (DBR). The transaction became effective on October 1.

Founded in 2004, DBR is an employee benefit and actuarial consulting firm providing a full range of benefits consulting and brokerage services to organizations of all sizes, including corporations, nonprofits, Taft-Hartley funds, and public-sector employers. DBR will continue to operate out of their Framingham, Massachusetts location under the direction of the founding leadership: Paul Desrosiers, Chris Bean and Jim Roche.

“Joining THG’s team will allow our clients to access a wider range of products and services to address their emerging and evolving needs,” says Desrosiers.

“Paul, Chris, and Jim have an outstanding partnership and they bring significant expertise in large group benefits to our firm,” says Ricky Spiro, CEO of THG. “I am pleased to welcome them and DBR’s talented employee benefits professionals to our team.”

Mercer Hires Past Actuarial Associate as Principal


Mercer appointed Crystal Leben-Reyes as principal for Mercer’s Wealth Business in its New York Office. Her responsibilities include leading client relationships and developing innovative solutions to fit their needs. Leben-Reyes will report to Mary Gobes, Mercer’s national consulting team leader.

“We are thrilled to welcome Crystal back to Mercer,” says Christopher Keach, Mercer’s New York Wealth Business leader. “Her experience, knowledge and proven track record of success will help us further provide exceptional service and solutions to our clients while strategically growing our Wealth business.”

Prior to this role, Leben-Reyes was a senior actuarial consultant at Buck and before that she was a senior actuarial associate at Mercer. She has 12 years of experience providing extensive consulting services to clients of various sizes and industries on topics such as retirement plan design, retirement readiness, forecasting, risk transfer and other financial strategies. She earned her bachelor’s in actuarial science from Baruch College, and is an associate of the Society of Actuaries, a member of the American Academy of Actuaries and an enrolled actuary.

ESOP Consultant Joins Ascensus TPA Solutions

ESOP Economics, a firm providing consulting and software solutions related to employee stock ownership plan (ESOP) repurchase obligations, has joined Ascensus’ TPA Solutions division

The firm focuses on helping ESOP companies quantify their future repurchase obligations (i.e., their legal obligation to buy back stock distributed to ESOP participants) and develop strategies for managing and funding them.

“Because repurchase obligations are our sole focus at ESOP Economics, we’ve developed a depth of experience over time that’s unmatched in the industry,” says Judy Kornfeld, founder and chief executive officer of ESOP Economics. “As part of Ascensus, we’ll continue to provide the crucial forecasts and information that clients need to make educated ESOP decisions for the future.” 

“ESOP Economics is known not only for its software, but also for its staff’s expertise and the quality of the work it delivers to its clients,” says Jerry Bramlett, head of TPA Solutions. “Adding their reputation, skillset, and experience allows us to provide an even more robust ESOP offering to current and prospective clients.” 


Alan Biller and Associates Promotes Managing Senior Consultants

Alan Biller and Associates has promoted two of its members to senior management positions, effective immediately. Jennifer Newell, CFA, CAIA will assume the role of president, and Simon Lim, CFA, CAIA will assume the role of chief financial officer. They both will also continue their current client-facing responsibilities. 

“These promotions put in place the key elements of our management team,” says Alan Biller, CEO, “ensuring the firm’s continuing ability to remain an independent fiduciary adviser to its clients.”

The firm says institutional investors seek independent fiduciaries that apply objectivity to the investment decision-making process, reducing potential conflicts of interest that could bring loss or liability to plans and participants. The firm offers independent fiduciary consulting services to institutional investors, particularly Taft-Hartley pension and fringe benefit plans. 

Newell joined the firm in 2009 and serves as a managing senior consultant. She is a member of the team that advises the firm’s largest client. Previously, she held roles at Wells Capital Management and was president of her own firm, Newell Associates. Newell earned a bachelor’s in economics, magna cum laude, Phi Beta Kappa from Wheaton College, attended the London School of Economics, and holds a master’s from the University of California, Berkeley.

Lim joined the firm in 2010 and serves as a managing senior consultant and more recently chief compliance officer. He is a member of the team that advises the firm’s largest client. Prior to joining the firm, he was a lead analyst at CalPERS. Lim earned a bachelor’s in economics from the University of California, Los Angeles and holds a J.D. and master’s from the University of California, Davis and a master’s in Finance from the London Business School.

Pennsylvania-based Firm Merges with Cafaro Greenleaf

Carroll Consultants, Ltd., a provider of retirement and health care plan services in higher education and independent schools, has merged with Cafaro Greenleaf (CG).

According to the firms, the merger will be relatively seamless, with clients receiving the support of an expanded team of professionals.

Wayne Greenleaf, Cafaro Greenleaf’s managing principal, says, “The merger of Carroll Consultants, Ltd. and Cafaro Greenleaf gives us the unique ability to provide value-added and enhanced services to our clients in the areas of administration, recordkeeping and group benefits.” According to Greenleaf, clients of Carroll Consultants, Ltd. will receive additional investment advisory resources, enhanced services, participant support with monthly Financial Fitness webinars for participant education, plan design optimization studies, and innovative retirement plan solutions and tools.

“We are thrilled to have Cafaro Greenleaf as a partner, who shares the same values and principals we do, to consistently listen to our clients’ needs and apply innovative retirement plan solution strategies,” said Marcie Carroll, principal at Carroll Constultants, Ltd. “Jamie, Wayne, and the entire Cafaro Greenleaf team also share our passion for participant education, and this merger will allow us to continue to enhance our commitment to that.”

With the merger, Cafaro Greenleaf consults on approximately 300 retirement and group benefit plans, with assets under advisement exceeding $4.6 billion.

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Categories: Financial News

Millennial Educators Especially Want Retirement Savings Investing Help - Fri, 10/19/2018 - 17:09

Saving for retirement ranks as a top long-term financial goal among Millennial educators, yet tackling credit card debt and student loans is a major barrier, according to a new study from Security Benefit.

More than half (58%) of Millennial teachers report having credit card debt along with 64% of non-teacher (administrators, specialists, etc.) Millennials. In addition, 56% of Millennial teachers report having student loan debt compared to only 39% of non-teachers. Both groups noted that these loans are a major barrier to reaching their financial goals.

Despite these obstacles, Millennial educators are paying attention to retirement savings. While 66% of Millennial teachers have access to a pension, only 33% expect to fund retirement strictly on a pension. More than three-fourths (76%) of Millennials have access to employer retirement savings plans, and 80% contribute to them.

Help wanted

Millennial educators said they need help with retirement planning, especially when it comes to determining an appropriate asset allocation or the best investment vehicle. The survey found they tend to first research budgeting and investing strategies online. However, 73% said they are likely to work with a financial adviser in the future, and 41% currently work with one (versus only 17% of non-teachers that work with a financial professional).

For Millennial educators, developing a personal relationship with a financial adviser is especially important; 80% would prefer to work with an advisor in person. While 74% are at least somewhat interested in using an app for help with retirement savings, still 77% would place most of their trust for financial advice with an adviser.

The study was conducted in partnership with researcher Greenwald & Associates and is based on qualitative and quantitative research from U.S.-based educational professionals ages 21 to 37.

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Categories: Financial News

DOL Not Giving Up on Fiduciary Rule - Fri, 10/19/2018 - 16:34

The Department of Labor’s (DOL)’s Employee Benefit Security Administration (EBSA) has a number of items on its regulatory agenda—for example, a proposed rule on the definition of employer for multiple employer plans and an interim final rule on the adoption of an amended and restated Voluntary Fiduciary Correction Program (VFCP).

However, of interest is the continuation of the final rule stage for Fiduciary Rule and Prohibited Transaction Exemptions. The item notes that on April 8, 2016, the DOL replaced the 1975 definition of fiduciary regulation with a new regulatory definition.  However, its new definition was vacated by the 5th U.S. Circuit Court of Appeals

The agency said it is considering regulatory options in light of the 5th Circuit opinion, and has on its timeline that a final rule will be issued in September of 2019.

Meanwhile, a look at the regulatory agenda for the Securities and Exchange Commission (SEC) also shows a September 2019 date for a final action on its Regulation Best Interest. In April, the Commissioners of the SEC voted by a four-to-one majority to propose a multi-pronged set of new impartial conduct standards and disclosure requirements that will apply to both financial advisers and broker/dealers serving “retail clients,” which in the eyes of the SEC includes retirement plan participants.

The retirement plan and adviser industry has long called for the DOL and SEC to work together on a new fiduciary—or conflict-of-interest rule. Perhaps the corresponding dates on their agendas signify this is happening.

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Categories: Financial News

OPERS Reduces Return Assumptions - Fri, 10/19/2018 - 14:55

Faced with declining market expectations, the Ohio Public Employees Retirement System (OPERS) Board of Trustees has lowered the pension system’s investment return assumptions for both the Defined Benefit Fund and Health Care Fund, Michael Pramik, with OPERS reported.

Beginning with the 2018 calendar year, the assumed actuarial rate of return will be 7.2% for the Defined Benefit fund and 6.0% for the Health Care Fund. The current rates are 7.5% and 6.5%, respectively.

OPERS said the move is expected to lower its funding level, but increase the time in which it can pay off liabilities.

This action reflects worsening expectations in the capital markets since OPERS’ last five-year experience study in 2016. Investment consultants have told OPERS to expect to earn half a percent less annually on investments than they forecasted during the experience study.

Further, the present value of OPERS’ future benefit payments to current retirees stands at $117 billion, and more than 60% of that liability is due to be paid within the next 15 years. “The rate of return adjustment is part of OPERS’ continuing effort to keep the pension plan healthy and sustainable. It determines how much money we need to have on hand now to pay future obligations,” Pramik said.

Pramik points out that many institutional investors have been lowering their earnings expectations. The median investment return assumption used by 129 public pension plans surveyed by the National Association of State Retirement Administrators (NASRA) was an all-time low 7.45% in July.

Last year, NASRA cautioned in an Issue Brief that, if near-term rates do prove to be lower than historic norms, plans that maintain their long-term return assumption are likely to experience a steady increase in unfunded pension liabilities and corresponding costs. Alternatively, plans that reduce their assumption in the face of diminished near-term projections will experience an immediate increase in unfunded liabilities and required costs. “As a rule of thumb, a 25 basis point reduction in the return assumption, such as from 8.0% to 7.75%, will increase the cost of a plan that has a COLA, by three percent of pay (such as from 10% to 13%), and a plan that does not have a COLA, by two percent of pay,” the Issue Brief stated.

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Categories: Financial News

SEC Commissioner Calls for Simpler Ways to Compare Investments - Thu, 10/18/2018 - 17:42

Kara Stein was appointed by President Barack Obama to the U.S. Securities and Exchange Commission (SEC) and was sworn in on August 9, 2013.

More than five years later, Stein is the last Obama-era commissioner, with the remaining three commissioners and the SEC chair all having been appointed by President Donald Trump. Under the leadership of SEC Chair Jay Clayton, the regulator’s agenda has clearly shifted to favor a more conservative perspective.  

During a recent speech given during a Brookings Institution retirement symposium, Stein urged her fellow commissioners to do whatever they can to help all Americans more adequately prepare for retirement.

“We’ve moved from a collective retirement system to one in which each person is expected to go it alone,” Stein said. “About three out of every four adults in the United States live in a household with at least one type of investment account. And, an overwhelming number of those investment accounts are retirement accounts. But, unfortunately, most Americans are not, and may never be, prepared.”

Stein pointed to data from the National Institute on Retirement Security, showing the median retirement savings of Americans between the ages of 55 and 64 is currently zero.

“Indeed, even for those who do have retirement accounts, the average balance is only $88,000, which would provide a mere $3,600 per year in retirement [once annuitized],” Stein said. “This is consistent with recent surveys conducted by the U.S. Securities and Exchange Commission’s Office of the Investor Advocate, where most investors reported holding less than $50,000 of assets in their investment accounts.”

As an SEC Commissioner, Stein said, her job is “to talk about solutions specifically related to the third leg of the proverbial stool—investments.”

“Stashing away money in a savings account only gets retirees so far. To have a safe and secure retirement, Americans must invest their savings to allow them to grow,” Stein said. “For example, someone who saves $17 a day starting at 21 will have put aside $273,000 by the time they are ready to retire at 65. However, if they invest that same amount with a return of 7%, they will have almost $1.8 million in their retirement account. Without investment, retirement may be a dream that never comes true. Given the importance of investment to Americans’ ability to retire, what can the SEC do to help?”

A Push for Investor Education

While some of Stein’s speech focused on voicing her dissatisfaction with the SEC’s light-handed approach to crafting the new Regulation Best Interest, she raised some new ideas about ways the SEC could promote investor education. She acknowledged that financial education is difficult and has its limits, but she said it is still one of the most important ways to start to solve the retirement savings shortfall.

“As an initial matter, we can certainly help build financial capacity and investing acumen. The Commission already does a lot of work in this area, but we need to do more,” Stein said. “For instance, we know that much of the education people receive about investing comes once they have enough money to invest. But if we are truly to make a difference, financial literacy education needs to start much earlier. The SEC should work with other agencies to create a model curriculum for schools. We should sponsor contests—similar to spelling bees—for middle school and high school students about investing in their future.”

Stein proposed the idea of creating a digital app that teaches kids and adults how to invest.

“And we can work with private industry to have public service announcements on saving for retirement,” she said. “This is the kind of thinking we need to engage in if we are going to help prepare Americans for the task of investing for their own retirement.”

Noting that “education will only get us so far,” Stein further said the Commission “must ensure that investors have the information and tools they need to make good decisions.”

“This means the information they are given about potential investments must be clear and easy to understand. Investors should be able to look at the first page or two of a prospectus and understand how much they will pay in fees, and to whom,” Stein said. “Investors also should be able to understand the key features and risks of the security without having to dig through hundreds of pages. If we can simplify food labels, we can simplify investment disclosures. For instance, in the home mortgage area, a concise disclosure form has greatly increased consumers’ understanding of the details of their mortgages. Why shouldn’t we have a similar requirement for investments?”

It is far from clear that the other commissioners, especially SEC Chair Clayton, will embrace these last suggestions, but Stein is defiant.

“Moreover, investors should be able to easily compare financial products. To accomplish this, I would urge the Commission to consider updating the means by which information is provided to investors,” Stein said. “Many online retailers use tools that allow customers to compare similar products online, side-by-side, in an easy-to-understand format. We can learn from these retailers and allow investors the same opportunity to understand the choices before them. If we can compare toasters online, we should also be able to compare stocks, mutual funds, and other investments.”

Specifically referencing the retirement plan industry, Stein encouraged the SEC to implement “mandatory periodic disclosures about the value of investors’ 401(k) accounts to show how much income will likely be generated in retirement.”

According to Stein, “this could be like the [credit score] box on the back of your credit card bill. Such information would let an investor know if they are on track to meet their retirement goals.”

Criticism of Regulation Best Interest

Notably, Stein’s speech did not directly mention the SEC’s Regulation Best Interest proposal, but she did take some veiled shots at her fellow commissioners for taking a softer approach to tamping down on advisory industry conflicts of interest, relative to the court-vacated approach taken by the Obama-era Department of Labor.

“My guess is that it would be easier to simply require that all persons actually giving investment advice put their client’s interest first. It’s simple and straightforward,” she said. “The costs of conflicted investment advice are huge and they come, in large part, at the expense of retirees. The Commission must address the differing standards of conduct applicable to investment professionals and do so in a way that protects investors. This is our mission. This may require action from Congress, but the consequences are too large for us not to get this right.”

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Categories: Financial News

Merrill Lynch Increases Personalization of Education Offerings - Thu, 10/18/2018 - 17:27

Merrill Lynch has updated several of its participant resources to address various needs, in order to make them more personalized. For example, its Education Center now covers seven life priorities: finances, home, health, family, leisure, giving and work.

Its Benefits OnLine Mobile App now permits users to log onto it either through touch or facial identification, and its dashboards are now customized.

Merrill has also bundled its educational resources by topics, such as student loan debt, caregiving, health savings and women’s unique journey to financial wellness. The firm has updated its educational content on health savings to underscore the benefits of health savings accounts (HSAs).

When participants meet with financial wellness specialists, they are given a personal consultation action checklist that they can use to spell out their financial priorities.

Later this year, Merrill Lynch will introduce various online illustration tools on topics such as health care, lifetime income and inflation. Also, early next year, the firm will expand its online tool, Advice Access—which helps participants figure out how much to save and how to invest—to include a redesigned engagement experience and additional investment portfolios.

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Categories: Financial News

Investment Product and Service Launches - Thu, 10/18/2018 - 16:48

PGIM Rolls Out First of Set of ETF Expansion

PGIM Investments has launched the first of four actively managed equity exchange-traded funds (ETFs) that it plans to roll out in 2018, expanding the platform from the two actively managed fixed income ETFs launched earlier this year. Sub-advised by QMA, the quantitative equity and global multi-asset solutions manager of PGIM, the PGIM QMA Strategic Alpha Large-Cap Core ETF (NYSE Arca: PQLC) seeks long-term growth of capital by investing primarily in large-cap stocks.

“Adding equity to our mix of ETF strategies gives investors a cost-effective way to access the equity markets while obtaining the potential benefits of active management,” says Stuart Parker, president and CEO of PGIM Investments. “Introducing these funds—managed by one of the industry’s pioneering quantitative managers—is a natural evolution in our effort to create new investment vehicles that meet investors’ evolving needs.”

Priced at 0.17%, PQLC is approximately half the cost of the average passively managed ETF in the large blend category despite the active approach which targets higher returns, the company says. By the end of 2018, PGIM Investments plans to offer three more actively managed equity ETFs—the PGIM QMA Strategic Alpha Small-Cap Growth ETF (NYSE Arca: PQSG), the PGIM QMA Strategic Alpha Small-Cap Value ETF (NYSE Arca: PQSV), and the PGIM QMA Strategic Alpha International Equity ETF (NYSE Arca: PQIN).

Sub-advised by QMA, these four Strategic Alpha ETFs will seek to provide investors with access to broad multifactor equity exposure while capitalizing on investor bias.

“With more than 40 years of systematic active management expertise, we’ve created an investment product that delivers our best institutional research on multifactor investing to the ETF market,” says QMA Chairman and CEO Andrew Dyson. “Our research shows that investors frequently overpay for stocks that have a low probability of outsized returns or may provide lower risk. We’ve found a way to help protect investors from such behavioral biases.”

Invesco Acquires MassMutual Asset Management Affiliate

Invesco Ltd. and MassMutual have entered into a definitive agreement, whereby Invesco will acquire MassMutual asset management affiliate OppenheimerFunds, Inc.

In turn, MassMutual and the OppenheimerFunds employee shareholders will receive a combination of common and preferred equity consideration, and MassMutual will become a significant shareholder in Invesco, with an approximate 15.5% stake.

“The combination with OppenheimerFunds and the strategic partnership with MassMutual will meaningfully enhance our ability to meet client needs, accelerate growth and strengthen our business over the long term,” says Martin L. Flanagan, president and CEO of Invesco. “This is a compelling, highly strategic and accretive transaction for Invesco that will help us achieve a number of objectives: enhance our leadership in the U.S. and global markets, deliver the outcomes clients seek, broaden our relevance among top clients, deliver strong financial results and continue attracting the best talent in the industry.”


Horace Mann and SWBC to Offer Investment Solutions for Educators

Horace Mann, a company focusing on helping educators achieve their financial goals, has partnered with SWBC, a diversified financial services company, to provide school districts with additional investment solutions for educators. 

SWBC’s investment solutions will be implemented on Horace Mann’s open architecture mutual fund platform, Retirement Advantage.

In addition, SWBC includes an Environment, Social and Governmental (ESG) investment lineup that Horace Mann will offer on its Retirement Advantage platform.

“Horace Mann knows educators are concerned about the type of investments they make. Offering an ESG lineup gives school business officials the option to let their educators align their investments with their beliefs,” says Bret Benham, executive vice president of Life & Retirement at Horace Mann. 

The business of selecting and monitoring plan investments is a complicated process. The partnership between Horace Mann and SWBC will make it easier for school business officials to take care of their employees, and assist them in saving for their futures.



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Categories: Financial News

DOL’s Open MEP Proposal Advances Through OMB - Thu, 10/18/2018 - 15:44

The Office of Management and Budget confirms it has finished its review of the Department of Labor (DOL)’s proposed regulation to expand access to open multiple employer plans (MEPs).

The DOL’s Employee Benefit Security Administration (EBSA) is driving the regulatory effort, which comes after President Donald Trump earlier this year signed an executive order directing several federal agencies to examine the prospects of making open MEPs more viable.

Some experts in the retirement plan industry think that, if DOL find success in promoting open multiple employer plans, this could result in many more small businesses offering MEPs—which will in turn open up new opportunities for advisers. Others go so far as to suggest open MEPs may, once the marketplace matures, start to attract mid-size and even larger plan sponsors

It is still unclear at this stage exactly what language is contained in the proposed regulation OMB has now signed off on, and it should also be stated that the regulation will be subject to comment and revision. Assuming the DOL’s proposal closely follows the executive order’s instructions, it is likely to revise the “common nexus” and “one bad apple” rules that have held back open multiple employer plans. Less clear is whether the DOL regulation will speak to the president’s simultaneous order to the Treasury Department to consider how to update its rules establishing that individuals must begin making withdrawals from 401(k) accounts starting no later than six months after their 70th birthday.

Industry stakeholders have been calling loudly for greater use of open MEPs as one of the primary ways to address the retirement plan coverage gap. While there has been less discussion of the RMD issue, it is also a timely matter for today’s retirees. In fact, 68% of retirees are only taking the required minimum distributions (RMDs) from their retirement accounts.

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Categories: Financial News

PBGC Asks That More Information Be Added to Reportable Events Filings - Thu, 10/18/2018 - 15:15

The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) extend approval of collections of information under PBGC’s regulation on Reportable Events and Certain Other Notification Requirements, with modifications.

The PBGC is proposing in this renewal request that all reportable events filings include controlled group information, company financial statements, and the plan’s actuarial valuation report. Currently there are five reportable events where some or all of that information isn’t required. All three types of information would be added to two of these events (‘‘Active Participant Reduction’’ and ‘‘Distribution to a Substantial Owner’’). One type of information would be added to two events (‘‘Transfer of Benefit Liabilities’’ and ‘‘Change in Contributing Sponsor or Controlled Group’’), and two types to one event (‘‘Extraordinary Dividend or Stock Redemption’’). The agency says the additional information is needed to help it determine a defined benefit (DB) plan sponsor’s ability to continue to maintain its DB plan.

Section 4043 of the Employee Retirement Income Security Act (ERISA) requires DB plan administrators and plan sponsors to report certain plan and employer events to the PBGC. The reporting requirements give agency notice of events that may indicate plan or employer financial problems. In 2015, the agency issued final rules which provide most plan sponsors with increased flexibility to determine whether a waiver from reporting will apply.

OMB approval of this collection of information expires November 30, and the PBGC is requesting that OMB extend its approval for another three years, with the requested modifications.

The agency is also asking for public comment on its request. Comments are due November 13. More information is provided in the Federal Register.

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Categories: Financial News

Wolters Kluwer Streamlines Distribution Process with Tracking Software - Wed, 10/17/2018 - 19:54

Wolters Kluwer Legal & Regulatory U.S. has launched a tracking software designed to streamline qualified plan participant distributions, available for

Designed with retirement service providers in mind, the Distribution Tracking Software (DTS) looks to simplify the procedure of planning distributions by automating tasks typically completed manually and offer accountability tools, data collection, and communication. Additional features include global and plan level dashboards; document exchange portals, where providers can download, send and receive forms from plan sponsors and participants; batch import distributions for force outs, plan termination and conversion; batch print and attach custom documents to distribution records; and more, according to the firm.

The DTS module joins other programs, including 1099, Compliance and Documents. More information about the software can be found here.   

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Categories: Financial News

IRS Identifies Retirement Plan Compliance Strategies for 2019 - Wed, 10/17/2018 - 19:39

A Program Letter from the Tax Exempt & Government Entities (TE/GE) Business Operating Division of the IRS offers a heads up to what retirement plan sponsors can expect from the IRS in 2019.

Strategies approved for the Employee Plans (EP) division include:

  • Distributions: verify that plans are following correct distribution processes and procedures and that participants are receiving correct distribution amounts;
  • Form 5500, Annual Return/Report of Employee Benefit Plan, and Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan, stop filers: contact employers sponsoring plans that did not file one or more required returns;
  • IRC Section 403(b)/457 plans: examine 403(b) plans for universal availability, excessive contributions and proper use of catch-up contributions under IRC Section 414(v); and 457(b) plans for excessive contributions and proper use of the special three-year catch-up contribution rule;
  • Small plans with large assets: determine whether smaller plans with trusts holding large assets have taken deductions on Form 1120, U.S. Corporation Income Tax Return, exceeding IRC Section 404 limitations;
  • Simplified Employee Pension (SEP) plans: determine whether accounts violated maximum participant rules, failed to meet statutory and matched employer contribution requirements, and/or failed to meet IRC Section 416(i)(6) top-heavy requirements; and
  • Terminated cash balance plans: examine terminated plans with cash balance features that may have exceeded IRC Section 415 limitations or generated a reversion which is subject to an excise tax.

Strategies approved specifically for tax-exempt organizations include:

  • Previous for-profit: focus on organizations formerly operated as for-profit entities prior to their conversion to Internal Revenue Code (IRC) Section 501(c)(3) organizations;
  • Self-dealing by private foundations: focus on organizations with loans to disqualified persons;
  • Early retirement incentive plans: determine whether federal, state or local governmental entities that provide cash (and other) options to employees as an incentive for early retirement have applied proper tax treatment to these benefits; and
  • Worker classification (misclassified workers): determine whether misclassified workers result in incorrectly treating employees as independent contractors.
“As more issues are developed and approved, those with a higher priority may potentially replace Compliance Strategies currently set forth in this document,” the Program Letter states.

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Categories: Financial News

Appellate Court Revives Putnam Self-Dealing Suit - Wed, 10/17/2018 - 19:26

In a case alleging disloyalty and imprudence against fiduciaries of Putnam Investment’s 401(k) plan, the 1st U.S. Circuit Court of Appeals ruled, “Finding several errors of law in the district court’s rulings, we vacate the district court’s judgment in part and remand for further proceedings.”

A district court ultimately found that since plaintiffs did not establish a case in which a particular fiduciary breach caused a loss to the plan, their arguments fail. Prior to that, U.S. District Judge William G. Young of the U.S. District Court for the District of Massachusetts dismissed prohibited transactions claims saying they were time-barred under the Employee Retirement Income Security Act’s (ERISA)’s three-year statute of limitations. However, he offered discussion on two points, which the Appellate Court addressed.

On the question of whether the payments received by Putnam subsidiaries for their services to Putnam mutual funds were reasonable, the Appellate Court agreed with the District Court; however, it vacated another claim deciding whether “other dealings” between the plan and Putnam were any less favorable to the plan than dealings between Putnam and other shareholders investing in the same Putnam funds. The District Court did not find whether or to what extent the revenue sharing paid to or for the benefit of some third-party plans would have exceeded the fees borne by third-party plans but not by the Putnam plan. Instead, at defendants’ behest, the district court pointed to the fact that Putnam paid into the plan (for the benefit of most participants) discretionary 401(k) employer contributions that totaled much more than the rebates would have.

Pointing to the fact that Prohibited Transaction Exemption 77-3 calls for an assessment of “[a]ll other dealings between the plan and the investment company,” the District Court reasoned that, on a net basis, Putnam treated its plan even more favorably than it treated those that received the benefit of revenue-sharing payments. The 1st Circuit did not agree with this analysis because it did not regard Putnam’s payment of discretionary contributions to be a relevant “dealing” between Putnam and the plan.

The Appellate Court’s opinion noted that because the defendants had not yet presented the entirety of their case, Young refrained from making conclusive findings and rulings about whether the defendants breached their duty of prudence. It began with the District Court’s tentative finding that the plan’s investment committee breached its fiduciary duty by automatically including Putnam funds as investment options for the plan then failing to independently monitor the performance of those funds. The 1st Circuit said the District Court correctly observed that such a breach does not mean that the plan necessarily suffered any loss. While the lower court discounted the plaintiffs’ expert testimony comparing the Putnam funds to Vanguard funds; the 1st Circuit reviewed the District Court’s reasoning and found that plaintiffs’ evidence was sufficient to support a finding of loss.

Assuming the plan suffered a loss, the Appellate Court said the District Court was correct that the lack of prudence in the procedures used to select investments may not have caused the loss. There’s a split of authority at the Federal circuit level about who bears the burden of proving what is called loss causation, but the 1st Circuit said it joins those circuits that approve a burden-shifting approach. Its reasoning begins with the language of the statute—establishing that a breaching fiduciary shall be liable for any losses to the plan “resulting from” its breach—which clearly requires a causal connection between a breach and a loss in order to justify compensation for the loss. However, the statute does not explicitly state whether the plaintiff bears the burden of proving that causal link or whether the defendant must prove the absence of causation.

The Appellate Court noted that when the Supreme Court confronts a lack of explicit direction in the text of the Employee Retirement Income Security Act (ERISA), it regularly seeks an answer in the common law of trusts. The common law of trusts places the burden of disproving causation on the fiduciary once the beneficiary has established that there is a loss associated with the fiduciary’s breach. “Common sense strongly supports this conclusion in the modern economy within which ERISA was enacted. An ERISA fiduciary often—as in this case—has available many options from which to build a portfolio of investments available to beneficiaries. In such circumstances, it makes little sense to have the plaintiff hazard a guess as to what the fiduciary would have done had it not breached its duty in selecting investment vehicles, only to be told ‘guess again.’ It makes much more sense for the fiduciary to say what it claims it would have done and for the plaintiff to then respond to that,” the Appellate Court said in its opinion. “For the foregoing reasons, we align ourselves with the Fourth, Fifth, and Eighth Circuits and hold that once an ERISA plaintiff has shown a breach of fiduciary duty and loss to the plan, the burden shifts to the fiduciary to prove that such loss was not caused by its breach, that is, to prove that the resulting investment decision was objectively prudent.”

Regarding the violation of loyalty claims, the 1st Circuit ruled that since the plaintiffs point to no action of Putnam that can be explained only by a disloyal motivation, the District Court had the discretion to dismiss those claims.

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Categories: Financial News

Findings About 401(k) Participation Signal Opportunity for Education - Wed, 10/17/2018 - 17:41

Capital One offers two 401(k) plan platforms for employers. The Spark 401k platform offers expenses of less than 1%, all exchange-traded funds (ETFs) and fiduciary services, while the Sharebuilder 401k solution is for larger plans and offers more dedicated services.

Recently, Capital One conducted a Spark 401k survey of 1,500 adults who are full-time employees ages 18 and older to gauge why employees are participating in their 401(k) plans and why some are not.

Stuart Robertson, president of Capital One Advisors 401k Services, told PLANSPONSOR that access to retirement plans continues to be an issue in the small business market. He said most small businesses think they can’t afford to offer a plan or that they have to provide a matching contribution on employee deferrals.

According to Robertson, 86% of employees whose companies offer a plan are satisfied with it, and 79% are confident their contribution levels will support them in retirement.

So, why are some employees not participating in their employer’s retirement plan, and what would spur them to do so? The Spark 401k survey found 40% of employees feel they do not make enough money to contribute, and 14% say it costs too much to participate.

Given these findings, it is not surprising that having a higher salary was the top reason respondents would consider participating in their 401(k) plan (49%). In addition, 37% of employees say they would reconsider participating if employers matched their deferrals, and 22% would reconsider if there were lower fees.

Opportunity for Education

Robertson said he sees an opportunity for education in the research findings. Asked what they think they are paying for investments in their 401(k) plan, 62% of employees said they do not know. This is more pronounced among female respondents: 77% of female employees whose companies offer a 401(k) have no idea what their 401(k) fees are compared to 53% of men.

Robertson added that the survey found 29% of employees indicated they believe they pay 5% or more in fees, and 51% said they have no idea what a fair rate for fees would be.

According to Robertson, most don’t understand that saving 10% to 15% of salary is necessary for a secure lifestyle in retirement. And for those survey respondents who said they would reconsider participating if they had a higher salary, education can help. “They may not be in a position to start saving, but knowing that savings are tax-deferred and it is not a dollar-for-dollar hit to their paycheck would be helpful,” he said.

Robertson said a glaring finding for him was that 58% of men are participating their company’s 401(k) plan, but only 25% of women are. However, he caveated that 49% of women work at company that does not offer a plan versus 29% of men.

Retirement income

Finally, another surprising finding was how many respondents still plan to rely on Social Security for income in retirement.

The survey found 50% of Millennials, 82% of Baby Boomers and 51% of Gen X plan to rely on Social Security as one of the means to fund their retirement.

“Given the issues with Social Security solvency, reliance by generation is dropping back, but still, the majority of folks plan to rely on it,” Robertson said.

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Categories: Financial News

Learning Lessons From ‘High Influence’ Plans - Wed, 10/17/2018 - 16:52

Sitting down with PLANSPONSOR to offer an inside take on the results of the firm’s “Driving Plan Health” report, Mel Hooker, director of relationship management at Wells Fargo Institutional Retirement and Trust, made some important points about “inertia,” and how this theme impacts the retirement plan industry in pervasive and pernicious ways.

As Hooker explained, retirement industry practitioners will almost certainly be familiar with the topic of inertia as it pertains to participants—used as short-hand to reference the simple fact that most workers in the U.S. just do not spend a lot of time or mental energy in their daily lives thinking about retirement. And even if they do know they should take action, this knowledge seldom suffices to inspire concerted, unilateral action from a would-be retirement saver.

Hooker said inertia is one of the biggest reasons why traditional defined contribution (DC) retirement plans, which put much of the burden of signing up and managing investment accounts over time directly on the plate of individual workers, often fail to generate the same type of retirement readiness that participants in defined benefit (DB) pensions can enjoy.

According to Hooker, the conversation around inertia has been immensely helpful for improving the “choice architecture” that surrounds DC plans, leading to an understanding of the importance of automatic enrollment and deferral escalation features, and to the widespread use of pre-diversified investment options in the qualified default investment alternative (QDIA) slot.

“Where the conversation has not been as advanced is when we are talking about the ways plan sponsors also have their own amount of inertia to grapple with,” Hooker said. “We have built this new report to help plan sponsors understand the many opportunities they have to be much more proactive in the design and management of their DC retirement plans. We identified the set of specific features of a well-designed 401(k) plan that are most effective in helping employees amass the savings they need to replace 80% of their income in retirement.”

In the Driving Plan Health report, researchers point to 16 distinct features and strategies that can be highly effective in improving retirement plan outcomes. Interestingly, Hooker said, the research shows “high influence plans” do not by any means look all the same. Nor are they all just the most generous plans to be analyzed in terms of the matching formula.

“Instead, they use their own thoughtful combinations of the different features to launch employees on the path to replace 80% of their pre-retirement income once they retire,” Hooker said. “For the top performing plan sponsors, this is not just about generosity or doing the right thing. These plans are targeting high income replacement rates because that is what it takes to effectively manage a workforce and ensure people can retire on time.”

Hooker said that, of the 16 features that exert influence, four generate the most positive outcomes. First is automatic enrollment with a default deferral rate of 6% and tied to automatic annual re-enrollments; second is the use of re-enrollments (with opt-outs, of course) to increase employee deferrals to a rate of 10% or higher; third is the offering of diversified investment choices, such as a target-date funds; and fourth is an “above-average company match of at least 5%, or profit sharing.”

“When used together, these features address the psychological barriers, or inertia, that tend to get in the way of a person’s path to a well-funded retirement,” Hooker said. “Our research shows that effective plan design helps render better outcomes for employees. When plans are built with the right features, employees have a much better shot at building the savings they need for retirement.”

Among the thousands of plans analyzed by Wells Fargo Institutional Retirement and Trust, just 10% are deemed to be high influence—i.e., their plan sponsors have addressed their own inertia and made progressive, goals-based plan design a priority.

“High influence plans are not concentrated in any one industry. Our research shows many U.S. businesses can and do institute plans that have positively influenced employee behavior,” Hooker said. “I would add that even the companies with the highest influence scores can all still make small changes that have a big impact.”

Other findings show participation in 401(k) plans overall has increased 19% over the last five years, with Millennials continuing to make the biggest gains. Also positive, savers contributing at a rate of 10% or higher have increased 10%. Baby boomers (45%) are significantly more likely to contribute at that rate, followed by Generation X (36%) and Millennials (29%). 

The figure for Millennials, Hooker said, shows that DC plan sponsors cannot afford to be complacent. If they want their DC plans to truly prepare their workers for retirement, they simply must consider implementing the four key influence factors aforementioned. Indeed, among high influence plans, the Wells Fargo Plan Health Index has improved by 62% over the past five years, and average balances have increased 30%.

“Although plan design is the foundation and the most influential component for engaging participants, businesses also should incorporate effective communications and forward-thinking digital tools to help employees overcome psychological barriers to saving,” Hooker said. “Targeted participant communications and digital tools is likely to encourage positive participant behavior. For example, having a peer comparison tool with a simple ‘click here to change your deferral rate’ option is an easy way to encourage participant action.”

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