Financial News

403(b) Core Menus Offer Variety of Investments - Fri, 12/07/2018 - 20:27

The average large 403(b) plan subject to the Employee Retirement Income Security Act (ERISA) offered 27 core investment options in 2015, according to a new report from the Investment Company Institute (ICI) and BrightScope.

“The “Brightscope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403(b) Plans, 2015” suggests that nonprofit employers sponsoring 403(b) plans recognize the importance of plan design and include features that will help attract and retain qualified workers,” says Sarah Holden, senior director of retirement and investor research at ICI. “Plan design features, which drive engagement with retirement savings, include automatic enrollment, employer contributions, active and indexed investment options, and the flexibility of a loan feature. With these multiple features, employers are able to customize the design of their 403(b) plans to suit their workforces.”

The study found that in 2015, nearly all large 403(b) plans covered by ERISA included domestic equity funds, international equity funds and domestic bond funds in their offerings. Nearly nine in 10 offered fixed annuities, and more than eight in 10 offered target-date funds (TDFs). Other core investment options included balanced funds, international bond funds and money funds. Ninety-seven percent offered index funds, and 81% offered TDFs.

Eighty-one percent included employer contributions, up from 74% in 2009. “Employer contributions have grown over time and constitute an important share of total ERISA 403(b) plan contributions, totaling $8 billion, or 29% of all contributions,” says Brooks Herman, head of data and research at BrightScope. “Often designed as matching contributions, these employer contributions promote retirement saving among employees and encourage them to build a nest egg for the future.”

ICI and BrightScope also identified that total ERISA 403(b) plan costs in 2015 averaged 71 basis points, down from 82 basis points in 2009.

Fifty-four percent of plan assets were invested in mutual funds, 34% in variable annuities and 22% in fixed annuities.

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Categories: Financial News

Wellness Programs That Combine Health and Finance Seen as Essential - Fri, 12/07/2018 - 19:52

When workers are both financially and physically fit, human resource (HR) executives believe this can boost workplace productivity, job satisfaction and employee retention, benefits consulting firm Buck learned in a survey.

The survey also found that 84% of HR executives believe that when employees are not financially fit, this could deteriorate into financial instability, and 83% think it could lead to financial distress. Fifty-two percent think it could lead to lower productivity. Forty-seven percent think it could result in higher health care costs, and 30% think it could result in higher turnover.

The HR executives said that the most mature offering their companies have been presenting to workers is help with physical wellness. However, in the last five years, many have added financial education, specifically on money management and budgeting (66%), financial health assessments (66%), retirement calculators (63%) and financial literacy education (59%).

Nearly 75% view holistic financial and physical health support as important employee value propositions, up dramatically from 38% in 2016. Nearly half say they offer these services tailored to different generations. Seventy-three percent are focused on reducing health care or insurance costs, up from 63% in 2016.

“Our survey results confirm that supporting employee wellness holistically is much more than a ‘nice to do’—it’s a core, competitive business need,” says Ruth Hunt, a principal in Buck’s engagement practice. “Our findings demonstrate that a failure to creatively invest in employee wellness can result in many adverse consequences for the success and sustainability of a business.”

Companies are also turning to technology to drive efficiencies in benefits. This includes predictive analysis (84%), incentive tools and tracking (80%), portable hubs (69%) and decision-support tools (63%).

“A combination of stresses such as health challenges, relatively stagnant wages, heightened financial pressures, and always-on technology are taking a personal toll on employees,” Hunt says. “Employers are now focusing on well-being programming accordingly. Well-being has become a popular catchphrase, but the stressors are real and employers can actually see how employees’ well-being is impacting the bottom line.”

Buck’s findings are based on responses from 252 employers in 56 countries covering 5.22 million employees.

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Categories: Financial News

Retirement Industry People Moves - Fri, 12/07/2018 - 19:51

DWC – The 401(k) Experts brings in industry veteran as first in-house actuary

DWC – The 401(k) Experts
has hired Joe Nichols as the firm’s first in-house actuary.

Nichols is joining the team in several capacities, the most significant of which is to streamline the way the firm works with defined benefit (DB) plans. As an enrolled actuary, he is also responsible for ensuring technical accuracy of the work product and effective communication of the results to plan sponsors, plan participants and other interested parties.

Over his 30-year career history, Nichols has worked with both national and regional actuarial firms, including as a founding owner of a pension actuarial and administration firm. In addition to his history of pension consulting and list of professional designations, Nichols also volunteers his time to the profession by serving as the secretary of the Board of Directors for the American Retirement Association, and he is a past president of both the American Society of Pension Professionals and Actuaries (ASPPA) and ASPPA College of Pension Actuaries (ACOPA).

His work experience includes plan design, consulting, actuarial valuations, experience studies, projection modeling, cost studies and presentation as well as special consulting projects related to data analysis, benefit calculation programs, mergers and acquisitions, liquidity analysis and bankruptcy proceedings. His passion is working closely with clients to assist them in achieving their goals.

Ascensus adds two executives to retirement division

Ascensus has appointed Chad Brown and Mindy O’Connor to leadership positions within the firm’s retirement division. In these newly created roles, they will help to drive retirement plan sales. 

As division vice president, western region, Brown will help achieve national goals for retirement plan sales while leading a team of external sales associates alongside Ascensus veteran Anthony Bologna, who will continue to manage the eastern half of the sales organization.

Prior to joining Ascensus, Brown served as vice president, managing director of institutional plan sales at Transamerica, where he led a team focused on building strong business partnerships in the large plan space. He has also held positions at Nationwide Financial, First Citizens Bank, M&T Bank and Manning & Napier. Brown earned his bachelor’s degree in political science from the University of Nevada. 

O’Connor will serve as head of business development, leading a team charged with building and maintaining strong working relationships with broker/dealers, registered investment advisers (RIA), and third-party administrator (TPA) firms nationally.

Most recently, O’Connor served as managing director, business development, retirement for Transamerica, where she oversaw national relationships with key distribution partner firms while focusing on strategic growth and execution. She also held leadership positions in client development and worked in roles within relationship management and education services. She earned her bachelor’s degree in business management from Indiana University’s Kelley School of Business. 

Corporate Development executive joins FS Investments

FS Investments has hired Robert Stark as senior managing director of corporate development. His responsibilities will include developing and implementing the firm’s strategic plan and supporting the expansion into new sales channels, both domestically and internationally. Stark will split his time between the firm’s New York and Philadelphia offices and serve on the executive committee.

In his most recent position at J.P. Morgan Asset Management, Stark oversaw J.P. Morgan’s response to the Department of Labor’s (DOL) fiduciary rule reforms. Prior to that role, he was head of global strategic relationships and U.S. funds, responsible for national account relationships across all distribution platforms. Stark previously held the position of global head of strategy and business development at J.P. Morgan Asset and Wealth Management, where he oversaw long-term strategy and worked to improve the operating performance of each business. 

Earlier in his career, Stark served as global head of strategy and M&A at Russell Investments and as a partner with McKinsey & Company, where his international consulting practice focused on the financial services industry.

Stark is a graduate of the University of Cologne, where he studied strategic management, finance and logistics.

CBIZ purchases Sequoia Financial business unit

CBIZ has acquired Sequoia Institutional Services (SIS), a business unit of Sequoia Financial Group, effective December 1.

Founded in 2010 and based in Akron, Ohio, SIS provides retirement plan investment advisory services.

Jerry Grisko, president and CEO of CBIZ, says a strong cultural fit between SIS and CBIZ will allow the firms to provide clients with a broader array of services, backed by a larger team of professionals.

Mid Atlantic Capital Group acquires First Mercantile

Mid Atlantic Capital Group has closed on a transaction to acquire First Mercantile Trust Company from Massachusetts Mutual Life Insurance Co., as of November 30.

“We are continually looking for opportunities to improve our ability to serve our client base and provide our business partners with additional tools to expand their business,” says Paul Schneider, CEO of Mid Atlantic.

John Moody, CEO of Edge Holdings (the parent company of Mid Atlantic) says the acquisition represents the first of what the firm hopes will be many acquisitions designed to support its mission of providing quality technology, products and services to financial intermediaries.

Willis Towers Watson announces leader of expat benefits solutions

Willis Towers Watson appointed Pam Enright as leader of its expat benefits solutions business. In this role, Enright will oversee the growth and operations of the business, which helps multinationals determine the right mix of benefit coverage for their globally mobile workforce. Enright will report to Francis Coleman, managing director, global services and solutions, and will be based in Chicago.

According to the firm, internationally mobile employees often have specific challenges with respect to their benefits, which can vary greatly in each of the markets to which they are assigned. 

Enright has been in the employee benefit industry for over 25 years. Prior to joining Willis Towers Watson, she was a senior vice president and director of global benefits at Lockton Companies for over 12 years. There, she launched and developed the global benefits practice, including growing the expat benefits business. Prior to this, Enright was a regional sales director at Aetna Global Benefits. She has a bachelor’s degree in English from The University of Kansas.

The Standard promotes regional sales director to retirement plan VP

Rob Baumgarten of The Standard has been promoted to vice president of Retirement Plan Sales.

Baumgarten is a 20-year veteran of The Standard, having previously served in various sales leadership and management roles. Most recently he served as west regional sales director and was previously vice president of field sales, managing The Standard’s field sales team. In his new role, Baumgarten will have responsibility for the regional sales directors and managers, sales operations, institutional business development as well as retirement plan communications.

Baumgarten is a graduate of the University of Colorado in Boulder, where he earned a bachelor’s degree in business administration. He holds FINRA Series 7, 24, 63 and 65 securities licenses. He will be based out of The Standard’s Denver sales and service office.

White Oak Advisors joins retirement plan aggregator

White Oak Advisors, LLC has joined Strategic Retirement Partners (SRP).

Jim Robison, founder of White Oak Advisors, becomes SRP’s new managing director for the Great Lakes region. 

The White Oak team adds eight new colleagues to SRP’s ranks, including Jim Robison and Ric Clouse, who will be managing directors in the Great Lakes region. 

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Categories: Financial News

Economists Remain Optimistic Despite Volatility - Fri, 12/07/2018 - 16:56

Vanguard this week published its 10th annual economic and market forecast, “Vanguard Economic and Market Outlook for 2019: Down but not out,” which a representative of the firm described as its most comprehensive recurring analysis on the state of the global economy and financial markets.

Despite slowing global growth, disparate inflation rates, and continued normalization of U.S. monetary policy, Vanguard economists believe that a near-term recession remains less than likely.

“In short, economic growth should shift down but not out,” the white paper says. “From an asset return standpoint, Vanguard foresees a 10-year outlook for a balanced portfolio in the 4% to 6% range, representing a modest improvement over 2018.”

Joseph Davis, Vanguard’s chief economist, says that while market volatility over the past two to three months has some investors overly cautious going into 2019, his firm’s outlook, while still guarded for the near term, shows optimism for long-term investors.

Higher short-term interest rates, coupled with improved international equity market valuations, slightly raises our expectations for long-term global investment returns for U.S. investors,” he says.

Giving some context to the bout of selling seen this week on Wall Street, Davis says there are some factors that point to a higher risk of a recession next year. Like other experts, he cautions investors about reading too much into catchy news headlines about the yield curve—which has not actually inverted—or other supposed indicators of an impending market crash.

“Vanguard’s analysis on the fundamentals and historical drivers causing recessions concludes that the more likely scenario is a slowdown in growth, led by the U.S. and China. However, the expected easing of global growth over the next two years is charged with economic and market risks,” Davis explains. “Potential scenarios include the possibility of a severe deceleration of China’s economy, a policy mistake by the Fed as it raises rates further into restrictive territory, trade tensions, and other geopolitical and policy uncertainties.”

He says his firm has, in recent years, been correct in its anticipation that globalization and technological disruption would make it difficult for economies—especially those of the U.S., Europe and Japan, among others—to reach and sustain 2% inflation.

“In 2018, Vanguard rightly anticipated a rise in core inflation across various economies,” Davis says. “For 2019, our economists do not see a material risk of further strong rises in core inflation despite lower unemployment rates and higher wages. Higher wages are not likely to funnel through to higher consumer prices, as inflation expectations remain well-anchored.”

For the U.S., Davis says Vanguard has confidence that the Fed will “continue on its gradual rate-hike path, reaching the terminal rate of 2.75% to 3% in mid-2019, followed by a pause or stop to reassess economic conditions.”

According to Vanguard’s analysis, the expected equity market returns in the U.S. are slightly lower than those for global or international markets, “which emphasizes the importance of global diversification going forward.”

“Vanguard’s outlook for U.S. equities over the next decade is in the 3% to 5% range, and we can expect to see equity valuations continue to contract as interest rates rise over time,” Davis says. “For non-U.S. equities, investors will likely see returns in the 6% to 8% range.”

Vanguard’s analysis concludes that, versus the firm’s previous reports, continued interest rate increases have positively benefited the investment outlook for fixed-income markets. Over the next 10 years, investors can expect to see global fixed-income returns in the 2.5% to 4.5% range. Non-U.S. bond investors could expect returns from 2% to 4%—slightly lower than the anticipated return of U.S. bonds, but also providing diversification benefits in a balanced portfolio.

“Given the somewhat challenging outlook ahead, it is important that investors focus on key factors such as saving more, spending less, and controlling investment costs, rather than concentrating on the less reliable benefits of ad hoc portfolio tilting,” Davis says. “Additionally, Vanguard believes investors should continue to adhere to time-tested investment principles such as maintaining a long-term focus, employing a disciplined asset allocation and conducting periodic portfolio rebalances.”

Similar take from J.P. Morgan Asset Management

On the same day Vanguard published its annual update, J.P. Morgan Asset Management Chief Economist David Kelly also briefed reporters about the current volatility, comparing this with his firm’s economic outlook for next year. He spoke on a panel that included four other top J.P. Morgan forecasters—all of them telling investors to remember that volatility is normal. They stressed that the lack of volatility in recent years has caused investors, many of them with portfolios tilted strongly toward risky assets, to be surprised by moves that would previously have been considered unremarkable.

Echoing Vanguard’s take, the J.P. Morgan leader said the most pressing question for 2019 is, can the U.S. economy slow down without stalling out? He said he remains more optimistic than not about avoiding a near-term recession, but, like Davis, he has some pressing concerns as well.

“Our 2019 assumptions still suggest increased global financial stability,” Kelly said. “This is a good thing insofar as it means recessions and downturns are likely to be weaker and shorter lived relative to, say, the Great Recession of 2008 and 2009. But, on the flip side, this also means that growth is likely to be slower—and that there will be fewer opportunities to exploit market rebounds.”

Kelly pointed to the firm’s recent 2019 to 2029 capital market assumptions report, “J.P. Morgan Asset Management 2019 Long-Term Capital Market Assumptions.” The full market report is quite dense, considering 50 different asset classes and sectors and featuring dozens of illustrative charts.

In U.S. equities, J.P. Morgan anticipates 5.25% potential growth on average each year for the next 10 to 15 years. According to Kelly, U.S. equities “look pretty good,” but the macroeconomic business cycle presents challenges to investors. The emerging challenges are reflected in recent stock market volatility.

One place where Kelly’s outlook seems to diverge at least a bit from Davis’ is on the global fixed-income picture. On the fixed-income side, there is “almost a new equilibrium forming,” Kelly said.

“We’ve had such great debt loads and such low interest rates for so long now that it has reshaped the behavior of central banks in a significant way,” he said. “We may even see central banks keep interest rates much lower than they have in the past, simply in order to help their governments finance these major debt loads. This in turn means we may be facing lower interest rates globally than we traditionally would expect, and for potentially quite a long time.”

For those investors who are having trouble stomaching the current bout of equity market volatility, Kelly and Davis agree that the best way to keep one’s footing is to think about what risks a portfolio is carrying and using this information to better define how the risk-taking is being compensated—or not. As Kelly said, the last decade has brought remarkably low volatility, and investors should expect a bumpier ride going forward, whether the markets go up or down in the near future.

“I think investors in particular should rethink liquidity risk and consider being compensated for accepting lower liquidity, for example in private equity,” Kelly said. “This type of investing will become more important as the cycle progresses.”

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Categories: Financial News

Transamerica Updates Website for Spanish-Speaking Retirement Plan Participants - Thu, 12/06/2018 - 19:32

Transamerica has made available new navigation tools to help Spanish-speaking participants use its retirement plan website.

Plan sponsors may now elect to enable participant website navigation in Spanish, as well as full translation of select pages.

Spanish-speaking participants may now benefit from both fully translated primary website navigation, specific page translations, and description overlays to provide additional information. These features help empower Spanish-speaking participants to take control of their retirement planning, access more educational resources to make informed decisions, and initiate transactions, such as contribution increases or loan requests.

“Technology and communication play key roles in how people engage with their company’s retirement plan,” says Scott Ramey, senior vice president and head of workplace solutions for Transamerica. “We believe the new website features are valuable to both our plan sponsor clients and their employees. Adding Spanish language capabilities to the retirement plan website can help improve retirement outcomes by building bridges to essential resources for customers whose primary language is Spanish.”

A report published by UnidosUS and the National Institute on Retirement Security revealed retirement readiness disparities between working Latinos ages 21 to 64 and other racial and ethnic groups in the U.S.

The new feature is available to 401(k) and Section 451 nonqualified deferred compensation retirement plans administered by Transamerica.

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Categories: Financial News

Investment Product and Service Launches - Thu, 12/06/2018 - 18:41

Northern Trust purchases FX software provider

Northern Trust has agreed to acquire BEx LLC, a provider of foreign exchange (FX) software solutions, to drive growth in its Global Foreign Exchange business. 

The acquisition will give Northern Trust ownership of a platform providing algorithmic FX trading, global liquidity aggregation and transparency in execution and pricing to institutional clients worldwide. The agreement builds on an exclusive partnership between Northern Trust and BEx announced in 2016.

“BEx has been a key differentiator for Northern Trust, increasing the depth and breadth of our global FX execution capabilities,” says Pete Cherecwich, president of Corporate & Institutional Services (C&IS) at Northern Trust. “In an evolving FX marketplace, this acquisition provides a foundation for sustained growth and innovation on behalf of our clients.”

Headquartered in Chicago and established in 2013, BEx is a financial technology software firm dedicated to developing automated FX trading solutions. 

In recent years Northern Trust has launched solutions integrating BEx technology with Northern Trust’s global platform and experience in FX, including CompleteFX, a stand-alone execution service for investment managers seeking best-in-class operational efficiency and reduction of risk; and the FX Algo Suite, sophisticated client execution algorithms that allow clients to manage their FX exposure with an enhanced level of control and transparency.

“We’ve built a compelling global offering that allows clients to benefit from highly automated trade execution with enhanced transparency,” says John Turney, head of Global Foreign Exchange at Northern Trust. “Ownership of BEx will strengthen our proven ability to bring innovative products to market rapidly, further enhancing the speed, reliability and quality of our FX services.”

Northern Trust has also partnered with Lumint Corporation, a provider of currency management services, to deliver advanced portfolio, share class and look-through hedging services, complemented by sophisticated transparency and analytical tools. 

“This acquisition reinforces Northern Trust’s commitment to providing innovative trading, execution and outsourcing services across all asset classes and regions,” says Michael Vardas, global head of Northern Trust Capital Markets. “Taking full ownership of the BEx platform will future-proof our growth strategy and support our most sophisticated clients as they navigate global markets.”

Nuveen incorporates ESG funds to fixed-income lineup

Nuveen has added two actively-managed fixed income mutual funds to its responsible investing suite of funds, the TIAA-CREF Green Bond Fund (TGROX) and TIAA-CREF Short Duration Impact Bond Fund (TSDBX). The funds seek to deliver competitive financial returns and positive environmental, social and governance (ESG) outcomes.

“Responsible investing should be at the core of prudent portfolio construction. It continues to appeal to today’s diverse generation of investors who are seeking specific social and environmental outcomes, alongside the financial performance objectives established for their portfolios,” says Amy O’Brien, managing director and global head of responsible investing at Nuveen. “We are committed to offering investors competitive investment solutions that leverage the combined knowledge and talents of our investment professionals and our legacy of responsible investing innovation.”

The TIAA-CREF Green Bond Fund invests in a diversified investment-grade portfolio that leverages Nuveen’s expertise in labeled and unlabeled green fixed income securities designed to deliver competitive long-term risk-adjusted investment returns against its benchmark, the Bloomberg Barclays MSCI U.S. Green Bond Index. Investments primarily include securities issued by sovereign and local governments, corporations, securitized bonds and multinational agencies, with an emphasis on renewable energy, climate change and natural resources. This fixed-income subset may be attractive to investors who wish to make a positive impact on the environment and climate without compromising risk or returns.

The TIAA-CREF Short Duration Impact Bond Fund seeks current income by investing primarily in a diversified portfolio of fixed income securities with an average maturity of three and a half years. The fund makes strategic allocations to bonds that demonstrate environmental and societal impact within affordable housing, community or economic development, and renewable energy, climate change and natural resources. The limited amount of time until maturity helps manage risks associated with rising interest rates and is designed to appeal to investors with a shorter time horizon or for retirees in a draw down phase. The fund’s benchmark is the Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond Index.

The funds will be co-managed by Stephen Liberatore, CFA, and Jessica Zarzycki, CFA.

Both funds focus on undervalued, investment-grade securities and seek to add value through sector allocation, security selection and duration, and yield curve positioning. This investment approach gives special consideration to certain ESG criteria, with an emphasis on identifying publicly traded fixed income securities with a direct and measurable societal or environmental impact.

Nuveen launches quantitative strategies affiliate

Nuveen has launched Nuveen Quantitative Strategies, a new investment affiliate providing systematic investments and insights across equity and fixed-income asset classes.

The firm’s existing quantitative- and index-investing team, based in San Francisco and New York, will serve as a foundation for this effort as Nuveen continues to build out its investment platform to harness and develop new technologies. To augment these capabilities, Nuveen will also seek external partnerships with academics and industry experts. 

“We created this new affiliate to better leverage artificial intelligence and other technologies as big data plays an increasingly important role as a positive disrupter in the asset-management industry,” says Nuveen Chief Executive Officer Vijay Advani. “We continue to invest in our people and technology so that we can offer clients solutions that provide competitive returns as well as efficient market exposure. We’ll also work closely with our parent firm, TIAA, whose heritage of providing retirement solutions to academic institutions can help us forge partnerships with universities to conduct research and further advance our capabilities.” 

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Categories: Financial News

Janus Henderson Outlines Next-Generation Automatic Plan Features - Thu, 12/06/2018 - 17:46

Automatic retirement plan features have put significant numbers of employees in the U.S. on a path towards retirement readiness, but employers could still do a lot more to overcome participant inertia.

This is according to a new white paper published by Janus Henderson, “Defined Contribution Redefined.” According to Janus Henderson researchers, since the enactment of the Pension Protection Act of 2006 (PPA), automatic features have become common within defined contribution (DC) plans such as 401(k)s, 403(b)s and 457s. In particular, the main trio of automatic features—auto-enrollment, auto-escalation and automatically diversified qualified default investment alternatives (QDIAs)—have helped increase DC assets from $3.0 trillion in 2007 to $5.3 trillion in 2017.

“Now that these automatic and default features have gained widespread acceptance, it may be time to consider additional steps to further enhance participant retirement preparedness,” the white paper says.

Most plans with auto-enrollment offer it to new hires (94.5%), while approximately one-quarter (25.4%) have auto-enrolled existing employees either as a one-time sweep or periodic sweep. According to the white paper, anecdotal evidence suggests the vast majority of auto-enrollment programs fund only pre-tax accounts. This is despite the fact that for younger, lower-income employees, funding a Roth account may be a more appropriate long-term option.

“While contributions are made with after-tax dollars, the earnings can potentially accumulate tax free for many years. Further, younger, lower-paid employees are likely in a lower tax bracket, so the tax advantages of pre-tax deferrals are muted,” the white paper says.

Janus Henderson researchers consider a theoretical 25-year-old in a 20% effective federal tax bracket.

“Contributions of $2,500 a year for 10 years will grow to $32,951, assuming a 6% annual rate of return. If no additional contributions are made, the balance will grow to $189,253 by the time the investor reaches age 65,” the white paper says. ‘Distributions from a Roth will be tax free, while distributions from a tax-deferred account will result in an after-tax distribution of $151,403. In this case, the Roth provides a more valuable retirement benefit, even after accounting for the annual $5,000 tax savings over 10 years ($2,500 x 20% = $500/year).”

According to Janus Henderson researchers, another innovative strategy that employers should consider is linking automatic escalation to retirement income replacement projections. Citing a previous Callan survey, the white paper says approximately 70% of all nongovernmental plans offer auto-escalation, up from 48% in 2014. Further, the number of plans that use an opt-out approach also grew from 52.8% in 2014 to 70.8% in 2017.

“The vast majority of plans automatically increase deferrals by 1% per year (86%), with a median cap of 15% of compensation,” the white paper says. “About half of companies selected their cap because it was likely to be most palatable to participants or limit opt-outs, while one-third felt it would maximize the likelihood participants reach their retirement goals.”

While automatically increasing deferrals annually should help participants accumulate larger balances at retirement, a uniform 1% approach may not help some participants adequately replace their pre-retirement income, Janus Henderson researchers warn.

“For example, older employees have fewer years to accumulate savings. If these employees do not have substantial account balances, they may require both a higher starting deferral rate and more aggressive annual increases to meet their retirement goals,” the white paper says. “Even younger employees may fall short unless prompted by their employer to increase deferrals at a faster rate.”

When it comes to automatic investments, while most plans use target-date funds as their default, 75.2% offer a managed account option. In these cases, the vast majority (92.6%) offer it as an opt-in feature whereby participants must proactively elect to use the feature similar to any other investment decision.

“According to Callan, only 13.3% of sponsors pay for the managed account fee, with the majority assessing the costs directly to the participant or shared by the sponsor and participant,” the white paper says. “Given the sensitivity to the additional cost of a managed account, it is understandable why many sponsors have elected to use a target-date fund as their plan’s default option.”

As the white paper points out, Morningstar and others posit that in some cases, the higher fee associated with managed accounts may be justified, particularly for older participants with significant balances.

“A hybrid or dynamic solution is suggested whereby younger participants are defaulted into the plan’s target-date fund but later defaults participants into the managed account solution upon reaching a specified age,” the white paper says. “Choosing an appropriate age would depend upon each plan’s unique participant characteristics.”

The paper notes that few DC providers currently offer the ability to facilitate a dynamic QDIA approach; however, the marketplace will likely evolve to meet future plan sponsor demand, according to Janus Henderson researchers.

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Categories: Financial News

IRS Provides Do-Over for 403(b) Plans Not Following Once-In-Always-In Condition - Thu, 12/06/2018 - 15:52

The IRS has issued Notice 2018-95, which provides transition relief from the “once-in-always-in” (OIAI) condition for excluding part-time employees from 403(b) plan eligibility under Section 1.403(b)-5(b)(4)(iii)(B) of the Treasury Regulations. 

Under the OIAI exclusion condition, for a 403(b) plan that excludes part-time employees from making elective deferrals, once an employee is eligible to make elective deferrals, the employee may not be excluded from making elective deferrals in any later exclusion year on the basis that the employee is a part-time employee.

The IRS explained that when it announced the opening of document submissions for its 403(b) pre-approved plan program, it issued a List of Required Modifications (LRM) which included the OIAI condition. However, commenters requested transition relief with respect to the OIAI condition, stating that many employers were not aware that the part-time exclusion included that condition.

Commenters noted that the OIAI condition was not specifically highlighted in writing until the 2015 LRMs were issued, and that, even then, the LRMs were directed at drafters of pre-approved plans and not adopting employers or sponsors of individually designed plans. As a result, the commenters argued, many 403(b) plan sponsors did not follow the OIAI condition.

So, the Treasury Department and the IRS are providing transition relief from the OIAI condition, including relief regarding plan operations for a transition period referred to as the “Relief Period,” relief regarding plan language, and a fresh-start opportunity after the Relief Period ends. The Relief Period begins with taxable years beginning after December 31, 2008, (the general effective date for the 403(b) regulations). For plans with exclusion years based on plan years, the Relief Period ends for all employees on the last day of the last exclusion year that ends before December 31, 2019.  For plans with exclusion years based on employee anniversary years, the Relief Period ends, with respect to any employee, on the last day of that employee’s last exclusion year that ends before December 31, 2019.

During the Relief Period, a plan will not be treated as failing to satisfy the conditions of the part-time exclusion merely because the plan was not operated in compliance with the OIAI condition. 

The Notice offers examples of the relief provided. 403(b) plan sponsors have until March 31, 2020, to adopt a pre-approved plan document and to make sure their plan has been operating in accordance with the plan terms.

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Categories: Financial News

Workers in ESOPs Have Double the Retirement Savings - Thu, 12/06/2018 - 15:46

S Corporations are likely to be fully employee stock ownership plan (ESOP) owned, and S Corporation ESOPs, in particular, tend to prepare workers much better for retirement than other types of workplace retirement savings plans, according to the National Center for Employee Ownership (NCEO).

ESOP participants have an average retirement balance of $170,326, more than twice the $80,339 that other workers have saved, NCEO says. Even for ESOP employees making less than $25,000 a year, their balances average $55,526, compared to the $22,447 that their counterparts have saved at other companies.

Ninety-seven percent of companies with an ESOP offer at least one other retirement plan in addition to the ESOP. By comparison, 32% of workers in the U.S. are not offered a retirement savings plan. Among the 68% who are offered a retirement savings plan at work, 49% do not participate in it.

S ESOP workers nearing retirement have a median account balance of $147,522 in their ESOP plus $98,942 in non-ESOP plans. By contrast, 35% of all workers nearing retirement have neither individual retirement savings or a pension. Among low-income workers nearing retirement, 50% have neither retirement savings or a pension.

As such, NCEO says, the median account balance for all U.S. workers between the ages of 55 and 64 is zero. Among workers who have retirement accounts, the median balance is $100,000.

Millennial workers at S ESOP companies have a median ESOP account balance of $22,588 and $11,239 in a non-ESOP account. In contrast, the median savings of U.S. Millennials is zero.

Lower wage workers at S ESOP companies, those making between $10 and $12.85 a hour, have a median ESOP account balance of $4,381 and $2,149 in a non-ESOP account. In contrast, nationally, 56% of workers in this category are not offered any retirement benefits at work, translating their median savings to zero.

NCEO says there are 6,669 ESOPs in the U.S. with 14.4 million participants and $1.3 trillion in assets. Among them, 3,192 are S corporations, which have 850,000 participants and $80 billion in assets.

NCEO says that while employees must select their deferrals into a 401(k), which are commonly matched with a company contribution, in a ESOP, the company must allocate contributions based on relative pay or a more level formula not determined by what employees put in.

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Categories: Financial News

Steps to Prepare for a DB Plan Termination - Thu, 12/06/2018 - 15:06

Colleen Lowmiller, a consultant with Findley, said during a webcast hosted by the firm that defined benefit (DB) plan terminations usually take 12 to 18 months.

There are goals and deadlines during the process, and if a plan sponsor hits a roadblock, it can stop the termination process. However, when the issue has been addressed, the sponsor will have to start the process all over again. For this reason, Lowmiller said DB plan sponsors should assess their readiness well ahead of time. She suggested designating a project team with clear responsibilities and firm deadlines.

“Use the time when the plan is well-funded to be ready to go,” she told webinar attendees.

Financial preparedness

Larry Scherer, managing consultant at Findley, said financial preparedness is important. The DB plan must first be frozen in order for benefit accruals to stop. This is because benefit calculations should not be estimates, they should be certified by the plan’s actuary as final, explained Alan Pennington, senior consultant at Findley.

According to Scherer, financial preparedness for a DB plan termination considers asset returns, employer contributions and interest rates. He said plan sponsors should understand economic conditions and that what the market will do to a plan’s funded status is always a moving target. For example, whether interest rates are high or low will affect a plan’s funded status.

Scherer suggested using a liability-driven investing (LDI) strategy to reduce portfolio risk as the plan’s funded status improves. He said the goal is to maintain funded status. “You don’t want to be overfunded, because there will be excise taxes on assets returned to the plan sponsor,” he told webinar attendees. “On the other hand, if a plan has recognized losses, there will be a settlement cost on its financial statement.”

As for employer contributions, Scherer recommended having a funding policy. DB plan sponsors need to decide what they can afford to put in the plan based on minimum required contributions, whether they should set contributions or adjust them every year, and whether they want to borrow to fund, weighing that against whether market conditions will help close any funding gap.

DB plan sponsors may decrease their liabilities, and perhaps some of the funding gap, by taking risk transfer actions, such as offering a lump-sum window to terminated, vested participants or purchasing an annuity for retirees, he said.

According to Scherer, plan sponsors should monitor their plan’s funded status as conditions change and do some forecasting. They may need to make changes to asset allocation or contributions.

Data and benefit design preparation

Having complete and accurate employee data will be essential for benefit calculations, as well as the notice of plan termination, said Pennington.

DB plan sponsors should make sure they have vesting correct for each employee, have correct addresses, correct Social Security numbers and have minimal missing participants. He added that plan sponsors should create good documentation of the steps taken to find missing participants. Pennington said the Pension Benefit Guaranty Corporation (PBGC) is auditing all plan terminations of plans with more than 300 members, and it is randomly selecting for audit plans with 300 members or less.

In addition, if it has been a while since the plan sponsor filed for an IRS determination letter, it may want to do that before starting the plan termination process. Pennington said it is not required, but can be prudent so the IRS can sign off that the plan is up to date.

Before terminating a DB plan, plan sponsors may want to design replacement benefits—for example, a defined contribution (DC) plan—to make sure employees still have the ability to prepare for a secure retirement, Pennington said. In addition, if the DB plan does not currently allow lump-sum distributions, the plan sponsor may want to amend it to allow them, as lump sums can be less expensive than annuities. He added that if a plan sponsor decides to allow for lump-sum distributions, it should make sure the new retirement plan will allow for rollovers from the DB plan.

Preparing communications

Miriam Batke, a consultant at Findley, told webinar attendees an important aspect of a DB plan termination is effective communications. Plan sponsors need to consider the timing, message and to whom communications will be delivered. Communications need to go to participants, retirees, active employees not in the plan and union representation, if applicable.

Required communications include a Notice of Intent to Terminate, a Notice of State Guaranty Association Coverage of Annuities, a Notice to Interested Parties for IRS filings, a Notice of Plan Benefits and benefit election forms.

Plan sponsors should communicate information to employees about the replacement retirement plan. Batke also suggested plan sponsors make sure participants are aware of how their decisions—whether to take a lump sum, whether to participate in the replacement plan—will affect their retirement readiness.

“Early communications about changes will help increase employee understanding and can reduce questions during benefit elections time,” she said. She added that it may take weeks or even months to develop a strategy for communications.

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Categories: Financial News

PBGC Asks for Information About DB Plans’ ERISA Coverage - Wed, 12/05/2018 - 18:31

The Pension Benefit Guaranty Corporation (PBGC) intends to request that the Office of Management and Budget (OMB) approve a collection of information necessary for the PBGC to determine whether a defined benefit (DB) plan is covered under title IV of the Employee Retirement Income Security Act (ERISA).

The PBGC insures DB plans covered under title IV of ERISA. Covered plans are those described in Section 4021(a) of ERISA but not those described in Section 4021(b)(1)–(13). If a question arises about whether a plan is covered under title IV, the PBGC may make a coverage determination.

A proposed form and instructions would be used by a plan sponsor or plan administrator to request a coverage determination and would be suitable for all types of requests. The proposed form would highlight the four plan types for which coverage determinations are most frequently requested:

  • Church plans as listed in Section 4021(b)(3) of ERISA;
  • Plans that are established and maintained exclusively for the benefit of plan sponsors’ substantial owners as listed in Section 4021(b)(9);
  • plans covering, since September 2, 1974, no more than 25 active participants that are established and maintained by professional services employers as listed in Section 4021(b)(13); and
  • Puerto Rico-based plans within the meaning of Section 1022(i)(1) of ERISA.

Notably, a number of DB plans that have been determined to qualify for church-plan status by the IRS have had that status challenged in lawsuits. Plaintiffs in the lawsuits are concerned that the plans are not following ERISA funding requirements and are not insured by the PBGC.

The PBGC is requesting public comment on its proposal. More information is here.

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Categories: Financial News

No Entries in 2018 Required Amendments List - Wed, 12/05/2018 - 17:21

The IRS has issued Notice 2018-91 containing the Required Amendments (RA) List for 2018 for individually designed retirement plans to maintain their qualified plan status.

When the agency ended its determination letter program effective January 1, 2017, it said it would publish an RA List after October 1 of each year. Individually designed plan sponsors must adopt any item placed on the list by the end of the second calendar year following the year the list is published.

There are no entries listing changes in qualification requirements on the 2018 RA List.   

The IRS reminds plan sponsors that an RA List does not include guidance issued or legislation enacted after the list has been prepared and also does not include:

  • Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance (which would be included on an RA List issued in a future year);
  • Changes in qualification requirements that permit (but do not require) optional plan provisions (in contrast to changes in the qualification requirements that cause existing plan provisions, which may include optional plan provisions previously adopted, to become disqualifying provisions); or
  • Changes in the tax laws affecting qualified plans that do not change the qualification requirements under Internal Revenue Code Section 401(a) (such as changes to the tax treatment of plan distributions, or changes to the funding requirements for qualified plans).

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Categories: Financial News

Optum Enhances Data Analytics to Increase HSA Savings - Wed, 12/05/2018 - 17:17

In order to raise health savings account (HSA) accumulation and raise awareness behind HSAs and heath care costs, Optum bank has updated its data and analytics tool, Health Finance Journey.

The model, which implements “behavioral science and advanced analytics” to gauge why consumers behave the way they do, groups clients into microsegments based on mutual characteristics and incentives. These clustered, shared interests between consumers allows employers who sponsor HSA-qualifying insurance plans to develop targeted communications for their employees, which can then grow health care savings, says Optum.

“Employers want access to the latest data-driven analytics and tools that help their employees save for their current and future health care needs,” says Deb Culhane, president and CEO of Optum Bank. “The Health Finance Journey’s enhanced capabilities offer employers better strategies to help them communicate the right messages, to the right employees, at the right time. We are very encouraged by the initial results of applying this updated model.”

The company recently analyzed almost 200,000 de-identified accountholders and identified natural segments and cluster, says Optum. Over 2,000 attributes based on HSA contributions and distributions, account tenure and consumer behaviors were then created, leading to an end result of 20 microsegments that can be targeted with specific communications relevant to them.

Optum says the enhancement has already shown results. Overall, accountholders who were targeted with new messages based on the enhanced Health Finance Journey increased their balances, became eligible to invest, and chose to open investment accounts. Specifically, the enhanced tool resulted in a 26% increase in one-time contributions, an increase of average balances of 12%, and a 23% increase in investment account openings.

More information about Health Finance Journey can be found here.

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Categories: Financial News

Institutional Investors Bracing for Continued Market Volatility in 2019 - Wed, 12/05/2018 - 16:12

Sixty-five percent of institutional investors expect the bull market will end within the next 12 months, according to a report from Natixis Investment Managers, “Keep Calm and Invest On.” Seventy percent expect another financial crisis within the next five years.

Seventy-nine percent believe the current market favors active management, and their allocations to active strategies comprise 70% of their portfolios today, up from 64% in 2015. Sixty percent think they are prepared to handle the risks in 2019.

“Our research shows institutional investors are already positioned for potential market turbulence on the horizon,” says David Giunta, CEO for the U.S. and Canada at Natixis Investment Managers. “For these sophisticated investors, actively managed strategies and alternative investments are their tools of choice to help optimize their portfolios for the challenges ahead.”

Institutional investors’ long-term target return is 6.7%, and 77% believe this is realistically achievable. Fifty-six percent plan to maintain this goal in 2019, although 35% plan to lower it and 9% expect to raise it.

Despite bracing for increased volatility, institutional investors are not planning major changes for their portfolios in 2019. They expect to trim their equity allocations back from 38% to 36%, while raising their fixed income exposure from 37% to 38%, and cash, from 5% to 6%. Forty-one percent expect to decrease their exposure to U.S. equities, and 36% plan to increase their exposure to infrastructure.

The sectors that institutional investors think will deliver above-market returns are information technology (cited by 40%), health care (39%), energy (36%) and financial services (36%).

Asked what they see as the biggest threats to performance, 77% said geopolitical disruptions, such as tension with North Korea and Brexit. That is followed by trade disputes (74%), the unwinding of quantitative easing (65%), asset bubbles (60%) interest rate increases (56%) and market volatility (54%).

The areas where institutional investors fear there could be market bubbles are cryptocurrency (64%), technology (45%), the stock market (41%), bonds (33%), real estate (32%) and China (24%).

Eighty-four percent of institutional investors expect greater volatility in stocks in 2019, and 70% expect the same will occur in bonds.

Seventy-six percent expect the Federal Reserve will continue to increase interest rates in 2019. Fifty-three percent are concerned about the pace of the rate hikes, but only 27% are worried about the level of the increases.

Sixty-one percent  believe that active investments outpace passive investments in the long run, and 78% are willing to pay a higher fee for outperformance.

They are also turning to private markets, with 51% saying that private equity or private debt are an important part of their portfolio. Seventy-one percent say these investments deliver higher returns, and 60% say they offer greater diversification. Sixty-six percent say that even though they command higher fees, private market investments are worth it for their potential performance.

Natixis Investment Managers’ findings are based on a survey of 500 institutional investors in 28 countries that CoreData Research conducted in October and November.

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Categories: Financial News

Duke University 403(b) Plan Lawsuits Reportedly Settled - Wed, 12/05/2018 - 15:49

A case accusing fiduciaries of the Duke Faculty and Staff Retirement Plan of causing the plan to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services has been reported settled by the university’s counsel as well as the plaintiffs’ counsel.

Likewise, the docket report for a second complaint against Duke University—this one focusing on revenue sharing it took but didn’t deliver for distribution to plan participants—says the parties have settled. A stipulation of dismissal for both lawsuits was due by December 2, but neither has been filed yet.

No details of a settlement have been reported to the U.S. District Court for the Middle District of North Carolina.

Higher education institution 403(b) plans have been the target of Employee Retirement Income Security Act (ERISA) litigation in the past two years. In the first to go to trial, a lawsuit alleging imprudence in the management of two New York University (NYU) 403(b) plans was decided in favor of the university, although the judge did find some concerning lack of knowledge among some plan committee members.

In other similar lawsuits, universities’ motions for dismissal have been approved.

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Categories: Financial News

Bristol-Myers Squibb Announces Pension Risk Transfer - Tue, 12/04/2018 - 18:04

Bristol-Myers Squibb Company will transfer $3.8 billion of U.S. pension obligations through a full termination of its plan. The obligations will be distributed through a combination of lump sum payments to those participants who elect them, with the remaining money being used to purchase a group annuity contract from Athene Annuity and Life Company.

The company froze its pension plan in 2009, and since then, has continued to de-risk the plan. Bristol-Myers Squibb says the latest action will reduce its future risk and administrative costs while entrusting its funds to a highly rated financial institution.

There are 4,800 active participants in the plan, 1,400 retirees and their beneficiaries receiving benefits and 18,000 prior Bristol-Myers Squibb employees who have not yet initiated their benefits.

The plan will terminate on February 1, 2019, lump sums will be distributed the following July and the transfer to Athene is expected to occur in August.

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Categories: Financial News

$24M Settlement Proposed By Parties in BB&T Self-Dealing ERISA Litigation - Tue, 12/04/2018 - 17:50

After a year of mediated negotiations, BB&T Corporation has reached a proposed settlement with participants in the firm’s own retirement plan, who allege inappropriate self-dealing has damaged plan performance.

Back in 2017, a federal district court judge granted class certification in the consolidated complaint, in which participants in BB&T Corporation retirement plans accuse the company of breaching the Employee Retirement Income Security Act (ERISA) by favoring its own proprietary investment options and recordkeeping services at the expense of performance.

The settlement agreement would bring to an end two lawsuits—Bowers vs. BB&T Corporation from 2015 and Smith vs. BB&T Corporation from 2016. According to the text of the original Smith complaint, favoring its own proprietary investments options and recordkeeping services allowed BB&T and its subsidiaries to collect millions of dollars in revenues, “in an amount that greatly exceeded the value of the services to the plan, thereby enriching BB&T at the expense of plan participants.”

Details of the proposed settlement filed in court

According to the text of the proposed settlement agreement, the lawsuit brought about “contentious discovery proceedings that eventually included production of over 260,000 pages of documents, the designation and deposition of six experts, and over 16 fact depositions.”

In addition, the parties filed numerous discovery-related motions. BB&T defendants filed multiple dispositive motions, including a motion to dismiss and a motion for summary judgment. The motion to dismiss was denied, while defendants’ motion for summary judgment was granted in part and denied in part. Ultimately, with trial less than two weeks away, the parties notified the district court that they had reached an agreement in principle.

In terms of monetary relief, the settlement provides for a $24 million settlement fund, “returning significant money to current and former BB&T employees who were participants in the plan.”

As the text of the settlement states, “all of the money will be paid out; BB&T Defendant will not receive anything back.” Further, the “gross settlement fund will be used to pay the participants’ recoveries as well as class counsel’s attorneys’ fees and costs, administrative expenses of the settlement, and class representatives’ compensation as described in the settlement.”

Most class members will automatically receive their distributions directly into their tax-deferred retirement account. Those who already left the plan and no longer have an active account will be given the option to receive their distributions in the form of a check made out to them individually or as a roll-over into another tax-deferred account. As a result, most class members will receive their distributions tax-deferred, “further enhancing the significant monetary recovery.”

The settlement also provides “significant future relief in terms of scope and duration while also securing additional commitments for participants’ benefit.” In particular, the parties have agreed to the following additional terms: “The plan fiduciaries will engage a consulting firm to conduct a request for proposal for investment consulting firms that are unaffiliated with BB&T and engage an investment consultant to provide independent consulting services to the plan; the investment consultant will evaluate the plan’s investment options and provide the plan fiduciaries with an objective evaluation of the options in the plan; within two years after the entering of the final order, plan fiduciaries will participate in a training session regarding ERISA’s fiduciary duties; during the two year period following entry of the final order, BB&T will rebate to the plan participants any 12b-1 fees, sub-ta fees, or other monetary compensation that any mutual fund company pays or extends to the plan’s recordkeeper based on the plan’s investments; and if, during a two-year time period following the entry of the final order, BB&T decides to charge plan participants a periodic fee for recordkeeping services, the plan fiduciaries will conduct a request for proposal for the provision of recordkeeping and administrative services.”

Significant attorneys’ fees awarded

As stipulated in the proposed agreement, the class counsel will request attorneys’ fees to be paid out of the gross settlement fund “in an amount not more than one-third of the gross settlement amount, or $8,000,000, as well as reimbursement for costs incurred of no more than $1,100,000.”

“A one-third fee is consistent with the market rate in settlements concerning this particularly complex area of law,” the proposed agreement states. “In addition, a one-third fee to class counsel is also provided for in the contract with the class representatives. Further, although class counsel will not request a fee greater than one-third of the monetary recovery, the additional terms of the settlement add meaningful value in addition to the monetary amount. This results in the requested fee being lower than a one-third award. In addition, class counsel will not seek fees from the settlement class for the following: the interest earned on the gross settlement amount; communications with class members or BB&T defendants during the settlement period and review of related documents; and work required if mediation or enforcement of the settlement is necessary.”

The full text of the proposed settlement agreement is available here

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Categories: Financial News

Tips for Improving Employee Wellness Programs - Tue, 12/04/2018 - 16:58

Seventy-one percent of employers see a positive impact on company health benefit costs from wellness programs, the Transamerica Center for Health Studies found.

MediKeeper, a provider of population health management tools, says continual advances in wellness technology mean that plan sponsors need to stay on top of the trends and adjust frequently in order to remain relevant in an increasingly competitive workplace environment. It has reported four trends to improve on health wellness programs.

The firm recommends using intelligent personalization. Adding business intelligence/data mining capabilities delivers the ability to take data captured within the portal, manipulate it, segment it, and merge with other sets of data to perform complex associations all within each population groups’ administration portal. Generating reports targeted specifically to the information that plan sponsors are seeking, as well as layering various reports including biometrics, incentives, health risk assessments and challenges, will help them see what is working and what is not. MediKeeper says plan sponsors can use these results to inform and better customize the intelligent personalization side of your wellness program, and send messages to targeted groups from the reports, making them actionable instead of just informative.

Along the same lines, MediKeeper suggests using these high-tech smart analytics to get a better understanding of how effective wellness programs have been, and to highlight the areas that may need improvement in the future.

Online social interaction is becoming an increasingly important part of wellness platforms as well, according to MediKeeper. Through social recognition, which can include posting, sharing, commenting and other virtual interactions, employees can help motivate each other to reach their goals. Social recognition gives people a built-in cheering section and offers them the ability to provide support for their fellow co-workers through words of encouragement, gifts, and virtual high fives.

In addition, MediKeeper says, managers can promote their employees’ achievements by offering praise in an online public forum, or even further boost morale by handing out incentive points that can be redeemed for tangible rewards. “Ultimately, the more people feel appreciated and recognized for their efforts, the more likely they are to continually engage with a wellness program and portal,” the firm says.

Finally, MediKeeper says, the importance of a digital strategy and a virtual wellness program continues to grow. Since employees may work variable hours or work in several locations around the world, it simply doesn’t make sense to solely rely on lunch time health seminars that may not be accessible to much of the workforce. Instead of providing physical classes, consider hosting virtual programs that can be viewed at any time or any place. By making the wellness program available online, plan sponsors are able to reach a broader audience and make more of an impact within the entire working population.

“In order to maximize participation, make sure that your program is accessible via computer, phone, tablet and even a mobile app. The more convenient it is to use, the higher the participation will be, which is—or should be—one of the primary goals of your wellness program,” MediKeeper says.

MediKeeper’s white paper, “Four Emerging Employee Wellness Trends for 2019,” may be downloaded from here.

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Categories: Financial News

Many Retirees Outspend Planned Budget - Tue, 12/04/2018 - 16:38
Thirty-nine percent of retirees are spending more than they had expected, according to the “Global Atlantic Retirement Spending Study: Perception vs. Reality.” Forty-nine percent of pre-retirees believe planning for retirement is more difficult for them than it was for their parents.

The typical non-retired U.S. consumer older than 40 spends an average of $2,993 a month, and retirees spend 32% less ($2,008), according to Global Atlantic Financial Group. The areas where retirees are spending less are entertainment (29% less), dining out (24% less), traveling (18% less) and housing (23% less on mortgage payments and 22% less on rent).

When a retiree has a pension, they spend 39% more than those without a pension ($2,379 vs. $1,709), and 20.5% less than pre-retirees. Retirees with an annuity spend 37% more than retirees without an annuity ($2,545 vs. $1,850) and 17.6% less than pre-retirees. The areas where the retirees with a pension or an annuity spend more are on rent, dining out and recreation.

“Many Americans adjust their lifestyles and cut spending once they see how quickly costs add up in retirement,” says Paula Nelson, president, retirement, at Global Atlantic Financial Group. “Our study indicates that while those with pensions and annuities still often make changes as they age, there isn’t as much of a need to drastically adjust their spending. This doesn’t surprise us, as guaranteed income beyond Social Security can help retirees maintain the lifestyles that they are accustomed to, even after they stop working.”

Asked to rate the importance of income to pay for basic living expenses in retirement on a 10-point scale, 56% of non-retirees give it a 9. Sixty-six percent think they are on track to generate enough income to meet basic needs in retirement.

Global Atlantic Financial Group asked retirees what their top three financial regrets are. They said not saving enough (36%), relying too much on Social Security (20%) and not paying down debt before retiring (12%).

Forty-two percent of those with an annuity have financial regrets, compared to 58% of those without an annuity, and 43% of those with a pension have financial regrets, compared to 65% of those without a pension.

Global Atlantic Financial Group’s findings are based on a Echo Research survey of 4,223 people age 40 and older, conducted in September.

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Categories: Financial News

Reported Lack of Knowledge Indicates Need for More Financial Wellness Programs - Tue, 12/04/2018 - 16:36

Financial wellness programs are popular and sought after but are rarely offered as an employer-sponsored benefit, according to Corporate Insight’s 2018 Employee Financial Wellness Survey.

Of the 1,544 employees surveyed, a mere 221 (or 14%) indicated that their employer offers programs or resources to help improve financial well-being; 63% indicate that they use them when offered. More than half (53%) of respondents who indicated that they lack employer-sponsored financial wellness programming also said they feel their employer should offer such a program to employees.

When comparing respondents enrolled in an employer-sponsored financial wellness program with those who are not, the former group tends to report feeling “very confident” (49% to the latter group’s 23%) and more knowledgeable about retirement. The group also reports—at higher rates than those without access to an employer-sponsored financial wellness program—being enrolled in an employer’s defined contribution (DC) retirement plan, contributing more to retirement and having more saved up overall.

Forty-four percent of respondents indicated they are very concerned about budgeting, while around 40% expressed being very concerned about health insurance, health care costs, emergency savings and saving early enough. Around 38% said concerns about credit and debt management are top of mind.

When it comes to financial and retirement planning and savings topics, more than half of respondents reported being a novice or having a low understanding about asset allocation, market volatility, stock options and estate planning. Forty-seven percent said they had low knowledge of general investing strategies, while the same percentage reported low knowledge about pensions and the effects of working in retirement.

Overall, the largest contingent of respondents claimed to have less than $10,000 in savings for retirement. Baby Boomers are the only age demographic that reported greater savings: 20% indicated having between $50,000 and $100,000 saved for retirement. Similar to the low overall savings totals, respondents also indicate low contribution rates. Across all survey respondents, the most common contribution rate among respondents is 4% to 6.

A notably small majority of respondents reported having an emergency fund. Often considered a first priority item, emergency funds should be enough to tide over an individual and their dependents for at least three months if income ceases. Only 55% of respondents indicated that they have a dedicated emergency savings fund; of that group, one-third have only enough for two or fewer months’ worth of expenses, and 5% do not know how long their savings could support them.

In spite of these rather low numbers, respondents remain confident—if not over confident: 80% of respondents who plan to retire claim to be “somewhat confident,” “confident” or “very confident” in their ability to afford the retirement lifestyle they desire. Strategic Insight says much of the disparity between confidence levels and actual savings habits and statuses can be tied back to a lack of education. Many respondents seem aware of general rules regarding a healthy retirement (though perhaps not full retirement age), including income replacement ratios; two-thirds say they will need more than 70% income replacement to sufficiently sustain their desired retirement lifestyles. However, few respondents appear to be on track to achieve such an income replacement ratio, and 45% either do not know or have never thought about how much in total they will need to have saved up for retirement.

More findings can be found by downloading the report preview at

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