Financial News

Putting a Price Tag on Workplace Financial Stress - Tue, 10/22/2019 - 04:01

John Hancock Retirement this week offered PLANSPONSOR an early look at its forthcoming Financial Stress Survey.

The sixth annual edition of the survey shows more than half of employees worry at least once a week about personal finances while on the job, causing workplace distraction and a loss of productivity. This loss of productivity, combined with absenteeism from financial stress, has major impact on organizations, John Hancock finds.

In dollar terms, absenteeism and lower productivity tied to financial stress is costing more than an estimated $1,900 per year, per employee, and totaling an estimated annual loss of $1 million for midsized employers and $19 million for large employers.

Patrick Murphy, CEO, U.S. Retirement, says the survey report shows employers cannot afford to ignore their employees’ financial stress.

“Our 2019 Financial Stress Survey highlights a downward trend on retirement readiness and indicates participants’ financial situations are at risk, with 46% of participants responding they are not in a good financial situation,” Murphy warns. He points to other stats showing 71% of participants are worried about having financial difficulties.

“This is the most we have seen from this survey in the past six years,” Murphy says. “We must come together as recordkeepers, financial representative, and plan sponsors to help participants plan for their future and better understand the underlying cause of stress and its effect on retirement savings.”

Some good news for employers is that the survey shows financial wellness programs, when properly structured and executed, may improve job retention, reduce stress levels and buoy job productivity. However, some survey findings underscore the challenge of building effective financial wellness programs. While 88% of employers say they currently have or are developing a financial well-being strategy, only 20% of participants claim their employer offers “anything more than a limited financial wellness program.”

Higher than in previous years, slightly more than half (51%) of workers consider themselves behind schedule when it comes to saving for retirement. Fifty percent of respondents feel they would be at least somewhat more productive at work if they did not worry about finances while at their jobs—up from 43% last year. This trend is disproportionately impacting the younger workforce, the survey results show.

Only 18% of respondents feel very confident in their ability to make the right financial decisions, showing a decrease over the past three years. About one-third consider themselves very knowledgeable about basic financial concepts, such as managing debt (33%) and budgeting (31%).

According to John Hancock’s research, debt is one of the most significant indicators for financial stress, and most people are dealing with some kind of debt. Fifty-nine percent say their debt is a problem, with more than one in five saying it’s a major problem. And among participants with student loans, 76% say debt is a problem, with almost half calling debt a major problem.

“This is hitting younger generations particularly hard, as 46% of participants aged 36 and younger have as student loan,” the survey report explains. “People who say their debt is a major problem and people with student loans have much higher financial stress than those who don’t. Women feel more financial stress than men, likely because they rate their financial situations worse than men. They’re also more worried about having financial difficulties.”

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Categories: Financial News

TRIVIAL PURSUITS: Which 60s and 70s TV Actor Voiced The Flintstones’ Alien? - Mon, 10/21/2019 - 19:35

Fred Flintstone and Barney Rubble, from the animated television series The Flintstones, met The Great Gazoo, a tiny green flying alien, when his flying saucer crashed to Earth.

The Great Gazoo’s voice was provided by actor Harvey Korman. Korman is best remembered for his performances on the sketch comedy series The Carol Burnett Show for which he won four Emmy Awards.

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Categories: Financial News

Law Firm Confirms SEC Examination of 403(b) Plan Investment Practices - Mon, 10/21/2019 - 19:23

News reports at the beginning of the month announced that the New York State Department of Financial Services is planning to investigate sales of annuities in the 403(b) retirement plan market.

Now a client alert from law firm Jenner & Block confirms that the Securities and Exchange Commission (SEC) is conducting its own investigation.

According to Jenner & Block attorneys, the SEC “sent letters to companies that administer Section 403(b) and 457 retirement plans, opening an investigation to determine whether violations of federal securities laws have occurred in the plans’ administration. The SEC is seeking details on how the plan administrators, which often serve crucial roles in selecting investments for the retirement plans of employees including teachers and government workers, choose investment options and police themselves when conflicts of interest arise.”

The client alert states that the “SEC also is requesting (1) documents pertaining to any compensation that the administrators have received since January 1, 2017 for referring investors to specific investment options or companies; (2) explanations of any gifts that administrators have received from companies that sell investments; (3) ‘information and documents’ pertaining to how administrators provide investment counseling to investors; and (4) organizational charts that show companies that own or have ties or partnerships with 403(b) and 457 plan administrators.”

The attorneys say the investigation has not been made public, and it is unclear how many plan administrators have received letters.

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Categories: Financial News

PBGC to Assume Responsibility of Health System’s Retirement Plans - Mon, 10/21/2019 - 18:14

The Pension Benefit Guaranty Corporation (PBGC) is taking steps to assume responsibility for two pension plans sponsored by Verity Health System, which cover nearly 8,000 people. The six-hospital system is based in El Segundo, California.

Verity, with 16 of its affiliates, filed for Chapter 11 protection on August 31, 2018, and is no longer able to continue its plans. The bankruptcy court and the state of California recently approved the sale of four of Verity’s hospitals to KPC Group’s Strategic Global Management Inc. News reports say KPC is the only bidder that agreed to keep the hospitals open.

The Verity Health System Retirement Plan A covers 6,989 people. PBGC estimates Plan A is 52% funded, with underfunding of approximately $306 million. A separate plan, the Verity Health System Retirement Plan B, covers 985 people. PBGC estimates it is 74% funded with underfunding of approximately $2.8 million.

This protection for employees and retirees by the PBGC is one reason for a string of lawsuits that challenge other nonprofit healthcare systems’ retirement plans’ status as “church plans” under the Employee Retirement Income Security Act (ERISA). ERISA imposes funding and reporting requirements for defined benefit (DB) plans, but church plans are exempt from these rules. Since they are exempt, church plans are also not insured by the PBGC.

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Categories: Financial News

Principal Announces Key Platform Decisions in Wells Fargo Integration - Mon, 10/21/2019 - 17:39

Principal Financial Group has revealed key technology details in its ongoing integration of the Wells Fargo Institutional Retirement & Trust (IRT) business. Technically, the firm has announced its choice of technology platforms for its Trust and Custody business, its nonqualified plans business, and its employee stock ownership plan (ESOP) business segments.

Principal’s acquisition of Wells Fargo was first announced early in 2019 and more recently made final. Through the acquisition, Principal doubled the size of its U.S. retirement business and brought on board new institutional trust and custody offerings for the non-retirement market while also expanding its discretionary asset management footprint.

Moving forward, the firm’s leadership has selected the current SEI platform to serve trust and custody clients. The Principal platform, on the other hand, will be used to serve ESOP and nonqualified plans. Last month, Principal announced its retirement recordkeeping platform would also serve 401(k) plans and defined benefit customers.

Renee Shaaf, president of retirement and income solutions at Principal, says the collective tech infrastructure will be flexible, robust and efficient. It is also meant to provide “a solid foundation to build enhancements in the future.”

“We’re committed to delivering a results-driven, customer-first experience,” Schaaf says. “These digital and service model investments support our efforts to bring the best from both organizations to provide unparalleled value to participants, clients, advisers and consultants.”

Offering more detail about what these developments mean, Shaff explains that Principal will retain the SEI trust accounting platform Wells Fargo IRT uses today to support the combined organization. She says using the existing trust accounting platform provides a familiar, reliable, high-quality interface for clients and employees, and builds additional capabilities for Principal.

According to the firms, clients will benefit from single login access to account information across the trust accounting and additional reporting platforms, including access to performance measurement for domestic and multi-currency investment portfolios.

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Categories: Financial News

Military Retirement Plan Participants Need Financial Education Too - Mon, 10/21/2019 - 17:22

Financial wellness education is increasingly a focus for retirement plan sponsors in the private sector, but a new report suggests military members who have recently switched to the Federal Thrift Savings Plan (TSP) need the same type of education.

Service members who entered military service on or after January 1, 2018, are offered a new military retirement system that replaces the traditional 20-year pension with a blended program that includes a reduced pension in exchange for a lump-sum bonus and a new matching funds program through the TSP. A 2016 white paper from First Command Financial Services, Inc. suggested that service members who fail to save a sufficient portion of their basic pay and all of their lump sum bonus—and invest both in recommended fund offerings through the TSP—are at risk of receiving monthly retired pay that could be considerably smaller than the size of monthly paychecks under the previous 20-year pension.

At the time, Scott Spiker, CEO of First Command, said, “Success will depend on adopting the types of strong personal financial choices and behaviors that often run counter to the temptations of our instant-gratification society.” And, First Command noted that the new retirement system features financial education to help service members take a stronger role in pursuing their financial security in retirement.

However, a Government Accountability Office (GAO) report announced by Senators Patty Murray, D-Washington, ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Dick Durbin, D-Illinois, found that some of the Department of Defense’s (DOD) financial education efforts generally lacked any assessment component that could be used to ensure the trainings were effective or to improve future financial preparedness efforts for servicemembers.

After assessing the DOD’s implementation of a new military retirement system and its efforts to educate and prepare servicemembers to make decisions with long-term implications for their financial wellbeing, the GAO made three recommendations:

The Secretary of Defense should evaluate the results of its financial literacy training assessments to determine where gaps in servicemembers’ financial knowledge exist and revise future trainings to address these gaps;

The Secretary of Defense should provide servicemembers with disclosures that explain key pieces of information about the lump-sum payment, including some measure of its relative value, the potential positive and negative financial ramifications of choosing the lump-sum payment option, and a description of how it was calculated; and

The Executive Director of the Federal Retirement Thrift Investment Board should work with the Secretary of Defense to explore alternative options (including online resources) for servicemembers to receive their initial Thrift Savings Plan password so that servicemembers can access and manage their online accounts without added delays.

Some examples of financial literacy challenges of military members, according to the GAO are understanding the training due to a low initial level of financial literacy and relating to long-term goals of retirement due to short-term life goals. These are similar to findings about the American population in general.

In June, The Securities and Exchange Commission (SEC) introduced its Military Service Members’ Initiative. The initiative will increase proactive outreach to educate servicemembers and veterans about savings and investment, investment fees and expenses, retirement programs and the red flags of investment fraud.

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Categories: Financial News

Allina Health System Reaches Agreement in Lawsuit Regarding Plans’ Investments - Mon, 10/21/2019 - 16:22

Participants in the Allina Health System 403(b) Retirement Savings Plan and 401(k) Retirement Savings Plan have reached an agreement with defendants to settle a lawsuit challenging plan investment decisions, among other things.

The complaint filed in 2017 suggested plan officials ceded discretion to a provider to add any mutual fund it wished, “regardless of whether the funds were duplicative of other options, had high costs, or were performing poorly.” The plaintiffs also claimed their 401(k) and 403(b) plan fiduciaries failed to adequately monitor investment services providers.

Without admitting any liability or wrongdoing, the Allina defendants agree to deposit $2.425 million into a settlement fund. The settlement fund will be used to pay case contribution awards to the named plaintiffs, attorney’s fees and expenses, costs and expenses incurred by the plans’ recordkeeper and the settlement administrator to implement the settlement and proceeds awarded to a class of participants represented by the lawsuit.

The settlement agreement still needs the court’s approval.

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Categories: Financial News

SURVEY SAYS: Reasons for Employee Disengagement - Mon, 10/21/2019 - 10:30
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Last week, I asked NewsDash readers which, from a list of factors, do they think MOST CONTRIBUTES to employees becoming disengaged at work.

The top reason selected, by far, was lack of appreciation shown by management (44.2%). Half as many (21.1%) chose “poor communication among employees and managers,” and 9.6% selected “nothing new to learn.” Coming in fourth, was “loss of interest in the work,” chosen by 7.7% of respondents, and “bad relationships in the workplace” (5.8%) rounded out the top five.

“Underpaid” was selected by 3.8% of responding readers, while “workload is too great,” “lack of work/life balance,” “lack of ability to move up” and “none of the above” each received 1.9% of readers’ votes. No readers selected “poor benefits or lack of benefits” or “personal reasons not related to work.”

Of course, a combination of factors can contribute to employee disengagement, and this point was made by the small group of respondents who chose to leave comments. Suggested additions to the list were bad managers, lack of empowerment and change for the sake of change. Factors that were touted as most important coincided with the top two selected as those that most contribute to disengagement. Editor’s Choice goes to the reader who said: “This is a tough one! I think for most people, it is a combination of issues. For me personally, I’m just running out of steam and am looking forward to retirement in a couple years! :)”

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Thanks to all who participated in the survey!


A little praise/thank you goes a long way.

All of the suggested choices are relevant. A job is like a marriage; there’s seldom any one reason why you stay or leave. An accumulation of reasons will send employees out the door.

Probably a little bit of “all of the above,” but it all comes down to the value placed on communication.

Relationships have always been the tipping factor for me. If your coworkers or supervisor(s) are making the work and non-work interactions difficult, the work eventually suffers as a result.

I believe most employees want to perform well and be appreciated/acknowledged for the work they do. If you continue to be ignored or overlooked for the work you do, it becomes just a “job” and you give up trying to do your best.

In my experience, a bad manager can turn a job you love into a source of dread. I’ve only left two organizations and both were due to unbearable managers. On the flip side, a great manager can make an ok job worth staying at for the longer-term.

In my experience it usually comes down to the manager. A bad manager can sour an entire team, ultimately sending them elsewhere in the company or to other companies.

It truly is all about environment…no one wants to work long hours and not hear what an excellent job they are doing…that just goes against all of human nature and kindness…

I would add lack of empowerment to this list.

Change for the sake of change. I believe in the “if it’s not broke, doesn’t need to be fixed” seems that is the new rule in Bschool that new grads bring to the table. Not always thought through and implemented effectively before pushed out.

It only takes a little to keep most employees happy. When employees feel their voice isn’t heard is when things start to go downhill.

This is a tough one! I think for most people, it is a combination of issues. For me personally, I’m just running out of steam and am looking forward to retirement in a couple years!

The importance of communication cannot be overstated. It is key to having engaged employees who understand the company’s values and mission.

Sometimes it is just that one person you just can’t seem to agree with or work with well and it causes whole days to be at a disconnect.

Too bad that I can only choose one item above. Seems like you have hit on many factors that cause this. Not sure one is the MOST.

I think all your options contribute to becoming disengaged, but for me, it’s when I feel unappreciated for putting in extra time daily because of my workload and they just add more to it.


NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Institutional Shareholder Services (ISS) or its affiliates.

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Categories: Financial News

TriNet Solution Helps Employees With Benefit Selection - Fri, 10/18/2019 - 19:33

TriNet, a provider of full-service HR solutions for small and medium size businesses, has launched a Benefits Enrollment Application that provides customers on its platform with an intuitive navigation experience that simplifies the benefit enrollment selection process.

Key features of the Benefits Enrollment Application include:

  • Guided and flexible navigation with step-by-step direction for enrollment in available benefits plans;
  • Easy access to critical benefits and submission information, including modeling of pay period costs as benefits are selected;
  • Easy-to-use benefits plan analysis that allows users to select and compare eligible plans, along with a dynamic cost calculator and one-click view to learn more about the plan summaries;
  • Comprehensive integration of all benefit types; and
  • Paired with the TriNet Mobile App users have on-the-go access to insurance cards for health care benefits and information on retirement, life, disability and flexible spending account (FSA) benefits.

Selecting the right benefits is an important decision for our customers’ employees and their families. With multiple types of benefits, carriers, plans and associated costs, the process can be time consuming and overwhelming,” says Dilshad Simons, SVP of products at TriNet. “Our Benefits Enrollment Application is designed to save time and simplify the benefits selection experience, helping our customers to better provide their employees with a positive, quality benefits experience.”

In addition to enhancing the benefit selection experience, TriNet also announced that it has added to its health insurance provider offering. Beginning January 1, 2020, TriNet customers headquartered in New York will have access to an additional health insurance carrier.

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Categories: Financial News

Retirement Industry People Moves - Fri, 10/18/2019 - 19:18
Principal Global Investors Selects Global Managing Director

Principal Global Investors appointed Matthew Minnetian as managing director, global head of Investment Grade Credit for Principal Global Fixed Income. Minnetian assumes responsibility for investment grade credit portfolio management, research and trading and will also lead efforts to further integrate data science and quantitative tools into the fixed income investment management process.

“Matthew brings extensive expertise in investment grade credit, as well as experience in combining fundamental investment management with quantitative approaches to achieve strong results for clients,” says David Blake, senior executive director and head of Principal Global Fixed Income. “We look forward to bringing his leadership on-board as we continue to integrate the latest technologies with our core investment management processes.”

Minnetian will lead an investment grade credit team managing more than $46.3 billion in assets.

Previously, Minnetian worked at AllianceBernstein for more than 20 years holding multiple leadership roles across fixed income.

Nassau Acquires Holding Company and Subsidiary

Foresters Financial has entered into a definitive agreement with Nassau Financial Group, L.P., subsidiary Nassau Life Insurance Company (NNY), to acquire Foresters Financial Holding Company, Inc. and its subsidiary Foresters Life Insurance and Annuity Company (FLIAC). NNY and FLIAC are New York-domiciled life insurance companies. 

The sale marks the final stage of Foresters strategy of exiting its North American Asset Management business, which commenced earlier this year with the sale of its asset management and broker-dealer businesses.

“Following the sale of our U.S. and Canadian asset management businesses earlier this year, this transaction is in step with our strategy of focusing on fixed life insurance in North America and continuing to grow as a purpose-driven international fraternal benefit society. We will continue to evolve our business by focusing on innovation, new product development and independent distribution to best serve our members,” says Jim Boyle, president and chief executive officer, Foresters Financial.

The transaction is expected to close in the first quarter 2020 and is subject to customary closing conditions including regulatory approval by the New York State Department of Financial Services.

Mercer Announces Multiple Appointments

Mercer has appointed Ethan Bronsnick and Charlie Wright to its Wealth business, as well as promoted Forest Banks.

Bronsnick joins as partner, U.S. Financial Strategy Group, and Wright joins as sales director for Endowments and Foundations, while Bank’s new role will be sales director for Large Market Employer Plans.    

“We’re thrilled to have Ethan and Charlie join our growing team at Mercer, and to announce Forest’s promotion. We aim to cultivate talent within while adding industry leaders and expanding our footprint for the benefit of our clients,” says Marc Cordover, East Market Wealth Business Leader. “These individuals will further strengthen our expertise and capabilities in annuity transactions and pension risk management, endowment and foundation services and large-market employer plan advisory services respectively.”

Bronsnick joins Mercer’s Financial Strategy Group, a team specifically focused on managing risk in defined benefit (DB) pension plans. He brings expertise in facilitating large-case annuity transactions between pension plan sponsors and insurers.

Prior to joining Mercer, Bronsnick spent 10 years at Morgan Stanley, where he led its pension solutions team and prior to that spent 10 years at Credit Suisse working closely with life insurance companies. Bronsnick will be based in New York, reporting to Matt McDaniel, partner and U.S. Financial Strategy group leader.

Wright is an institutional asset management sales and client service executive with over 10 years of industry experience in advising OCIO, multi-asset class, single asset sleeve, and environmental, social and governance (ESG) strategies to endowments, foundations, family offices and pension plans. 

Prior to joining Mercer, he worked for Russell Investments and Northern Trust in Institutional Asset Management Sales positions. He held previous roles at Citibank and Wells Fargo. He is based in New York, reporting to Cordover.

Banks will become the sales director for Large Market Employer Plans, effective January 1, and will be responsible for business development and client solutions for the Southeast U.S. region. With Mercer for four years, he is currently working as a senior investment consultant, providing investment advice to defined contribution (DC) clients. He is a member of Mercer’s U.S. Defined Contribution Investment Committee and Mercer’s Manager of Manager strategic research team, and chairs Mercer’s Stable Value strategic research team.

Prior to joining Mercer, Banks spent 10 years at Northern Trust as a senior investment consultant. Having worked with large market foundations, endowments, DB and DC plans, he has aided clients with asset allocation decisions, performance measurement, plan design, and manager selection and monitoring. Banks is based in Charlotte, North Carolina, reporting Cordover.

Pentegra Announces New Executive VP Overseeing Sales and Marketing

Matthew P. Mintzer has joined Pentegra as executive vice president. Mintzer will head Pentegra Sales and Marketing, Client Services and Operations and will report directly to John Pinto, president and CEO.

In making the announcement, Pinto says, “We are fortunate to have someone of Matt’s caliber and industry experience leading our team.  Matt has a solid understanding of our products and markets. His clear vision for integrating technology throughout the customer experience is exactly what Pentegra needs as we enter the next chapter of our business, as we’ve already seen in the development of our exciting partnership with ADP. This vision and leadership will position us to take advantage of the market opportunities that lie ahead.”

Prior to joining Pentegra, Mintzer was a principal at Eyes Up Consulting, where he worked with firms nationally to develop product, sales, marketing, operations and distribution solutions designed to differentiate clients from the competition. His previous senior leadership roles include: head of Advisor Retirement Business at J.P. Morgan Asset Management; head of Advisor Retirement Business at AllianceBernstein (AB); and head of Retirement Marketing at Putnam Investments.

Mintzer earned a bachelor’s degree in finance from Pennsylvania State University and currently holds FINRA Series 7 & 63 licenses.

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Categories: Financial News

Participants Invested in TDFs Contribute Less to Retirement Accounts - Fri, 10/18/2019 - 18:18

Retirement plan participants who invest in target-date funds (TDFs) contribute less to their plans than participants who don’t use them, an analysis from Alight Solutions finds.

And what Alight thought were reasons this is true, turned out not to be. Alight studied behavior for approximately 2.5 million target-date fund investors as of January 1, 2019 who are in its book of business, and found that even when accounting for factors like age and automatic enrollment, participants who fully invest in TDFs tend to save less than others.

According to the data, full TDF users who were automatically enrolled contributed an average of 5.3% of salary to their plans. This compares to 7% for partial TDF investors and 7.6% for non-TDF investors. Among those self-enrolled, full TDF users contributed 7.4%, while partial users contributed 8.5% and non-users contributed 8.7%.

Full TDF users younger than 30 contribute on average 5.6% of salary to their retirement plans compared to non-TDF users, who contribute 7.7%. For those ages 40 to 49, full TDF users contribute 6.4% and non-TDF users contribute 8.7%. The differences are even higher for those age 50 and older.

The study found when people changed from full TDF use, approximately half (47%) actively changed their contribution rate, 14% changed their contribution rate via automatic escalation and the rest kept their contribution rate the same. Among those who remained full TDF investors, only 24% actively made a contribution rate change, while another 24% increased their rate via automatic escalation.

“The prevailing wisdom is that younger investors save less than older investors or participants who are automatically enrolled save less because they stick with the initial default rate, but we isolated for those things and still find people investing in TDFs are saving less,” says Rob Austin, head of research at Alight Solutions.

Another possible idea is that those who remain full TDF investors feel that TDF returns will boost their savings accumulation more so than other investments. However, other findings from Alight seem to contradict this as well. Even though many plans label TDFs with descriptions like “lifecycle funds,” participants are not staying invested in them throughout their working lives. In fact, half of participants (49%) who were fully invested in them ended up moving out of them within ten years.

In addition, when participants stop using TDFs, many make extreme changes to their asset allocation, the study suggests. Among those who stopped using TDFs altogether, 46% invested their entire portfolio in equities, while 14% went all-in on fixed income.

Austin calls this finding “pretty interesting.” He notes, “Some TDFs for the youngest participants have high balance in equities already—up to 90%—so the move to 100% equities is a bit alarming. It is less surprising for older participants to take on more equities; they may need a greater return. But maybe all those moving out of TDFs are chasing returns, especially with the fixed income market as it is today.”

Austin says knowing what the reasons for these actions aren’t is a lesson in itself. “We have debunked some of the myths about savings behavior.” He also says the findings indicate there is something unique to TDFs that lead participants to take these actions. It’s an area ripe for future research. Employers could target participants making these decisions to ask why—maybe even use focus group conversations.

The research found investing in multiple TDFs is common. One out of every 10 TDF investors uses more than one vintage. Among partial TDF users—those who invest in TDFs as well as other core investment menu options—the percentage more than doubles.

“I think this is a combination of people following the market and misunderstanding TDFs. In previous research we found only 11% of people know a TDF is designed to invest in only that fund,” Austin says. “People have been told not to put all their eggs in one basket, and that’s what a TDF looks like to them. They don’t understand that there’s diversification in underlying funds.”

Aside from indicating the need for better education and communication about TDFs, another lesson for plan sponsors is to perhaps slim down the core investment menu. “We looked at the number of investments offered other than TDFs, and found the more funds available to participants, the less likely they are to fully invest in TDFs. It’s counterintuitive because TDFs are an easier choice,” Austin says. “We also found if fewer funds are available, the less likely participants are to create their own portfolios.”

Austin concludes that there needs to be more personalization in TDFs. “I think what we’re seeing here is TDFs are good, but not all they promised to be. They are not lifecycle funds because people are not staying in them. Maybe they are oversimplified—they only consider the age of participants and there are other considerations for people planning for retirement.”

Some may argue that managed accounts are the solution to more personalization for participant investment choices. And, Austin admits Alight’s study on managed accounts showed they provided better outcomes than if participants chose their own investments.

Austin says while TDFs lagged managed accounts, they also provide better outcomes than if participants choose their own investments. “I think there can be more innovation in TDFs going forward,” he says.

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Categories: Financial News

Retirement Income Can Be About More Than Guaranteed Options - Fri, 10/18/2019 - 17:05

BlackRock analysts tackle the timely and vexing issues of retirement income strategies and the potential greater use of in-plan annuity products in a new white paper, “Income reimagined: expanding DC from saving to spending.”

According to BlackRock, plan sponsors, providers and legislators are all showing growing interest in providing guaranteed or income annuity options within defined contribution (DC) retirement plans. But so far, BlackRock finds, no consensus approach has emerged.

“Despite the rational case that can be made for lifetime income solutions, a number of participant biases and behavioral financial barriers need to be overcome to drive adoption,” the paper suggests.

The BlackRock analysis points to the contractions one discovers when surveying retirement plan investors about annuities and guaranteed income. On the one hand, survey data tends to show that participants are interested in “guaranteed income solutions,” but at the same time people commonly voice negative views of “annuities.” As such, even when progressive plan sponsors have made annuity products available in their plans, there has been quite modest uptake.

“Yet when they do choose guaranteed income, the surveys suggest that [investors] are more satisfied than those who try to manage retirement spending on their own,” the BlackRock white paper says. “A MetLife study found that nearly everyone who took monthly income instead of a lump sum payment were happy with their choice. The same study found nearly one-third who took a lump sum regretted their first year spending habits.”

According to the white paper, research suggests that how one frames income solutions greatly impacts participants’ perceptions and decisions. For example, when income solutions are framed as a way to protect their ability to spend over time, participants see it as a rational decision. If participants focus on the “risk” that they will not collect enough income payments in return for the purchase price, they may think of income as a bad “investment.”

“We believe that framing income as a smart decision to protect retirement spending can be the first step to overcoming a range of biases and behavioral barriers,” the BlackRock paper concludes. “And by embedding income into the default option, DC plans can take advantage of one of the most powerful plan design features to help nudge participants into appropriate retirement income decisions.”

The analysis then explains that target-date funds (TDFs), as highly trusted and popular default investment options used by many plan sponsors, may be a great pathway for introducing guaranteed income in the plan context.

“Target-date funds are already in place on most plans and capture the majority of contributions,” the paper explains. “They are widely understood by participants and already frame their planning around the target date. They have a structure that naturally lends itself to building up income over time, leading to partial annuitization at the target date. They may offer a growing stream of retirement income that feels like a natural extension of the lifecycle management they provide.”

An Alternative Take

Toni Brown, senior defined contribution specialist at Capital Group, home of American Funds, agrees that retirement income is the next frontier of innovation in this space.

“There is a broad and important discussion going on about the potential of bringing annuities closer to DC plans,” Brown says. “First of all, I am so excited about the energy in the marketplace and among plan sponsors about the 401(k) becoming a true retirement vehicle, rather than a supplemental savings plan as it was originally designed.”

However, as Brown sees it, so much of the discussion has been around guaranteed income and annuities, and while that makes sense to some extent, guaranteed income products are not the only important part of this conversation. In fact, given the various challenges associated with bringing annuities into DC plans, Capital Group’s perspective is actually that annuities are better sitting outside of plan.

“Many plan sponsors offer an annuity bidding platform that is linked to their plan, but it technically sits outside of the plan for a number of important reasons,” Brown explains. “Under this approach, in the plan, you then select the TDF be very effective to and through retirement. Sponsors should also then consider adding an option specifically built for those people who will be taking money out regularly.”

As an example, Capital Group/American Funds offers a retirement income solution that is basically a series of three risk-based funds. In a sense, they are similar to the risk-based portfolios that were quite popular before the Pension Protection Act cleared the way for target-date funds’ dominance.

“The difference between these funds and other funds is that these are built specifically for retirees, so they are sufficiently liquid and portable to serve retirees’ needs,” Brown says. “They are, generally speaking, more conservative in their equity holdings, to make it possible for the funds to pay income efficiently to retired investors. Within this more conservative framework, there are three different risk levels to meet the individual’s needs—conservative, moderate and enhanced.”

Other investment managers have similar solutions. They aren’t guaranteed and they don’t need to be guaranteed, Brown says.

“In sum, we think the future of retirement income in-plan is really this non-guaranteed approach,” Brown says. “It will be important for people to, out of plan, be able to access guaranteed income that is really tailored for and appropriate for the individual.”

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Categories: Financial News

Investment Product and Service Launches - Thu, 10/17/2019 - 20:02
J.P Morgan Improves TDF Analysis Tool

J.P. Morgan Asset Management has enhanced its Target Date Compass, the target-date fund (TDF) analysis tool used by advisers to help plan sponsors evaluate and select funds with greater knowledge and confidence.

The enhanced Target Date Compass delivers new search capabilities that allow advisers to more quickly find the funds that align to plan sponsor goals, while new filters enable them to easily narrow down the target-date universe. The upgraded tool is powered by third-party Morningstar data.

“Since Target Date Compass was launched in 2008, the program has been a standard bearer for target-date fund evaluation. Over the past decade we have continued to work in consultation with our clients to evolve the tool. The latest iteration provides advisers with the capability to assess target-date funds more quickly, easily and accurately,” says Michael Miller, head of Retirement Distribution at J.P. Morgan Asset Management.

The new Target Date Compass offers a suite of new search filters resulting from extensive user testing with advisers. These include fund types, minimum track records, Morningstar analyst rating, equity exposure, diversification, and more.

Nuveen Presents CIT TDF Series

Nuveen has increased its target-date fund (TDF) solutions offering with the introduction of the Nuveen TIAA Lifecycle Blend CIT series. The new collective investment trusts (CITs) will be managed by Nuveen’s mixed assets portfolio management team.

The Nuveen TIAA Lifecycle Blend CIT series consists of 12 funds, including 11 target-date funds (TDFs) at five-year intervals for retirement dates 2010 through 2060 and a retirement income fund for those already in retirement.

The trustee for the new CITs is SEI Trust Company, wholly owned subsidiary of SEI Investments Company, a global provider of institutional and private client wealth management solutions. SEI maintains ultimate fiduciary authority over the management of and the investments made in the CITs, with Nuveen as adviser.

“Collective investment trusts offer an attractive investment framework for plan sponsors and their advisers and consultants who are focused on cost-effective investment solutions,” says Jeff Eng, managing director and head of retirement products at Nuveen. “This new blended target date fund CIT series helps meet a growing demand in the 401(k)-market space.”

The Nuveen TIAA Lifecycle Blend CIT series contains a blend of active and passive holdings. The series aims to appeal to plan sponsors seeking expertise and experience in actively managed funds while seeking to balance investment costs by using index funds where appropriate.

“We’re excited to partner with SEI to offer a blended CIT series with direct real estate investments,” says Brendan McCarthy, defined contribution investment only (DCIO) national sales director at Nuveen. “With the addition of an active passive mix of underlying investments designed to help meet the needs of today’s corporate retirement plan market, we expect the response from plan sponsors and their advisers to be very positive.”

Fidelity Promotes New Bond Index Fund

Fidelity Investments has launched Fidelity International Bond Index Fund (FBIIX).

Fidelity International Bond Index Fund’s total net expense ratio is 0.06%, and is available, with no investment minimum, to individual investors, as well as through third-party financial advisers and workplace retirement plans.

The fund will normally invest at least 80% of its assets in securities included in the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Diversified Index (USD Hedged), which is a multicurrency benchmark that includes fixed-rate treasury, government-related, corporate and securitized bonds from developed and emerging markets issuers while excluding U.S. dollar-denominated debt. The fund’s foreign currency exposures will be hedged by utilizing forward foreign currency exchange contracts.

“While historically known for our active management expertise, Fidelity has arguably built one of the best index fund franchises in the industry, backed by exceptionally low costs and world-class customer service,” says Colby Penzone, head of Investment Product. “Whether it’s index funds, actively managed funds or separately managed accounts, we’re focused on providing individual investors, workplace retirement plan sponsors and participants, and financial advisers with extensive choice and exceptional value, elements that we believe are unmatched in the industry.”

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Categories: Financial News

DC Plan Dominance Is Overstated, But Not For Long - Thu, 10/17/2019 - 19:54

The newly published 2019 Wells Fargo Retirement Study, now in its 10th edition, compiles the survey reposes of some 2,700 workers and another 1,000 retirees.

The Wells Fargo study outlines several key characteristics that influence today’s retirees, who, in this survey, are 70 years old at the median. Among retirees, nearly nine in 10 (86%) fund their retirement primarily with Social Security and pension income. Currently just 5% say personal savings accounts, such as a 401(k) or individual retirement account (IRA), are their main source of retirement funding. In addition, 70% of those surveyed said they “wouldn’t know what to do” to fund their retirement years effectively if Social Security benefits were substantially cut.  

According to Fredrik Axsater, head of the institutional client group for Wells Fargo Asset Management, these stats show the generational change from pensions to defined contribution (DC) plans is still very much playing out. Despite recognition that saving and paying for retirement will increasingly rest with the individual, younger generations hold mixed views about whether they are saving enough.

As Axsater points out, debt plays a critical role in workers’ inability to save sufficiently. In fact, 31% of Millennials surveyed say they have an “unmanageable amount of debt,” followed by Generation X (26%). Fully 67% of workers paying off student loans say the burden of student loans is getting in the way of saving for retirement.

“I would say that Generation X stands out as the most vulnerable in the survey population,” Axsater says. “They are caught in the middle of the shift from pensions to personal savings, and at the same time they are caught in the middle of supporting their own growing children and aging parents.”

In reviewing the Wells Fargo data, Lori Lucas, president and CEO of the Employee Benefit Research Institute, says many people appear to be over confident about their retirement prospects—even with the debt challenges already mentioned. She notes that nearly a third of workers have personally saved less than $25,000, while 13% have saved between $25,000 and $100,000. Just 11% of those in the Wells Fargo survey have saved between $100,000 and $250,000. This means in turn than half of workers have saved less than $250,000. Looking at workers on a median basis, including those with no savings, Baby Boomers have $160,000 saved, Generation X has $66,000 and Millennials have $10,000.

Zar Toolan, head of advice and research, Wells Fargo Advisors, says the survey results underscore the importance of instilling “a planning mindset” in people. This entails such things as helping them set a long-term goal, helping them set and achieve shorter terms goals, and ensuring they understand the importance of making sacrifices today to benefit themselves in the future. In a phrase, those survey respondents that have such a planning mindset are far ahead of their peers in terms of accumulated savings, confidence levels, projected retirement readiness, etc.

By generation, the planning mindset is highest among retirees (42%), followed by Millennials (39%), Baby Boomers (37%) and Generation X (30%). Current workers with the planning mindset start saving at a younger age, save more each month for retirement and have saved more for retirement than workers without the planning mindset. Lucas suggests the best way to get people to have such a planning mindset is simply to help them generate a balance in a retirement plan.

“This emphasizes the importance of automatically enrolling workers into retirement plans,” Lucas says. “Once people see even a few thousand dollars accumulate in a retirement plan, they become far more engaged.”

Other findings show that, across generations, workers and retirees voice strong emotions about the importance of Social Security and the need for the nation’s political leadership to tackle the retirement security topic. As such, 91% of workers and 95% of retirees say they would feel betrayed if the money they paid into Social Security was not available when they retire. At the same time, 90% say Congress needs to make it easier for workers to have access to tax-friendly retirement plans, and 79% believe companies should automatically enroll new employees into such plans. 

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Categories: Financial News

Friday Files – October 18, 2019 - Thu, 10/17/2019 - 19:09
Beautiful music, courtesy of… Mother Nature.

If you can’t view the below video, try

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Categories: Financial News

Envisioning Retirement Can Lead to Better Savings Behavior - Thu, 10/17/2019 - 18:14

People who take the time to envision their ideal retirement save a higher rates than those who don’t go through this exercise, according to new research from Lincoln Financial Group.

Retirement plan participants who have envisioned their ideal retirement think they need to save a median of 20% of their income. As a result, those who have a picture of what retirement holds for them are more than twice as likely to save 15% or more to their workplace retirement plan compared to those who have not given it any thought.

“Planning for retirement is more than just a number,” says Jamie Ohl, executive vice president, president of retirement plan services at Lincoln Financial Group. “When savers take the time to really think through what retirement will hold—like volunteering, traveling the world or even working part time—they are better able to take steps today to make the tomorrow they imagine a reality.”

Asked what they thought an ideal retirement would include, the most popular themes were traveling (35%), not worrying about money (30%) and living comfortably (16%). This was followed by being debt-free (12%), relaxing (11%), relocating or downsizing their home (10%), enjoying entertainment or hobbies (9%), spending time with family and friends (9%) and working part time (8%).

“We heard directly from participants in our study, who said they wanted to ‘live comfortably, not extravagantly’ and ‘don’t want to fee like we can’t do fun things because money is tight,’” Ohl says. “This is powerful—and we are doing everything we can to help participants understand not just how much they need to save, but how to save more, so they can achieve those goals.”

Lincoln Financial says besides envisioning an ideal retirement, it is also important for people to estimate the cost of that ideal retirement. However, among those within 10 years of retirement, only half have estimated the basic costs they will face in retirement, and only 38% have calculated what their ideal retirement would cost.

Retirement plan sponsors can help employees plan for their unique vision of retirement. Offering retirement planning calculators allows participants to understand what their finances and savings might look like years down the line. If participants run a variety of potential scenarios, they can start to formulate a picture of their ideal retirement—whether that means retiring outright, embracing part-time work or even launching their own business.

Sponsors can also offer financial wellness programs, automatically enroll participants or escalate their contributions into the plan. And employers may also consider setting up phased retirement programs.

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Categories: Financial News

Research Finds No Impact of Auto Enrollment on Debt - Thu, 10/17/2019 - 18:07

The idea has been presented that it makes sense to pay off debt before saving for retirement—especially if the interest paid on debt is greater than the interest earned on retirement savings.

Employers recognize the issue with debt and many have included education about paying off debt in financial wellness programs. And, some employers encourage employees with student loan debt to pay it off and save for retirement at the same time by offering student loan repayment programs. There are numerous ways employers can do this.

At least one survey has found that “among households under the age of 55, each dollar contributed to a 401(k) plan or similar tax-advantaged retirement account is offset by approximately 40 cents in pre-retirement taxable withdrawals.” The study calls into question whether automatic enrollment in retirement plans is really helping employees with their overall financial security.

However, recent research indicates that forcing employees to save—auto enrollment—does not increase debt levels for retirement plan participants. The study published by the National Bureau for Economic Research (NBER) found “no statistically significant evidence that automatic enrollment increases” consumer debt.

The research looked into the experience of civilian Army employees enrolled in the Federal Thrift Savings Plan (TSP). Prior to August 2010, they had to opt into contributing to the TSP. Starting on August 1, 2010, newly hired employees were automatically enrolled in the TSP at a default contribution rate of 3% of their income unless they opted out.

The researchers also found credit scores indicate automatic enrollment does not increase high-interest debt and financial distress.

In a regression analysis, the researchers also did not find a statistically significant effect of automatic enrollment at 43 to 48 months of tenure on auto debt or first mortgage debt.

This may be the case even if a participant takes a loan from the TSP to fund a home or auto purchase. The researchers explain, “An automatically enrolled household might purchase a more valuable durable because it feels wealthier due to its increased TSP balances. The larger mortgage balance does not represent any contemporaneous net worth reduction in this transaction, since each dollar of borrowed TSP balances has been transformed into a dollar of home equity, and each additional dollar of mortgage debt is offset by an additional dollar of housing asset. Conversely, an automatically enrolled household might extract equity or spend down fewer financial assets to acquire a durable because it has fewer financial assets available.” They say the latter transaction still has no effect on net worth.

However, the researchers concede that they cannot be absolutely sure of the financial impact of auto enrollment on auto and home debt because they did not have non-TSP financial data for the research subjects. There could be implications for future net worth.

The study report, “Borrowing to Save? The Impact of Automatic Enrollment on Debt,” may be downloaded from here.

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Categories: Financial News

What’s With All the Hype About the EBSA Reorganization? - Thu, 10/17/2019 - 16:23
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Senator Patty Murray, D-Washington, ranking member of the Senate Committee on Health, Education, Labor and Pensions (HELP), seems up-in-arms about the reorganization of the Department of Labor’s Employee Benefits Security Administration (EBSA) that went into effect October 1.

Prior to the reorganization, she sent a letter to Assistant Secretary Preston Rutledge asking him to hold off on the shuffle and requesting answers to more than a dozen questions, as well as documentation of an implementation plan. When the reorganization went into effect, she followed up with a letter saying the agency’s response was “woefully inadequate and unresponsive.” She also stated, “The lack of an adequate response … deepens my concern around the impact it could have on the workers, retirees, and families who turn to EBSA for help with the benefits they rely on.”

So what’s the big deal?

First of all, according to Michael Kreps, attorney with Groom Law Group in Washington, D.C., as ranking member of the HELP committee, which oversees the DOL, Murray takes that oversight seriously and has “an instinctual interest” in having a better understanding of how the DOL, and particularly the EBSA, operates. “It’s pretty common for folks in senior positions in Congress to inquire about major developments in agencies they oversee,” he says. He points out that lawmakers did the same thing when the Wage and Hour division reorganized in August.

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The proposed reorganization appears to be a meaningful structural change from the status quo, shifting some authorities to EBSA’s politically appointed deputy and creating a new director position to oversee regional offices.

Rutledge, a political appointee, oversees the EBSA. Previously, Timothy D. Hauser, a career EBSA staff member was over all operations—national and regional; however, the reorganization has split his position, making him Deputy Assistant Secretary for National Office Operations and naming Amy J. Turner the Deputy Assistant Secretary for Regional Office Operations, another career position.

Kreps explains that the reorganization has also revised the reporting structure so some policy-heavy offices report to Principal Deputy Assistant Secretary Jeanne Klinefelter Wilson, a political appointee.

From conversations in the industry, Hauser has a reputation for being very supportive of a more employee-favorable agenda, although he is seen as a balanced person. So, it could be that Murray is concerned that political people are asserting themselves and trying to limit the extent of Hauser’s role—which could be problematic for people opposed to the current administration. The national office is more employer friendly, so some may see the reorganization as trying to reign in those from field offices that may be giving employers a hard time.

However, from conversations and news reports, that is not how the majority view it.

A positive change

According to Kreps, it appears at the EBSA that a lot of policy issues are run through the second most senior person at the agency. Previously, that was Hauser, but now it is Wilson, a political official. He says there is a justification that when the EBSA makes a policy decision, it should be made by part of the political structure in the administration. “The reorganization seems more about aligning policy decisions and running them all through central political officials,” Kreps says.

He notes that the DOL has historically issued a lot of sub-regulatory guidance—for example, advisory opinions to explain its views. But, Kreps says, starting in the Obama administration and flowing into the Trump administration there has been a shift from sub-regulatory guidance to focusing on large regulatory projects—the fiduciary rule under Obama, and association retirement plans under Trump. “There have been some public statements by DOL officials that they would like to help the industry by issuing more guidance and opening up a process that has been dormant for a while.”

As for the new structure to have someone higher up coordinate the field offices—coordinate the regional offices at a national level—Kreps says it seems important that the EBSA wants to offer consistency. “The EBSA wants to treat similarly situated stakeholders in the same way and make sure the benefits community has rules of the road that are the same for all,” he says. “It also helps the national office have a better sense of what is going on in the field and better process information that is coming in.”

The retirement plan community may see more fairness, as well as guidance, from the reorganization.

“We have a group that works a lot with the EBSA and they deal with some of the most important issues out there, so we are hopeful that [the agency will] be able to engage with the broader community to make positive changes going forward both on the participant and plan sponsor/provider side,” Kreps concludes.

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Categories: Financial News

Leader McConnell Pushed for SECURE Act Passage by GOP Senators - Thu, 10/17/2019 - 15:42

Senate Majority Leader Mitch McConnell is being pressured by Senators on both sides of the political aisle to take action on the Setting Every Community Up for Retirement Enhancement Act, commonly referred to as the “SECURE Act.”

The popular bipartisan bill passed the House earlier this year with a practically unanimous vote, but it has since been stalled in the Senate. In recent months, advocates have voiced hopes that the SECURE Act’s key provisions—for example supporting the establishment of open multiple employer plans and setting up an in-plan guaranteed income product selection safe harbor for retirement plan sponsors—could be folded into budget negotiations at the end of the year.

Sources tell PLANSPONSOR the SECURE Act’s holdup is more logistical than substantial. That is to say, with the GOP’s clear focus on making appointments to the judicial branch, there is actually a great premium on floor time for the remainder of this year. That’s why the Senate leadership initially pushed first for the SECURE Act’s passage under a loophole known as “unanimous consent.” In short, if a bill enjoys unanimous consent among every Senator, it doesn’t require any floor time. At this juncture, it appears three GOP Senators are refusing to allow the bill’s passage under unanimous consent: Ted Cruz, Mike Lee and Pat Toomey. 

Senator Cruz has concerns about certain 529 college savings plan provisions. Senator Lee has concerns about a provision that provides some relief for small community newspapers. And Senator Toomey has primarily voiced concerns about certain technical tax corrections that impacts retailers, which he wants to see addressed through floor debate and amendment.

Sources say none of the leadership in the Senate or the House opposes moving this bill in its current form into law. Nonetheless, this week, a group of seven prominent Republican senators took the step of mailing an open letter to Leader McConnell, publicly pressing him to work to get the SECURE Act passed into law this year. Signers of the letter include Republican Senators Tim Scott, Rob Portman, Thom Tillis, Joni Ernst, Martha McSally, Susan Collins and Cory Gardner.

“This bipartisan legislation would expand access to retirement plans for millions of Americans, especially those working for small businesses,” the letter states. “It would allow older workers and retirees to contribute more to their retirement accounts. It would increase 401(k) coverage to part-time employees. It would prevent as many as 4 million people in private-sector pension plans from losing future benefits for which they have worked and planned. The legislation would protect 1,400 religiously affiliated organizations whose access to their defined contribution retirement plans is in jeopardy. The SECURE Act also does the right thing for Gold Star families. It would correct unfair tax treatment of the survivor benefits of more 18,000 children and spouses of fallen service members.”

The Senators further emphasize SECURE Act provisions aim to help new parents, including those adopting, with expenses by allowing tax-free distributions of retirement savings.

“This legislation builds on the Senate’s version of the bill, the Retirement Enhancement and Savings Act (RESA), sponsored by our colleagues Senator [Chuck] Grassley and Senator [Ron] Wyden,” the letter states. “During the 114th Congress, RESA was approved unanimously by the Finance Committee. We encourage the Senate to take action on the SECURE Act as soon as possible. Doing so would demonstrate to our constituents that the Senate can lead in a bipartisan way for workers saving for retirement, for tax fairness and for family financial security.”

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Categories: Financial News

Firms Partner to Help Public Employees Save for Health Care in Retirement - Wed, 10/16/2019 - 19:13

BPAS and MOR Strategy Partners have partnered to deliver the Re$erveMOR benefits solution to public-sector employers and employees.

It addresses the need for employees to optimize their pay through the use of multiple tax-advantaged employee benefits. It’s a convergence of health care, retirement and wellness benefits designed to help public-sector employers and employees build health reserve dollars for retirement.

“The loss/sunset of retiree health coverage for employees in the public sector over the past decade has resulted in a significant economic challenge as they move from active employment,” says Nancy Melcher, chief engagement officer at MOR Strategy Partners. “The ordinary individual who retires with [a] pension, Social Security income and some savings will be significantly under-resourced to deal with health care costs under the current industry benefit structure. We are fixing that with Re$erveMOR.”

The program is currently being offered to select public-sector employers in Wisconsin. It is expected to expand nationally. For more information, contact Nancy Melcher at

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