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Insight on Plan Design & Investment Strategy
Updated: 6 hours 39 min ago

Gen X Struggling Most With Retirement Readiness and Confidence

Wed, 04/17/2019 - 18:56

“What is ‘Retirement’? Three Generations Prepare for Older Age,” prepared by the Transamerica Center for Retirement Studies, looked at the retirement outlook of Baby Boomers, Generation X and Millennials.

All generations—Baby Boomers, Generation X and Millennials—associate retirement with freedom, enjoyment and being stress-free. Among those of all ages, 72% are looking forward to retirement. Among Baby Boomers, this is 81%. For Gen Xers, it is 70%, and Millennials, 68%.

However, among all age groups, 76% think people in their generation will have a harder time achieving financial security in retirement than their parents. This is slightly lower for Baby Boomers (69%) but higher for Generation X (81%) and Millennials (79%).

Thirteen percent of workers expect to live to age 100. Among Millennials, it is 17%; Generation X, 11%; and Boomers, 9%.

Millennials are a digital do-it-yourself generation of retirement savers. Seventy-one percent are saving through a workplace retirement plan. At the median, they began saving for retirement at age 24. Among those participating in a workplace retirement plan, they are saving a median of 10% of their salaries. Fifty-three percent expect their primary source of retirement income to be self-funded through retirement accounts. They have a median of $23,000 saved in all household retirement accounts.

Twenty-one percent of Millennials frequently discuss savings, investing and planning for retirement with family and friends—significantly higher than for the older generations. Seventy-two percent say they do not know as much as they should about retirement investing, and 72% would like to receive more information from their employers about how to achieve their retirement goals.

Generation X is the first generation to have had access to 401(k) plans for the majority of their working careers. Some have taken loans and early withdrawals (32%), their retirement confidence is lacking, and many are behind on their savings. Seventy-seven percent are saving for retirement in a company-sponsored retirement plan or outside of that plan.

They started saving at a median age of 30 and contribute a median of 8% of their salaries. Only 14% have a written retirement strategy. They have a median of $66,000 saved in all household retirement accounts. Only 14% are very confident they will be able to fully retire with a comfortable lifestyle.

Seventy percent of Baby Boomers either expect or are already working past age 65—or do not plan to ever retire. However, only 56% are focused on staying healthy and only 40% are keeping their job skills up to date to ensure that they will be able to continue working.

Forty-two percent envision a phased transition into retirement, and 63% are hoping to stay with their current employer while transitioning into retirement.

Seventy-eight percent of Boomers are saving for retirement in a company-sponsored retirement plan or outside the plan. They started saving at a median of age 35. They are saving a median of 10% of their salaries and have a median of $152,000 household savings in retirement accounts. Only 26% have a backup plan for retirement income should they be forced to retire sooner than expected.

Among all age groups, they are planning to live to a median of age 90. They consider a person to be old once they have turned 70. Millennials consider a person age 70, at the median, to be too old to work, but for Boomers and Generation X, it is age 75.

Asked about their retirement fears, the most frequently cited is outliving savings.

The Harris Poll conducted the 19th Annual Transamerica Retirement Survey of 5,168 workers between last October and December. Transamerica’s full report can be downloaded here.

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Categories: Financial News

Actionable Steps Engage Employees in Financial Wellness Programs

Wed, 04/17/2019 - 18:12

Despite all of the talk in the retirement plan industry about financial wellness, only 20% of employers offer such programs, according to a new report from MetLife, “Financial Wellness Programs Foster a Thriving Workforce.”

This is primarily due to the fact that most employers are not aware of the lost productivity that financial stress among employees is costing their company, Meredith Ryan Reid, senior vice president, group benefits at MetLife, tells PLANSPONSOR.

As MetLife’s report notes, lost productivity costs a company of 10,000 employees 1,922 hours and $28,830 in lost productivity a week. For a single company of this size, that would be a loss of nearly $1.5 million, and throughout the U.S., employers report $250 billion in lost productivity each year.

What employers are more attuned to is that 52% of employees are planning to postpone their retirement, Ryan Reid says. “Many employers are aware that they are having a problem helping people prepare for retirement,” she says. “Sixty-six percent are concerned about workers remaining in the workforce for too long, and 42% are worried about higher benefit costs among older workers. This is something many employers are struggling with and do not know how to address.”

Not only are few employers currently offering financial wellness programs that could alleviate the problems of lost productivity and workers failing to retire in a timely fashion—but among those employees who are offered a financial wellness program, only 19% take advantage of it, MetLife’s report reveals.

It is this lack of traction that frustrates employers and prevents them from offering financial wellness programs, Ryan Reid says. To date, that may be because broadly designed financial wellness programs are not doing an effective job of “serving diverse populations in terms of demographics and locations,” she says. “What is really going to meet employees’ needs and create meaningful improvement is personalized information that is easy for them to use.

“Some of the success we have heard about are financial wellness programs that break things down into activities and smaller actionable steps—goals that keep employees engaged,” Ryan Reid continues.

In addition, in many cases, employers are offering a patchwork of financial wellness education from various providers, she says. “They may be on different platforms, with different touch points,” which makes it difficult for employees to relate.

“As employers start to think about the financial wellness products available, they should be looking for those that are customer friendly, and digitally delivered with the support of a call center,” Ryan Reid says. “With the financial wellness that we offer, we sit across the table with employees or speak with them on the phone” to learn about their personal situation. “You need to have holistic conversations in one-on-one situations. The human element is really important. When employees have to wade through the information on their own, they can be overwhelmed.”

MetLife’s program if offered on a digital platform that permits employees to aggregate their accounts and use calculators to plan for both short-term and long-term goals, she adds.

If an employer is unable to offer personalized one-on-one advice, MetLife’s report says that they can at least, on a company-wide basis, “gather demographic data—generation, life stage, family structure and financial circumstances—and analyze existing benefit data—such as retirement plan contributions and loans and disability claims—to assess the financial health and coverage of employees. This quantifiable data can help employers define their financial wellness objectives and tailor benefits accordingly to best help their employees.”

Once retirement plan advisers and sponsors begin to embrace this type of personalized approach to financial wellness programs, and sponsors witness the positive results, Ryan Reid foresees financial wellness programs gaining more traction. “We have a very long way to go on the adoption curve,” she says. “We are only in the early stages.”

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Categories: Financial News

Court Denies Summary Judgement in SafeWay ERISA Lawsuits

Wed, 04/17/2019 - 17:57

After a ruling issued by the U.S. District Court for the Northern District of California, two Employee Retirement Income Security Act (ERISA) lawsuits filed against SafeWay will proceed to trial.

Technically, the court’s new order grants in part and denies in part Safeway defendants’ motions for summary judgement, while also denying as moot defendant Aon Hewitt’s motion for reconsideration. The court has previously rejected motions to dismiss the two substantially similar ERISA lawsuits, known as Lorenz v. Safeway and Terraza v. SafeWay.

In the latest round of cross-motions, SafeWay moved for summary judgment on the grounds that “plaintiff has not established a causal link between any specific alleged breach and loss to the Safeway 401(k) Plan.” But according to the new ruling, there is a triable dispute of fact about whether the SafeWay Benefit Plans Committee discharged its duty of prudence in monitoring and, in some cases, selecting assets for the plan.”

The plaintiffs contend, based on expert opinion, that SafeWay should have “applied a conservative approach of monitoring the plan’s investment options based on a top-quartile criterion and removing investment options with six quarters of cumulative underperformance.” The court says it will decide after considering the testimony whether the benefit plan committee failure to adhere to this standard was imprudent.

“If it was, then the court will determine whether there were comparable assets the benefits plan committee could have offered plan participants that would have performed better,” the decision states. “Plaintiffs have identified such assets; whether they are fair comparators is an issue the court will resolve at trial.”

According to the ruling, SafeWay’s argument that the plaintiffs’ case is premised entirely on hindsight misses the point.

“As they did in their motion to dismiss, the SafeWay defendants again conflate the principle that investment decisions should not be evaluated based on information available after the decision is made with the need to use historic information available at the time the decision was made,” the ruling states. “Accordingly, summary judgment on this issue must be denied.”

The ruling continues by addressing the defendants’ summary judgement argument that there is no evidence suggesting the committee’s process in selecting or retaining the J.P. Morgan target-date funds (TDFs) was imprudent.

“To the contrary,” the ruling states, “there is evidence from which the inference can be drawn that the benefit plan committee accepted J.P. Morgan’s proposal to replace certain of the plan’s investment options to shift the responsibility for payments for recordkeeping services from SafeWay to the plan. Specifically, after analyzing J.P. Morgan’s proposal, Aon informed the committee that the plan’s revenue-sharing component had been insufficient to offset J.P. Morgan’s recordkeeping fees in past quarters and, as a result, that SafeWay may soon be required to make direct payments to J.P. Morgan to pay for the shortfall unless the committee accepted J.P. Morgan’s proposal.”

As the court stated in other orders, there is a dispute of fact about whether this prospect actually motivated the benefit plan committee; that issue will be resolved at trial.

Turning to the issue of recordkeeping fees, the decision points out that SafeWay’s argument for summary dismissal rests on the contention that the testimony of plaintiff’s expert, Roger Levy, is inadmissible. But since the court has previously ruled that Levy’s testimony is admissible, the basis for this argument collapses. SafeWay here also argues that plaintiff’s claim “ignores that the committee renegotiated the plan’s recordkeeping fees to lower the costs throughout the relevant time period.”

“That the fees were lowered by some amount during the relevant period does not establish as a matter of law that SafeWay discharged its duty of prudence or that it reasonably might have, and should have, obtained the same services at lower cost,” the ruling states.

Despite these setbacks, the SafeWay defendants prevailed on one claim having to do with the offering of “Chesapeake and Interest Income Funds.”

“Here, it is not sufficient for the complaint to state that defendants have breached their fiduciary duties but leave them to guess the funds as to which the breach allegedly occurred,” the ruling states. “Nor is it sufficient to suggest that because the Interest Income Fund was mentioned in a different capacity, defendants were on notice that it was the basis of a claim for breach of fiduciary duty. Plaintiffs mention several funds in their complaint that are not the subject of criticism, so mere mention of a fund puts no one on notice.”

Accordingly, the court granted SafeWay’s motion as to the Chesapeake and Interest Income Funds because the second amended complaint does not allege that either fund was either imprudently selected or retained.

Also of note, the court’s prior order denying Aon’s motion for summary judgment in the Terraza action did not address Aon’s arguments regarding the Chesapeake or Interest Income Funds. As to those funds, Aon’s motion is now granted. Its motion for reconsideration is denied as moot.

The full text of the new ruling is available here.

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Categories: Financial News

Senators Introduce Legislation to Further AHPs

Wed, 04/17/2019 - 16:29

Last June, the Department of Labor (DOL) finalized regulations to expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health Plans, also known as Association Health Plans (AHPs). However, earlier this month, a district court determined that the DOL’s regulations are unlawful, leaving in limbo the creation of new AHPs.

 

Now, a group of senators, led by Senator Mike Enzi, R-Wyoming, have introduced legislation that would ensure the new pathway remains available for small businesses to offer AHPs under the DOL’s final rule.

 

AHPs are intended to allow small businesses to group together and leverage power in numbers to obtain comprehensive and affordable health insurance as though they were a single large employer. The coverage offered to association members is subject to the consumer protection requirements that apply to the nearly 160 million Americans who receive coverage from large employers.

 

According to a press release on Enzi’s website, roughly 30 AHPs have formed under the rule so far. According to the Congressional Budget Office, about 4 million people are expected to enroll in an AHP by 2023, including 400,000 who would otherwise be uninsured.

 

“Association health plans offer millions of Americans in the individual health insurance market who have been left behind by Obamacare the opportunity to buy the same kind of lower-cost health insurance with the same patient protections as the roughly 160 million Americans who already get their insurance by working for a large employer,” says Chairman of the Senate Health, Education, Labor and Pensions Committee Senator Lamar Alexander, R-Tennessee. “This legislation would make sure that working Americans who are uninsured, underinsured, or paying through the nose in the individual market can continue to have this option.”

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Categories: Financial News

WEX Health HSAs Added to MassMutual Wellness Platform

Wed, 04/17/2019 - 15:47

Massachusetts Mutual Life Insurance Co. (MassMutual) is expanding its wealth accumulation and protection benefits at the workplace by making health savings accounts (HSAs) available on its MapMyFinances financial wellness tool.

The HSAs are powered by WEX Health Inc., enabling workers covered by high-deductible health care plans to put aside money on a tax-favored basis for eligible health care expenses during their working years as well as retirement. According to MassMutual, contributions to the account may be made by the employee, the employer or both, and the account is owned by the employee.

Survey data shows business owners are interested in speaking with advisers about health savings accounts (HSAs). That is driven by the fact that 55% of business owners think health care is the biggest expense for retirees, followed by housing (24%), food (6%) and transportation (1%). However, only 20% of business owners say they fully understand how HSAs work. Many business owners did not know that HSAs must be paired with high-deductible health plans, for example. Many also did not know that employers can contribute to an HSA and that the balances carry over year-to-year.

MassMutual cites other data from Aite Group showing usage of HSAs is projected to outpace other financial accounts for health care such as health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) by 2021. Notably, while HRAs and FSAs require eligible expenses to be validated by a third party, the IRS does not require such validation for HSAs. However, it is required that consumers keep all of their medical receipts for eligible expenses in the event of a tax audit.

Based on the data provided, MassMutual’s MapMyFinances tool analyzes the user’s personal financial needs and sets priorities accordingly. While health care coverage is typically a top priority for most people, other financial needs such as retirement savings; life, disability, accident and critical insurance coverage; college savings; debt reduction and others vary depending upon the person’s family situation and budget.

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Categories: Financial News

Largest DB Plan Sponsors Adjust Policies to Manage Risks

Tue, 04/16/2019 - 17:02

According to the latest report from Russell Investments about the largest corporate defined benefit (DB) plan sponsors in the United States, they are uniquely situated to set the trends that the rest of the industry often follow.

 

Based on its analysis of the FYE 2018 annual filings, these corporations continued to make changes to their pension plan policies to take more control of the costs and to better manage their risks.

 

As for investment policy, the analysis finds over the last several years, the $20 billion club (the group of 20 publicly listed U.S. corporations with pension liabilities in excess of $20 billion) has been shifting from the traditional asset-only focus to an asset-liability focus. During 2018, the $20 billion club shifted asset allocations significantly away from risky assets and into fixed income. On average, equity allocations were down 5% and fixed income allocations were up 5%, which was the highest de-risking movement in the past eight years.

 

However, Russell Investments says it’s worth keeping in mind that most plans will be under exposed to equities because of the very difficult fourth quarter in 2018. This may cause the appearance of a conscious allocation to fixed income; but, in reality, plan sponsors just haven’t rebalanced to targets. Still, plan sponsors have sited specific intent to de-risk.

 

Regarding benefits strategy, the analysis finds that since the Pension Protection Act of 2006 (PPA), large DB plan numbers have been on the decline, both in total count and head count. Almost all $20 billion club member plans are closed to new entrants, frozen altogether, have offered a lump-sum offer window and/or have made some form of annuity purchase.

 

As for funding policy, Russell Investments notes that following the implementation of PPA in 2008, which coincided with the global financial crisis, plan sponsors faced rising contribution requirements. However, plan sponsors began to contribute less as the contribution requirements dwindled thanks to multiple rounds of legislation that incorporated pension funding relief. Included in these funding relief initiatives were large increases in the Pension Benefit Guaranty Corporation (PBGC) variable rate premiums. Combining the low contribution rates, PBGC premium increases, and an expected update in prescribed mortality assumptions, led plan sponsors to increase discretionary contributions above their minimum required amounts (in many cases this was zero). 

 

In 2017 and 2018, the $20 billion club posted record contribution amounts—over $65 billion over the two years—mostly to take advantage of the tax deductions that were reduced because of the Tax Cuts and Jobs Act of 2017. In most cases, these contributions appear to be accelerations of future contributions as the actual 2018 contributions were higher than expected and now the expected 2019 contributions are at historical lows.

 

“The low interest rate and return environment persists and sponsors continue to focus on areas within their control, such as benefit, funding and investment policies. By improving plan funded positions and taking steps to minimize portfolio risks, sponsors will help promote stability, reduce surprises and place the sponsors in control of where their DB plans go,” the report concludes.

 

The full report may be downloaded from here.

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Categories: Financial News

CUNA Mutual Introduces Financial Wellness Program

Tue, 04/16/2019 - 16:59

CUNA Mutual Retirement Solutions introduced Financial Fitness, a new online program now available to all retirement plan participants.

 

The interactive program goes beyond simple education by featuring a financial fitness assessment and score, personalized curriculum based upon needs and preferences, game mechanics, and one-on-one support from an internal team of retirement consultants. It is available for all plan participants through CUNA Mutual Retirement Solutions’ BenefitsForYou website, and there is no cost to participants or plan sponsors.

 

The program was designed by Financial Fitness Group. Its proprietary Financial Fitness SCORE is research and academic-based, providing organizations with more than 20 million data points to benchmark participants’ aptitude, behavior, and confidence regarding personal finances. It was built to help individuals and organizations assess, benchmark and ultimately change the financial fitness of the American workforce.

 

“It’s unfortunate so many Americans are not saving enough to fund the type of retirement they’ve imagined,” says Paul Chong, senior vice president, CUNA Mutual Retirement Solutions. “As many of our participants indicated in our 2018 Participant Retirement Education Preferences Survey, it comes down to financial wellness issues. They’re looking for information to help them overcome obstacles and get their financial house in order, so they can save more for the long-term. Financial Fitness supports our corporate mission of helping people achieve financial security.”

 

The new Financial Fitness content was introduced to some early-users on BenefitsForYou in February. Analytics show the top three articles selected by users reflect core financial wellness topics: Budgeting Made Simple, Managing Your Debt, and Living within Your Means.

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Categories: Financial News

Sponsors Can Expect Expanding ESG Opportunities

Tue, 04/16/2019 - 15:18

Ron Cohen, Wells Fargo Asset Management’s head of defined contribution investment only (DCIO) sales, took on his current role back in 2015, moving over from J.P. Morgan’s national accounts team for defined contribution investment services.

While that was just four years ago, Cohen says the retirement industry’s conversation around the subject of environmental, social and governance (ESG) investing has evolved remarkably quickly in the time since. Cohen points to the growth in his own firm’s ESG-focused staff, including the hiring of Fredrik Axater as an executive vice president and head of strategic business segments—of which ESG is one of the most promising. Cohen also points to the influence of Nate Miles, who joined the firm in 2017 as head of DCIO, for whom ESG is a significant topic.

“Until pretty recently, the retirement plan industry was only just starting to think about the ESG topic, whereas today it is a frequently addressed subject at conference events and in trade publications,” Cohen says. “The subject increasingly comes up in formal requests for proposals circulated by plan sponsor clients and prospects, as well.”

According to Timothy Calkins, director of fixed income at Nottingham Advisors, client expectations are indeed evolving rapidly around the question of how environmental, social and governance-focused investment approaches fit into the world of institutional asset management.

“I’ve been working on and alongside the topic of ESG for some time now,” Calkins says. “Back, say, 10 years ago, the consensus was still that you had to give up some performance by ‘doing good’ in the markets. But more recently, especially since some big meta-studies published in 2015, the conclusion around ESG integration has moved to being either neutral or more often positive from the performance perspective.”

In practical terms, Calkins’ firm is already using separately managed accounts (SMAs) as a way to deliver ESG strategies to clients. Some clients choose to really engage with risk management and return-boosting opportunities having to do with the environment, he explains, while others may choose to utilize a gender lens when reviewing the fund managers they use or the companies they invest in. As opposed to mutual funds or collective trusts, the SMAs can be customized to allow clients to uniquely implement their ESG perspective.

“Being able to offer customized ESG solutions is a big part of our future, we feel, as is finding new ways to clearly demonstrate the performance benefits of these strategies,” Calkins says. “Especially when it comes to serving clients under the Employee Retirement Income Security Act, we know the performance conversation is always going to be critical.”  

Cohen agrees that there exists strong, objective evidence there to show that ESG utilization is at a minimum neutral from a performance standpoint. In fact, he says, the majority of the evidence actually shows ESG can be a positive from the performance perspective.

At this stage, Cohen highlights, Wells Fargo Asset Management has not rolled out any funds with an ESG label meant for retirement plans. Instead the firm is taking “an education-first approach” and creating a value-add ESG investment review program that advisers and sponsors have already eagerly embraced.

“Now let me be clear, we’re on the road to have ESG-labeled product, but at this point it’s not about selling products,” Cohen notes. “What I’m really excited about is the scorecard component we have recently rolled out in partnership with Morningstar. We felt from the beginning that, at a minimum, plan sponsors would want their advisers to be able to talk with them about what the existing fund options look like from an ESG perspective.”

Sponsors can work with their advisers to use Wells Fargo’s scoring service to analyze a plan’s exiting menu to ensure the plan is using funds that perform well not only from an absolute return perspective, but also from an ESG perspective and a risk mitigation perspective.

“Sponsors can and should promote this among their participants. We have seen the data that shows employees have more favorable views of the employer organization when ESG is offered,” Cohen says. “It’s important to point out that this ESG framework is something that can be applied across the market, it’s not just about ESG-labeled funds. We can see the individual scores of funds on an ESG basis and run very informative comparisons of risk, performance and ESG scores.”

At this stage Cohen cannot offer more specific detail about Wells Fargo’s plans for ESG-labeled products in the retirement plan space, nor could he speculate whether ESG will be more conspicuously included in the firm’s asset-allocation solutions or target-date funds (TDFs).

Reflecting on what comes next with ESG investment opportunities, Calkins says ESG can only become more mainstream and more accepted by investors, even under ERISA.

“The consensus is that this is a material conversation and that ESG can positively impact returns,” he says. “With younger people and Millennials growing to be a larger part of the investing population, this topic is not going to diminish. That’s why we are moving enthusiastically into this space.”

Cohen and Calkins agree that product development will heat up in this area in the coming years. At Nottingham, for example, the firm plans to roll out additional ESG products to complement its two existing ESG-labeled strategies. Next will come ESG approaches to global equity and global income.

“We have seen a lot of activity in terms of launching mutual funds and ETFs that are ESG focused, but these funds are actually mostly limited in their scope, perhaps focusing just on the S&P 500 or small-cap funds,” Calkins explains. “This is a hurdle from the plan sponsor perspective because you don’t want to have to include 50 or 100 funds to cover the market in both an ESG and non-ESG way. So we expect ESG to evolve to really be applied in asset-allocation solutions. In our case, we have developed risk-based ESG asset-allocation strategies that hit just about every participants’ needs.”

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Categories: Financial News

Contributions and Asset Returns Give State Pensions a Positive 2018

Mon, 04/15/2019 - 18:11

The funding ratio of state pension plans rose 1.7 percentage points to 72.2% in fiscal year 2018, according to Wilshire Consulting, the institutional investment advisory and outsourced chief investment officer (OCIO) business unit of Wilshire Associates Incorporated.

“Benefit accruals and interest cost decreased the funded ratio by nearly six percentage points, but this was more than offset by total contributions and asset returns, which increased the funded ratio by over nine percentage points,” says Ned McGuire, managing director and a member of the Pension Risk Solutions Group of Wilshire Consulting. “The biggest year-over-year change has been the increase in plans with funded ratios between 70% and 80%.”

According to the “2019 Wilshire Consulting Report on State Retirement Systems: Funding Levels and Asset Allocation,” Wilshire estimates that the aggregate Total Pension Liability (TPL) increased to $4,277.7 billion as of fiscal year end 2018 up more than 3% from $4,141.3 billion as of fiscal year end 2017. The two largest factors of the annual increase in aggregate TPL were continued annual benefit accruals, i.e. service cost and interest cost. Service Cost, or continued annual benefit accruals, is estimated to have increased the TPL by 1.91%. Interest cost is similar to time value of money and is approximately equal to the discount rate as a percentage of the beginning of year TPL. The increase due to interest cost is estimated to be 7.04% for fiscal year-end 2018.

Wilshire estimates that the aggregate assets increased to $3,087.5 billion as of fiscal year end 2018, an increase of close to 6% from $2,917.9 billion as of fiscal year end 2017. Continued robust investment returns and contributions drove asset values higher for the year. Contributions increased the asset value by 4.86% for the year, with nearly 30% coming from plan participants. Investment income increased the asset value by 8.87% for the year.

Discount rates have trended lower over the past several years. This trend continued this year as nearly half of the plans studied lowered their discount rate. The range for discount rates in 2018 was 3.95% to 8.00% with a median of 7.25%, which is the same as last year.

Asset allocation varies greatly by retirement system. In aggregate, state pension plans had allocations to equity, including private equity, equal to 57.8% in 2018. Allocations to fixed income were equal to 23.7%, with the remaining 18.5% allocated to real assets, alternatives and cash.

 

Over the past ten years, the total allocation to equity has declined by nearly five percentage points. Interestingly, the allocation to private equity has increased by over four and one-half percentage points with the allocation to U.S. Equity declining by nearly nine percentage points. The other significant change has been the increased allocation to total real assets such as real estate.

 

The 2019 report is based upon data gathered by Wilshire Consulting from the most recent financial and actuarial reports issued by 134 retirement systems sponsored by the 50 states and the District of Columbia. Of the 134 systems studied, 106 systems reported actuarial values on or after June 30, 2018, and the remaining 28 systems last reported prior to that date.

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Categories: Financial News

Retirement Plan Sponsors’ Interest in Retirement Income Is on the Rise

Mon, 04/15/2019 - 16:42

Nearly two-thirds of the largest and mid-sized 401(k) consultants and advisers believe that sponsors want to continue to serve individuals once they retire, according to PIMCO’s 13th annual Defined Contribution Consulting Study. This is up 14 percentage points from the year before.

PIMCO’s findings are based on a survey of 238 large and mid-sized consultants and advisers serving 109,000 clients with more than $4.9 trillion in plan assets.

Sixty-six percent of these advisers and consultants recommend that sponsors offer a retirement income tier to serve retirees. Eighty-four percent think this should include distribution flexibility, 41% think it should include education and tools, and 38% think it should include retiree-focused investment options.

Seventy-eight percent think retirees’ equity exposure should be 40% or less. Seventy-two percent think distributions should be done on a monthly basis, and all believe that annual distributions should be north of 4% of assets.

The study also found a significant shift in plan sponsor priorities, with most large and mid-sized consultants and advisers now ranking reviews of target-date funds as the highest priority (63%), followed by evaluation of investment fees (44%) and administration fees (28%) and simplification of investment menus (25%). 

When evaluating target-date funds, 84% think that the glide path is the most important factor, while 56% think it is fees. Thirty-one percent think the cost of managed accounts are justified. However, only 6% think managed accounts deliver superior performance to target-date funds (TDFs). Fifty-three percent think managed accounts offer value through their customization, but only 37% think participants provide the necessary information for that customization.

Sixty-two percent think that custom and white-label strategies can offer superior performance, especially for equities (44%) and fixed income (41%).

“We are starting to see a definitive shift in sentiment across the DC [defined contribution] landscape, as plan sponsors seek to tailor plan offerings not only to those currently saving for retirement but also those who are already in retirement,” says Rick Fulford, head of U.S. defined contribution at PIMCO. “Retirees demonstrate a propensity to spend only from available income, while preserving account balances, so we’re not surprised by the emphasis on income generation and capital preservation.”

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Categories: Financial News

John Hancock Offers Retirement Plan Account Information Via Alexa

Mon, 04/15/2019 - 15:14

John Hancock Retirement Plan Services is providing its retirement plan participant clients access to personalized information, including frequently-asked account queries, through their Alexa-enabled devices.

Now, by saying, “Alexa, open John Hancock,” and providing a secure and personalized voice code, participants can hear their account and loan balances, fund allocations, personal rates of return, contact information for the plan, and more. Participants whose Alexa-enabled devices have a built-in display capability, such as the Echo Show, will also see the information displayed on screen.

In the interest of account security and data protection, the company incorporates a variety of safety measures to address potential issues into its program for Alexa. For example, a participant’s identity will be verified through multi-factor authentication during the account linking process. In addition, participants will be required to set up a secure voice code when first enabling the skill in the Alexa app, and recite it correctly before getting access to any account information. No participant account information is recorded or maintained on their Alexa-enabled device or in the hardware servers storing their Amazon account.

“Our goal is to make it easier for people in our plans to save more for retirement, and to do that we want to provide the personal information they need in the ways they want to receive it,” says Patrick Murphy, president and CEO of John Hancock Retirement Plan Services.

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Categories: Financial News

Lively HSA Goes Mobile

Fri, 04/12/2019 - 19:54

Lively Inc., a provider of health savings accounts (HSAs), announced the release of an iOS mobile device application, designed to bring the capabilities of a Lively HSA to consumers’ smartphones.

According to Alex Cyriac, co-founder and CEO of Lively, this new addition to the Lively platform represents an important step in expanding accessibility to health savings tools.

“The whole world runs on smartphones,” says Cyriac, co-founder and CEO of Lively. “People want to be able to track and manage their personal finances whenever and wherever it is convenient for them. Lively was built on the idea that HSAs should be easy to use.”

Lively’s mobile app brings the firm’s digital user interface to the palm of the hand, Cyriac notes. The app allows HSA owners to manage their balance and review transactions. The app can also be used to track HSA spending and to automate future contributions, among other capabilities.

“Our users have requested a mobile app ever since our launch, and we’ve made it our mission to modernize and deliver the highest quality products and technology,” adds Shobin Uralil, co-founder and COO of Lively.

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Categories: Financial News

Retirement Industry People Moves

Fri, 04/12/2019 - 17:50

Art by Subin Yang

Northern Trust Names Foreign Exchange Sales Head

Northern Trust has announced that Ernesto Arteta has been named head of foreign exchange sales, Americas.

Arteta has over 25 years of experience in sales, trading, structuring and portfolio management of fixed income and foreign exchange cash and derivatives. Based in Chicago, he will lead a team of sales managers located in the Americas responsible for driving growth through Northern Trust’s range of FX solutions for institutional investors and investment managers across the region.

MassMutual Adds Head of Benefits Practice

MassMutual has appointed a new leader for its voluntary and executive benefits businesses in support of employers and their employees.

Shefali Desai has been named head of worksite, a new position reporting to Teresa Hassara, head of workplace solutions for MassMutual. Desai, a 19-year veteran of MassMutual, is now responsible for management and ongoing development of the full worksite portfolio, including voluntary benefits and executive benefits. Worksite provides protection benefits such as life, disability, critical illness and accident insurance through employers.

As head of worksite, Desai will focus on the end-to-end customer journey, including web experience, underwriting process, operations, client acquisition and customer communications.

Previously, Desai had led MassMutual’s workplace strategy. She has also held leadership roles in retirement plan sales management, customer support roles, financial management, and mergers and acquisitions

A graduate of Babson College, Desai holds Series 7, 24 and 63 FINRA registrations.

Transamerica Implements Series of Promotions   

Transamerica has announced that Blake Bostwick will lead its workplace solutions business line as president. Transamerica’s workplace solutions team provides employer-sponsored retirement plans and insurance benefits to U.S. organizations of all sizes.

Bostwick is a 17-year veteran with Transamerica, and has previously led multiple functional areas for Transamerica, including operations, marketing, product and technology. In his new role, he will continue reporting to Mark Mullin, Transamerica president and CEO.

Bostwick is joined by Kent Callahan, who will lead workplace solutions distribution and client engagement as senior managing director. Callahan managed Transamerica’s retirement plans team from 2003 to 2015, and the employee benefits team from 2009 to 2012. He previously oversaw a portfolio of U.S. businesses and Latin American joint ventures. Callahan will report to Bostwick in his new role.

Also reporting to Bostwick, Phil Eckman has been named chief operating officer of workplace solutions. Eckman is a 23-year veteran of the organization, who most recently headed Transamerica’s customer experience and advice center. Eckman now will expand his responsibilities to lead workplace solutions operations.

Ascensus Renames TPA Solutions Group

Ascensus has announced that its TPA Solutions group will become FuturePlan by Ascensus.

FuturePlan by Ascensus will encompass 42 locations throughout the country and service more than 34,000 plans with 30 different recordkeeping partners. The group’s expertise includes defined contribution plans, defined benefit traditional and cash balance plans, employee stock ownership plans, specialty plans, and 3(16) fiduciary services.

“FuturePlan by Ascensus gives advisers and plan sponsors a new way of thinking about retirement plan administration,” says Jerry Bramlett, who heads the group. “We’re able to provide high-touch, local service backed by the tremendous resources of a large national organization, including a deep bench of talent, significant ongoing technology investments, data security infrastructure, in-house ERISA expertise, and many other advantages.”

Insight Investment Creates Consultant Head Role

Insight Investment has announced that Jon Morgan is now head of Consultant Relations, North America, a newly-created role. Morgan will help develop Insight’s consultant relationships as the firm responds to pension plan sponsors seeking strategies for liability and liquidity needs. He will also cover consultant-supported platforms and retail offerings.

“In addition to supporting defined benefit solutions, Jon will play a key role in building consultant advocacy for Insight’s fixed income and multi-asset strategies such as Core Plus and Broad Opportunities,” says Jack Boyce, head of Distribution for North America at Insight. Insight’s business has been built on a reputation for investment quality, demonstrated by the fact more than 80% of our global assets under management are consultant-intermediated. We rely on consultants to undertake the deep analysis required to identify what differentiates a leading manager from a good one.”

“In my view, there are few asset managers who can have a conversation about LDI on the same level as Insight,” says Morgan. “We believe plans are becoming more liability-aware and interested in approaches making use of customized benchmarks, derivatives and new cash-flow management strategies. In the retail market, there is opportunity for a manager that can provide fresh ideas for the future, particularly around outcome-oriented approaches to investing in core asset classes such as fixed income and multi-asset.”

Morgan joins from BlackRock where he was most recently director of Global Consultant Relations. He will be based in New York and report to Paul Hamilton, global head of Consultant Relations.

Nationwide Increases Distribution and Sales Team with New Hires  

Nationwide has expanded its distribution and sales team with two new hires.  

Scott Ramey is joining Nationwide’s retirement plans business to lead efforts serving and expanding relationships with the company’s existing public-sector partners and plan sponsors. He will report to Eric Stevenson, who continues to lead all distribution and sales efforts for Nationwide’s retirement plan business and was recently promoted to senior vice president.

Ramey has more than 25 years of experience in financial services, most recently as senior vice president of workplace solutions at Transamerica. Prior to that role, he led institutional sales for Transamerica.

The second addition to the team is Jennifer Yellot, who will serve as a client acquisition director, reporting to Rob Bilo. Yellot will oversee large, public-sector acquisitions in the Midwest United States. She joins Nationwide with over 15 years of experience in retirement plan sales. Most recently, she served as a vice president of tax-exempt sales at Prudential. Prior to working at Prudential, she held sales roles at Aspire, Transamerica and Empower.

Ramey received his undergraduate degree from John Carroll University, and holds Series 7, 24, 26, 63, Life, Accident and Health licenses. Yellot has a bachelor’s degree from Pennsylvania State University. Additionally, she holds FINRA Series 6, 63, and 26 licenses.

SMA Executive Joins Franklin Templeton

Franklin Templeton has hired Brian Silverman as its new head of separately managed accounts (SMAs). Reporting to Pierre Caramazza, head of the U.S. financial institutions group, Silverman will be responsible for overseeing business development and strategy for the firm’s U.S. SMA business. He will lead a team servicing the SMA business and partnering with the broader U.S. distribution group, as well as with marketing, product development and investment management.

Silverman has over 25 years of experience in financial services, with a focus on the managed accounts industry. He joins from BlackRock Financial, where he spent the past 11 years focusing on platform and product development in the SMA business line, and previously held positions at Goldman Sachs and Morgan Stanley. Silverman earned his bachelor’s degree in psychology from Muhlenberg College and his master’s in finance from Fordham University Gabelli School of Business. 

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Categories: Financial News

ESG, Proxy Voting Trends Unlikely to Shift on Executive Order

Fri, 04/12/2019 - 17:23

This week the White House issued an executive order on the evolving topic of proxy voting and environmental, social and governance investing programs being put into practice by retirement plans subject to the Employee Retirement Income Security Act (ERISA).

In the order, the Trump Administration says its intent is to “promote energy infrastructure and economic growth.” To this end, the order covers 10 sections that describe the Administration’s vision for greater exploitation of natural resources as a driver of economic growth.

For the retirement plan industry, Section 5 of the executive order is probably most significant. As this section details, the majority of financing in the United States is conducted through its capital markets.

“The United States capital markets are the deepest and most liquid in the world,” the order states. “They benefit from decades of sound regulation grounded in disclosure of information that, under an objective standard, is material to investors and owners seeking to make sound investment decisions or to understand current and projected business.”

Here the order cites the Supreme Court’s 1976 decision in TSC Industries Inc. vs. Northway, which determined that environmental, social and governance (ESG) information is “material” to investment decisions of fiduciaries if “there is a substantial likelihood that a reasonable shareholder would consider it important.”  

According to the executive order, the United States capital markets have “thrived under the principle that companies owe a fiduciary duty to their shareholders to strive to maximize shareholder return, consistent with the long-term growth of a company.”

After laying this out, the order gets prescriptive: “To advance the principles of objective materiality and fiduciary duty, and to achieve the policies set forth in subsections 2(c), (d), and (f) of this order, the Secretary of Labor shall, within 180 days of the date of this order, complete a review of available data filed with the Department of Labor by retirement plans subject to the Employee Retirement Income Security Act of 1974 in order to identify whether there are discernible trends with respect to such plans’ investments in the energy sector.”

Furthermore, within 180 days of the date of this order, the Secretary “shall provide an update to the Assistant to the President for Economic Policy on any discernable trends in energy investments by such plans. The Secretary of Labor shall also, within 180 days of the date of this order, complete a review of existing Department of Labor guidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.”

Experts Anticipate Order Impact Could Be Muted

In written commentary discussing the new executive order, George Michael Gerstein, co-chair of the fiduciary governance group at Stradley Ronon, suggests the impact of the executive order is likely to be more symbolic than substantive when it comes to the real-world activities of retirement plan fiduciaries and investment managers. 

“Less than one year ago, the DOL released Field Assistance Bulletin 2018-1, in which the DOL clarified its views on how shareholder engagement could be conducted in a manner consist with ERISA’s fiduciary duties,” Gerstein observes. “Proxy voting and other forms of engagement are fiduciary functions under ERISA.”

According to Gerstein, the application of ERISA’s fiduciary duties in this context is “ultimately a function of materiality and cost, each positively related to the other, so that as the perceived materiality of an issue on investment performance that is the subject of engagement increases, a fiduciary has more rope to incur costs on its meetings with the board, etc. The converse is also true.”

With this in mind, should the DOL respond to this executive order by implementing a narrower interpretation of what ESG risks are material to a company’s performance, this could in theory drive less engagement on those risks by retirement plan fiduciaries.

“A more probable result, however, is that fiduciaries already evaluating ESG risks will continue parsing whatever ad hoc disclosures are volunteered by the companies, and may point to statements made by prominent individuals and institutions on the materiality of these risks,” Gerstein says.

Shifting Perspective on ESG and Proxy Voting in ERISA Plans

Earlier commentary shared by David Levine, principal with Groom Law Group, provides some helpful context for understanding the potential impact of the new executive order.

As Levine explains, the DOL’s Field Assistance Bulletin 2018-01 (issued under the Trump Administration) puts a new spin on the earlier and more legally significant Interpretive Bulletin 2016-01, in which the Obama Administration directed the DOL to operate under the assumption that proxy voting and shareholder engagement can be consistent with a fiduciary’s obligation under ERISA.

The new Trump-inspired spin, in essence, says that the DOL primarily characterized proxy voting and shareholder activism activities as permissible under ERISA because they typically do not involve a significant expenditure of funds, Levine explains. In other words, with President Trump in charge, the DOL now operates under the assumption that it is not always appropriate for retirement plan fiduciaries to routinely incur significant expenses and to engage in direct negotiations with the board or management of publicly held companies with respect to which the plan is just one of many investors.

Similarly, according to Levine, FAB 2018-01 states that another Obama-era Interpretive Bulletin (IB 2015-01) was not meant to imply that plan fiduciaries, including appointed investment managers, should routinely incur significant plan expenses to, for example, “fund advocacy, press, or mailing campaigns on shareholder resolutions, call special shareholder meetings, or initiate or actively sponsor proxy fights on environmental or social issues relating to such companies.”

Finally, Levine says, FAB 2018-01 uniquely cautions fiduciaries who believe there are special circumstances that warrant “routine or substantial” shareholder engagement expenditures to document an “analysis of the cost of the shareholder activity compared to the expected economic benefit (gain) over an appropriate investment horizon.”

“Thus, DOL has signaled that, as a matter of enforcement, it will require additional documentation regarding significant expenditures of plan assets for shareholder proxy voting activities,” Levine says.

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Categories: Financial News

Despite Market Rebound, Investors Flocked to Fixed Income in Q119

Fri, 04/12/2019 - 14:46

Even as stock markets rebounded in the first quarter, 401(k) investors moved from equities to fixed-income funds, according to the Alight Solutions 401(k) Index. Investors favored fixed income on nearly 90% of the trading days, 54 out of 61, in the quarter.

In total, there were nine days of above-normal trading activity, three in each month. During the first quarter, investors transferred an average of 0.50% of their balance.

Asset classes with the most trading inflows in the first quarter were bond funds (66%, with $627 million flowing into them), stable value funds (24%, $225 million) and money market funds (6%, $58 million). Asset classes with the most trading outflows in the quarter were large U.S. equity funds (51%, $408 million), company stock (30%, $280 million) and international funds (9%, $88 million).

After steep declines in the fourth quarter of 2018, the start of 2019 was strong for small U.S. equities, which rose 14.6% in the first quarter; large U.S. equities, up 13.7%; international equities, up 10.3%; and U.S. bonds, which rose by 2.9%.

For the month of March, 401(k) investors continued their march into fixed income, with that asset class garnering the majority of the transfers on 95% of the trading days. Year-to-date, fixed income has garnered flows on 89% of the trading days. Investors favored equities on only one day in March. Year-to-date, they have primarily moved into equities on only 11% of the trading days.

In March, an average of a mere 0.014% of 401(k) balances were traded daily. The asset classes with the most trading inflows in the month were bond funds (61%, $226 million), stable value funds (26%, $96 million) and money market funds (6%, $24 million). Asset classes with the most trading outflows in March were large U.S. equity funds (37%, $137 million), company stock (22%, $82 million) and small U.S. equity funds (15%, $54 million).

Asset classes with the largest percentage of total balances at the end of March were target-date funds (TDFs) (29%, for a total of $55.93 billion of assets), large U.S. equity funds (21%, $48.16 billion) and stable value funds (10%, $19.43 billion).

Asset classes with the most contributions in March were TDFs (42%, $835 million), large U.S. equity funds (21%, $416 million) and international funds (8%, $159 million).

The capital markets delivered somewhat poor performance in March. The U.S. bond market was up 1.9%. Large U.S. equities rose 1.9%, and international equities ticked upward by 0.6%. Small U.S. equities fell by 2.11%.

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Categories: Financial News

Communicating the Difference Between FSAs and HSAs to Participants

Fri, 04/12/2019 - 13:00

In order to accurately communicate about medical flexible spending accounts (FSAs) and health savings accounts (HSAs) to participants, employers must understand the basics of each.

While there are similarities between the two—both allow employees to contribute up to a certain amount to pay for out-of-pocket health care costs and in both, contributions are pre-tax and distributions are tax-free—there are some important differences, Sara Caddy, benefits manager at Dimensional Fund Advisors, told attendees of a webinar sponsored by the Plan Sponsor Council of America (PSCA).

A big difference is the “use-it-or-lose-it” feature of FSAs—funds must be used within the calendar year or they will be forfeited, with two exceptions. Caddy explained that the plan may provide for a 2.5-month grace period to spend or a balance carryover of up to $500. “This could lead FSA participants scrambling to spend their funds at the end of the year or grace period,” Caddy said. However, assets left over in HSAs can be carried over from year-to-year.

Amounts employees are allowed to contribute to HSAs are higher than for FSAs, and there are additional expenses for which employees can use HSA assets. COBRA premiums, long-term care insurance premiums and employer-sponsored Medicare Supplement/Advantage premiums can be paid with HSA assets, Caddy said.

HSAs are considered “triple-tax-advantaged” because contributions are made pre-tax (federal, state, FICA and FICA-Med); earnings are tax deferred; and payouts are tax-free if used for qualifying expenses (otherwise payouts are subject to income taxes and a 20% penalty tax if paid prior to age 65). However, there is no excise tax for nonqualified plan expenses after age 65.

There is also a difference between when participants can change contribution amounts. Participants have to estimate what their out-of-pocket spending will be for the year and make an election for contributions prior to the year, Caddy explained. The only way contributions to an FSA can be changed during the year is due to a qualifying event. However, contribution amounts to HSAs may be adjusted any time during the year, “so there is no need to predict what a participant will spend on medical expenses,” Caddy said.

According to Caddy, employees can have one or the other, not both an FSA and HSA, except for limited purpose FSAs which are strictly for out of pocket vision and dental, not all medical expenses. She also reminded webinar attendees that HSAs can only be offered in conjunction with an HSA-eligible high-deductible health plan, and while employees can take HSAs with them if they leave their employer, they may not contribute to their HSAs if it is not paired with an HSA-eligible plan.

A big difference is that HSA assets can be invested, and this is something Caddy recommends. She also said it helps HSA participants see them as a long-term savings option. “I recommend saving for out-of-pocket medical expenses upon retirement. I’d much rather use tax-free HSA funds for Medicare and/or long-term care insurance premiums,” she stated.

Communicating HSAs as a long-term savings option

Caddy suggested that when communicating to plan participants about HSAs, employers should highlight what the ‘S’ stands for—“savings,” versus “spending” in FSAs. She also recommended employers reiterate to employees that the primary expense that increases after retirement is health care. Remind employees that HSA assets left in the account will be rolled over from year-to-year.

As for plan design, Caddy said plan sponsors should make sure HSA-eligible plan premiums are at least the same if not lower than other health plan offerings and make sure the benefits covered are the same for each plan, to encourage participation in these plans.

In the associated HSAs, “employers should encourage employees to save at least to their deductible amount…that’s not hard; then to the maximum out-of-pocket expenses,” Caddy said. “Some say employees should contribute an amount to receive the entire employer match in a defined contribution plan, then turn to HSAs, but I wouldn’t recommend one over the other. I would advocate for saving in both at the same time.”

Finally, employees should be reminded that if they are lucky enough not to need HSA assets for medical expenses after retirement, they can access the money for any expense desired, subject to regular income taxes.

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Categories: Financial News

MassMutual Enhances Website for Participants Affected by Pension Risk Transfer

Thu, 04/11/2019 - 18:53

As the growth of its pension risk transfer (PRT) business accelerates, Massachusetts Mutual Life Insurance Company (MassMutual) has enhanced its website to serve PRT annuitants, improving navigation, providing more self-service features and information, and offering mobile access.

 

“The website is a home for annuitants whose employers or former employers have selected MassMutual for a pension risk transfer annuity,” says Keith McDonagh, head of MassMutual’s Institutional Solutions unit.

 

Both active annuitants (who are receiving annuity payments) as well as deferred annuitants (those who have not yet elected to receive payments) can go to MassMutual’s website to access information about their annuity, as well as update their records.  Annuitants are able to view information about their annuity payments, tax withholding, tax reports, history and beneficiaries. In addition, annuitants can go to the site to enroll in direct deposit, access online forms and update their mailing address. The website is fully compatible with mobile devices.

 

The new portal also allows for easy access to other products and services an annuitant may have with MassMutual.

 

“Through strategic investments in new capabilities, we aim to become the provider of choice for employers seeking to transfer their pension risks to a financially strong and capable provider,” says McDonagh.

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Categories: Financial News

Investment Product and Service Launches

Thu, 04/11/2019 - 17:37

Art by Jackson Epstein

Finadium Builds Database of Securities Lending Mutual Funds and ETFs

 

Finadium has created a database of U.S. mutual funds and exchange-traded funds (ETFs) in securities lending that incorporates Securities and Exchange Commissions (SEC) filings and additional industry content. The database provides clients an analysis of market trends and funds using factors such as strategy, benchmark, fund complex, fee splits, cash collateral fees and more.

 

The database will be available to Finadium clients as part of the standard research subscription, with no additional cost, and supports fund boards and management with corporate governance, program management, regulatory compliance and cost analysis, including dynamics between fund management fees and securities lending revenues.

 

According to Finadium, a large market participant was signed as a cornerstone consulting client using the new database. On the buy-side, 18 leading fund managers will have online access as part of the Finadium research subscription.

 

Finadium will also use the database to drive ongoing research programs in securities finance, collateral and derivatives. Recent reports for mutual funds and ETFs in securities lending include:Large Institutional Investors on Securities Lending, Collateral and Repo; Next Steps for Agency Securities Lending, Or, Life After SFTR; and The US Repo Market at End of 2018.

 

OneAmerica, Russell Investments Managed Accounts Consider Outside Retirement Assets

 

OneAmerica and Russell Investments’ Personalized Retirement Accounts (PRA) solution has launched in support of defined contribution (DC) plan clients.

 

Through the targeted/personal online portal, PRA takes into consideration retirement accounts and assets that are outside of the employer’s retirement plan. PRA also features personalized investing approaches, a 3(38)-fiduciary component over the participant’s asset allocation and an outsourced investment solution.

 

According to OneAmerica, PRA advantages include embedded financial planning tools with advice to participants available on-demand.

 

“This is a great way for financial advisers to change the conversation from funds, fees and fiduciary to retirement readiness,” says Jay Breitenkamp, business development director, defined contribution, adviser and intermediary solutions, with Russell Investments. “We believe the Personalized Retirement Accounts solution is an upgrade to the retirement savings experience for the plan sponsor because we view it as a big ‘easy button’ for participants in that PRA does it for them when they may not have the time, interest or inclination to do it themselves.”

 

Each participant’s customized asset allocation is assessed quarterly and adjusted as needed based on progress toward his or her targeted retirement income goal.

 

MainStay Moves Target-Date Funds to Other Asset Allocation Funds

 

The Board of Trustees of MainStay Funds Trust has approved an agreement and plan of reorganization for a list of mutual funds, each a series of MainStay Funds Trust.

 

According to a filing with the Securities and Exchange Commission, the MainStay Retirement 2010 Fund and MainStay Retirement 2020 Fund will be acquired by the MainStay Conservative Allocation Fund. The MainStay Retirement 2030 Fund will be acquired by the MainStay Moderate Allocation Fund. The MainStay Retirement 2040 Fund and MainStay Retirement 2050 Fund will be acquired by the MainStay Moderate Growth Allocation Fund. The MainStay Retirement 2060 Fund will be acquired by the Retirement 2010 Fund; MainStay Retirement 2020 Fund.

 

According to the Board, after considering the recommendations of New York Life Investment Management LLC, it has concluded that the reorganization of each acquired fund with and into the corresponding acquiring fund is in the best interests of each fund’s shareholders. The reorganizations are expected to occur on or near June 14. Upon completion of the reorganization, pending investors will become shareholders of the corresponding acquiring fund, and will receive shares of the corresponding class of the acquiring fund equal in value to shares of the acquired fund. The reorganizations are expected to be tax-free for federal income tax purposes, and no commission, redemption fee or transaction fee will be charged as a result of the reorganizations, says the Board.

 

The Board asks that shareholders review the Information Statement/Prospectus, available here, which contains information about each acquiring fund, outlines the differences between each acquired fund and its corresponding acquiring fund, and provides details about the terms and conditions of the reorganizations.

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Categories: Financial News

Prudential Expands Financial Wellness Capabilities

Thu, 04/11/2019 - 17:09

Prudential Financial Inc. introduced a range of new financial wellness solutions, which will be available via employers, to help individuals manage student loan debt, navigate job changes, access financial coaching and develop a personalized financial roadmap.

Prudential’s workplace financial wellness platform now includes LINK by Prudential, an interactive, personalized resource that enables people to identify their most important financial milestones and create a path toward achieving them. Already available to individuals through Prudential’s website, employees can use LINK to create an online personal profile and establish goals like building an emergency fund, insuring loved ones, saving for retirement or purchasing a home.

LINK by Prudential leverages AI technology, allowing employees to integrate their existing Prudential retirement accounts and non-Prudential financial accounts to help round out their financial wellness roadmap. The LINK experience enables employees to be self-guided, work with an investment adviser via video chat or phone or meet in person with a financial professional from Prudential Advisors.

Prudential is also expanding its financial wellness engagement capabilities to include a financial coaching service, available via phone and one-way screen share. This coaching service is designed to help individuals learn about and adopt healthier financial behaviors, such as developing and sticking to a budget. The service is being piloted with selected employers.

The company is adding several new solutions that focus on specific life events and customer needs. In addition to the emergency savings and budgeting solutions it already offers, Prudential is launching Student Loan Assistance, an online resource that enables individuals to evaluate student loan consolidation and repayment options, and allows employers to make one-time or ongoing repayment contributions. Prudential is partnering with Vault, an Austin, Texas-based student loan technology benefits firm, to provide this service.

The company is also introducing PruPassages, a new program that helps people make more-informed decisions and maintain financial wellness during a job transition. As part of the service, a licensed financial professional from Prudential Advisors proactively reaches out to employees to offer guidance on their options to continue life insurance coverage. Employees can also receive a complimentary evaluation of their financial needs, priorities and goals.

In addition, Prudential is providing new beneficiary services for individuals who have just lost a loved one, with an easier claim process and resources to help guide their decision-making. These new capabilities include digital submission of claim forms, text and email status alerts, and online resources that help beneficiaries navigate tasks like planning a funeral and managing their loved one’s financial and social media accounts.

“Each person’s journey to financial wellness is deeply personal and constantly evolving,” says Judy Dougherty, who was recently appointed Prudential’s chief financial wellness officer. “We all face pivotal financial decisions throughout our lives, when the choices we make have the potential to either put us on a track toward financial health or derail us. This insight has guided our work on new solutions that are designed to be as in sync as possible with our customers’ lives. From digital experiences to coaching and in-person advice, our goal is to meet our customers where they are, and to help them to make informed decisions that establish and sustain their financial wellness over a lifetime.”

To learn more about Prudential’s Financial Wellness offerings for the workplace, visit www.prudential.com/employers/financial-wellness.

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Categories: Financial News

DOL Offers Relief for Plan Sponsors Due to Severe Storms

Thu, 04/11/2019 - 16:50

The Department of Labor (DOL) has published employee benefit plan compliance guidance and relief for victims of the 2019 Nebraska Severe Winter Storm, Straight-line Winds, and Flooding (per FEMA-DR- 4420); 2019 Iowa Severe Storms and Flooding (per DR-4421); and the 2019 Alabama Severe Storms, Straight-line Winds, and Tornadoes (per FEMA-DR-4419).

The Department says it recognizes that a natural disaster may impede efforts by plan fiduciaries, employers, labor organizations, service providers, and participants and beneficiaries to comply with the Employee Retirement Income Security Act (ERISA) over the next few months. So, it will not—solely on the basis of a failure attributable to a covered disaster—take enforcement action with respect to a temporary delay in forwarding participant loan repayments or contributions to plans.

In addition, if a plan sponsor fails to follow procedural requirements for plan loans or distributions imposed by the terms of the plan, the DOL will not treat it as a failure if, that failure is solely attributable to the covered disasters, the plan administrator makes a good-faith diligent effort under the circumstances to comply with those requirements, and the plan administrator makes a reasonable attempt to assemble any missing documentation as soon as practicable.

The guidance also provides relief for timing of blackout notices and processing benefit claims.

Form 5500 Annual Return/Report filing relief is provided in accordance with the relevant covered disaster news releases listed on the IRS disaster relief website under “Recent Tax Relief.”

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Categories: Financial News