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Insight on Plan Design & Investment Strategy
Updated: 6 hours 32 min ago

Research Briefs Help Participants With Retirement Planning

Tue, 2019-10-15 11:52

Financial Finesse has released the latest installment in a series of retirement literacy research briefs published in partnership with the Society of Actuaries Aging & Retirement Strategic Research Program.

The first brief in the series explores retirement from a holistic perspective looking at non-financial issues. The second brief looks at retirement planning and the things to consider throughout one’s career. The third brief explores the types of expenses that may occur in the first year of retirement.

The latest brief is a resource to help individuals better understand how different retirement planning tools are used to estimate how much money they should be saving to retire comfortably with a reasonable assurance of meeting their future spending needs.

Employers may provide employees with access to the briefs; however, the briefs also can inform plan sponsors about how to approach retirement planning with retirement plan participants.

The latest brief, “Retirement Planning Tools,” explains that retirement planning tools are designed differently to be able to answer various types of retirement scenarios, and given the complexity of the variables that comprise one’s retirement income needs, it is unlikely that any single retirement planning tool will be able to do it all. Perhaps retirement plan participants should be offered more than one retirement planning tool.

In addition, the brief says tools should be user-friendly, and to avoid bias, the source of the retirement planning tool should be considered when evaluating options.

The brief discusses the difference in stochastic modeling (simulating volatility) to forecast probabilities and ranges of future values and a fixed or deterministic approach to arrive at a more specific outcome. With a deterministic approach, average values are assumed for unknown variables, like investment rate of return, in order to estimate future retirement outcomes. It is important to understand which assumptions each retirement planning tool uses.

A simple retirement calculator will typically have fewer questions and rely on more assumptions in its result, according to the brief. These calculators are meant to give a more general type of answer. Given their limited objectives, they avoid asking very detailed questions about current or future spending habits or whether individuals have any specific goals in retirement that would need funding. An intermediate level retirement calculator will go into more detail, but it may also be more difficult to use. It will ask a variety of detailed questions about current finances and future goals, and it may also allow for some variation in some of the variables, such as rates of return on investment, tax rates, longevity, etc.

Advanced retirement calculators may be geared more toward use by financial professionals or those who have a significant amount of personal finance experience. Featuring the ability to evaluate many adjustable inputs and outcomes, these tools often employ stochastic models that evaluate a variety of random outcomes, such as prolonged market downturns, higher taxes or health care costs, variations in spending patterns, and so forth. Consequently, the output from these tools often illustrates the probability of achieving various retirement goals, rather than a simple “number” in terms of how much to save, invest, or spend for retirement.

For each type of calculator, the brief suggests ideal users.

Links to each brief may be found here.

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Categories: Industry News

IRS Releases 2019-2020 Priority Guidance Plan

Tue, 2019-10-15 11:45
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The IRS has issued a new 2019-2020 Priority Guidance Plan, which sets forth guidance priorities for the Department of the Treasury and the IRS.

The 2019-2020 Priority Guidance Plan contains guidance projects that will be the focus of efforts during the 12-month period from July 1, 2019, through June 30, 2020 (the plan year). So, some items have already been completed. For example, the plan notes that final regulations have been issued regarding hardship withdrawals and regarding missing participants and uncashed checks.

The IRS says the published guidance process can be successful only if it has the benefit of the insight and experience of taxpayers and practitioners who must apply the internal revenue laws. It invites the public to continue to provide comments and suggestions as the agency develops guidance throughout the plan year.

Listed in the new Priority Guidance Plan are regulations updating life expectancy and distribution period tables for purposes of the required minimum distribution (RMD) rules. Current legislation being considered by the Senate would push RMDs to a later age.

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The plan also includes guidance on student loan payments and qualified retirement plans and 403(b) plans. Student loan repayment programs have gained interest by employers as well as lawmakers. In August 2018, the IRS issued a Private Letter Ruling sanctioning a student loan repayment program tied to the 401(k) plan of employer Abbott.

The IRS is still working on regulations on the definition of governmental plan, regulations updating rules for service credit and vesting, and regulations on the treatment of future interest credits and annuity conversion factors under a hybrid defined benefit plan and adjustments under a variable annuity plan for purposes of satisfying certain qualification requirements, among other things.

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Categories: Industry News

Participants Continue Movement Out of Equities

Tue, 2019-10-15 09:41
The third quarter saw 401(k) investors continue to trade money from equities to fixed-income funds, according to the Alight Solutions 401(k) Index. This marks the seventh consecutive quarter where net trades favored fixed-income funds over equity funds.

During the third quarter, 401(k) investors traded 0.61% of their starting balances. Year-to-date, they have traded 1.77% of their balances. Fifty-four of 64 trading days in the third quarter had net trading dollars moving from equities to fixed income. Net equity trading days only totaled 10. Year-to-date, 401(k) investors have moved the majority of their money into fixed income on 161 days, whereas they moved the majority of their money into equities on only 27 days.

In the third quarter, there were only eight above-normal trading days. Year-to-date, there have been 24.

Asset classes with the most trading inflows in the third quarter were bond funds, taking in $605 million, or 47% of the inflows, followed by stable value funds ($394 million, 30%) and money market funds ($207 million, 16%). Asset classes with the most trading outflows were large U.S. equity funds ($643 million, 49%), company stock ($359 million, 28%) and small U.S. equity funds ($109 million, 8%).

In the third quarter, equity markets were mixed. U.S. bonds were up 2.3%. Large U.S. equities gained 1.7%. Small U.S. equities fell by 2.4%, and international equities lost 1.8%.

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Categories: Industry News

TRIVIAL PURSUITS: Things You May Not Know About Daddy Longlegs

Mon, 2019-10-14 12:25

Whether you call them “granddaddy longlegs,” “daddy longlegs,” “cellar spiders” or “harvestmen,” the creatures with a tiny body and eight very long legs are not spiders. However, it is an arachnid—just as scorpions are.

A common myth is that daddy longlegs are the most venomous creatures, but cannot bite humans because of their short fangs. The common daddy longlegs that we mostly see does not have venom.

There is a less common daddy longlegs spider, but because they rarely bite, scientists have not studied the myth. However, Nature reports that the team of the Discovery Channel show “Mythbusters” got an expert to milk the venom and compare its effect on mice (a standard test for venoms) to the effect of the same amount of black widow venom. Black widows were far more deadly. In addition, Adam Savage allowed himself to be bitten by a daddy longlegs—not only was it able to bite him, but he barely felt the bite and suffered no ill after effects.

Back to the daddy longlegs arachnids, they have a tendency to shed their legs. They will voluntarily shed legs to get away from predators, but sadly, a new appendage does not grow back if it is already full grown. The reason this is sad is their legs are also nerve centers, according to ThoughtCo. Through its legs, the daddy longlegs may sense vibrations, smells and tastes, so pulling the legs off may be taking away a sense or senses.

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Categories: Industry News

New Lawsuit Highlights Importance of Cybersecurity for Retirement Plans

Mon, 2019-10-14 12:23

A former participant in the Estee Lauder 401(k) plan has sued the plan sponsor and plan providers for failing to safeguard her retirement account.

According to the complaint, in September and October 2016, an unknown person or persons stole the participant’s retirement savings by withdrawing a total of $99,000 in three separate unauthorized distributions from her account in the plan.

The lawsuit names as defendants Estee Lauder; Alight Solutions, whose predecessor Hewitt Associates was the recordkeeper to the plan at the time; and State Street Bank & Trust, the plan’s custodian.

Alight Solutions said it has no comment. Estee Lauder and State Street did not respond to a request for comment.

The complaint says by June 30, 2016, the participant’s account balance in the Lauder Plan had grown to more than $90,000. However, in October, she received by mail two documents entitled “Confirmation of Payment – 401(k) Savings Plan,” one of which stated the plan had distributed $37,000 from the participant’s account to a checking account at Suntrust Bank. The second stated that the plan had distributed $50,000 from her account to a checking account at TD Bank.

In addition, when the participant received by mail her plan account statement for the third quarter of 2016, it showed a withdrawal of $12,000. She received no confirmation letters for this withdrawal, but learned from Estee Lauder that the $12,000 had been distributed on September 29, 2016, to an account at Woodforest National Bank.

The complaint says the participant never requested or authorized any distribution from the plan and never had any account at Woodforest National Bank, Suntrust Bank, or TD Bank.

Upon receiving the first confirmation of payment, she telephoned the Hewitt Customer Service Center at the number on the confirmation form and was informed that her remaining account balance was $3,791. The Customer Service Center stated that it would investigate the unauthorized distributions, but never provided the participant with any information regarding its investigation.

According to the complaint, between October 24, 2016, and January 2, 2017, the participant made at least 23 calls to the Customer Service Center regarding the unauthorized distributions. Ultimately, it informed her that it had completed its investigation, no money had been recovered, and her plan account would not be made whole for the losses.

On or about October 25, 2016, the participant reported the unauthorized distributions to the San Francisco Police Department and the FBI, and placed a fraud alert on her credit file with Equifax.

On November 7, 2016, State Street emailed her and requested that she complete an “Affidavit of Forgery” for each unauthorized distribution. The participant returned the requested affidavits the same day, but State Street did not contact her further.

The lawsuit claims that the defendants breached their fiduciary duties of loyalty and prudence by causing or allowing the unauthorized distributions of plan assets; failing to confirm authorization for distributions with the plan participant before making distributions; failing to provide timely notice of distributions to the plan participant by telephone or email; failing to identify and halt suspicious distribution requests, such as requests for multiple distributions to accounts in different banks; failing to establish distribution processes to safeguard plan assets against unauthorized withdrawals; and failing to monitor other fiduciaries’ distribution processes, protocols and activities.

In addition, Estee Lauder is being sued for not timely providing plan documents that were requested by the participant’s lawyer.

Among other things, the lawsuit seeks an order that the defendants restore to the participant’s plan account $99,000, plus investment earnings thereon from the distribution dates to the date of judgment.

The case highlights the importance of provider process reviews regarding cybersecurity. There are also things retirement plan sponsors and participants can do to safeguard accounts.

Andy Adams and Jay Schmitt, with Strategic Benefits Advisors, have provided information about what makes retirement plan data vulnerable and actionable steps to protect it from fraud.

The cybersecurity threat is so pervasive that lawmakers have asked the Government Accountability Office (GAO) to examine the cybersecurity of the U.S. retirement system.

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Categories: Industry News

DC Plans 3.0 Will Really be Tailored to Individual Situations

Mon, 2019-10-14 11:04
In a new report, “Shifts for the DC Organisation of Tomorrow,” Willis Towers Watson’s Thinking Ahead Institute outlines what it calls defined contribution (DC) plans version 3.0. The findings are based on surveys and interviews of 10 leading companies on four different continents with a median size of $80 billion in assets serving a base of 900,000 participants.

“Target-date funds (TDFs) offered what was the beginning of customization for defined contribution plans, by taking into account an individual’s age,” Bob Collie, head of research at the Thinking Ahead Institute, tells PLANSPONSOR. “As technology advances to address each individual’s situation, then DC plans will begin to really be tailored to individual situations.”

The new research also asserts that the DC version 2.0 is now emerging, with a focus on retirement income solutions. Collie says version 3.0 will be customized by “hyper-customization and integrated whole-of-life wealth management” that takes into account all of a person’s savings.

“The need for change has been clear for a long time,” Collie says. “Even 10 years ago, we talked of a version 2.0 of DC that was built around the purpose of providing income throughout retirement. It’s only recently that real progress has started on this front. But momentum has been building, and we expect things to develop quickly from here.”

The institute also expects DC plans to embrace the growth of master trusts and other multiple-employer platforms.

Collie adds: “DC has become the world’s dominant retirement savings vehicle, and work is needed if it will live up to the responsibilities of this role. The next few years will be pivotal ones in the development of retirement plans all around the world.”

The report says that “post-retirement income arrangements are primitive” and that there is a need for “longevity tail insurance.”

The Thinking Ahead Institute also expects that the need for retirement plan providers to keep up with technological developments will squeeze out small players.

The institute says there is a real problem with the coverage gap in the U.S., with roughly half the private-sector workforce not participating in an employment-sponsored retirement plan. People are also not saving enough, and there is a need for plans with automatic enrollment to increase the deferrals. Plans also need to address leakage, as people move from one job to another, the institute says.

Ninety-three percent of the respondents to the survey and interviews said their organizations make effective use of their investment managers. Collie says he believes the reason they did not express concerns about their investment lineups is because there has historically been so much emphasis on the investments offered in a plan.

With the growth of master trusts and multiple employer plans, the institute believes more retirement plan sponsors will be able to outsource many functions of their plans. “This development will offer employers more choice in what role they’d like to play in the provision of retirement benefits,” the institute says in its report. “It will, most likely, become easier to outsource not only merely investment or administrative functions, but also the key fiduciary role of operating a plan.”

Collie also believes that because technology will enable customization for each participant, the pendulum will move away from set-it-and-forget TDFs and automatic enrollment to obtaining more personal information from each participant—resulting in more engaged participants.

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Categories: Industry News

PBGC Announces Premium Rates for 2020

Mon, 2019-10-14 10:48

The Pension Benefit Guaranty Corporation’s (PBGC) webpage has been updated to provide the 2020 premium rates for single-employer and multiemployer defined benefit (DB) plans.

For single-employer plans, the per-participant flat-rate premium is $83, up from $80 in 2019. The variable-rate premium per $1,000 in unfunded vested benefits (UVBs) is $45, up from $43, with a per participant cap of $561, up from $541.

For multiemployer plans, the per-participant flat-rate premium is $30, up from $29 in 2019.

The PBGC’s website shows historical rates from 2007. The agency notes that there are no scheduled increases (other than indexing) for years after 2019. And, it reminds DB plan sponsors that for certain distress or involuntary terminations, a special termination premium must be paid to the PBGC for three years.

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Categories: Industry News

Club Vita Introduces Mortality Tables Considering Geography

Mon, 2019-10-14 09:57

Club Vita, which specializes in longevity analytics, has made its longevity model available in the U.S.

Subscribed users can receive full mortality tables for every combination of pension amount, ZIP code and collar type. Each table is a set of probabilities for someone of a certain age to survive for one year. Each table is called a “VitaCurve”—hence the full model being called “VitaCurves.”

Club Vita says the nine-digit ZIP code, or ”ZIP+4 code,” offers significantly more detail on geographical differences in life expectancy than other methods.

Earlier this year, Mercer announced it’s the first consulting firm to offer Club Vita’s longevity risk reporting to its clients in the United States. As part of their five-year agreement, Mercer’s pension plan clients in the United States will have access to Club Vita’s proprietary longevity assumptions, analytics and reporting, which will help them to help better assess and manage their plans’ longevity risk. In addition, the aggregate enhanced data set will also be used by Mercer’s consulting teams to provide more powerful insights to help with client decision making. 

Club Vita has produced a white paper, “Zooming in on ZIP Codes,” which explains how integrating ZIP codes and identifying other socioeconomic factors can help pension plan sponsors have a better handle on the life expectancy estimates for their participants.

The longevity model is a technical actuarial model for calculating current life expectancy (generally for participants of defined benefit (DB) plans). The calculations are based on three different factors: ZIP code (preferably at the ZIP+4 level), pension amount and blue/white collar. Club Vita plans to include more factors in subsequent updates of the model. This year’s model is based on 2014 to 2016 data.

The full longevity model is available to subscribers of Club Vita’s services. Subscribers can be pension plans, insurance companies, asset managers or other industry stakeholders. Subscribers can work directly with Club Vita to access the model, or through an adviser who has signed up to license the model.

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Categories: Industry News

SURVEY SAYS: Allowances and Teaching Money Management

Mon, 2019-10-14 04:30

Last week, I asked NewsDash readers, “Did you get an allowance as a child, and in coordination with that, did your parents teach you how to manage your money?” I also asked, “Did you regularly save any of your allowance?”

More than six in 10 responding readers (60.9%) received an allowance as a child, while 39.1% did not. Yet, more than half (52.3%) said their parents did not teach them about how to manage their allowance.

Still, nearly six in 10, (59.1%) said they regularly saved some or all of their allowance.

In comments about allowances and teaching children about money management, readers explained the money management lessons or advice their parents gave them. Several noted that they learned money management skills when they got their first jobs as a teenager—as was my experience. I was surprised to find that many responding readers were taught—and taught their children—like me, that household chores were part of maintaining a family household and the reward was having basic necessities met. Editors’ Choice goes to the reader who said: “The mint makes it first. It’s up to you to make it last.” Clever.

Thank you to all who participated in our survey!


I would save for a specific purchase, then spend it all on that item or that trip to Disneyland.

Sadly my parents never broached the subject. Rather surprising since they were young during the Depression and very frugal and financially risk averse. I suspect they thought we’d learn by example rather than instruction.

Allowances are not necessary, but the correct point of view is. I never received an allowance but from my modest early jobs I always saved most of my take-home pay, resulting in early and sustained wealth that most would find envious.

Growing up on a farm, we were not given an allowance. We did have lots of chores and jobs to do though. According to my Dad, our “allowance” was having a home to eat and sleep in and clothes to wear no matter what the season.

I only got my allowance when I completed my chores. They opened up a savings account for me when I was 4 years old and I had bank deposit booklet to keep track of my savings. I loved going to the bank to make a deposit because they gave out suckers.

My allowance wasn’t much more than pocket change and finances weren’t talked about. My kids have no allowance and we talk about finances a lot with our kids. Chores are a part of living together, not something for an allowance. If they want extra money they can do extra work (usually at their grandparents’ house or the stuff we’d pay someone else to do, like mow the lawn) and they’ll save that money for things we won’t buy.

I saved money earned working as a babysitter. My dad always said we got paid our allowance every time we put our feet under the dining room table!! We learned to do house and yard work without being bribed and to take pride in our work. The work ethic is still with me today.

My first allowance was a quarter a week, which I then used to open a savings account. Five years later I bought my first car using everything I had saved, and those financial lessons have stayed with me until this day.

I have a fond memory of taking my little book to the bank when I made a deposit. Passbook Savings – wow that’s a thing of the past.

The older I got the more I learned to save. I saw the benefit of saving for emergencies and larger ticket items.

Small potatoes compared to today’s allowances

My parents made me track every cent – save 10% and give away 10% – and I had to use my allowance to “pay my bills” too. I was buying toilet paper for my bathroom when I was 10. It may have been a lot but it sure was an effective teaching tool!

Although we did not get an allowance, we were taught to save. The rule was “save half/spend half”. The save half was to save for college. The ‘spend’ half might also be ‘saved’ more short-term, to accumulate it to be able to spend it on something more costly. When grandma gave us $5 for birthday or Christmas, we made a trip to the bank to deposit at least half. I was able to graduate from college without any debt. Unfortunately, kids (and many adults) don’t understand the concepts of living within your income and saving.

The mint makes it first. It’s up to you to make it last.

My allowance was $1 a week, so not a lot to work with. I saved for more expensive items that my parents would not buy me, like Levi’s jeans. Times have changed, but I did learn to appreciate the value of saving toward a goal.

I wish my parents taught me about personal finance.

I did not get an allowance as a child, I earned my own money when I got a job at 14. That taught me about saving, money management and budgeting. It also teaches a little bit of independence as well.

Allowance was minimal, like 25 cents. I was expected to do chores as part of the family. When I wanted to take a trip at age 13, I was told I had to earn half, and was paid $5 to clean the house every week as if I were paid help. That taught me more about saving and managing than 25 cents a week ever could. I think when parents give their children large allowances, it never lets them want for anything and the value of money is what is lost. Until you have to save for something you desire, it doesn’t make sense.

Your personal example is the best way to teach. Frugality, patience, consideration — all good words.

I started working at 13 and had a passport book to manage monitor my savings account. Circa 1980

With 5 kids and 1 working parent, we didn’t receive an allowance but still had chores. Our parents taught us budgeting, work ethic and family values by example. When we were old enough to work, we employed those lessons. We’re probably some of the lucky few who have built retirement nest eggs.

I didn’t receive an allowance. My father would pay us for work that was completed. He taught us that is wasn’t about how much you make, but how much you save. That advice has served me very well.

The best money management lesson I had was in college when my $80 textbook became $10 for beer money.

I received money from relatives for my birthday and Christmas which my parents made me deposit in the bank. I never withdrew that money to buy something for myself. That money was eventually used to pay for books and entertainment in college. As a child, I participated in a Christmas club at my local bank. My parents put in $1 week and I ended up with $50 two weeks prior to Christmas and used the money to buy gifts for my family. Although I did not receive an allowance, I was still responsible for household chores.

So, even though I did not receive an allowance, I did start babysitting at the age of 10 (yes I was that responsible back in the early 70’s). I saved all of that money and at the age of 18 I had saved about $4,500. Enough to pay cash for my first car, but my dad informed me I needed to get a loan for the car so I could build my credit and save my own money for the personal property taxes and registration.

For my kids, I put them on a salary- $20/week and the salary must go into an investment account. Special projects were available for spending money. To use investment dollars, they had to debate the value of what they wanted to use it for and the value of college. My kids paid their way through college – no loans. The investment account helped as did budget guidance. They remain debt-free and professionally employed.

We bought savings stamps that converted into bonds this was done at school and that would have been our allowance per se. My child did receive an allowance and was required to save 25% each week when she graduated from college, she had money in the bank and no debt. I am still a saver to this date and am glad I chose to do so

My dad said I could have an allowance and even let me name an amount. Then he sat me down with a piece of paper and proceeded to list all of the things I’d have to pay for with my allowance and when I ended up owing him money we stopped that game! Having to do household chores is a responsibility of living in the house and doing a good job is expected. There are other ways to teach your children money management, budgets, saving for a goal.

I think a child should get an allowance, with the stipulation that 10% of it goes into a savings account every week, and take the child to the bank to do it. I think that would start the child on the right track!

My father matched any part of my allowance that I put in my savings account. I could withdraw the match after a year in the bank. As a teen, my father invested my savings and his match in a mutual fund, so I could learn about earnings and compounding. I used part of that money to help pay for my wedding!

Money management at any age takes discipline…something that appears to be lacking in today’s society.

I grew up understanding the important of saving and I am trying to teach my teenagers the same thing. It seems harder to save than ever, especially when anything their little hearts’ desire can be deliver same-day from Amazon! In our day, we had to get a money order and wait six to eight weeks!

Our “allowance” was more reward for hard work. “Dad, can I have $3 to go to the movies? Sure, but my car could use a good washing.” More work ethic teaching than money management.

I received .25 cents a week – hey, it was the 60’s. Every four weeks I would give my dad my four quarters and ask for a dollar bill. He would always smile and give it to me with a wink while commenting to my older siblings about what a good saver I was and maybe they could learn something from me.

My allowance went into a piggy bank, and occasionally emptied for deposit into a bank account. When I got my first job as a teenager, I was advised to put half my paycheck into savings.


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: Industry News

Test Reader Responses

Sat, 2019-10-12 08:09
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Categories: Industry News

Retirement Industry People Moves

Fri, 2019-10-11 12:55

Art by Subin Yang

TRA Acquires Retirement Consulting and Administration Firms

The Retirement Advantage, Inc. (TRA) has acquired two retirement plan consulting and administration firms: Benefit Strategies, Inc. of Roanoke, Virginia (BSI) and Scholz & Friends Enlightened Retirement Group, Inc. (S&F) of San Antonio, Texas.

“BSI and S&F are two strategic acquisitions for us. Both firms will allow us to further expand TRA’s consulting capabilities and extend our national footprint,” says Matt Schoneman, president of TRA. “We are very excited to have the knowledgeable and experienced staff members of each company join our firm. With the addition of the staff and our continued investment in technology, cybersecurity, automation, sales, and service capabilities, we will further enhance the already excellent customer service experience we provide to our clients and recordkeeping and financial partners.”

“The timing and locations of these opportunities couldn’t have been more ideal,” comments Jeff Schreiber, TRA’s director of Sales. “These are two well-respected retirement plan providers in two of our designated growth markets. TRA’s business is providing service to retirement plans of all sizes, and we look forward to supporting our newest clients and helping their employees reach their retirement goals.”

Over the past eight months, TRA has acquired and successfully integrated Gillespie and Company of Virginia and Quality Pension Services, Inc. in Chico, California. “We are currently offering complimentary and confidential business assessments for TPA business owners who might be asking ‘Is it time to sell?’ Whether an acquisition proves to be a good fit or not, exploring the possibility is a great exercise to contemplate the future of a business. It never hurts to talk,” says Schoneman.

AIG Elects CEO of Institutional Investment Unit

American International Group, Inc. has elected John Panagakis as chief executive officer, First Principles Capital Management, LLC (FPCM), the unit of AIG Investments that serves institutional clients with expertise across the global fixed income securities and derivatives markets. He will be based in New York and report to Douglas Dachille, executive vice president and chief investment officer of AIG.

“John is a recognized leader in financial services and investments. He has an extensive track record in all aspects of asset management and distribution, along with significant operational and leadership experience,” says Dachille. “His proven expertise in the development and distribution of investment services for institutional investors and intermediaries will be an advantage for FPCM in the market.”

Panagakis joins FPCM from TIAA Nuveen, where he spent more than 30 years in a variety of asset management, operational and advisory leadership roles, most recently as executive vice president, head of International Advisory Services. While at TIAA Nuveen, he transformed the organization from a U.S.-focused asset manager to a global presence with international distribution, product and marketing offerings. During his tenure, he also held numerous other leadership roles that included executive vice president, head of Global Institutional Business Development; managing director, head of Institutional Distribution; and director, Northeast Region Institutional and Individual Services.

Schroders Announces Changes to North America Leadership Team

Schroders has made changes to its country leadership team with the announcement of its North America CEO.

Karl Dasher, currently CEO of North America and co-head of Fixed Income, will leave the firm at the end of the year. Marc Brookman, who joined Schroders earlier last year as deputy CEO of North America, will take over as CEO of North America. Philippe Lespinard, who has worked with Karl Dasher for the past 10 years on the fixed income investment platform, will continue as head of Fixed Income reporting to Charles Prideaux, global head of Investment.

Dasher will work with Brookman and Lespinard on the leadership transition throughout the remainder of this year and will be available as an adviser to the firm from January 2020. Brookman will report to Lieven Debruyne, global head of Distribution.

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Categories: Industry News

IRS to Hold Public Hearing About Proposed MEP Rules

Fri, 2019-10-11 10:22

The IRS and Treasury have issued a notice of public hearing on proposed regulations relating to the tax qualification of plans maintained by more than one employer, often referred to as multiple employer plans (MEPs).

The public hearing is being held on Wednesday, December 11, at 10:00 a.m.  The IRS must receive speakers’ outlines of the topics to be discussed at the public hearing by Monday, November 25.

In July, the Department of Labor (DOL) released final rules on Association Retirement Plans permitting employers to connect with associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide to provide retirement plans for their employees. While considered a positive step in closing the retirement plan coverage gap, some were still disappointed that the final rules stopped short of allowing for what is called “open multiple employer plans,” which would allow employers without a common nexus to band together to offer retirement plans for employees.

Allowing open MEPs, however, is a key component of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). That bill remains stalled in the U.S. Senate.

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Categories: Industry News

Court Orders ESOP Fiduciary to Complete Fiduciary Training

Fri, 2019-10-11 10:16

The U.S. District Court for the Eastern District of Tennessee has approved a settlement between the U.S. Department of Labor (DOL) and Big G Express Inc., Stephen Thompson, and David Nolan involving the company’s employee stock ownership plan (ESOP).

In accordance with the consent judgment, Big G Express—a Shelbyville, Tennessee-based trucking company—paid $454,545 in restitution to the plan. The Department also assessed a civil penalty of $45,454 against the defendants. 

In addition to the reimbursement to the ESOP, the court ordered Thompson, the ESOP’s former trustee, to be enjoined permanently and restrained from serving as a fiduciary, trustee or service provider to any Employee Retirement Income Security Act (ERISA) plan. The court also ordered Nolan, Big G Express’s chief financial officer, to complete 12 hours of fiduciary training within 12 months of his appointment as a fiduciary or service provider to any employee benefit plan.

The court’s action follows an investigation by the DOL’s Employee Benefits Security Administration (EBSA) which found that in October 2009, both Thompson and Nolan—acting as fiduciaries for the ESOP—caused the plan to pay more than fair market value when it purchased Big G Express common stock from Nolan and other shareholders.

The judgment also orders that Big G Express Inc., Thompson, and Nolan not seek direct or indirect contribution or indemnification from the ESOP either to pay the judgment or to pay its legal expenses.

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Categories: Industry News

Platform Integrates Consumer Accounts Employee Benefits

Fri, 2019-10-11 08:20

Businessolver, a provider of software-as-a-service (SaaS)-based benefits administration technology and services, launched what it says is the first fully integrated consumer accounts benefits platform within the HR and benefits industry—MyChoice Accounts.

The platform allows employees to manage all of their benefits, including consumer accounts, such as health savings accounts (HSAs), flexible spending accounts (FSA), commuter benefits, fitness reimbursements and more from one holistic technology platform, Benefitsolver. Employees can enroll in these benefits year-round, and within the same system and mobile app they can submit claims, check balances, view employer contributions and more.

Users are issued just one debit card, which can be used for purchases from multiple consumer accounts. It automatically deducts from the relevant account based on the purchase. Submitted claims are processed in real-time.

With the solution, employees have continued access to the MyChoice Recommendation Engine and Businessolver’s AI-powered personal benefits assistant, Sofia, ensuring they have the information and guidance they need to make informed choices and continually engage with their benefits in one place throughout the year.

For employers, the platform removes the need to manage multiple systems and vendors for employees’ consumer accounts. It provides simplified funding and financial reconciliation, and it streamlines the payroll deduction process as well as reporting, since it features automated data exchange.

The solution improves data security because all data remains within the Benefitsolver platform. And, opening HSAs is simplified and streamlined, vastly reducing the need to reconcile accounts after elections have been made.

To make this experience possible, Businessolver has partnered with UMB Bank as its custodial banking partner.

More information can be obtained from the Businessolver website.

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Categories: Industry News

A Little Friday File Fun

Thu, 2019-10-10 13:13

In Jacksonville, Florida, a woman stopped to get gas before work. While at the pump, a deer leaped over her and hit her in the head with its hoof. The woman said she thought she was being robbed. She is doing fine.

In Spain, a police vessel began pursuing a speedboat “with four people on board that was suspected of transporting drugs” in waters off the southern coast of Spain, a police statement said. During the chase, the two vessels collided, causing three police officers to fall into the sea as their boat “span out of control.” According to the AFP, the officers were pulled to safety—by the drug-smugglers they were chasing. Despite the assist, when police found three ton of hashish in the water nearby, the rescuers were arrested for drug trafficking.

In Moscow, Russia, a man has filed a lawsuit against Apple for moral harm claiming that an iPhone app had turned him gay, according to a copy of the complaint seen by AFP. The man filed suit asking for one million rubles ($15,000) after an incident this summer in which a cryptocurrency called “GayCoin” was delivered via a smartphone app, rather than the Bitcoin he had ordered. The GayCoin cryptocurrency arrived with a note saying, “Don’t judge until you try,” according to the complaint. “I thought, in truth, how can I judge something without trying?” the man said in the lawsuit. “Now I have a boyfriend and I do not know how to explain this to my parents” he added, alleging that Apple pushed him towards homosexuality through manipulation.

In Japan, scientists found that painting zebra-like stripes on cows significantly reduced attacks by biting flies, providing a means of defending livestock against flies without pesticides. The study’s inspiration came from past experiments that suggested the striped coats of zebras―and black and white surfaces in general―attracted fewer flies than the solid black color of the Japanese bovines that were studied. The Huffington Post reported that the researchers found the zebra-painted cattle were bitten nearly 50% less than solid-black animals. Flies are less likely to land on black and white surfaces due to the polarization of light, which impairs their perception, according to the study published in the journal PLoS One.

The terms “fake news,” “slam-dunk” and “promposal” have made it into the Oxford English Dictionary; however, it notes that “fake news,” although popularized by the president, actually dates back to 1890.

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Categories: Industry News

WEX Health to Host HSA Education Event

Thu, 2019-10-10 13:07

WEX, a financial technology service provider, announced its health division will host a free live-streamed panel discussion aimed at educating Americans on the uses, benefits and tax advantages of health savings accounts (HSAs).

The discussion will take place at 3 p.m. EST on National Health Savings Account Awareness Day (HSA Day), Tuesday, October 15. Financial expert and 2019 HSA Day education ambassador Jean Chatzky will moderate the panel. WEX’s national partners, including providers, employers, financial institutions, fintechs and more, will livestream the panel discussion to their audiences.

The live-streamed panel discussion will take an in-depth look at how HSAs can be used for everyday health care expenses such as doctor visits, co-pays, prescriptions and even orthodontia, as well as a long-term retirement plan and safety net. A variety of HSA knowledge leaders will comprise the panel along with Chatzky.

“The majority of Americans who can take advantage of an HSA aren’t doing so, and we want to help change that,” says Robert Deshaies, president, Health, WEX. “As a spending account that offers a tax benefit—and oftentimes an employer match—an HSA is a tremendously powerful way to help manage health care-related expenses.”

WEX announced the launch of its new HSA awareness initiative earlier this year.

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Categories: Industry News

Investment Product and Service Launches

Thu, 2019-10-10 12:27

Art by Jackson Epstein

Mesirow Financial Presents Third Mutual Fund and Managed Account Program

Mesirow Financial (Mesirow) has launched its third mutual fund, the Mesirow Financial Enhanced Core Plus Fund, as well as a participant managed account program, the Mesirow Financial Precision Retirement.

Led by Mesirow’s Core Fixed Income team, the new fund will leverage the expertise from two of Mesirow’s other institutionally focused investment and alternative strategies—Currency Alpha and High Yield Fixed Income—to offer investors a differentiated strategy. 

“In today’s low-yield environment, investors are re-thinking fixed income allocations and searching for ways to achieve sufficient income and manage interest rate risk,” says Peter Hegel, head of the Core Fixed Income team at Mesirow. “By incorporating high yield and active currency, the Enhanced Core Plus Fund introduces asset classes that have low or negative correlations to major equity and fixed income asset classes, while also offering investors the potential for higher yield. We believe this is a combination that can provide attractive risk-adjusted performance over a market cycle.” 

The Mesirow Financial Precision Retirement program is designed to enhance financial wellness and offer professional portfolio management for retirement assets.

Mesirow Financial has also partnered with fintech provider Financial Soundings to leverage its Retirement Planning Insights program and expand upon the offering to include participant managed account functionality. 

“As a leader in custom portfolio and fiduciary services, Mesirow Financial continues to develop solutions to meet the evolving needs of retirement plan stakeholders. We built this cutting-edge managed account program with Financial Soundings to deliver a highly personalized solution that proactively engages participants and constructs portfolios to address participants’ specific set of circumstances,” says Michael Annin, head of Investment Strategies at Mesirow Financial.

BPAS Partners with Lincoln Financial on Stable Value Solution for VEBAs

BPAS has launched a custom guaranteed stable value solution with Lincoln Financial Group. The newly-launched BPAS Stable Value option is an elite cash product for BPAS Fiduciary Services Voluntary Employees’ Beneficiary Association (VEBA) plans.

According to Greg Woods, senior vice president of BPAS Fiduciary Services, “We are thrilled to team up with Lincoln Financial Group on this custom product offering for our VEBA clients. Lincoln’s financial soundness as a stable value provider, along with its dedication to serving the needs of the retirement participants made it a solid choice as a partner. This product will allow risk-averse savers to earn an industry best cash-like return as they save for their retirement medical expenses.”

“We are proud to partner with BPAS to provide our Stable Value option to its clients. Stable Value is a critical component of any retirement plan, and will become even more important as Baby Boomers approaching retirement increasingly look for capital preservation,” says Ralph Ferraro, senior vice president, head of Product, Retirement Plan Services, Lincoln Financial Group.

A VEBA is a tax-exempt, irrevocable Trust under Section 501(c)(9) of the Internal Revenue Code. This type of trust is used as a vehicle for employers to fund certain types of benefits, including funded health reimbursement accounts (HRAs). 

MSCI Builds Indexes to Track Long-Term Megatrends

MSCI Inc. has launched five thematic indexes tracking the performance of long-term megatrends which are widely expected to impact society and the economy in the future.

The new thematic indexes are useful for investors focused on the rise of smart cities, the digital economy, future mobility, disruptive technology and Millennials. 

MSCI constructs these thematic indexes with scalable and flexible methodologies. The index methodology systematically identifies companies based on the linkage of their business lines and business description information with the theme being modeled. MSCI derives an economic relevance score to assess the strength of that link to select the final index constituents.

This launch adds to MSCI’s existing thematic index suite of four indexes focused on cyber-security, robotics, ageing societies and efficient energy.  

Stephane Mattatia, head of Index Products EMEA and Global Thematic Index Products at MSCI, comments“It is widely acknowledged that there are a number of megatrends which will significantly impact the global economy and societies around the world, and we’re seeing increasing demand from investors seeking to align their investments to these long-term themes. This new suite of indexes provides them with tools they need to assess and measure these structural trends.”

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Categories: Industry News

States Have Made Progress in Partly Mitigating Funding Risk

Thu, 2019-10-10 12:22

Despite investment gains in 2018, U.S. states have made relatively slow progress since the Great Recession in improving funded ratios, with S&P Global Ratings’ most recent survey data indicating that the average weighted pension status across state plans was 72.5% compared with 83% in 2007.

However, the agency says looking at the funded ratios alone falls short of understanding whether or not states have made progress toward improving the overall pension funding picture.

In recent years, many states have made conservative changes to actuarial methods and assumptions that, while hindering actuarial funding ratios, show a more realistic assessment of market risk tolerance for states, thus better enabling them to make funding progress. S&P Global says it has also witnessed that many states have learned lessons from funding discipline mistakes over the past ten years and better understand sources of pension liability and costs, and have therefore demonstrated a commitment to actuarially based funding.

In this sense, states may be better prepared heading into the next recession despite weaker funded ratios, yet according to the agency, many plans’ current contributions, discount rate assumptions, and investment allocations still fall short of fully mitigating the market volatility that increasingly appears to lie ahead.

According to S&P Global’s report, Minnesota and Kentucky led states in funding gains because they increased their discount rates or trimmed benefits, such as maximum cost-of-living adjustments. The agency expects that due to reforms, Colorado will be a leader among states in funding gains for fiscal 2019. It notes that all three states no longer assume a crossover date for their largest plan following reforms that moved the states to funding closer to actuarially determined contributions (ADCs).

Wisconsin, South Dakota, and New York continue to rank among the states with the best reported funded ratios in the nation. The largest plans in these states also use actuarial funding, regularly update experience studies, employ reasonable amortization methods, and assume rates of return that are lower than the national median for determining actuarial contributions.

In 2018, 18 states lowered their assumed rate of return for their largest plans while 15 did so for their second-largest plans. On average, largest plan downward revisions were marginal, at just 0.24%, S&P Global found. The lower assumed rates of return reduce states’ exposure to market volatility, minimizing swings in required contributions with investment returns, and providing for faster funding progress.

Illinois, New Jersey, and Connecticut have incorporated or are considering asset transfers as a means to improve pension funded ratios and lower required contributions, according to the report. The way that these solutions are valued and influence funding discipline can have varying effects on the overall health of a pension system and long-term fiscal sustainability. S&P Global says that to the degree they are based on unsubstantiated valuations, create liquidity concerns, or otherwise undermine long-term funding progress, it would view them as a negative credit factor. However, it notes that if these states resist overvaluing assets and sell them to deliver cash to the pension system or use future revenue to supplement pension contributions and accelerate funding progress, the transfer could lead to a consistent paydown of the unfunded liability and stabilize contributions.

Not enough?

Despite their efforts to improve funding discipline, many states are failing to make meaningful progress on their aggregate pension liabilities. Many are funding their pensions on an actuarial basis; however, if the underlying actuarial assumptions are not conservative enough or if the funding strategy is poorly crafted, even ADCs could fail to make realistic funding progress toward paying down the long-term liability, S&P Global says.

The agency believes there is likely some minimum amount of funding progress if the annual plan contributions cover service cost (the present value of benefits earned by participants in the year), a portion of the annual total interest cost related to pension liabilities unmatched by plan assets, and 1/30 of the beginning net pension liability (NPL).

Looking at static funding, which measures whether or not a state meets just current service and interest costs, 60% of states fail to meet this threshold. “This means that that even for those that maintain a track record of funding at actuarially determined levels, total plan contributions can still fall short of levels necessary to make progress on paying down the long-term liability. This typically happens when the actuarial assumptions and methods used to calculate ADCs are somewhat optimistic and do not align with recent experience,” the report says.

As for assumed rates of return, S&P Global suggests they should not only align with the expected realistic performance of the target asset portfolio, but should also reflect prudent and informed decision-making on how much market volatility and liquidity risk or budgetary stress a state can absorb. Higher risk typically means exposure to greater volatility. In the event of a market correction, a drop in asset values would necessitate an escalation in required contributions.

Despite widespread state efforts to continue to ratchet down assumed rates of return, most plans retain rates that exceed what S&P Global views as a sustainable rate based on likely market volatility. It suggests a sustainable discount rate for the typical plan is 6.5%.


S&P Global notes that states with mature plans and elevated discount rates that still have low funded ratios may warrant additional attention with regard to budgetary vulnerability.

As a plan matures, there are reduced plan inflows as fewer active members contribute annually, and this is compounded by increased outflows for a greater number of retirees and beneficiaries. There is greater strain on employers, as well as asset returns, to maintain plan funding, particularly if the avoidance of intergenerational inequity is desired, the agency says. Increased liquidity needs, along with reduced capacity for market volatility, could push mature plans toward lower assumed returns.

“A mature plan with a high active-to-beneficiary ratio might elect to reduce market risk by incorporating a safer target portfolio and corresponding lower assumed return. A lower assumed return correlates to a lower discount rate, and therefore, a lower funded ratio,” the report says.

S&P Global notes that plans that incorporate assumed payroll growth in their amortization methodology have a built-in deferral of contributions that is intended to be a stable percentage of the budget. However, every year that payroll growth is not realized leads to a contribution shortfall from expectations and adds unfunded liabilities that further add to already-accelerating contributions. The agency has seen amortization methods reduce such risk of acceleration in states such as Kentucky and Connecticut and expects this trend to continue.

S&P Global concludes that it does not anticipate the next recession will lead to a pension crisis or acute budgetary stress. A majority of plans retain sufficient assets to withstand a market shock, and when smoothed over the remaining amortization period, contribution increases are likely to require difficult budgetary choices but remain affordable. In the agency’s view, actions to reduce annual contributions, whether shorting ADCs, extending amortization periods, or poorly executed asset transfers/pension obligation bonds, are more likely to lead to budgetary stress and downward rating revisions than weak pension investment returns in a typical recession.

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Categories: Industry News

Principal Offers Patent-Pending Complete Pension Solution

Thu, 2019-10-10 09:06

Principal Financial Group has developed the patent-pending Principal Complete Pension Solution and the Principal Pension Risk Management Dashboard to help defined benefit (DB) plan sponsors manage the financial, demographic and fiduciary risks in their plans.

The Principal Complete Pension Solution system provides a technology-driven approach to pension risk management that can be tailored for individual plan needs alongside what the company says is a first-of-its-kind annuity quote commitment to ensure plan sponsors can consider transferring risk to Principal when the time may be right for their plan.

The system uses proprietary technology to combine expertises spanning actuarial science, liability-driven investing (LDI), pension risk transfer, as well as plan administration and data management to offer a complete suite of risk management services for both ongoing and frozen defined benefit plans.

The process includes:

  • Technology integrating key defined benefit services—including administration, actuarial, investment management, liability-driven asset management, trust and custody of plan assets and pension risk transfer services;
  • An up-front audit and review of participant data to help ensure it’s in good order for ongoing administration or plan termination; and
  • Opportunity for plan sponsors to secure a commitment to quote an annuity, transferring risk to Principal.

Legal & General Retirement America’s latest Pension Risk Transfer Monitor shows the U.S. pension risk transfer market has remained very active throughout the first three quarters of 2019, with consistent deal flow that is starting to ramp up for the typical Q4 rush. Comparing this year to last, it has seen a 12% increase in total deal count.

The increase in plan terminations that Legal & General observed earlier this year has continued. Plan terminations accounted for just under $4 billion of sales in the first half of 2019, nearly surpassing total plan termination sales in 2018.

To complement the Principal Complete Pension Solution, Principal built the Principal Pension Risk Management Dashboard, a unified platform for monitoring key interest rates and equity market volatility that may impact a plan’s funded status, contribution requirements and financial accounting expenses. The dashboard enables plan sponsors to see potential impacts on their plan driven by the economic environment in order to help them make informed asset allocation and risk transfer decisions.

Principal notes that every pension plan is unique, and it’s important to tailor programs based on need.

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Categories: Industry News

Social Security Administration Announced COLA for 2020

Thu, 2019-10-10 09:03
The Social Security Administration has announced that Social Security and Supplemental Security Income (SSI) benefits for nearly 69 million Americans will get a cost of living adjustment (COLA) of 1.6% in 2020.

The COLA will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020. The COLA adjustment for the eight million SSI beneficiaries will begin on December 31, 2019.

According to the Social Security Administration’s website, Social Security will replace about 40% of an employee’s pre-retirement income after retirement—more than half of what experts recommend the average person will need. But, retirement plan participants—and even plan sponsors—lack knowledge about how Social Security works. Employees not only need basic education, but they need to know how to include Social Security in their retirement income strategy.

The administration says the Social Security Act ties the annual COLA to the increase in the Consumer Price Index, as determined by the Department of Labor’s Bureau of Labor Statistics. Based on that increase, the maximum amount of earnings subject to the Social Security tax will increase from $132,900 to $137,700.

People will be able to view their COLA notice online through their my Social Security account; they can crease or access this at:

Information about Medicare changes for 2020, when announced, will be available at:

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Categories: Industry News