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Retirement Industry People Moves

Plansponsor.com - Thu, 04/18/2019 - 13:15
Art by Subin Yang Broadridge Acquires Custody Assets from TD AmeritradeBroadridge Financial Solutions, Inc. has entered into a purchase agreement to acquire the retirement plan custody and trust assets from TD Ameritrade Trust Company, a subsidiary of TD Ameritrade Holding Company. The acquisition is said to expand Broadridge’s suite of solutions for the growing qualified and nonqualified retirement plan services market and the support it provides for third-party administrators (TPAs), financial advisers, recordkeepers, banks, and brokers. “The TD Ameritrade trust and custody assets are a strong complement to Broadridge’s established mutual fund and retirement business, and uniquely positions us as one of the largest neutral, independent service providers of custodial and sub-custodial solutions,” says Broadridge Head of Mutual Fund and Retirement Solutions, Michael Liberatore. “The acquisition represents the next step forward in Broadridge’s strategy of serving a broader set of retirement stakeholders and unlocking new opportunities for our clients.”“After careful consideration, we decided to exit a part of our retirement plan trust business, one that’s better served by a scale player dedicated to expanding and investing in this business. Broadridge is a leader in this space with the proven technology and experience to provide advisers with access to innovative solutions and high-level client service,” says Tom Nally, president of TD Ameritrade Institutional. “With this deal, TD Ameritrade Institutional can increase its focus on developing and delivering industry-leading technology, products and service that can help independent RIAs grow and compete.”Terms of the deal were not disclosed. The transaction is expected to be completed in the second quarter of the calendar year, subject to customary closing conditions and regulatory approvals.Symetra Life Promotes Retirement Division LeadSymetra Life Insurance Company has named Daniel Guilbert as president of its Individual Life and Retirement Divisions.“Leading Symetra is very much a team effort. Dan’s new title recognizes the significant role he plays in developing Symetra’s long-term strategic plans and his ongoing contributions to the successful execution of our strategy,” says Margaret Meister, president and chief executive officer of Symetra Financial Corporation.Since taking on overall responsibility for the Individual Life Division (ILD) in 2017, Guilbert spearheaded the unit’s launch of its first indexed universal life product. He has worked closely with the ILD leadership team to prioritize systems and processes modernizations.Voya Financial Adds Support for Tax-Exempt MarketVoya Financial’s retirement business has hired Christopher Engelhardt as the newest leader to join its Strategic Relationship Management (SRM) team to support the company’s tax-exempt market business (TEM). In his role at Voya, Engelhardt will serve as vice president, client relationship director for TEM and primarily focus on executing plan retention and growth goals to support large plan sponsors (in excess of $100 million in AUM /AUA) in the health care and nonprofit segment.Engelhardt previously spent the last 17 years with Transamerica where, most recently, he served as regional vice president, client engagement and healthcare markets. He was also involved in developing request for proposal (RFP) responses and creating the service delivery model for Transamerica’s large and mega health care clients. “Voya is laser-focused on continuing our momentum and expanding its footprint in the tax-exempt market,” says Heather Lavallee, president of TEM for Voya Financial. “After an extensive search, it became clear that Chris was the best individual to fill this key role at Voya. He has the drive, the talent and the expertise to successfully partner and expand our existing relationships with some of Voya’s largest and most important plan sponsors in the health care and nonprofit markets—while also helping us win new business. We’re lucky to have him as part of TEM’s Strategic Relationship Management team.” Engelhardt started his new role at Voya on April 15. He will be based in the Chicago area, and reports directly to Frederick Blue, SVP and head of client relationship management for TEM. Engelhardt holds FINRA Series 6, 63 and 24 and Life Insurance licenses.Stone Harbor Appoints Chief Market EconomistStone Harbor Investment Partners LP (Stone Harbor) has selected Seamus Smyth to the role of chief developed market economist. Based in the firm’s New York office, Smyth will report to report to Peter Wilby, managing partner and co-CIO and Jim Craige, co-CIO and head of emerging markets.According to Wilby, Seamus will be responsible for developing Stone Harbor’s outlook on advanced economies and will contribute to the firm’s investment policy discussions. Previously, Smyth served eight years as a managing director and senior economist for Caxton Associates where he was responsible for assessing the market implications of his economic views for the firm’s portfolio managers across rates, foreign exchange (FX), equities, credit and commodities. Prior to joining Caxton in 2009, Seamus spent just over three years at Goldman Sachs as part of its U.S. economics team and, while in graduate school, spent time at the U.S. Treasury and Federal Reserve Bank of San Francisco.Smyth holds a Pd.D. in economics from Harvard University and a master’s in statistics from Stanford University. He graduated from Stanford University with a bachelor’s in economics with honors and distinction and a bachelor’s in mathematical and computational sciences with distinction.Jackson Announces Changes Within Company Leadership RolesJackson National Life Insurance Company announced that Aimee DeCamillo, who has been serving as head of Retirement Plan Services at T. Rowe Price, has been named chief commercial officer and president of Jackson National Life Distributors LLC (JNLD), the marketing and distribution arm of Jackson. DeCamillo will be based in the company’s Franklin, Tennessee office, a commercial hub near Nashville, and will assume her new role effective June 3.DeCamillo held her current role at T. Rowe Price since 2014, where she led the growth of the company’s full-service defined contribution (DC) recordkeeping business. She previously served as the head of product and marketing for retirement plan services at T. Rowe Price and prior to that was head of personal retirement solutions for Bank of America, Merrill Lynch Wealth Management. She is the former chair of the LIMRA/LOMA Secure Retirement Institute Board and currently serves on the board of the Employee Benefit Research Institute (EBRI) and the Spark Institute.“I am pleased to welcome Aimee to the Jackson team,” says Michael Falcon, chief executive officer, Jackson Holdings LLC. “Aimee’s insights and expertise are an outstanding complement to our already strong capabilities. Her proven track record of driving growth and innovation will help us broaden and deepen our success, expanding our reach into new areas that can position Jackson to even more effectively serve Americans seeking to build their financial freedom.”“I am delighted to join the Jackson team,” DeCamillo adds. “I look forward to helping build on their already strong track record of proven success as an industry leader, both in the eyes of advisors and the clients they serve.”DeCamillo’s announced arrival coincides with the upcoming departure of Greg Cicotte, EVP and chief distribution officer of JNLD, who recently announced he will be leaving Jackson to pursue other interests.Meketa and Pension Consulting Alliance Complete IntegrationInvestment consulting and advisory firms Meketa Investment Group, Inc. (Meketa) and Pension Consulting Alliance, LLC (PCA), have formally combined. This follows the January announcement that the two organizations had signed an agreement to join forces, to be known as Meketa Investment Group, Inc.The blended firm’s collective client assets under advisement now represent approximately $1.8 trillion, including over $100 billion in private markets and real estate assets. Meketa serves a variety of public and private institutional investors, including defined benefit (DB) and defined contribution (DC) plans as well as nonprofits and corporations, in non-discretionary and discretionary capacities.“Having collaborated on client relationships for many years, and with a similar approach to capital markets and institutional investing, we believe the combination of Meketa and PCA is a logical step in the evolution of both organizations,” says Stephen McCourt, co-CEO, Meketa. “We thank all those at both firms who worked so diligently over the past several months to make this combination a reality, and sincerely thank our clients for helping make possible our continued success.”In keeping with the planned integration, PCA Founder and Managing Director Allan Emkin, and PCA Managing Director Christy Fields, have now joined Meketa’s Board of Directors, while PCA Managing Directors Judy Chambers and Neil Rue are now members of Meketa’s Executive Committee. In addition, other management committees now include representatives from Meketa and PCA, and all members of PCA’s board have become Meketa shareholders. Meketa will continue its tradition of extending ownership to top-performing employees, with staff of both legacy firms eligible to become Meketa shareholders. New Meketa shareholders will be announced in the coming weeks.“We believe the sharing and building upon of best practices developed by Meketa and PCA over many decades offers an opportunity to enhance our organizations’ resources, geographic coverage, and services,” says Peter Woolley, co-CEO, Meketa. “We remain confident that leveraging our combined institutional knowledge and client experience will help ensure we continue as thought leaders in the industry and further our goal of consistently providing best-in-class service to our clients.”The newly expanded Meketa is now serving clients from six cities across the United States, as well as London. The firm will continue to operate as an independent fiduciary and remain fully employee-owned.Former PwC Partner Appointed to FASBThe Board of Trustees of the Financial Accounting Foundation (FAF) has appointed Susan Cosper to the Financial Accounting Standards Board (FASB). Cosper currently serves as the FASB’s technical director and chair of the Emerging Issues Task Force (EITF). Her term is effective May 1, and her appointment runs through June 30, 2024.“On behalf of the FAF Board of Trustees, I am very pleased that Sue will be joining the FASB as a member,” says Charles Noski, chairman of the FAF Board of Trustees. “As a true collaborator, Sue has built an extensive network among the FASB’s various stakeholder groups. She has a strong reputation among these constituents as a strategic thinker and good listener in the pursuit of better accounting standards.”“Sue Cosper is an outstanding choice for the FASB and will make significant contributions to the Board during her tenure,” says Russell Golden, FASB chairman. “Sue has been at the vanguard of the FASB’s culture change to better incorporate private company and not-for-profit perspectives throughout the standard-setting process.”Golden adds, “As the FASB’s technical director since 2011, she has been intimately involved in every major Board activity and has served as a mentor to the FASB staff. Sue’s deep knowledge of our standard-setting process and her consideration of various stakeholder perspectives are great assets for the Board.”Prior to joining the FASB, Cosper served as a partner with PricewaterhouseCoopers LLP (PwC), most recently based in PwC’s Financial Instruments, Structured Products, and Real Estate Group in New York City. She worked before that at PwC offices in Florham Park, New Jersey, Pittsburgh and London. She earned her bachelor’s in accounting from Indiana University of Pennsylvania and is a certified public accountant (CPA) in New York, New Jersey, and Pennsylvania.Cosper will succeed Harold Monk, Jr., who resigned from the FASB in 2018.Golden adds that Cosper will serve as the official FASB liaison to the Private Company Council, succeeding FASB member Marsha Hunt in that role.The post Retirement Industry People Moves appeared first on PLANSPONSOR.
Categories: Industry News

Current Legislation Missing the Mark on Annuity Safe Harbor

Plansponsor.com - Thu, 04/18/2019 - 11:32
During a Brookings Institution event focused on the topic of retirement income, J. Mark Iwry, nonresident senior fellow – Economic Studies at the Brookings Institution, and former senior adviser to the secretary and deputy assistant secretary for retirement and health policy at the U.S. Department of Treasury, pointed out that many defined contribution (DC) plan sponsors are reluctant to offer retirement income solutions, such as annuities, in their plans due to a concern about fiduciary liability if the insurer—or annuity provider—becomes insolvent.He and Phyllis C. Borzi, former assistant secretary for the Employee Benefit Security Administration (EBSA) at the U.S. Department of Labor (DOL), agree that a safe harbor is needed in order to move forward on lifetime income options in DC plans.Iwry said a safe harbor could use a financial strength criterion about how sound an annuity carrier is in terms contract and costs. Although he says it could help to use information from major ratings agencies and, say, require at least two good ratings for the insurance carrier, he notes that ratings agencies have gotten a “black eye” for ratings of certain investments in the past.Borzi said in prior safe harbor regulations, the EBSA thought about bootstrapping onto credit ratings, but it was a violation of Dodd Frank, which took reliance on credit ratings off the table. “It was because of the distrust of ratings agencies at the time,” she said. “Ideally, Congress would change Dodd-Frank and put credit ratings back on the table.”Borzi believes a standard for establishing the financial solvency of insurers is the way to go with a safe harbor, but also the point is to narrow down due diligence decisions for plan sponsors. “I think in terms of a safe harbor, it should be narrowed down to the types of products the sole purpose of which is to provide guaranteed income. A problem in the insurance marketplace is insurers have a proliferation of products with different objectives. Failings with one type of product does not mean failings with other products insurers offer.”Iwry pointed out that the Employee Retirement Income Security Act (ERISA) expects plan sponsors to pay for their own independent assessment of whether insurers can pay claims and have financial strength. And, he said, recent legislative proposals, such as the Retirement Enhancement and Savings Act (RESA), do not include financial strength criterion, just regulatory approval. “We would include financial ratings, but we are in favor of having legislation passed,” he said. “If the legislation cannot be changed, maybe regulations following passage of the legislation can shore up the safe harbor.”Borzi says a safe harbor is not as simple as checking off five or so points. “A poorly designed safe harbor does more harm to the plan sponsor. It should be designed in way to not only protect the plan sponsor, but participants,” she said. “That is my greatest disappointed in current legislative proposals. I wouldn’t call it a safe harbor, I would just call it a ratification that the insurer isn’t a bottom dweller. Plan sponsors can select any carrier as long as it is not under investigation.”She added, “Plan sponsors I know have not spent a lifetime to help participants have good, solid retirement income in order to throw it all away on a substandard product. The safe harbor needs to focus on financial solvency and strength of the insurer.”Borzi talked about what some in her circle call the “mother rule”—if the alternative to selecting this annuity is having your mother live with you, would you select this product? “The safe harbor in proposed legislation fails this mother rule,” she said.Iwry noted that another issue plan sponsors have with including annuities in their DC plans is the portability issue—participants can’t get the annuity out of the plan if they leave their employer. He suggested amending regulations to allow lifetime income products to be rolled over to an individual retirement account (IRA), provided it’s not abused to include only participants in senior positions.A model in placeKelli Hueler, CEO of Hueler Income Solutions, which offers outside-of-plan annuity solutions to DC retirement plan sponsors and participants, said, “We are not going to get much further without an annuity selection safe harbor.” She added there are a high number of rollovers to the insurance providers with predatory practices because employers are not offering lifetime income options.Hueler’s firm has practiced standards since 1997 that definitely include looking at the investment grade of insurance companies, with a focus on ongoing efforts to make sure insurers are doing things to remain solvent. The firm looks at:Conflict free, no pay-to-play;Institutional pricing with level fees;Fee disclosure;Independent insurer selection criteria and ongoing monitoring;Standardized quote, fees and features;Meaningful competition;IRA rollovers;Retiree selects annuity form and income features; andObjective guidance and purchase guidelines.“Getting employers to feel comfortable offering guaranteed lifetime income in the features of retirement plans is the future of the market,” Hueler said. “We believe our system is actuarially very fair, and we value having an independent fiduciary and serve as that model.”The post Current Legislation Missing the Mark on Annuity Safe Harbor appeared first on PLANSPONSOR.
Categories: Industry News

Investment Product and Service Launches

Plansponsor.com - Thu, 04/18/2019 - 10:42
Art by Jackson EpsteinGSAM Announces First Actively Managed ETFGoldman Sachs Asset Management (GSAM) has created GSST, an exchange-traded fund (ETF) offering exposure to a broad range of U.S. dollar denominated ultra-short duration bonds, U.S. government securities and other fixed-income securities at a cost of 16 basis points to investors.GSST is GSAM’s first actively managed ETF and is listed on Cboe BZX Exchange.“In the current rate environment, investors are increasingly seeking exposure to short-term strategies,” says Michael Crinieri, GSAM’s global head of ETF strategy. “We have constructed GSST to meet this investor demand, constructed with an innovative, diversified mix of government securities and credit, all delivered through the same lower-cost, high-value model that defines our fixed-income Access ETF products.”GSST is GSAM’s second ultra-short fixed-income ETF after Goldman Sachs Access Treasury 0-1 Year ETF (GBIL), which seeks to track the FTSE US Treasury 0-1 Year Composite Select Index. It will be actively managed by GSAM’s Global Fixed Income team.GSAM’s complete Access ETF suite includes Goldman Sachs Access Treasury 0-1 Year ETF; Goldman Sachs Access Ultra Short Bond ETF; Goldman Sachs Access Inflation Protected USD Bond ETF; Goldman Sachs Access Investment Grade Corporate Bond ETF; and Goldman Sachs Access High Yield Corporate Bond ETF.Lyxor Americas Launches Hedge Fund Program for Institutional Investors  Lyxor Asset Management Inc. (Lyxor Americas), an indirect subsidiary of Paris-based Lyxor Asset Management S.A.S. (Lyxor), has announced a new program enabling institutional investors to participate in stand-alone co-investment and selective hedge fund opportunities presented to Lyxor Americas by third-party managers. Opportunities available through the program are expected to include high conviction, concentrated, and/or bespoke investments offered outside of a manager’s other funds, according to Lyxor Americas. Investors participating in it can review and invest in individual opportunities arising from Lyxor’s relationships with approximately 100 hedge fund managers. This “opt-in” investment program allows participating investors to evaluate each investment opportunity. Each proposed opportunity is supposed to successfully complete a formal investment, risk and operational due diligence process by Lyxor Americas, prior to being made available through the program.“Co-investments are playing an increasingly significant role in institutional investors’ pursuit of alpha and absolute returns,” says Andrew Dabinett, CEO of Lyxor Americas Lyxor. “With its 20-year history of managing hedge fund portfolios, Lyxor has built a far-reaching global network of partnerships with managers and we are well positioned to access and evaluate co-investment and bespoke opportunities for our clients in a thorough, timely, and cost-effective manner.”Sanctuary Adds Solutions Division Platform and MembersSanctuary Wealth (Sanctuary) has built a new division, Sanctuary OCIO Solutions, an outsourced chief investment officer (OCIO) platform providing advisers, their high-net-worth/ultra-high-net-worth clients, and institutional clients ways to manage investments through day-to-day investment practices, research, and decisionmaking.According to the company, Sanctuary OCIO Solutions offers services including investment advice, research, execution, and reporting.“The creation of Sanctuary OCIO Solutions underscores our commitment to serving the investment needs of advisers, their clients, and institutional investors,” says Sanctuary CEO and Founder Jim Dickson. “We now can provide the research, knowledge, investment expertise and fiduciary oversight that otherwise might not be accessible to independent advisers for their high-net-worth clients. Institutional clients, such as colleges and universities, foundations and endowments, and Taft-Hartley funds, can access our skilled resources and attain additional oversight through Sanctuary OCIO Solutions.”Additionally, James Otley, Jr. has been named managing director of Sanctuary OCIO Solutions and serves as business development leader for the new division. Otley will partner with Sanctuary Wealth’s CIO Greg Hahn to offer expertise in investment management and administrative services.Otley will also continue to serve his clients through Otley Private Wealth Management, an independent investment advisory firm serving high-net-worth clients and institutions and part of the Sanctuary Wealth network of independent advisory firms. Michele Stiff joins Otley in the new firm as vice president and chief operating officer of Otley Private Wealth Management.The post Investment Product and Service Launches appeared first on PLANSPONSOR.
Categories: Industry News

‘Modern Tontine Theorists’ Have Ideas for Retirement Savings Decumulation

Plansponsor.com - Thu, 04/18/2019 - 10:21
The Brookings Institution hosted a thought leadership conference dedicated to the topic of retirement income, featuring such prominent speakers as Professor Richard Thaler, of the University of Chicago Booth School of Business, and Phyllis Borzi, former Assistant Secretary for Employee Benefits Security at the U.S. Department of Labor.The day kicked off with a panel of experts who explored the history of retirement income, highlighting the fact that the challenges facing retiring workers today are by no means new or novel. And, as the panel pointed out, neither are the types of solutions being debated by academics and policymakers.David John, a nonresident senior Brookings fellow and senior strategic policy adviser for the AARP Public Policy Institute, said the retirement income planning challenge has literally for centuries been the most complex financial decision an individual faces in a capitalistic society.“The simple fact is that this topic is difficult,” John said. “In 2019, the data shows more than seven in 10 Americans don’t know how to implement a retirement income plan—and that’s just the proportion who will admit it. When you test their skill sets, most of those who say they can make a plan aren’t going to always make optimal decisions. So this begs the question, can we automate the same way we did with accumulation? That’s something a lot of people are asking themselves right now.”John observed that this is not a U.S.-only issue. Every country with a developed retirement savings system is focusing on this problem of converting savings into income.“The Australians have the same worry about running out of money despite the fact that they are required to save for retirement,” John said. “As a result, they are requiring all plans in their national system to offer income options by 2024. In the United Kingdom, the House of Commons has recommended a similar solution. In Canada, we have seven major pension stakeholders calling for longevity risk pooling at a massive scale. In New Zealand, they have a triennial review of the KiwiSaver system, and retirement income solutions are on their agenda for the next meeting.”According to John, there is growing global interest in retirement income solutions built around managed payout funds.“Shell Oil has this kind of a mechanism for their employees in the Netherlands,” he observed. “It is basically an active investment fund with a high proportion of equities, but it also has a significant amount of countercyclical hedging investments to limit great losses during market downturns. Retail funds in the U.S. offer some of these features already.”John recommended U.S. policymakers consider promoting a three-pronged approach to retirement income. Workers could enter a managed payout fund starting at age 55 or 58. This would form the basis of their nondiscretionary retirement spending, and supplemental investment accounts could be used by those with sufficient means and with an interest in taking more investment risk. Finally, individuals would purchase a longevity annuity kicking in later in life. This could be structured as a qualified longevity annuity contract, or an individual could choose to delay annuitization, perhaps purchasing the annuity at age 75 with payments set to start at age 85.Another speaker on the panel, Moshe Milevsky, professor at the Schulich School of Business, York University, zoomed into the interesting topic of “tontines,” which are a type of historical annuity structure that was first put into well-documented practice as far back as the 1600s. Commonly, tontines were used by governments to fund wars or other foreign exploits, especially in France and the United Kingdom.“In these income schemes, the individual would give, say, 100 pounds to the government, and in return he would essentially get installment payments for life, with interest,” Milevsky explained. “The approach resembled an indexed annuity, fascinatingly. So, there has been a really deep history of all this and that shows how complex the problem is. Centuries ago, people had already developed very sophisticated systems of budgeting mortality and longevity risk against annuity payments, and systems to divide up shares of any profits or interests.”One unique feature of early tontines was that they were often structured as closed “syndicates,” meaning that once a tontine money pool started paying out income streams, the size of the income stream going to the individuals grew each time one member of the syndicate died. By the same token, payments stopped when the last syndicate member died. The practical effect of this was that the income streams from tontines tended to start out modest and then grow to be quite large for the select few people who survived longest among the syndicate membership.“The system basically had a sum of income that would stay the same each year, but it was being paid out to a shrinking group of people over time,” Milevsky said. “The winner at the very end got a huge income. At the end the principal is gone, importantly. It’s basically amortized.”This system would not be practical in the modern context, Milevsky said, because of the back-loaded nature of the payouts for any given individual in the tontine. However, modern “tontine theorists” have developed models that would address these issues and deliver smoother income streams for members. “We can contrast this approach against a standard lifetime income annuity. As more people pass away over time, the sum of the total payments for a group lifetime annuity actually goes down, but the payments are stable for individuals,” Milevsky said. “On the tontine side, it’s basically the opposite. I also like to point out that, in the 18th century, Adam Smith was writing in favor of tontines. Alexander Hamilton was another big fan of these.”On Milevsky’s analysis, “tontine thinking is more important than actually using them.” What he means is that tontines very clearly demonstrate that “mortality credits are to be thought of as an asset class.”“When we are pooling people’s longevity risk, mortality credits are an alpha. Not everyone likes to think about it this way, but it’s true,” he said. “What this means in practice is that, if you’re willing to put your money in the insurance pool and accept the risk that you’ll die early, you will get a much greater return should you live to your hoped-for point of longevity. The lesson is that we need to stop mixing up annuities as a topic with mortality credits as a topic. I’ve noticed that explaining the tontine first makes annuities shine in a new life. Annuities are tamer; the income stream is stable and you don’t have to worry about people knocking each other off to increase their own payments.”The final panelist on this topic was Michael Davis, head of defined contribution plan specialists for T. Rowe Price and a former deputy to Phyllis Borzi during her time at the head of the Employee Benefits Security Administration.“Annuities can play a meaningful role for many people, and it’s critical to explain there is a variety of vehicles that can be used,” Davis said. “Given the documented heterogeneity in retirement spending patterns, Americans should have the right to choose how they structure and spend their retirement income.”Offering a history lesson of his own, Davis pointed out that, until just the last five or 10 years, retirement plan sponsors were not very interested in keeping participant assets in their plans post-retirement. But this has evolved significantly and sponsors and participants are highly interested in in-plan income solutions.“We already see a clear trend that more and more dollars are being left in the plan,” Davis observed. “I think part of that is the conversation about fiduciary protections, and the interest among plan sponsors to achieve and maintain scale for positive pricing benefits. Given all this, the behavior of retirees is becoming an important point of focus for providers like us and for our clients. Some have argued that, because of Social Security, U.S. retirees are over-annuitized. We find this is true for only the very lowest earners. For the great many working Americans that is simply not true. A single solve for these different needs is not the right way to go, I should add.”Davis expects the retirement system will rapidly evolve to give greater access to systematic withdrawal programs, bond ladders, tontines, deferred and immediate annuities, and managed payout funds.“Our firm is focused a lot on managed payout funds and we are going to launch a retirement 2020 income fund this year,” Davis noted. “This will be a target-date product but it’s not a qualified default product. Participants will have to select into this fund within five years of retirement.”The post ‘Modern Tontine Theorists’ Have Ideas for Retirement Savings Decumulation appeared first on PLANSPONSOR.
Categories: Industry News

Financial Incentives a Big Part of Employers’ Well-Being Program Budgets

Plansponsor.com - Thu, 04/18/2019 - 08:46
Companies across the country are expected to spend an average of $3.6 million on physical well-being programs in 2019 to help create healthier and more productive workforces, according to the 10th annual Health and Well-Being Survey from Fidelity Investments and the National Business Group on Health.While there are various components to corporate well-being programs, the study revealed that 40% of these budgets will be applied to financial incentives that encourage employees, and their spouses/domestic partners, to participate in these programs. The average per-employee incentive decreased slightly to $762 for 2019, down from $784 in 2018, but is still nearly three times the average employee incentive of $260 reported in 2009. In addition, the percentage of employers offering incentives to spouses and domestic partners increased to 58% in 2019, up from 54% in 2018, while the average incentive for spouses/domestic partners increased to $601, up from $596 in 2018.While many employers (57%) provide financial incentives to employees by reducing their health care plan premiums, more than one-third (34%) provide incentives by funding an employee’s health care account, such as a health savings account (HSA).Overall, employers are expected to continue to focus on financial incentives as a key benefit within well-being platforms in the future, as 33% of employers indicated they plan to continue to increase the amount of financial incentives for employees over the next three to five years.The study also finds that employers continue to focus on providing programs focused on well-being beyond physical health, including emotional/mental health (92%), financial health (88%), community involvement (69%), social connectedness (54%) and job satisfaction (43%). A study from FinFit shows continued engagement in financial wellness programs yields overwhelmingly positive results. The data supports a trend across the financial wellness industry – the longer a company has utilized a financial wellness platform, the higher the employee engagement. According to FinFit, employees are asking for employers to offer financial wellness programs, leading to an impressive initial participation rate upon program launch. Eighty-five percent of FinFit members say they appreciate their employer more for offering FinFit’s financial wellness program. “More employers view their investments in health and well-being as integral to deploying the most engaged, productive and competitive workforce possible,” says Brian Marcotte, president and CEO, National Business Group on Health. “Their focus is holistic, with physical health being a component rather than the only priority. Employers recognize that their employees have different needs and want to engage in different ways. Financial and emotional stress, for example, are major detractors from work performance and employers are doubling down on these areas.”Employers with multi-national workforcesEmployers with a multinational workforce are increasingly interested in developing a consistent benefits platform for their employees across different geographies, and many companies have taken steps to offer well-being programs to their global workforce, according to the study.More than half (56%) of employers surveyed offer well-being programs to their global employees, an increase from 44% in 2018, and another 14% are considering extending their well-being program to workers in multiple geographies by next year. However, only 34% of employers have a global strategy in place, while half (50%) let local markets focus on well-being as needed.In addition, the overall objectives of well-being programs still vary by region. According to the survey, two of the top objectives of well-being programs in the U.S. are to manage health care costs (82%) and improve employee productivity/reduce absenteeism (59%), while the top objectives globally are to improve employee engagement/performance (82%) and align employees with the corporate culture (72%).“As more employers recognize the relationship between employee well-being and productivity, well-being programs have taken on an increasingly meaningful role in employers’ business strategies. However, as the benefits landscape continues to evolve, employers need to ensure they are designing their programs to meet the changing needs of their workforce,” says Robert Kennedy, senior vice president, Fidelity Workplace Consulting. “Implementing programs that take a total well-being approach, designing programs for a global workforce and aligning well-being programs with the company’s health care strategy are just a few of the steps employers can take to ensure their well-being program continues to deliver maximum benefit to their organization.”The 10th annual survey on corporate Health & Well-being from Fidelity Investments and the National Business Group on Health includes responses from 164 jumbo, large and mid-sized organizations. The online survey was fielded during October 2018 and January 2019 among National Business Group on Health members and clients of Fidelity Investments.The post Financial Incentives a Big Part of Employers’ Well-Being Program Budgets appeared first on PLANSPONSOR.
Categories: Industry News

Gen X Struggling Most With Retirement Readiness and Confidence

Plansponsor.com - Wed, 04/17/2019 - 12:56
“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.The post Gen X Struggling Most With Retirement Readiness and Confidence appeared first on PLANSPONSOR.
Categories: Industry News

Actionable Steps Engage Employees in Financial Wellness Programs

Plansponsor.com - Wed, 04/17/2019 - 12:12
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.”The post Actionable Steps Engage Employees in Financial Wellness Programs appeared first on PLANSPONSOR.
Categories: Industry News

Court Denies Summary Judgement in SafeWay ERISA Lawsuits

Plansponsor.com - Wed, 04/17/2019 - 11:57
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.The post Court Denies Summary Judgement in SafeWay ERISA Lawsuits appeared first on PLANSPONSOR.
Categories: Industry News

Senators Introduce Legislation to Further AHPs

Plansponsor.com - Wed, 04/17/2019 - 10:29
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.”The post Senators Introduce Legislation to Further AHPs appeared first on PLANSPONSOR.
Categories: Industry News

WEX Health HSAs Added to MassMutual Wellness Platform

Plansponsor.com - Wed, 04/17/2019 - 09:47
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.The post WEX Health HSAs Added to MassMutual Wellness Platform appeared first on PLANSPONSOR.
Categories: Industry News

Largest DB Plan Sponsors Adjust Policies to Manage Risks

Plansponsor.com - Tue, 04/16/2019 - 11:02
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.The post Largest DB Plan Sponsors Adjust Policies to Manage Risks appeared first on PLANSPONSOR.
Categories: Industry News

CUNA Mutual Introduces Financial Wellness Program

Plansponsor.com - Tue, 04/16/2019 - 10:59
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.The post CUNA Mutual Introduces Financial Wellness Program appeared first on PLANSPONSOR.
Categories: Industry News

Sponsors Can Expect Expanding ESG Opportunities

Plansponsor.com - Tue, 04/16/2019 - 09:18
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.”The post Sponsors Can Expect Expanding ESG Opportunities appeared first on PLANSPONSOR.
Categories: Industry News

Contributions and Asset Returns Give State Pensions a Positive 2018

Plansponsor.com - Mon, 04/15/2019 - 12:11
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.The post Contributions and Asset Returns Give State Pensions a Positive 2018 appeared first on PLANSPONSOR.
Categories: Industry News

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

Plansponsor.com - Mon, 04/15/2019 - 10:42
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.”The post Retirement Plan Sponsors’ Interest in Retirement Income Is on the Rise appeared first on PLANSPONSOR.
Categories: Industry News

John Hancock Offers Retirement Plan Account Information Via Alexa

Plansponsor.com - Mon, 04/15/2019 - 09:14
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.The post John Hancock Offers Retirement Plan Account Information Via Alexa appeared first on PLANSPONSOR.
Categories: Industry News

Lively HSA Goes Mobile

Plansponsor.com - Fri, 04/12/2019 - 13:54
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.The post Lively HSA Goes Mobile appeared first on PLANSPONSOR.
Categories: Industry News

Retirement Industry People Moves

Plansponsor.com - Fri, 04/12/2019 - 11:50
Art by Subin YangNorthern Trust Names Foreign Exchange Sales HeadNorthern 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 PracticeMassMutual 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 acquisitionsA 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 GroupAscensus 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 RoleInsight 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 TempletonFranklin 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. The post Retirement Industry People Moves appeared first on PLANSPONSOR.
Categories: Industry News

ESG, Proxy Voting Trends Unlikely to Shift on Executive Order

Plansponsor.com - Fri, 04/12/2019 - 11:23
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 MutedIn 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 PlansEarlier 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.The post ESG, Proxy Voting Trends Unlikely to Shift on Executive Order appeared first on PLANSPONSOR.
Categories: Industry News

Despite Market Rebound, Investors Flocked to Fixed Income in Q119

Plansponsor.com - Fri, 04/12/2019 - 08:46
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%.The post Despite Market Rebound, Investors Flocked to Fixed Income in Q119 appeared first on PLANSPONSOR.
Categories: Industry News
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