January 2016 Archive

Factors affecting DC returns

January 27, 2016

We recently discussed the Boston College Center for Retirement Research Brief, Investment Returns: Defined Benefit vs. Defined Contribution Plans. The Brief reviewed over 20 years of Form 5500 data and determined that (after accounting for asset allocation and plan size) DB plans outperform DC plans by 0.7 percent. While BC’s comparison of DB and DC investment returns is provocative and raises some interesting issues, DB plans and DC plans are apples and oranges. Read More

DB vs. DC investment performance and fee significance

January 12, 2016

The Center for Retirement Research at Boston College has released a Brief, Investment Returns: Defined Benefit vs. Defined Contribution Plans (the “BC Brief”), reviewing over 20 years of Form 5500 data to determine the rate of return in defined benefit and defined contribution plans. The report finds that, after accounting for size of plan and differences in asset allocation, DB plans outperform DC plans by around 0.7 percent, and that underperformance is “likely” due to the fees charged on DC investments. Read More

2015 retirement policy in review

January 20, 2016

In this article we review significant 2015 retirement policy developments. We begin with defined contribution plan initiatives and DOL’s re-proposal of its re-definition of an ERISA ‘fiduciary.’ After discussing other DC developments, we then discuss defined benefit plan initiatives, where issues related to risk transfer and de-risking, Pension Benefit Guaranty Corporation premiums and valuation assumptions – changes in interest rate and mortality assumptions – dominated policymaker and sponsor attention. We finish with a discussion of some broader retirement policy initiatives, including the emergence of state Auto-IRA programs. Read More

ERISA Advisory Council recommendations on lifetime participation

January 11, 2016

Last December, the ERISA Advisory Council has released a summary of its 2015 recommendations. One of the (two) issues the Department of Labor had asked the EAC to consider for 2015 was “lifetime plan participation.” In this article we discuss EAC’s lifetime plan participation recommendations and conclude with some remarks about their significance for plan sponsors. We begin with some background on the EAC. Read More

DOL regulation & releases Interpretive Bulletin authorizing state plans proposed

January 06, 2016

At the July 2015 White House Conference on Aging, President Obama instructed the Department of Labor to propose guidance “clarifying how states can move forward” with state retirement plan initiatives. On November 16, 2015, DOL released (1) a proposed regulation addressing issues raised by state auto-IRA initiatives and (2) an Interpretive Bulletin (IB) setting forth its view that “certain state laws designed to expand the retirement savings options available to private sector workers through ERISA-covered retirement plans” are not preempted by ERISA. In this article we review DOL’s guidance. Read More

December 2015 Pension Finance Update

January 04, 2016

Pension plans lost a bit of ground in December due to stock market declines, but ended 2015 modestly ahead. Both model pension plans we track were down last month: Plan A lost 1%, ending the year up 3%, while Plan B dropped a fraction of 1% but still finished up close to 2% during 2015. Read More

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