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March 16, 2017
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California Plans’ Lowered Discount Rates Will Increase Pension Costs
401(k) Participant Sues Over Investment in Chesapeake Energy
Controlled Group Case Sent Back for Calculation of Damages
LDI Advances
Managing Taxes, Social Security Levers for Taking Control of Retirement Prospects
Benefits & Administration
California Plans’ Lowered Discount Rates Will Increase Pension Costs:
In a report from S&P Global Ratings, the agency notes that the two largest public pension systems in the U.S.—California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS)—both have committed to lowering their discount rates without changing their funds' asset allocations. Reducing the discount rate will accelerate the slope of cost increases, intensifying the pressure that state and municipalities will face as growing pension contributions account for larger portions of their budget, especially in this slow revenue growth environment, the report says. Read more »
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Products, Deals and People
DST Retirement Solutions announced the launch of the Retirement Solutions Plan Health Dashboard, a new tool designed to provide users with “real-time, data-driven insights about the health of their retirement plan business while also helping plan sponsors better understand how their retirement plan is performing.” Read more »
Empower Retirement is employing a new social media video campaign to provide Millennial retirement savers (those born during the 1980’s and early 1990’s) with an entertaining impetus to start saving for retirement if they haven’t done so, or to increase their retirement savings wherever possible. Videos illustrate fun scenarios that highlight some of questionable reasons Millennials might give to explain why they’ve put off saving for retirement. Read more »
Economic Events

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1% in February after rising 0.6% in January, according to the Bureau of Labor Statistics. The index for all items less food and energy rose 0.2% in February after increasing 0.3% in January.

Real average hourly earnings increased 0.1% in February, seasonally adjusted. Average hourly earnings increased 0.2%, and CPI-U increased 0.1%. Real average weekly earnings increased 0.1% over the month.

The combined value of distributive trade sales and manufacturers’ shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,359.3 billion, up 0.2% from December 2016 and up 6.4% from January 2016, the Census Bureau reported.

Advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $474.0 billion, an increase of 0.1% from the previous month, and 5.7% above February 2016. Total sales for the December 2016 through February 2017 period were up 5.4% from the same period a year ago. The December 2016 to January 2017 percent change was revised from up 0.4% to up 0.6%. Retail trade sales were up 0.1% from January, and up 5.9% from last year. Gasoline Stations sales were up 19.6% from February 2016, while Non-store Retailers were up 13.0% from last year.
Market Mirror

Wednesday, the Dow gained 112.73 points (0.54%) to finish at 20,950.10, the NASDAQ closed 43.23 points (0.74%) higher at 5,900.05, and the S&P 500 was up 19.81 points (0.84%) at 2,385.26. The Russell 2000 increased 20.45 points (1.50%) to 1,382.82, and the Wilshire 5000 climbed 226.10 points (0.925) to 24,790.88.

On the NYSE, 3.1 billion shares changed hands, with advancing issues outnumbering declining issues more than 6 to 1. On the NASDAQ, 2.9 billion shares traded, with a more than 2 to 1 lead for advancers.

The price of the 10-year Treasury note increased 27/32, bringing its yield down to 2.503%. The price of the 30-year Treasury bond climbed 1 8/32, decreasing its yield to 3.111%.
Compliance
401(k) Participant Sues Over Investment in Chesapeake Energy:
A participant in the Seventy Seven Energy Inc. Retirement & Savings Plan has filed a lawsuit on behalf of the plan and a class of similarly situated participants in the plan over the continued offering of Chesapeake Energy stock. The participant contends the employee stock ownership plan (ESOP) portion of the 401(k) should have been invested in the sponsoring company’s stock, not Chesapeake Energy’s stock. The lawsuit also contends the plan committee continued to allow investment in Chesapeake stock even when it was imprudent to do so. Read more »
Controlled Group Case Sent Back for Calculation of Damages:
An appellate court agreed employees of a company sold from Anheuser-Busch’s controlled group of companies were entitled to enhanced benefits, but disagreed with a lower court that calculation of damages was not necessary. Read more »
From the Magazine
LDI Advances:
The year 2016 presented a bagful of unexpected causes and effects for the investment world but repeated a familiar message to sponsors of defined benefit (DB) pension plans: You have to protect your funded status. During the first half, broad downward moves in interest rates raised valuations of benefit obligations. Stocks ended the period more or less flat, and the net result was a fall in the funding positions of many plans, reminding sponsors of the value of hedging through liability-driven investing (LDI). Read more »
Investing
Managing Taxes, Social Security Levers for Taking Control of Retirement Prospects:
“In this environment we know that the key to meeting the challenge of lower return expectations is getting people to save more. It is even too optimistic to suppose that high-single digit returns will be a reality over the next decade,” says Anne Lester, head of retirement solutions at J.P. Morgan Asset Management. “This implies that managing taxes will be one of the big levers for people to take control of their retirement prospects, as will the decision about when and how to claim Social Security and to enroll in Medicare.” Read more »
Small Talk
ON THIS DATE: In 1802, the U.S. Congress established the West Point Military Academy in New York. In 1836, the Republic of Texas approved a constitution. In 1850, the novel "The Scarlet Letter," by Nathaniel Hawthorne, was published for the first time. In 1882, the U.S. Senate approved a treaty allowing the United States to join the Red Cross. In 1883, Susan Hayhurst graduated from the Philadelphia College of Pharmacy. She was the first woman pharmacy graduate. In 1915, the Federal Trade Commission began operation. In 1945, Iwo Jima was declared secure by the Allies. However, small pockets of Japanese resistance still existed. In 1968, U.S. troops in Vietnam destroyed a village consisting mostly of women and children. The event is known as the My-Lai massacre.
SURVEY SAYS: We covered a survey that found many employees say thinking about work keeps them up at night. This week, I’d like to know, has a lack of sleep affected your work or has work affected your sleep? You may respond to this week’s survey by 6 p.m. Pacific time today. Read more »
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EDITORIAL

Alison Cooke Mintzer | Editor-in-Chief | alison.mintzer@strategic-i.com

Rebecca Moore | NewsDash Editor | rebecca.moore@strategic-i.com

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