GASB Proposes Amendment to Include Multiple-Employer Plans
Stakeholders raised concerns regarding the inability of governments whose employees are provided pension benefits through multiple-employer pension plans to obtain information required under GASB Statement No. 68.
The
Governmental Accounting Standards Board (GASB) today proposed new guidance
intended to assist governments that participate in certain multiple-employer
pension plans to meet the reporting requirements of GASB Statement No. 68, “Accounting and Financial Reporting for Pensions.”
The
proposed guidance would apply to governments that participate in certain
private or federally-sponsored, multiple-employer defined benefit pension
plans, such as Taft-Hartley plans or plans with similar characteristics. The
guidance would establish separate standards for note disclosures of descriptive
information about the plan, benefit terms, contribution terms, and required
supplementary information presenting required contribution amounts for the past
10 fiscal years. The requirements of the proposal would be effective for
reporting periods beginning after December 15.
The
GASB said that during the implementation of Statement No. 68, stakeholders
raised concerns regarding the inability of governments whose employees are
provided pension benefits through such multiple-employer pension plans to
obtain required information related to pensions. Specifically, stakeholder
concerns focused on the inability of those governments to obtain measurements
and other relevant data points needed to comply with the requirements of the Statement.
The GASB’s Exposure
Draft, “Accounting and Financial Reporting for Pensions Provided through
Certain Multiple-Employer Defined Benefit Pension Plans,” is here. Comments are due by November 16.
Retirement plan
recordkeepers can no longer count on selling their target-date funds (TDFs) to
the plans they serve. A new study finds that almost half of the advisers who
sell defined contribution (DC) plans now go shopping for clients’ TDFs, netting
them the best fund for the best price—and often from a competitor.
This and other
findings appear in Market Strategies International’s Cogent Report, “Retirement
Plan Adviser Trends.”
“This is the
first year we’ve seen plan advisers championing proprietary and non-proprietary
options equally, which underscores how competitive the target-date market has
become,” says Sonia Sharigian, senior product manager at Market Strategies and the
annual report’s co-author.
The likelihood an
adviser will suggest an external TDF increases, too, in line with a plan’s
assets under management (AUM). Nearly six in 10 (59%) DC specialists managing
$50 million or more in defined contribution AUM urge plan sponsors to consider an
external asset manager’s fund instead.
The trend to such
funds may not be surprising. According to Linda York, vice president, Syndicated Research and Consulting at Cogent Reports,
the percentage has been edging up every year. “In 2013, just 32% [of
advisers] recommended external target-date fund providers. In 2014, that number
was 41%. Now, in 2015, it’s up to 47%,” she notes.
As to why, she
posits “a variety of factors.” These include greater scrutiny of plan
fees and wider choice of target-date options. Also, “the fact that more
plan providers are offering more open architecture in their fund offerings
means more advisers have access to external managers,” she says.
NEXT: What
lesser competitors stand to lose
Less
competitive recordkeeper fund providers could potentially lose a growing amount of
market share, as target-date funds now rank as advisers’ second favorite
investment option, trailing only traditional, actively managed mutual funds,
the paper says. Four in 10 DC advisers (41%) recommend a target-date or
lifecycle fund as the plan’s default—twice as many as suggest
any other type of qualified default investment alternative (QDIA).
“The move toward external target-date
providers, along with [an] increasing popularity of index funds, shows that
retirement plan advisers are acknowledging their clients’ concerns of managing
plans more responsibly, including seeking the best overall value for the money,”
says York. “Among the elite group of DC specialists[—i.e., those managing $50 million or more in defined
contribution assets—]we find strong preference for both active and passive target-date
fund providers, indicating that asset managers will not only need to compete on
performance and price, but also find ways to further differentiate their target-date
offerings in the marketplace.”
Generally
speaking, investment managers can differentiate themselves by adhering
to the tried and true: reliability, trustworthiness and consistent performance, showing the adviser they are easy to do business with, the report says.
Other
findings include:
Nearly
three-quarters (73%) of established DC advisers also recommend index funds to
their clients, up from 64% in 2014.
The
percentage of advisers selling defined contribution plans is growing. Two-thirds
(65%) of advisers report managing defined contribution assets as part of their
overall book of business this year, up from 60% in 2014. “Established DC advisers
who manage $10 million or more in DC AUM represent 27% of all advisers, up from
23% a year ago,” York says.
Defined
contribution advisers work with an average of 4.7 investment managers in their
DC plans, down from 5.3 in 2014; however, they concentrate their business with
just 2.7 plan recordkeepers—a number that has held steady for several years.
The report is
based on a survey, performed in August, of 486 active advisers to defined
contribution plans.
Market
Strategies International is a market research consultancy that studies consumer/retail,
energy, financial services, health care, technology and telecommunications
topics.
More
information about “Retirement Plan Adviser Trends” can be found here.