Morningstar Enhances Managed Accounts Platform

May 6, 2013 (PLANSPONSOR.com) - Morningstar Inc. has introduced the next generation of Morningstar Retirement Manager, its advice and managed account service for defined contribution (DC) participants.

Among the most significant enhancements to Retirement Manager is the addition of Income Secure, which provides individualized, tax-efficient retirement income drawdown advice. A Morningstar research paper, “Alpha, Beta, and Now…Gamma,” shows that a participant’s withdrawal strategy—how much to take from a retirement portfolio each year and from which account (IRA, 401(k), taxable, etc.)—can have the most significant effect on the amount of income an investor has in retirement.

Retirement Manager can evaluate all of a participant’s holdings across both taxable and tax-deferred accounts and provide a specific, individualized drawdown plan that outlines how much he should pull from each account each year, considering taxes and minimum required distributions. “From an individual standpoint, [participants] just want to know how much they can spend in retirement,” James Smith, vice president of client solutions at Morningstar Investment Management, told PLANSPONSOR.

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Retirees must make many complex decisions every year based on changes that will occur upon leaving the work force: Savings mode will end, and participants will incur different tax rates, for example. “This helps simplify the process for the average person,” said David Blanchett, head of retirement research at Morningstar Investment Management. “Our recommendations will be very different based upon different states.”

Morningstar has also enhanced its investment recommendations to reflect its latest liability-driven investment (LDI) methodology. LDI recognizes that investors in or nearing retirement face different risks than those in the accumulation phase. For example, two investors may have the same stock-bond split in their portfolios, but the investor closer to retirement has greater need for inflation, currency and interest rate protection than someone further from retirement.

Participants who use Retirement Manager will now get investment recommendations that are not only suited to their risk capacity, but also sensitive to the unique risks associated with their life stage.

Another significant enhancement is more holistic retirement planning advice with recommendations about what age to retire. In addition, if a participant is not saving enough and has reached the annual 401(k) savings limit, Retirement Manager will provide participants with asset-allocation and savings recommendations for an outside taxable account.

Additional enhancements to Retirement Manager include:

  •  Portfolio assignment based on patented human capital methodology, which accounts for an investor’s total economic situation—both current wealth and future earnings and savings potential;
  •  Enhancements to fund selection methodology, inflation rate forecasting and treatment of stable value funds; and,
  •  Personalized recommendations for guaranteed income products, both in and out of plan.

The enhancements have already been rolled out to some institutional clients but will fully launch sometime between now and July, Smith said. 

In addition to providing defined contribution managed accounts and advice, Morningstar offers plan sponsor investment lineup selection, 3(21) and 3(38) fiduciary services and custom target-date fund (TDF) design through its registered investment advisers.

SURVEY SAYS: Communicating Health Care Changes

May 6, 2013 (PLANSPONSOR.com) – The health care reform law has led to changes in employers’ benefit offerings, and more changes are coming.

Last week, I asked NewsDash readers, has your company communicated coming health care offering changes to employees?  

One-quarter (25.5%) of responding said their companies have started communicating changes to employees, while 19.1% indicated their firms are waiting for the annual open enrollment period. Seventeen percent each reported their companies have not communicated anything yet, and their firms’ benefit offerings are not changing. Nearly 15% said their organizations’ have not decided about changes to health care offerings yet.  

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Around 6% of respondents chose “other.” Those responses indicated some companies plan to start communicating changes between now and open enrollment and some have educated employees about changes already made, but not about changes coming next year.  

In verbatim comments readers expressed frustration with the health care law in general, but many specifically discussed how difficult employee education is with the complexity of new rules and need for more communication guidance. For the Editor’s Choice this week, I couldn’t help but take advantage of the plug. It goes to the reader who said: “If I didn’t read NewsDash, sadly I would have no idea of the pending changes…Thank God I can manage my own accounts.”

Verbatim   

We are trying to inform our employees about the increasing coverage mandated and the costs that we are anticipating increasing to cover these additional items and additional insured individuals.  

No matter how well we try to explain all the changes and options from the new health care requirements, it is going to be hard for our workforce to understand. The governmental delays in guidance for the standard format of such communications and info on the exchanges is going to make a difficult task even harder. To explain adequately and prepare to deal with the questions and issues, employer HR staffs need time to prepare too. This should be delayed if the government doesn't already have all the decisions made and ready to give to employers by this point.  

We have already added an HDHP with HSA and communicated that it was in response to the FSA limits. We have also been communicating about the Open Enrollments this fall that will coincide with our regular Open Enrollment.  

We might not have any changes; one can only hope!  

Things are kept close to the vest around here, so even though I work in HR, and in the famous words of Schultz, (from Hogan's Heroes)...I know nothing!  

I believe we were e-mailed a 1-2 page information sheet. That's it.  

Our company has complied with all the required documentation under PPACA. 

This new Health Care Bill is going to cause a lot of problems for Employers and Employees get rid of the bums who are forcing this on us. 

We are interested in communicating about the 2014 changes but are finding that there are very few if any resources at the present time geared to employees.

Verbatim (cont.)  

We're a commercial construction company with many project sites and employees all over the city. It's very difficult to gather all of the people for meetings.  

clear as mud  

Communication isn't the issue so much as it's the actual changes. For example, we used to have a choice between deductible/no deductible. Obviously the premium was higher for no deductable. There is no choice. We now apparently must have a deductible. That means I'm forced to pay lots out of my pocket at the beginning of the year, rather than being able to spread it over the year in premium payments. How in the world is that making health insurance more affordable? Your government dollars at work.  

If I didn't read NewsDash, sadly I would have no idea of the pending changes...Thank God I can manage my own accounts.  

If you think health care is expensive now, wait until it's free!  

Educate them about what? The State we do business in has chosen not to offer an exchange. Has the Federal Government outlined their health insurance exchange yet?  

Up till now (or recently), it’s all been about the new benefits; adult dependent mandate (talk about your oxymorons), coverage of pre-existing conditions, "free" contraception coverage. Well, that "free" lunch that everybody likes so much in the polling is coming to an end. Forget about the $1 trillion this will cost American taxpayers over the next decade, your healthcare costs are getting ready to rise steeply, and your services likely to diminish (though perhaps more gradually). Then we'll see how much everyone "likes" the new health care law. "If you like the healthcare you have, you can keep it", my eye!  

 

NOTE: Responses reflect the opinions of individual readers and not the stance of Asset International or its affiliates.

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