Administration February 1, 2012

Institutional Plan Sponsors Post Fourth Quarter Gains

February 1, 2012 (PLANSPONSOR.com) - Northern Trust announced that U.S. institutional investment plan sponsors in the Northern Trust Universe gained 4.5% at the median in the fourth quarter of 2011. 
 
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A surge in U.S. equities created a positive ending to a mixed year for most plans. 

Institutional investors eked out a gain overall for the full year 2011, with a median return of 0.8% for all plans in the Northern Trust Universe. The results differed by segment, however. Corporate ERISA Pension Plans gained 2.3% at the median while the other two segments were practically flat, with the median public fund up by 0.9% and the median plan in the foundations & endowments segment down by 0.6% for the 12 months ending December 31, 2011.

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“Global market volatility contributed to an up-and-down year for institutional plan sponsors in 2011, with two quarters of moderate gains followed by a nearly 10% drop in the third quarter and a sharp recovery at year-end,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Last quarter’s positive results were in line with historical trends in the Northern Trust Universe, with fourth quarter median returns typically being the highest in the calendar year.”

Corporate Pensions led in the fourth quarter with median returns of 5.6%, as Public Funds gained 5.4% and Foundations & Endowments advanced 4.2% at the median. U.S. equities were the primary driver of performance, with the median U.S. Equity Program in the Northern Trust Universe gaining almost 12% in the fourth quarter. International equity programs gained almost 4% in the fourth-quarter while fixed income programs were up 2%. In alternative asset classes, real estate gained 2%, while private equity was down 1.6% and hedge funds were down 0.4% for the three months ending December 31.

Asset allocation again played a key role in relatively wide range of one-year performance figures. Corporate pension plans had the largest allocation (nearly 35% at the median) to fixed income in the third quarter, buffering losses, and also the largest allocation to U.S. equity (nearly 37% at the median), which contributed to gains in the fourth quarter. Public funds performance suffered from a larger allocation to international equities (16%) while foundations & endowments’ larger allocation to hedge funds (7%) was a drag on performance.

More detail on asset allocation and performance of funds can be found on the Investment Risk & Analytical Services web page.

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $689 billion, which subscribe to Northern Trust performance measurement services. 

Benefits February 1, 2012

Two-Thirds of Workers Unaware of Paycheck Increase in 2011

February 1, 2012 (PLANSPONSOR.com) – A poll found 66% of working Americans were unaware that their paychecks were larger last year due to the Social Security payroll tax cut. 

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However, the poll conducted by the National Foundation for Credit Counseling (NFCC) found those who were aware of the increase allocated the money responsibly, with the largest number of respondents indicating they used it to pay off debt (18%), while the second highest number (8%) caught up on past-due bills.

Smaller percentages either increased their retirement contributions (4%) or saved the money (3%).  Only 1% indicated that they spent the money on something for themselves.

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The 2% Social Security payroll tax cut put $1,000 back into the pockets of a family earning $50,000 annually. The cut has been approved for two months in 2012 (see Payroll Tax Cut Bill Includes Recapture Tax).

“Even if the dollar increase is small, consumers should be aware of it,” said Gail Cunningham, spokesperson for the NFCC.  “Not recognizing that the paycheck was larger begs the question of how the additional money was spent.  Knowing how much you make and consciously determining how to spend it are basic building blocks of financial stability.  This poll provides another example of the need for increased financial education.”

The NFCC’s January Financial Literacy Opinion Index was conducted via the homepage of the NFCC website from January 1-31, 2012 and was answered by 1,797 individuals. 

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