Administration June 25, 2014

Ill. Teachers Pension Further Lowers Return Assumption

June 25, 2014 (PLANSPONSOR.com) - The Illinois Teachers’ Retirement System (TRS) Board of Trustees lowered the fund’s assumed rate of investment return to 7.5% from 8%.
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The action was taken following a recent review of its asset liability model and revised capital market assumptions. “The assumed rate of return greatly influences the financial future of TRS. Reducing the rate from 8% to 7.5% is a prudent move that balances expected future reality with the needs of TRS members,” says Executive Director Dick Ingram. “The Board’s decision takes into consideration extensive input from our actuaries and investment consultants. It is one of the most important elements of the fiduciary duty we have to keep the System as strong as possible.”

The former 8% rate of return, adopted by the TRS Board in 2012, has proven to be appropriate. The actual long-term TRS investment rate of return currently exceeds 9%. Back in 2012, the Board voted to revisit the long-term assumed rate of return every three years in the future instead of the customary five years. Trustees said the change was prompted by increasing volatility in the international economy.

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The National Association of State Retirement Administrators (NASRA) reported earlier this year that of 126 major state and municipal pension systems across the country, 32 had set an assumed rate of return between 7.5% and 8%; 37 had set a rate between 7% and 7.5%; and 45 had an 8% rate (see “Indiana Pension Drops Return Assumption to 6.75%”). The average return rate of the 126 systems is 7.72%. The NASRA study also found that over the last 25 years, the 126 pension systems recorded a median actual investment return of 9%.

In other business, the Illinois TRS increased its long-term asset allocation targets for private equity and real estate investments (from 12% and 14% in 2011 to 14% and 15%, respectively) and decreased its long-term assets allocation targets for domestic and international equity (from 20% each in 2011 to 18% each). The system also moved its target for real return assets from 10% to 11%. The targets are designed to minimize investment risk and maximize returns, the system says.

Benefits June 25, 2014

Millennials the Most Financially Stressed

June 25, 2014 (PLANSPONSOR.com) – Workplace benefits focus on older employees’ needs, even though Millennials exhibit the greatest number of financial challenges, a survey says.

  

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This was the finding of a survey of 419 human resource (HR) professionals conducted by the Society for Human Resource Management, commissioned by Elevate, a provider of online credit products.

Fifty percent of the HR professionals said Millennials, those ages 25 to 34 age, are the most financially stressed, and 29% pointed to those in the 35 to 44 age group as the most financially stressed. A vast majority, 85%, said that when their employees are financially stressed, their productivity decreases. Another 37% said employees had missed work in the past year because of a financial emergency, and 61% rated the financial health of their employees as “fair,” “poor” or “very poor.”

More than half of HR professionals (53%) said employees had asked for a payroll advance in the past year, and 47% said employees had approached a manager or supervisor for financial advice in the past year. However, only 19% of organizations offer payroll advances and just 18% offer third-party provider loan products. Among this minority, 55% of those offering payroll advances and 73% of those offering third-party loan products said these were helping their employees to manage financial difficulties.

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When asked about the financial benefits offered to their employees, the most common is retirement planning (cited by 81%), followed by financial literacy training (42%), education on basic budgeting (25%) and management of credit (8%).

“HR professionals have a unique opportunity to help employees representing the new middle class, especially Millennial employees, relieve their financial stress by offering financial benefits more tailored to meet employee needs,” says Ken Rees, chief executive officer of Elevate. “More services to help up-and-coming or financially struggling employees—including basic financial literacy training, payroll advance, or third-party loan products—can have a big impact not only on productivity, but also on the future well-being of these employees.”

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