The Markets May 9, 2018

Plan Sponsor Returns Declined in First Quarter

This is the first dip since the third quarter of 2017, according to BNY Mellon

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The BNY Mellon U.S. Master Trust returned a median -0.39% in the first quarter of this year, the first negative result in 10 quarters. The BNY Mellon U.S. Master Trust consists of 626 corporate, foundation, endowment, public, Taft-Hartley and health care plans with a total market value of $2.1 trillion and an average plan size of more than $6 billion.

For the trailing one year, the Trust’s return was 10.13%, surpassing its three-year annualized return of 6.37% and five-year annualized return of 7.64%.

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In a reversal from the fourth quarter of 2017, corporate and health care plans underperformed, with quarterly returns of -1.14% and -0.71%, respectively.

“Endowments benefited from higher allocations to alternatives and lower allocations to U.S. fixed income investments versus other plan types,” says Frances Barney, head of global risk solutions at BNY Mellon. “These plans overweighted alternatives at a 44% allocation versus 21% for the Master Trust Universe as a whole and underweighted U.S. fixed income at 9% versus 27% for the whole. Non-U.S. equity was the top-performing asset class, with double-digit gains over the one-year period of 17.58%, followed by U.S. equity continuing its run of positive returns (13.85%) [and] non-U.S. fixed income (8.57%).”

The data also indicated that more than 29% of plans posted positive results in the first quarter. Endowments saw the highest median return (0.52%) followed by foundations (-0.12%). The median return for public plans was -0.14%, and the median return for Taft Hartley plans was -0.19%.

Data & Research May 9, 2018

Most Workers Willing to Pay More for Better Retirement Benefits

But less than half are willing to do the same for better health care benefits, Willis Towers Watson learned in a survey. 

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Sixty-six percent of U.S. workers said they would be willing to pay higher costs for more generous retirement benefits, and 61% would pay more for a guaranteed retirement benefit, according to the 2017 Global Benefits Attitudes Survey by Willis Towers Watson.

However, only 38% are willing to pay more for an improved health care plan, and 49% are willing to pay more to have lower, predictable health care costs. Only 24% are willing to pay for tools and services to live a healthier lifestyle, and a mere 19% would do the same to help boost their finances.

“While employees continue to feel vulnerable about their long-term financial prospects and say they are willing to pay more for greater retirement security, health care benefits evoke a much different response,” says Steve Nyce, senior economist at Willis Towers Watson. “Employees, who continue to see their health care costs increase annually, are basically saying ‘enough is enough,’ as far fewer are willing to pay more for more generous health benefits and more predictable costs.”

On the whole, the survey found that workers are happy with their benefits, with 55% saying they believe their retirement plan meets their needs, and 66% saying their health care plan is accommodating. However, only 43% say their benefits package offers the choice and flexibility to meet their needs, and 27% say that educational programs, such as financial wellness, meet their needs.

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Fifty-eight percent would take time off for an equivalent change in pay. Fifty-five percent would accept a more generous health care plan in exchange for an equivalent change in pay, and 48% would welcome added financial protection benefits. Nearly 90% with benefits choices and access to decision support say their benefit programs is satisfying—twice as many who do not have access to choice.

“Employers need to recognize that employee appreciation of their total benefit package has a positive impact on worker productivity,” says Julie Stone, managing director, health and benefits, North America, at Willis Towers Watson. “Our research shows that just over half of employees whose benefit package meets their needs are highly engage in their job, compared to just 25%” who do not believe their benefits package meets their needs.

Willis Towers Watson’s survey was conducted among more than 30,000 private sector workers in 22 countries last July and August. In the U.S., 4,983 workers were surveyed.

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