Products October 29, 2015

Investment Product Launches for the Week

CUNA Mutual Retirement Solutions adds to stable value offerings for 457 and 403(b) plans; Index Fund Advisors “Investing for Catholics” division launches faith-based target-date fund.
Reported by

CUNA Mutual Retirement Solutions Adds to Stable Value Account Capabilities

CUNA Mutual Retirement Solutions has added to its Guaranteed Account offerings by making rate classes available specifically for 457(b) and Employee Retirement Income Security Act (ERISA) 403(b) plans. Having served the 401(k) and defined benefit plan types for more than 30 years, this is the first time the company has offered the non-profit sector a stable value option, according to the firm.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“We are pleased to bring a stable value solution to plan types that haven’t had many choices,” says Paul Chong, senior vice president of CUNA Mutual Retirement Solutions. “The Guaranteed Account is a stand-alone, investment-only offering and is an exciting step in the evolution of our company beyond the 401(k) and defined benefit space.”

Unlike many types of stable value accounts, CUNA says this fund is “fully guaranteed and not subject to any type of price fluctuation.” The fund is underwritten by CMFG Life Insurance Company, part of CUNA Mutual Group, and features competitive interest rates ranging from 1.5% to 2%, depending on adviser compensation.

Other highlights of the Guaranteed Account for 457(b) and 403(b) plans include complete guarantees of principal and interest (not found in all stable value accounts); rates declared in advance semiannually with a 1% minimum rate guarantee; full liquidity (participants can transfer into and out of this account without restrictions or penalties); and an option to convert to guaranteed lifetime income at retirement.

“We believe it will be a good fit for retirement plans that have an underperforming money market or other form of stable value account in their plan,” Chong says. “Additionally, it’s a great way to add an element of guaranteed income to plans that do not have such features.”

Those interested in offering this account as an adviser, broker/dealer or plan sponsor should email RPSProductSupport@cunamutual.com or visit www.theguaranteedaccount.com for more information.

NEXT: Catholic values TDF

Catholic values TDFs and Risk-Based Funds from IFA

Index Fund Advisors (IFA) has launched a series of target-date funds (TDFs) and risk-based funds aimed at meeting the needs of Catholic investors who want to maintain investment portfolios in line with their religious values.

The funds will be available for purchase on January 1, 2016, and are being launched within IFA’s Investing for Catholics (IFC) division. According to the firm, the risk-based funds are designed “to both complement the TDF lineup, as well as to provide a suitable investment alternative for Catholic defined benefit plans.”

IFA says it unveiled the funds to a strong response at the recent annual Catholic Diocesan Fiscal Managers Conference (DFMC) held on September 27 in Atlanta, “fresh on the heels of Pope Francis’ historic visit to the United States.”

The firm explains the funds this way: “The IFC target-date funds are thoughtfully designed to invoke the simplicity of low-cost, easy-to-use managed solutions, with one major differentiator—the stock funds used in the IFC funds closely match the guidelines for socially responsible investing as laid out by the United States Conference of Catholic Bishops (USCCB). This distinction makes the funds an excellent default investment for plans, and marks a significant advancement for Catholic retirement.”

Funds are available for investment by eligible qualified retirement plan trusts only. The firm expects to target mainly 403(b) church plans, but a recent nod of approval by the Department of Labor for greater use of environmental and social factors in qualified retirement plan investment decisionmaking could change that moving forward.

The firm says it developed the daily valued funds in collaboration with Hand Benefits & Trust, a BPAS Company, and based them on IFC’s prudent and socially responsible investment strategies. The new funds will be accessible to employees of Catholic organizations through their retirement platforms. Reporting for quarterly holdings and monthly performance returns will be available through Morningstar.

More information is at http://www.ifa.com. 

Data & Research October 29, 2015

Rx Costs Drive Up Amount Needed for Retirement

Individuals with high prescription drug costs need to save substantially more for retirement than others.
Reported by

Projected savings targets needed to cover health care in retirement are going up again after several years of decline, according to research by the Employee Benefit Research Institute (EBRI).

EBRI found that the range of retiree health savings targets rose between 6% and 21% between 2014 and 2015. While there are various factors at play, “the main reason for the increase in needed savings is related to the yearly adjustment for out-of-pocket spending for prescription drug use,” says Paul Fronstin, director of EBRI’s Health Research and Education Program and co-author of the report.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Since the EBRI analysis does not factor in the savings needed to cover such things as long-term care expenses, retiring earlier than becoming eligible for Medicare, and higher Medicare premiums related to higher income, “many individuals will need more than the amounts cited in this report,” Fronstin adds. Conversely, some workers will need to save less than what is reported if they choose to work past age 65, thereby postponing enrollment in Medicare if they receive health benefits as active workers.

NEXT: How much savings is needed?

The range of increases in the amount individuals need to save for retirement depends on how much health expenses a person is likely to have and how high a probability they want to have enough money on hand. Specifically, EBRI found, in 2015, a 65-year-old man would need $68,000 in savings and a 65-year-old woman would need $89,000 if each has a goal of having a 50% chance of having enough money saved to cover health care expenses in retirement. If either instead wanted a 90% chance of having enough savings, $124,000 is needed for a man and $140,000 is needed for a woman. 

Those with high prescription drug costs would need to save substantially more. For a married couple both with drug expenses at the 90th percentile throughout retirement who want a 90% chance of having enough money saved for health care expenses in retirement by age 65, targeted savings increased from $326,000 in 2014 to $392,000 in 2015.

EBRI points out that projections of savings needed to cover out-of-pocket expenses for prescription drugs are highly dependent on the assumptions used for drug utilization, which is why its analysis provides three sets of estimates: prescription drug use is at the median (mid-point, half above and half below) throughout retirement; prescription drug use at the 75th percentile throughout retirement; and in prescription drug use is at the 90th percentile throughout retirement. 

The full report, “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the News Is Not Good,” is published in the October 2015 EBRI Notes, online at www.ebri.org.

«