Steve Montagna Playing Outside the Box  Probably like most people, I’m wedded to my routines. Like my morning green tea (organic and loose-leaf) with a firm caffeine cut-off by noon. Recently I did an afternoon “walking meeting” with the head of my department. We walked and talked our way to a matcha green tea shop in the heart of downtown Los Angeles. I resisted ordering because it was, well, the afternoon. But matcha..." />

Steve Montagna Playing Outside the Box  Probably like most people, I’m wedded to my routines. Like my morning green tea (organic and..." />

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NAGDCA Newsletter - The Contributor

NAGDCA accepts article submissions from all members. To submit an article for the NAGDCA Contributor, please click here.

2018 due dates for newsletter articles:

  • Winter:       January 10
  • Spring:       April 11
  • Summer:    July 11
  • Fall:           October 10
The Contributor - Summer 2017
Published on : Friday, August 11, 2017

Steve Montagna
Playing Outside the Box 
Probably like most people, I’m wedded to my routines. Like my morning green tea (organic and loose-leaf) with a firm caffeine cut-off by noon.

Recently I did an afternoon “walking meeting” with the head of my department. We walked and talked our way to a matcha green tea shop in the heart of downtown Los Angeles. I resisted ordering because it was, well, the afternoon. But matcha is supposed to be healthy, I’m there with the boss… So I went for some matcha iced tea. I hoped it wouldn’t hit me too hard.

I drank barely a quarter of it, but by the time I was back from the meeting, I was jittery enough to have trouble hitting the computer keys. By evening I was comatose. But I had a particularly productive, somewhat giddy, afternoon.

You probably think I’m heading for a market volatility metaphor, but no. The lesson of this story is – all familiar habits are best broken now and then.

If there’s one thing I’ve learned about creating program success, it’s that it flows from breaking free from convention – and that all of those conventions are self-imposed. In the retirement world, conventions abound. We have conventions around plan design. We have conventions around investments. We’re inundated with conventional wisdom about market behaviors, participant behaviors, and administrative thou-shalts and shalt-nots. 

It’s habitual to flow with the calm waters of convention. But now and then, it might be a good idea to trot out our assumptions for the equivalent of an afternoon matcha green tea.

Here’s a suggestion. Periodically assemble your team and try asking the craziest questions you can come up. Here are a few matcha-inspired musings:

  • What would happen to our plans if we all started living longer – I mean really longer – to ages like 120 or greater?
  • What if the next economic contraction lasted a decade instead of a few years?
  • What if the current bull market kept running for another decade?
  • What if you got to 100% enrollment?
  • What if your plan evolved to have more retired than active participants?
  • What if a larger plan wanted to take over your plan?
  • What if a portion of your population wanted to secede from your plan?
  • What if you were given the opportunity to re-design your plan from scratch in one year – would you take it? And what would your new plan look like? 

Imagining or experimenting with a future very different from present reality may make you either jittery or giddy. Or both. But as we think back over the last few decades, we’ve learned that change is inevitable, and to expect the unexpected. We’ve seen market downturns powerful enough to upend all the old rules. And once unimaginable legislative, product, and service changes creating exciting new possibilities for our participants.

What the future holds no one knows, although we do know it is not bound by the past. Whether you’re asked or nudged to take a walk on the wild side, take the opportunity to embrace the journey in full. Try your equivalent of an afternoon matcha green tea. Maybe you’ll love it, maybe you won’t, but you’ll learn something to help you move forward. For me, next time, I’ll try the matcha ice cream.

NAGDCA 2017 Industry Roundtable
In April, industry members attended the industry roundtable in Washington, DC where they discussed best practices for DC plans, auto enrollment vs engagement, and measuring success. Attendees also had the opportunity to hear directly from key staff members on Capitol Hill who work on retirement issues.  Dates for the 2018 industry roundtable will be announced soon.




Asset TV Interviews
During the Industry Roundtable, Polly Scott, NAGDCA Past-President and Deferred Compensation Manager for the Wyoming Retirement System, had the opportunity to sit down with Jeffery Snyder, Cammack Retirement, to discuss the National Retirement Security Week initiative as well as NAGDCA’s legislative efforts. She also shared key highlights from the Wyoming 457 deferred compensation plan.

Steven Montagna, NAGDCA President and the Executive Director of the City of Los Angeles Deferred Compensation Plan, also sat down with Snyder to share the innovative ways his city is engaging employees to ensure retirement readiness and financial wellness. 

You can view all interviews on NAGDCA's Facebook page or YouTube channel



2017 Arthur N. Caple Scholarship Winners Announced
The Arthur N. Caple Foundation (ANC Foundation) has selected one of the nation’s most promising financial planning students as the 2017 ANC Foundation Scholar. Six additional students also received scholarships. Each year the ANC Foundation provides scholarship awards to juniors, seniors or graduate students who demonstrate academic excellence and an understanding of the issues facing public sector retirement plans. This year’s scholars will be honored during the NAGDCA annual conference September 24-27 in Milwaukee, WI. 

The scholarships are made possible through the generous support of our donors. Please consider making a donation individually or through a company matching donation. For more information, please visit the ANC Foundation website or contact Tracy Tucker at

The students were chosen from 23 applicants nationwide for the ANC scholarships. Scholarship awards are based on academic performance and written responses to set essay questions. The top scholarship recipient receives $5,000 to be used toward educational expenses, registrations, travel and hotel accommodations for the NAGDCA annual conference, as well as, enrollment in the Certified Retirement Counselor certification program, including materials and exams. The remaining six recipients receive travel scholarships that include full registration, travel and lodging expenses to attend the NAGDCA annual conference.

2017 Scholarship Recipients:
Dalisha Herring,
University of Missouri (top scholar)
Kevin Cheng, University of Missouri
Trent Colledge, Utah Valley University
Colin Hardy, Utah Valley University
Joseph Kirkbride, Western Michigan University
Kimberly Lambiase, University of Maryland University College
Josh Wagstaff, Utah Valley University

The Arthur N. Caple Foundation was formed to advance knowledge in the field of public sector retirement security. The Foundation, established in 2006 as a supporting organization of the National Association of Government Defined Contribution Administrators (NAGDCA), supports both individual educational opportunities and research to expand knowledge related to the importance of retirement readiness.

National Retirement Security Week
National Retirement Security Week is set for October 15-21, 2017! Join your fellow NAGDCA members in using the universal engagement campaign, Your Whole Story. For the second year NAGDCA worked with NARPP (The National Association of Retirement Plan Participants) to develop a behaviorally effective communications campaign that is designed for use by all of NAGDCA’s plan sponsors. This award-winning campaign contains a variety of communication pieces that can either be used off the shelf, or customized to your plan. Click here to view the campaign website.

Click here to access the National Retirement Security Week webinar recording. This webinar featured Polly Scott, chair of the Participant Engagement Committee, and Laurie Rowley, NARPP President. They discussed the Your Whole Story campaign, and the best uses for the campaign materials. 

Low-volatility strategies: A new way to help DC plan participants navigate tough markets

Click here to view a PDF version

Kamila Kowalke, Director – BMO Global Asset Management
Erik Applegate, CFA, Product Manager – BMO Global Asset Management

Many government defined-contribution plan sponsors continue to have concerns regarding participants’ ability to retire with an adequate income replacement ratio. While the amount participants and employers contribute is important, as are plan design, automatic features and participant education, investment choices can also be a determining factor as plan sponsors work to help participants achieve better retirement outcomes.
Low-volatility investing represents a surprisingly significant opportunity to provide participants with a way to earn long-term excess returns. Low-volatility strategies are designed to deliver attractive performance with a meaningful level of risk reduction relative to traditional equity strategies. These features can reduce the impact of common behavioral biases exhibited by participants in times of market stress, making low-volatility strategies a compelling option for DC plans. 

Overview of low-volatility strategies
Low-volatility equity strategies aim to provide market-like returns with significantly less risk. They accomplish this by investing in high-quality, defensive companies with stable earnings and cash flows — characteristics deemed to be low risk. Below, we walk through three ways in which low-volatility strategies can help plan sponsors and their participants achieve desired outcomes.

1. Maintain return objectives[1]
Our research suggests that over full market cycles, low-volatility strategies offer market-like returns with 60%–70% of the risk.[2] This suggests that DC plans can replace existing market exposure (beta) with low-volatility strategies to meet return goals while mitigating risk.

Low-volatility pioneers Nardin Baker and Robert Haugen (2012)[3] have shown that the low-volatility anomaly holds in every country’s equity market for which data can be collected. Figure 1 shows the raw (not risk-adjusted) returns on quintiles of U.S. stocks over the period from 1970 to 2011, sorted by volatility. The relationship that emerges contradicts what common sense and financial theory would lead us to expect: low-volatility stocks outperformed high-volatility stocks even before adjusting for risk.


These findings have implications for target-date fund allocations and individual options in a DC investment lineup. Using low-volatility strategies in target-date funds to seek market-like returns while reducing risk would allow a plan to more effectively allocate capital and achieve better overall outcomes. Having a low-volatility option on the plan menu would allow participants to potentially capture returns of the equity market while mitigating downside risk.

2. Mitigate risk, particularly during large drawdowns[4]
While a low-volatility strategy’s ability to reduce overall risk has been well documented, we believe avoiding large drawdowns is particularly valuable to DC plan participants. In fact, it is crucial for participants in or approaching retirement who may still need an allocation to equities to meet their return objectives. Those participants are especially vulnerable to large market fluctuations and may not be able to wait out a long recovery.

The table below illustrates the value low-volatility strategies create by helping investors avoid large drawdowns:



market (%)


market (%)


average (%)


return (%)

Required return to recover from down market (%)

Low-volatility strategy






Cap-weighted benchmark







As the table shows, the negative realized return from two large moves (-30%, +30%) more than doubles the negative realized return from two smaller moves (-20%, +20%). Also, the positive return required to recover a large drawdown is much greater and may take longer to generate than the return required to recoup smaller losses. 

3. Manage behavioral biases
Research has shown that once DC participants select (passively or actively) their investments, the majority rarely make changes to their allocations. This is commonly known as status quo bias. A study by Ameriks and Zeldes (2004) found that nearly one-half of TIAA-CREF plan participants made no allocation changes over the 10-year period studied.[5]


The painful results of this inaction are typically highlighted during periods of economic stress. Participants who have failed to reduce their allocation to equities as they approach retirement age can experience irreparable harm to their long-term wealth creation. Worse yet, retired participants who maintain a significant allocation to equities but are making regular withdrawals are forced to sell after steep market declines.

While DC plan participants are usually reluctant to make changes to their investment allocations, research has shown that they are less reluctant to make changes during highly volatile periods in the market, when fear and panic are prevalent. During these times participants have overcome their status quo bias and made meaningful changes to their allocations. Unfortunately, these changes generally work to their detriment, as they sell equities when the price is low to buy bonds near peak price levels.

While low-volatility strategies cannot entirely prevent poorly timed reallocations, by mitigating risk during large market downturns they can help minimize the perceived need to reallocate, reducing the effect such reallocation can have on a participant’s long-term wealth creation.

As volatility increased in 2015 and 2016, low-volatility strategies (especially passive versions) became more popular and their valuation risk increased (along with their interest-rate sensitivity due to macro conditions); this risk, however, is mitigated by more sophisticated active strategies.

The continued existence of a low-volatility anomaly is supported by benchmark-sensitive active equity management, which continues to leave low-volatility stocks relatively undersubscribed and thus potentially priced for strong returns.[6] As a result, a low-volatility strategy can enhance a DC plan’s investment lineup and offer participants an option that is structured to counter behavioral biases and help meet their long-term objectives.

Kamila Kowalke
Director, Institutional Sales

Kamila is responsible for expanding the distribution of BMO Global Asset Management’s solutions in the western U.S. She joined the company in 2014.

Kamila previously served as vice president of institutional sales at Calamos Investments and director of institutional markets at Dow Jones Indexes.

Kamila holds an M.B.A. from the University of Arkansas and the U.S. equivalent of the B.A. from the Gdansk Institute of Technology. She has also passed CFA® Level I.

Erik Applegate, CFA
Product Manager

Erik is responsible for defining, prioritizing and executing the product positioning for all BMO Global Asset Management (U.S.) strategies with the purpose of maximizing distribution opportunities in the institutional channel. He joined the company in 2017.

Erik began his investment management career in 2011, and was previously a manager researcher at Mercer Investment Consulting.


He holds a B.S. in finance magna cum laude from the University of Missouri. In addition, Erik is a CFA® charterholder and a member of the CFA Society of Chicago.


[1] See Corris, David, Jason Hans, Jay Kaufman and Ernesto Ramos. “Incorporating low volatility equity into a strategy allocation.” (2014). and “Finding opportunities through the low-volatility anomaly.” (2013).

[2] For low-volatility strategies, we consider a full market cycle to consist of a mix of up and down markets, which typically occurs over a span of 3–5 years.

[3] Baker, Nardin L., and Robert A. Haugen. “Low Risk Stocks Outperform within All Observable Markets of the World.” (2012).

[4] See Corris, David, Jason Hans, Jay Kaufman and Ernesto Ramos. “Incorporating low volatility equity into a strategy allocation.” (2014).

[5] Ameriks, John, and Stephen P. Zeldes. “How Do Household Portfolio Shares Vary With Age?” (2004).

Ameriks and Zeldes note that this finding confirms earlier research: Samuelson, W.F., and R.J. Zeckhauser. “Status Quo Bias in Decision Making.” The Journal of Risk and Uncertainty 1, no. 1 (1988): 7–59.

[6] See Corris, David, Jason Hans, Jay Kaufman and Ernesto Ramos. “Finding opportunities through the low-volatility anomaly.” (2013).

Passively accepting market returns: Risky business for defined contribution plans?

David Ireland, CFA, Director, Defined Contribution Distribution - Wellington Management
Chris Goolgasian, CFA, CPA, CAIA, Associate Director & Portfolio Manager, Global Multi-Asset Strategies - Wellington Management

In the years since the financial crisis, the defined contribution industry has experienced large flows into passive options at the expense of active options.  Passive options have some important characteristics including low costs.  However, the trend towards passive has been so strong, many are beginning to question whether the pendulum has swung too far.  There seems to be consensus that future market returns may be challenged and the need to alpha may be greater than in the recent past.  In this paper, Wellington Management explores the “risk of passively accepting market returns” when one is saving for their retirement. For the full article, please click here.

Susan J. White & Jonah Mainzer, Susan J. White & Associates, Inc.

Congressional Action
As Congress moves into its August recess, it appears that the Senate will be moving on from health care and will start dealing with other legislation.  There have been reports that health reform may arise again later this year, but it is uncertain at this time if that will occur.

There are a number of issues that Congress will be working on including appropriations, raising the debt limit, and in the Senate, confirming Administration and judicial appointments.  Congress may also begin working on tax reform, an Administration priority. Though there have been only a handful of hearings on tax issues held this year, Congress and the White House are maintaining it will be their top priority when Congress returns after Labor Day.   

Tax legislation must originate in the House.  In the House of Representatives legislation can pass with a simple majority of 218 votes. Thus, proposals will be circulated first in the House of Representatives. 

It may be more difficult for the Republican majority to pass legislation in the Senate. Under regular order 60 votes are needed to cut off debate on legislation.  However, legislation can be passed via Reconciliation which requires only a simple majority of 51 votes.  Reconciliation must follow a Budget resolution.  There are strict rules for what can included in a Reconciliation bill, but it is likely that most of tax reform can be passed through this process.

The Administration released its fiscal year 2018 proposed budget in May. The Department of the Treasury did not release a “green book” and as a result there are no legislative proposals pertaining to taxes or retirement. The “green book” is normally released the same day as the budget and contains the Department of the Treasury’s legislative proposals for the following fiscal year. 

Congress has started working on the federal fiscal year 2018 appropriations. The next fiscal year starts on October 1. The last time Congress passed the eleven appropriations bills by that time was over 20 years ago.  In the event of not passing bills, Congress can either pass a continuing resolution, which funds government at current levels, or pass an omnibus legislation which merges the remaining appropriations bills into one large piece of legislation.  

The House of Representatives Committee on Appropriations has passed all eleven of their bills and the Senate Committee on Appropriations has passed four bills, but none of them have been passed yet by the full House or Senate. 

Tax Reform
Administration and House and Senate leaders recently released a joint statement on tax reform. This statement did not mention any new policy positions and this includes pension issues.  The only major announcement was that the border adjustment tax is no longer under consideration.  

Among the few hearings House Committee on Ways & Means has held was one on simplifying the tax code. There were some references to retirement savings as one witness discussed the general importance of tax incentives in retirement savings. Democrat members of the committee expressed concerns about “Rothification." They noted it could raise significant money immediately but would then leave shortfalls in the future. Most of the hearing, focused on simplification of the tax code in general and how it would then make the United States more competitive.

NAGDCA has been working with Committee on Ways & Means Ranking Member Neal (D-MA) on tax reform proposals. Ranking Member Neal’s tax staff reached out to NAGDCA on proposed legislation that currently includes a number of NAGDCA priorities (Saver’s Credit, first day of the month requirement, and allowing non spousal beneficiaries to roll assets into governmental plans) and have asked for feedback on the proposals.  

National Retirement Security Week
National Retirement Security Week is on track to once again be the third week in October. In past years, the resolution has been introduced in September after Congress has finished budget work and then passed via unanimous consent. This will most likely occur this year, but with the Senate being consumed by health reform, we do not yet have confirmation.

The Administration has recently announced that they were ending the MyRA program citing the costs to the program.  This was a program set up during the Obama Administration to provide no fee retirement accounts for low income workers.   The maximum that could be held in these accounts was $15,000.  The 30,000 participants in the program will be able to roll their accounts into Roth IRAs.






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