Q2 Market Recap: Powell's "Porridge"

The Fed defines success for monetary policy as when the economy is like Goldilocks’ porridge — not too hot and not too cold. Investors have enjoyed Fed Chair Jerome Powell’s “Porridge” several times in 2019 as we ushered in the longest bull market in history.

Read the Q2 Market Recap to learn more about the porridge-like conditions during Q2. Also included is update on the current buzz around a Multiple Employer Plan (MEP).

If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Q2 Retirement Market Recap - Stocks and Bonds Advance Again in the 2nd Quarter

As of June 30, 2017 U.S. equities advanced for the seventh consecutive quarter, with the S&P 500 Index gaining 3.09% in the second quarter and 9.34% year to date. With the economic expansion and the bull market for stocks both in their eighth year, it is understandable that many investors are nervous about a market correction. Equity prices are reflecting a very solid U.S. economy, operating at full potential and full employment. Most of the economic data followed by investors has been positive:

• surges in Leading Economic Indicators, and the Small Business Optimism Index;
• accelerating global Gross Domestic Product (GDP) growth forecast;
• rising housing starts;
• strong Purchasing Managers Indexes (manufacturing and service sectors), strong hiring, declining unemployment, record low weekly unemployment claims and high quit rate;
• low inflation;
• strong consumer data: growth in average hourly earnings/real disposable personal income, household balance sheets, savings rates, credit scores, and record low household financial
• obligations ratio; and
• strong retail sales.

Read the Q2 Retirement Market Recap to learn more about the 2nd quarter stocks and bonds performance, and also review tips on "Understanding Non-Governmental 457(b) and 457(f) Plans".

If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

11 Questions Employers Should Ask About Stable Value Funds

Stable value investments have been a core investment option in defined contribution retirement plans since the 1970s and are an attractive alternative to money market investments due to steady returns and principal preservation guarantees. Stable value funds have proven their worth to investors during the protracted period of low interest rates present since the recent financial crisis. Consider the following comparison of 2007-2016 calendar year total return for the Vanguard Federal Money Market Fund (VMFXX)[i] to the SBS MetLife Stable Value Fund.

1. What is a stable value fund?

8 Questions Plan Sponsors Should Ask about 457(b) and 457(f) Plans

Background:

457(f) and 457(b) plans are non-qualified deferred compensation plans for eligible highly-compensated employees. A non-qualified plan is a type of tax-deferred, employer-sponsored retirement plan that is not subject to Employee Retirement Income Security Act (ERISA) guidelines. Non-governmental 457 plans are not required to file Form 5500 since they are not subject to ERISA, but they are required within 120 days of the plan’s existence to file a one-time notification (“top hat letter”) with the Department of Labor. These plans are exempt from the non-discrimination testing that is required for qualified plans.

In 1986, Section 457 was added to the Internal Revenue Code (IRC) to specifically address the unique needs of the not-for-profit sector. The rules address governmental plans sponsored by state or local governments and non-governmental plans sponsored by tax-exempt organizations under Section 501(c). This frequently-asked question (FAQ) document will specifically address questions regarding non-governmental 457(b) and 457(f) plans.

4 Questions Plan Sponsors Should Ask to Understand the Similarities and Differences Between 401(k) and 403(b) Plans

1. Which employers can offer a 403(b) plan?

• Public education organizations such as public elementary and high schools, state colleges and universities, and boards of education.
• 501(c)(3) nonprofit organizations such as private schools, research facilities, private hospitals, charities, social welfare agencies, healthcare organizations, and religious institutions.
• Grandfathered Indian tribal governments.
• Certain religious ministers of a church or related religious organizations.

2. Which employers can offer a 401(k) plan?

Almost any type of company may offer a 401(k) plan. Most private, for-profit companies are eligible. Many tax-exempt, non-profit organizations have a choice between sponsoring a 401(k), a 403(b), or both.

6 Questions Plan Sponsors Should Ask About Safe Harbor Plans

1. What are safe harbor plans?

Safe harbor plans are retirement plans that generally satisfy the non-discrimination rules for elective deferrals and employer matching contributions and therefore are appealing to organizations that are at risk of failing the ADP and ACP tests (see below). Safe harbor plans can be offered with the same flexible features as traditional retirement plans, including eligibility, participant loans, and distributions. However, employers must satisfy certain contribution, vesting, and notice requirements and employers may not apply allocation conditions to safe harbor contributions (e.g., last day of employment requirement, 1,000 hours in the year requirement, etc.).

2. What is non-discrimination testing?

Generally, the U.S. Government wants to ensure that plans do not favor highly compensated

7 Questions Plan Fiduciaries Should Ask About Target Date Fund Strategies

1. What is a Qualified Default Investment Alternative (QDIA)?

The Pension Protection Act of 2006 (PPA) encouraged employers to adopt automatic enrollment features for their participant‐directed plans by providing a new type of fiduciary liability relief for “default investments,” or Qualified Default Investment Alternatives (QDIAs). A QDIA is used when a participant fails to make his or her own election. An investment must have specific qualifications to be considered a QDIA. Importantly, a QDIA’s asset allocation strategy need only take into account participant age, and does not need to consider an individual participant’s risk tolerance or other investment assets. One of four types of allowable QDIA’s, Target Date Funds (TDFs) were the QDIA in 95% of retirement plans in 2015 (Source: Vanguard, 2016).

2. What due diligence should plan fiduciaries perform when choosing a TDF?

12 Questions Retirement Plan Sponsors Should Ask about Adding An Automatic Enrollment Arrangement

1. What is an Automatic Enrollment Arrangement?

Traditionally, defined contribution retirement plans have required employees to affirmatively choose to save money in the plan through salary deferral. Today’s plans that adopt Automatic Enrollment are encouraging employees to save by making salary deferral the default, requiring them to opt-out or choose not to contribute to the plan.

2. What are the different types of Automatic Enrollment Arrangements?

8 Questions Plan Sponsors Should Ask About Adding a Roth Feature

1. What is a Roth?

According to the 2015 PLANSPONSOR Defined Contribution Survey, 62% of all defined contribution plans, across multiple industries now offer a Roth feature. Among 403(b) plans, 54.7% have adopted this popular design feature. A Roth is not a separate retirement plan, but simply an additional source of contributions accepted by the plan and record-kept separately so the rules applicable to Roth contributions can be followed. Once adopted, plan sponsors must give participants an opportunity at least once per plan year to make designated Roth contributions.

The basic difference between a traditional 401(k) or 403(b) and a Roth is when a participant pays taxes. Within a traditional 401(k) or 403(b), participants make contributions with pre-tax dollars, and receive a tax break up front, effectively lowering their current income tax bill. Their contributions and earnings grow tax-deferred until they take a distribution. At that time, withdrawals are considered to be ordinary income and participants pay taxes based upon their effective tax rate at the time of the distribution. They’ll also be required to pay a 10% early withdrawal penalty unless they’re over 59 ½ years of age.

Register for our live webinar:

Retirement Plan Lawsuits on the Rise

A number of prestigious colleges and universities, including several Ivy League schools, have recently appeared in the headlines as defendants in class action lawsuits relative to their retirement plans.

Starting in 2006, the law firm of Schlichter, Bogard and Denton filed a bevy of lawsuits against corporate giants relative to the 401(k) plans sponsored by each corporation. A common thread through all of the suits was excessive fees, but the overarching theme was the alleged failure on the part of the plan fiduciaries to fulfill their fiduciary responsibilities and obligations. Settlements have been reached in several of the suits, resulting in settlement amounts in the tens of millions of dollars.

Lawyers on behalf of retirement plan participants are now setting their sights on non-profit institutions, including one hospital in New York. This is a wake-up call to all non-profit organizations to make sure their retirement plan fiduciary oversight is robust and compliant.

Join this webinar to help you better understand and mitigate this often overlooked risk.The webinar will discuss:

• an overview of retirement plan litigation;
• the risk to the healthcare and not-for-profit industries;
• preventative measures to avoid litigation; and
• what the future may hold.

CLICK HERE to register 

Tuesday, October 25 at 2:00 p.m.

PRESENTER: James J. Kelley, President, Strategic Benefit Services

James Kelley directs all of the activities and services for Strategic Benefit Services. He has more than 20 years of experience in the institutional retirement market. Jim has spent much of his career working with healthcare and other not-for-profit organizations. He holds his New York State life, accident, and health and variable annuities license. He has his FINRA Series 6, 63, and 26 licenses. He is an accredited Plan Sponsor Retirement Professional. In Jim's role as senior executive for all SBS operations, he sets firm policy and has responsibility for all operations, customer service, and personnel for retirement plan services, employee benefits, and all other Advisory Services.

Reminder Dates for Retirement Plan Participant Notices

As we approach year end, now is the time to handle the distribution of annual participant notices as required by ERISA.

Strategic Benefit Services created this chart to remind plan administrators of the notices required for distribution, and their applicable deadlines.

Please call or email with questions about this Retirement Plan Participant Notices Chart, or for information on how Strategic Benefit Services can enhance your organization's retirement offering.

Q3 Retirement Market Recap

Stock investors experienced the first correction in nearly four years in August when the S&P 500 declined 12.5% from its recent high. So, what triggered this one?

Read the Q3 Retirement Market Recap to review the key market drivers for the third quarter financial performance. The SBS Retirement Market Recap provides a summary of market and economic events which have influenced the financial markets in the past quarter.

Should you have questions about this Market Recap, or for information on how Strategic Benefit Services can enhance your organization's retirement offering, please contact us by calling (855) 882-9177 or email us at sbs@hanys.org.

Q2 RETIREMENT MARKET RECAP

The 1972 Stealers Wheel song, “Stuck in the Middle with You” comes to mind when you look at the U.S. economy and stock market in the second quarter of 2015. Read the Q2 Retirement Market Recap to review the key market drivers for the second quarter financial performance.

The SBS Retirement Market Recap provides a summary of market and economic events which have influenced the financial markets in the past quarter. SBS Retirement Market Recap also includes a feature segment called “What’s Happening in the Retirement Market?” which selects a notable industry event to highlight for the quarter.

Should you have questions about this Market Recap, or for information on how Strategic Benefit Services can enhance your organization's retirement offering, please get in touch by calling (855) 882-9177 or email us at sbs@hanys.org.

Employee Benefit Plan Audits: Common Mistakes

Employee benefit and retirement plans are required to comply with a number of complex laws and regulations, and failure to do so can result in significant penalties.