In today’s market environment, many people are asking themselves “where can I find opportunity in fixed income?” It is a fair question; as rising rates will inevitably hurt the performance of most fixed income sectors. Participants have been riding a massive wave of decreasing rates and have become accustomed to 8% annual rates of return to their retirement plans from their core fixed income fund. Since those days are likely over, where do you go from here? May 2014
1st Quarter Newsletter 3/31/2014
This past winter season’s weather has been the one of the worst on record. Snow covered a large portion of the United States from mid – December through the end of March. The Great Lakes were completely ice covered. Ice storms left large portions of the country without power for extended periods and have damaged roads and other infrastructure. Travel disruptions were widespread and persistent. Consumer’s shopping, dining and entertainment plans were disrupted as well. Employees lost work hours due to the inability to get to work and employers lost revenue, all due to the persistent grip of winter weather. Newsletter 3-31-2014
Explore your Options
This month’s employee memo is a simple reminder/payroll stuffer that highlights the benefits of participating in a retirement plan. April 2014 Employee Memo
- Pretax dollars
- Potential Employer match
- Investment opportunities
- Convenient way to save
April Retirement Report
What is ERISA’s definition of a 3(16) Fiduciary? ERISA Section 3(16) states the definition for “plan administrator” as responsible for the daily operation of the plan. A plan administrator under ERISA 3(16) is identified in the plan document and if the plan document is not specific, the plan sponsor is considered to be the 3(16) fiduciary.
Part II talks about the challenges for participants in saving for retirement. Can peer influence help drive more people to save, with higher deferral amounts?
Part III-Pass or Fail? Each year you receive a “pass” or “fail” from your service provider regarding required non-discrimination testing (the Actual Deferral Percentage test and the Actual Contribution Percentage test). The ADP/ACP tests govern the amounts of deferrals and/or matching contributions that highly compensated employees (HCEs) are allowed to make or receive in relation to those of non-highly compensated employees (NHCEs).
And finally a deeper look at the scorecard system we can use to analyze the funds inside your plan. April 2014
“Are investors preparing for a correction?”
“One of the core concepts of inter-market analysis is the idea that certain areas of the investable landscape lead or lag others, which allows one to exploit information which gradually diffuses to stocks, commodities, bonds, and currencies.
Not all areas of the market are predictive. Many focus on copper (JJC) under the idea that its relative behavior may be a tell on growth/inflation expectations. The collapse as of late, however, is not anywhere nearly as worrisome for equity investors as positioning into sector-deflation trades.” See Correction
March Retirement Report
March’s Retirement Report has four main topics. The first speaking to investment policy statements. And though a written investment policy statement (IPS) is not explicitly required by ERISA, it is considered a best practice to create, and update, one to assist in guiding fiduciaries in making plan-related investment decisions.
Part II simply lists plan participant perspectives on risk. Quite eye opening.
Part III defines the 6 categories of fiduciaries.
And finally “what constitutes proper documentation of retirement plan committee meetings? With most retirement plans the fiduciary responsibility of selecting and monitoring the plan’s menu of investments is designated to a retirement plan investment committee. This committee usually includes financial officers and human resources officers of the employer. The committee meets periodically (anywhere from annually to quarterly) to consider agenda items including investment due diligence, fees and services of plan providers, status of plan goals, etc. From a fiduciary perspective it is just as important to properly document these meetings as it is to hold the meetings. March 2014
401(k) Plan Notice: Get the “Credit” you deserve!
You may be eligible for a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k). If you qualify, you may receive a Tax Saver’s Credit of up to $2,000 ($4,000 for married couples filing jointly) if you made eligible contributions to an employer sponsored retirement savings plan. The deduction is claimed in the form of a non-refundable tax credit, ranging from 10% to 50% of your annual contribution. See Employee Memo
“There’s nothing wrong with 401(k)s, except the players involved”
“This past year has seen a firestorm of criticism casting 401(k)s as mostly terrible. Their performance is too poor, and the fees too high, with poor investment choices built into most of them. Typical plans are complicated to manage and difficult to administer. Most people remain invested at levels far below their retirement needs.” See There’s Nothing Wrong
“The Recovery is not a Sugar High”
What happened to stocks in January and early February is nothing new. It’s happened quite a few times in the past four years and eleven months. Ever since mark-to-market accounting was fixed in March/April 2009, these corrections have been short-lived and relatively mild. And once they were over the market went higher. It’s been a very strong bull market.
Nonetheless, few investors truly understand why things turned around so abruptly in 2009 and every time the stock market declines there is a mad rush to believe this time the sky really is falling. See First Trust
Retirement Planning Doesn’t Have to be a Puzzle!
As your trusted retirement plan consultant we are always happy to make retirement planning less puzzling. But if you’re the type who still enjoys a puzzle now and then, see if you can spot the eight retirement-related terms in our Retirement Word Search! Retirement Plan Puzzle