Industry News

Benefit Insights: IRS Announces 2020 Limits & Safe Harbor 401(k) Plan Design & Hardship Distributions New Ruling

Here is an overview of what is included in the Fall 2019 Newsletter:

IRS Announces Limits for 2020
Every Fall, the coming year's Cost-of-Living Adjustments (COLAs) are released by the Internal Revenue Service. The benefit increases counteract the effects of inflation and keep up with the "cost of living." See the limits for 2020.

You can also access our website at anytime to see the most recent 3 years of the COLA Summary: https://www.pensiondynamics.com/irs-plan-limitations

Safe Harbor 401(k) Plan Design
Safe Harbor 401(k) Plans can eliminate a host of testing issues for traditional 401(k) Plans. If HCE contributions in your plan have resulted in corrective distributions in the past, you may consider a Safe Harbor plan in 2020. The deadline is quickly approaching, so be sure to contact us before December 1st to make 2020 plan changes.

Upcoming Compliance Deadlines
The December and January deadlines for 12/31 calendar year plans. 

The Final Rule on Hardship Distributions
The IRS published the final rule regarding participant hardship distributions from defined contribution plans. Hardships get a little easier with expanded qualification rules and streamlined review process.

Select the link to read more...

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to read more about these topics:

1. Market Summary

2. World Stock Market Performance

3. World Asset Classes 

4. US Stocks 

5. International Developed Stocks

6. Emerging Markets Stocks

7. Select Country Performance

8. Select Currency Performance vs. US Dollar

9. Real Estate Investment Trusts (REITs)

10. Commodities

11. Fixed Income  

12. Global Fixed Income  

13. Impact of Diversification

14. Quarterly Topic: Timing Isn't Everything

"If you have noticed your business slowing down or activity becoming spotty, plan on working through the slowdown phase of the business cycle through the first half of 2020. Keep track of the leading indicators and strategize about what resources you are going to deploy during the business cycle rising trend that we are projecting will begin in the second half of 2020." - Brian Beaulieu, CEO of ITR Economics

"There was an article in the July 28 New York Times noting that 'economists are notoriously terrible at forecasting recessions, especially more than a few months in advance.' ... They are either using the wrong indicators or don't know how to apply the indicator data." - Brian Beaulieu, CEO of ITR Economics

Bucket List: Retirement

This topic in this newsletter will focus on the financial concerns and stress for employees and guidelines to help them focus on retirement. 

Complying with Safe Harbor Deadlines

This topic in this newsletter will focus on making timely deposits which is a fiduciary duty, including complying with safe harbor deadlines.

Select the link to read more...

By Brian Beaulieu

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to read more about these topics:

1. Market Summary

2. World Stock Market Performance

3. World Asset Classes 

4. US Stocks 

5. International Developed Stocks

6. Emerging Markets Stocks

7. Select Country Performance

8. Select Currency Performance vs. US Dollar

9. Real Estate Investment Trusts (REITs)

10. Commodities

11. Fixed Income  

12. Global Fixed Income  

13. Impact of Diversification

14. Quarterly Topic: The Uncommon Average

By Brian Beaulieu

1. US Profits
2. Cash
3. Profits in China

"The difference between trends in Cold Rolled Steel and Steel Scrap prices caught our eye. At first, we thought that it would be a consequence of US tariffs. This may be the cause; or, it could be China interfering in their own economy. Either way, someone will have to pick up the tab." - Brian Beaulieu, CEO of ITR Economics

Automatic Enrollment is on the Rise

With the future of Social Security in question, it is becoming ever increasingly important for workers to self-prepare for post-retirement living. Studies show that approximately one out of every three eligible workers chose not to participate in their employer-sponsored 401(k) plan... 

Protect Your 401(k)

Though some employers may not think so, the truth is that in today’s world 401(k) Plans are subject to fraudulent activity, and that the often-overlooked retirement plan can be the perfect place for it to occur. For example, in late 2017, several news outlets reported a scheme targeting individual 401(k) accounts...  

Select the link to read more.

"There is a worthwhile article by George Will in the April 17 Washington Post. In it, he discusses the federal government's use of tax credits to influence the marketplace (consumers) toward a particular decision. The rationale for doing this is almost always that the government knows better than the marketplace what the consumer should decide." - Brian Beaulieu, CEO

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to read more about these topics:

Market Summary

World Stock Market Performance

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income  

Global Fixed Income  

Impact of Diversification

Quarterly Topic: Déjà Vu All Over Again

This report features world capital market performance for the past year.

Access this report to find out more about these topics:

Market Summary

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income

Impact of Diversification

"There is a reason ITR Economics uses rate-of-change to identify four distinct phases to the business cycle: Each phase requires a particular perspective in conjunction with a view to the future. The US economy is on the threshold of the third phase of the business cycle, Phase C. The "C" stands for "Caution," which is what we urge most folks to use when thinking about the next four quarters."

By Brian Beaulieu, CEO of ITR Economics

"There are economists that maintain that the US need not worry about the growing size of our national debt.  Some of those economists argue that when the interest rate on government borrowing is below the growth rate of the economy, financing the debt should be sustainable. They go on to postulate that interest rates will probably stay low for quite some time because of demographics."

By Brian Beaulieu, CEO of ITR Economics

There are three reasons to see a silver lining in the cyclical slowdown of 2019:

1. Interest rates in general will likely level off/decline
2. The cost of carrying the national debt will abate in 2019
3. Housing affordability will likely temporarily cease to be a growing problem

By Brian Beaulieu, CEO of ITR Economics

It's Testing Season!

Qualified plans must perform annual testing to be sure that the plan doesn’t unfairly discriminate in favor of "highly compensated employees" (HCEs) or exceed the contribution limits set forth by the IRS. Depending on your plan provisions, it isn’t just one calculation, but a series of tests that show that your plan is not discriminatory. If your plan is audited, the auditor is looking for proof of this compliance.  Select the link below to learn more...

Know Your Options 

If your plan offers a Roth 401(k) provision, your participants might ask, “Which one is better for me?” As the availability of Roth options in 401(k) plans and Roth contribution percentages continue to rise, it’s important to be able to guide participants in making the right choice.  Select the link below to learn more...

The 401(k) Turns 40

In 2018, the 401(k) plan celebrated its 40th birthday! Though extremely popular today, 401(k) plans came about almost by accident. IRC Section 401(k) was passed into law as part of the Revenue Act of 1978 and was included to limit executive compensation. However, in 1980, Ted Benna of the Johnson Companies used the provision to create and get IRS approval of the first 401(k) plan for his company. For this he is often referred to as the father of the 401(k). Select the link below to learn more...

2019 Oil Prices and the Impact of Saudi Arabia and Russia

US Crude oil, West Texas Intermediate (WTI), cascaded $20 in November and into December. This morning, Dec. 18, the WTI price was $48.91. In response to the price decline, OPEC recently announced its intent to cut production by 1.2 million barrels per day.

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to read more about these topics:

Market Summary

World Stock Market Performance

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income  

Global Fixed Income  

Impact of Diversification

Quarterly Topic: Why Should You Diversify?

There are three things to know when a search becomes a leading indicator...

We utilize all sorts of leading indicators. Some are traditional (e.g., the Purchasing Managers Index), some are international (G7 Leading Indicator), and some seem to stop working for us, at least for a while (Housing Starts), so we keep an eye on them. We discuss the leading indicators during our ITR Economics presentations at company sales meetings and trade association conventions.

By Brian Beaulieu, CEO of ITR Economics

Hardships Get a Little Easier

Earlier this year, the Bipartisan Budget Act of 2018 was passed by Congress and signed into law.  While this law made several changes that impact retirement plans, one provision changing the rules around hardship distributions is particularly notable.   Learn More - Access the link below.

Helping Hands

One of the most prevalent and difficult challenges for many twenty somethings these days is the repayment of their, often substantial, student loan debt. Statistics show that the average college graduate with a bachelor’s degree left school in 2016 with $28,446 in student loan debt.  Learn More - Access the link below.

Cost of Living Adjustments (TABLE)

Every Fall, the coming year’s Cost-of-Living Adjustments (COLAs) are released by the Internal Revenue Service. The benefit increases counteract the effects of inflation and keep up with the “cost of living”. Below are the limits for 2019.  Learn More - Access the link below.

'Tis the Season

It’s the time of year when Plan Sponsors scramble to deliver the myriad notices required to be given to their participants.  Even with the help of service providers, the sheer number of notices can be overwhelming.  Learn More - Access the link below.

Port in the Storm

Natural disasters can cause upheaval in many aspects of victims’ lives and this destruction often extends to financial matters. What should otherwise be routine compliance for plan deadlines can prove difficult in these extreme events and the government tends to grant temporary relief in such cases.  Learn More - Access the link below.

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to ready more on these topics:

Market Summary

World Stock Market Performance

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income  

Impact of Diversification

Quarterly Topic: Total Cost of Fund Ownership

The Retirement Income Gap

Many American workers participate in company retirement plans, methodically contributing to their accounts over time to fund for life after work. Beyond benefiting from employer-funded plans, retirees commonly draw from additional savings tucked away in IRAs or after-tax savings accounts as well. Add Social Security payments to the mix and it should be a recipe for a secure retirement, right?  

Read more by selecting the pdf below...

Helpful Hints for Plan Sponsors

Being a plan sponsor comes with a good bit of responsibility. You’ve taken the important step of hiring a third-party administration firm to help you navigate the myriad of processes that are required to keep your plan in compliance with applicable regulations. Below are a few helpful hints to keep your plan in compliance, avoid unnecessary corrections, and help to better serve your participants. 

Read more by selecting the pdf below...

We think there are four variables presently at work that are inhibiting stock market rise and one variable that typically means the market has gone as high as it can for the current cycle. The five mitigating variables are...

Militarily speaking, Russia is a powerful country; some might say even on par with the US. We are economists, however, not politicians. Accordingly, we think in metrics and mathematical terms. Economically speaking, there is no equivalency between the US and Russia.

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access this report to read more on these topics:

Market Summary

World Stock Market Performance

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income  

Impact of Diversification

Quarterly Topic: E+R=O, a Formula for Success

We think there are four variables presently at work that are inhibiting stock market rise and one variable that typically means the market has gone as high as it can for the current cycle. The five mitigating variables are:

1. Individual investors have gone heavily into this market; which tends to mean it is overbought.
2. The Cyclically Adjusted Price Earnings (CAPE) ratio is sufficiently high to suggest less-than-inflation rates of return ahead on average for the next five years.
3. Corporate profitability is going to need a significant lift from the tax changes to return the S&P 500 to a rising trend, and such a lift is not a slam dunk.
4. The specter of a trade war is creating uncertainty.
5. This is a mid-term election year.

“Secular stagnation” is meant to describe a market-based economy that experiences slow growth or no growth. Secular is used to imply a long-term condition as opposed to the cyclical variety with which we usually deal.

Who is an Employee?

Maintaining a retirement plan for your employees is no easy task. At various points during the year, employers and HR departments field participant questions, help with enrollments, deliver notices and statements, and participate in the distribution process. However, an additional responsibility, and one of the most important, is the collection of data that is used for compliance testing and government reporting. Learn more by selecting the Newsletter attachment below...

HSA vs 401(k)

If your company has decided to offer a high deductible health plan, don't worry, you are not alone. Recent studies show that an increasing number of employers have elected to offer high deductible health plans (HDHP) either to completely replace or be offered in conjunction with a more traditional Health Maintenance Organization (HMO) plan or Preferred Provider Organization (PPO) plan. Learn more by selecting the Newsletter attachment below...

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Access the report to find out more on these topics:

Market Summary

World Stock Market Performance

World Asset Classes 

US Stocks 

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Select Currency Performance vs. US Dollar

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income  

Impact of Diversification

Quarterly Topic: Sailing with the Tides

" Follow the money” is very good advice at this stage of the business cycle and the trend through April 24 was not encouraging.

"The Trump Administration decided to exempt the European Union, Argentina, Brazil, South Korea, and Australia from the steel and aluminum tariffs that went into effect on March 23. Below is a list of the top 11 sources of imported steel into the US."

"We are at that point in the business cycle when the leading indicator signals become “mixed.” Our leading indicator methodology is set up to account for this. We wait until two, then five, and ultimately 10 indicators have flipped from rise to decline, as is the case for 2017-2018."

The first quarter of the calendar year typically sees an uptick in the number of retirement plan distributions and participant loans. This year may be even busier than most, given the relief announced by the IRS for victims of the recent hurricanes and wildfires. Whatever the reason, participant distributions present a complex set of rules for Plan Sponsors to navigate. Under current law, a participant is entitled to a distribution from their account upon the occurrence of certain events or, as they are technically known, distributable events. 

There seems to be a broad assumption that the tax law changes are going to dump a lot of fresh, free cash into the economy. We are hopeful that it will move the economic needle, but we urge caution because more data is needed. 

We are heading into 2018 with the economy in good shape in most segments. Industrial, service, and retail data point toward a strong first half of 2018. We expect slowing growth in the second half of the year. That outlook is unchanged. Read more to see other predictions…

As the year-end approaches, our to-do lists can be lengthy. There are holidays to prepare for, employee performance reviews to complete, and, oh, wait, there is also the year-end data collection package from your TPA! We have once again reached that magical time of the year when you get to submit information regarding your retirement plan so your compliance services can be completed. While your TPA firm does the heavy lifting, the information you submit is the basis for accurate compliance testing. While not very exciting, this information is important. So, what should you know about the year-end tasks?

There is an overriding concern for the US economy and the labor shortage. However, every recent college graduate may ask “what shortage? I am right here?”

Know where you are in the business cycle and take the risks associated with doing everything you can to keep the good times rolling beyond 2018.

Read more about the economic business insights from ITR Economics CEO, Brian Beaulieu!

There has been a large amount of upheaval in the retirement world as of late and it centers around the “F”
word. And by “f” word, I mean “fiduciary.” The New Fiduciary Rule means that many professionals in the finance world that weren’t previously considered fiduciaries will now have to take on that title. In April 2016, the Department of Labor (DOL) laid out its plan to implement the “New Fiduciary Rule” or
“Best Interest Rule.” However, after several delays, further phases of the rule have been pushed out to July 2019. Read more to understand what the plan sponsors need to know.

Senior Analyst of ITR Economics, Alex Chausovsky, is frequently asked about the outlook for the US dollar. The dollar which has strengthened significantly over the last several years, should remain relatively strong versus foreign currencies in the near term.

Consumption accounts for approximately 67% of Gross Domestic Product in the U.S.

Our ability to consume goods and services provides key insight into what the economy will look like in the months ahead. Consumer trends have turned more positive in the latest month and look good for increased activity through at least the next two quarters.

Mitigating risk. Sometimes that what it is all about. There is risk in any decision. There is risk in not making a decision. 

The latest news regarding retirement plans has centered around service provider fees. While fees are a highly important aspect of managing an employer-sponsored retirement plan, they are not the only metric of your overall retirement plan's health. A low-cost retirement plan does not necessarily parallel a fruitful pension program for employees. Studies show that since Social Security was never designed to fully fund an individual's retirement, employer-sponsored retirement plans have become an integral part of employee's overall financial plan for their future. Relying so heavily on this one component should prompt any plan sponsor to ask one very straightforward question... How healthy is my company's retirement program?

It is easy to get caught up in the moment and lose some perspective when the stock market drops.

Read Brian Beaulieu’s, CEO of IT Economics, perspective on the “hype” when then stock market drops.

Legacy companies will face increasing difficulty in choosing to invest in the future while paying dividends or advancing bureaucratic infrastructure because these are competing, cash-consuming aspects of the business.

If legacy companies attempt to have it both ways, they run the risk of ending up like Sears, JC Penny, Digital Equipment Company, Circuit City, Compaq, Macy’s, Eastern Airlines, Nordstrom, and, perhaps someday, Walmart.

What both today’s big names and smaller companies (which are most of us) need is disruptive change...

With electronic communications becoming the standard in business industries worldwide, Plan sponsors are becoming increasingly interested in abandoning paper processes for a more electronic means of communication with plan participants and beneficiaries. This option has many advantages, however, raises a few important questions for today’s plan sponsors such as which documents do regulations allow to be e-delivered, and do I need the participants consent, etc.?

This newsletter will focus on the common participant communications acceptable via electronic delivery and their requirements.

The Department of Labor (DOL) has estimated that there is $15 million in retirement plan distribution checks that go unclaimed because plan participants, or their beneficiaries have failed to cash distribution checks. This has now become an issue for retirement plans as uncashed checks become plan assets. As the plan sponsor, this is a fiduciary duty and failure to take the appropriate steps to locate the participants, can be considered a breach of duty.

This newsletter will focus on the requirements of what the plan sponsor should do and how to search for missing participants, as well as what the options are if the participant cannot be found.

Since the Trump Administration has recently released the initial budget proposal, the document is not nearly complete. And, it is too soon to know what will happen.

Read the full article and see what the experts have to say…

Use technology and innovative processes to manage your labor costs.

Read the full article and see what the experts have to say…

The economy is gearing up for a better 2017 and we hope you are too! Leading indicators are all going up.

Read the full article and see what the experts have to say…

The stock market has been reporting record highs recently. This positive trend is a valid economic signal leading into 2017.  ITR has their reasons why the stock market is likely to continue.

Read the full article and see what the experts have to say…

Mr. Trump’s election recently as the next President certainly caught many of Americans by surprise. However, it really does not change the ITR Economics outlook for 2017. ITR Economics has been forecasting general economic rise in the US economy and the Global economy and the rise is still likely.

Read the full article and see what the experts have to say…

The last few months of data show a rebound and a better-than normal increase, however, we are not clearly out of the woods yet.

Read the full article and see what the experts have to say…

It has been months since the Brexit vote and the wheels have not come off the economic cart for Europe or the United Kingdom. The first batch of leading indicator data has been released and the hopes for better days, months, and quarters are ahead.

Read the full article and see what the experts have to say…

A 401(k) plan permits employees to defer a portion of their salaries on a pre-tax basis with the objective of accumulating assets for retirement. Additional assets are accumulated if the employer makes contributions to the participant’s account.

With today’s mobile workforce, many distributions are made before retirement because employees usually become eligible to receive distributions when they terminate employment. Distributions also become payable due to disability, death or a Qualified Domestic Relations Order (QDRO). In addition, many 401(k) plans permit hardship withdrawals. Sometimes active participants are forced to take minimum distributions after reaching age 70½.

This newsletter will examine the rules and tax consequences associated with the various types of distributions from a 401(k) plan.

The Trans-Pacific Partnership (TPP) agreement makes a convenient lightening rod for folks concerned about losing American jobs through global competition and those concerned about large corporations manipulating politics and the economy to their own selfish advantage within a world view that globalization and large corporations are inherently bad and that economics is a zero-sum game. 

Read the full article and see what the experts have to say…

On April 8, 2016 the Department of Labor (DOL) issued final guidance that greatly expands the types of retirement investment advice that will be subject to the fiduciary duty rules under the Employee Retirement Income Security Act of 1974 (ERISA). The so-called “conflict of interest” rule for retirement investments will have a significant effect on those who provide investment advice and sell investment products and services to retirement plans and IRAs. The central focus of the DOL guidance is to protect plan participants from conflicts of interest that could threaten their retirement savings.

Sooner or later, almost all 401(k) plans will face the “fun” of dealing with forfeitures. Just like every other plan-related operational item, there are specific rules that provide guidance on the “who, what, why, when and where” of using forfeitures.

More and more businesses are hiring part-time, seasonal or temporary employees (collectively referred to in this newsletter as “part-ti me employees”). Employers believe the advantages to using this alternative workforce include lower wages and significant savings in terms of not providing employee benefits to these individuals.

When it comes to operating your retirement plan, determining the compensation that should be used for each participant can be really confusing. It seems like it should be simple, but the reality is quite different. In fact, the rules can be so confusing that using an incorrect definition of compensation is on the top ten list of mistakes the IRS sees in voluntary correction filings. Since compensation is used not only to calculate contributions but also to apply limits, conduct nondiscrimination testing and determine tax deductions, the IRS is especially concerned that it be correct. While an exhaustive discussion of all the rules and exceptions would take up far more space than we have here, this article will cover some of the more common points of confusion.