October Checklist

September 26th, 2018

  • Audit third quarter payroll and plan deposit dates to ensure compliance with the Department of Labor’s rules regarding timely deposit of participant contributions and loan
  • Verify that employees who became eligible for the plan between July 1 and September 30 received and returned an enrollment Follow up for forms that were not returned.
  • For calendar year safe harbor plans, issue the required notice to employees during October or November (within 30 to 90 days of the beginning of the plan year to which the safe harbor is to apply). Also, within the same period, distribute the appropriate notice if the plan features an EACA (Eligible Automatic Contribution Arrangement), QACA (Qualified Automatic Contribution Arrangement) and/or QDIA (Qualified Default Investment Alternative).

Financial Terms To Know: Managed Account

September 21st, 2018

Managed account: A managed account is a fee-based investment product for individuals that offers a high degree of customization by investment managers, along with certain tax efficiencies. A managed account often charges fees that are higher than mutual funds or exchange-traded funds (ETFs) to compensate the investment advisor for the higher degree of customization it offers, or for providing access to highly skilled investment managers.

How Millennials View the Role of Employers and Government

September 18th, 2018

As the workforce transitions toward more Millennials in company leadership roles, change is happening in how things are done and in attitudes. Recently, a national cross-section of workers was asked about a variety of topics that included what they expect from their company. According to the survey, American workers say they play the largest role in their own success. But the next-highest number, 76% of the workers, say their employer should have “a meaningful role in providing access to opportunities to help them be successful.” In fact, 36% of the surveyed workers said their employers should have a large role in providing access to opportunities to be successful. That figure is higher than the 34% who said their families should have a large role in their success. The list of actions employers could take to give employees the help they need, according to the survey, included: access to financial products, including retirement savings plans, to help them grow and build wealth (87%); health and wellness programs (85%); and free financial education courses (82%).

Read more of the American Workers Survey commissioned by Prudential and conducted by Morning Consult, at https://tinyurl.com/Worker-attitudes-Pru.

What Happens To Your Pension When You Die?

September 14th, 2018

Written by Carla Seely for Bernews.com.

What happens to your pension when you die?

Anyone who knows me will know one subject I skirt around and immensely dislike talking about is death; I don’t even like using the word – it is just so final.

For me personally, I am not sure whether I am afraid of dying, or if I am more afraid about being told I am going to die and only have a certain amount of time to live. I don’t want the pity stares or the “I am so sorry” comments.

I can’t imagine what my mum at age 63 felt when she was told she had terminal cancer and only 1–2 years to live. She never made it to her 65th birthday, but what she did do was make sure her affairs were in order and that her estate would be distributed as per her wishes.

A common question we get in the pensions industry is in regard to what happens to a balance in a pension upon death. It’s a valid question, and the answer depends on whether it is pre or post retirement, what type of pension product you have now and what option you might select in the future.

First things first: your company’s pension plan, whether it is a defined contribution or defined benefit, will have an option to designate a beneficiary; this also applies to individual pension plans. A beneficiary as it relates to your pension plan means, in the simplest terms, the person[s] whom you designate to receive the retirement funds in the event of your death.

When you enroll in your company pension plan or open an individual pension plan, there will be a section to fill out regarding your beneficiary designation: it will ask for the specific details of the beneficiary and what percentage of the pension balance you wish to leave them in the event of your death.

The amount designated to the beneficiary will be represented as a percentage, e.g. 100% to a spouse. You may elect to have multiple beneficiaries, e.g. 50% to a spouse and 50% to a sister, but most importantly, if there is a balance in your pension plan, who you leave it to and how you decide to split it is entirely up to you.

It is also important to note that a beneficiary does not need to be a family member – you can leave it to anyone, including a charity. However, one disclaimer is that if you put down a beneficiary that is under the age of 18, you must include a trustee who will take care of the funds until the minor becomes of age.

Once you retire and you want to start receiving a retirement income from your pension, you need to study the options available with the company that administers your pension plan, and also see what the competitors are offering to ensure you select a retirement option that supports your retirement goals.

Whether you choose an annuity with monthly payments or select the drawdown method to receive retirement payments, each retirement options has its own set of rules regarding how any residual balance would be treated with regard to a beneficiary.

Sit down with your pension provider and make sure you understand each option and the impact each option will have on retirement. The last thing any retiree wants is to discover they are locked into an option that isn’t working.

As I tell all my clients, we all work hard for the money we make and we can’t change our fate, but we can make intelligent decisions about our retirement.

– Carla Seely is the Vice President of Pension and Investments at FM Group. If you would like any further details, please contact her at cseely@fmgroup.bm or call +1 441 297 8686.

Learning From the Baby Boom Generation’s Actual Retirement Experience

September 12th, 2018

Soon-to-be-retirees are sometimes unclear about how their finances will actually look in retirement. You may be offering them financial wellness information, but may also be wondering what you can learn from the Baby Boom generation’s actual retirement experience. That’s the exact topic of an Insured Retirement Institute (IRI) annual survey and report, now in its eighth year. While the survey indicates a generally positive financial picture for current Boomer retirees, many are not confident with their preparedness. Fifty-eight percent of Baby Boomers have retirement savings in 2018, up from 54% in 2017. Of the Boomers who have retirement savings, 43% have $250,000 or more, up from 32% last year. Still, just 25% of Boomers think their money will last throughout retirement, and 28% said they are doing (or did) a good job with their financial preparation for retirement. As far as who is doing the best job of preparing for retirement, the survey shows it’s those who work with a financial professional; these have at least $100,000 saved compared to 48% of those without a financial professional.

Read more from the IRI report, Boomer Expectations for Retirement 2018, here: https://tinyurl.com/IRonlineBoomers.

In The Driver’s Seat

September 6th, 2018

When it comes to investing for retirement, it’s up to you to decide how to manage your plan.

Your company offers a major benefit through its retirement plan — a powerful vehicle that helps you save. It’s up to you to decide how to make the most of its many features, including deciding on your investments. But you don’t have to go it alone… whether you want to “do it yourself,” have a professional “do it for you” or “get some help doing it,” most plans offer a wealth of resources to get you started and keep you on track.

Drive the “car” yourself.

If you’re interested in learning about the investment markets and comfortable making the choices that are right for you, you may want to be more involved in managing your plan.

When you choose to “do it yourself,” you:
• Mix and match individual funds from your plan’s investment menu.
• Select an asset allocation fund that invests in accordance with your tolerance for risk, and then decide when you want to change to another fund when your risk tolerance or new financial circumstances warrant.
• May want to consider a target-date fund if you are interested in an “all-in-one” type of investment that automatically invests according to your time horizon to retirement and beyond.

Uber your future!

Would you rather focus your time on interests outside of investing, taking more of a hands-off approach to managing money? Maybe you’re a “do it for me” investor. This option may be appealing to you if your finances are complex. Say your financial goals include buying a first home, having children or caring for parents. As a “do it for me” investor, you can have an investment professional select and manage the funds in your account for an annual cost and provide financial planning to help you pursue your goals.

Maybe ridesharing is more your speed.

Maybe you’d like to keep control over the funds you select in your account but would like someone to talk to about your decision. This describes the “get some help doing it” investor. Most retirement plans offer access to online advice tools, or a toll-free Call Center that you can call for guidance about the investments offered under your plan, how to allocate them, and when it may make sense for you to rebalance.

A Look Inside the Average 401(k) Plan: How Your Plan Compares

September 4th, 2018

3RD QUARTER 2018

As an employer, you face a challenge: attracting and retaining the right talent is necessary to drive your business forward. At the same time, you likely feel a responsibility to help your employees achieve retirement financially prepared. Your 401(k) plan can help manage both of these goals.

Keeping an eye on the latest trends and tactics in the 401(k) arena is one way you can keep your plan competitive. Let’s take a peek into defined contribution plan design and activities across a wide variety of industries and company sizes, with data drawn from a recent survey.

Contributions

In 2016, 84.9% of participants made contributions to their plans, up from 81.9% in the prior year. Lower-paid participants (as determined by the plan’s ADP test) contributed to their plan an average of 6.1% of their pre-tax pay. Higher-paid participants contributed more, at 7.0% of their pre-tax pay on average.

Company contributions have shown a relatively steady increase over time, since dropping to 3.5% of payroll in 2010. In 2015, company contributions amounted to 4.7% of payroll, rising to 4.8% in 2016.1 Just 5.6% of companies participating in the survey did not make contributions to the plan, 82% made matching contributions and 45.4% made non-matching contributions. For companies whose match is a fixed percentage, 41.3% match $.50 for each dollar contributed by the participant, up to the first 6% of pay. A further 31.8% of these employers match participant deferrals dollar-for-dollar up to 6% of pay.

Investments

Just where is the money going? Plans continue to offer between 17 and 19 investment options for company contributions, and between 18 and 20 for participant contributions, figures which have remained relatively steady for the last 10 years. Most frequently, assets in 2016 were invested in actively managed domestic equity funds, with 22.9% of assets directed there. Target-date funds (TDFs) were the investment of choice for 22.2% of assets, followed by indexed domestic equity funds at 13.5% and stable value funds with 8.1% of assets.

Almost 40% of the surveyed plans offered a professionally managed portfolio to participants. Seventy percent of plans use a Qualified Default Investment Alternative, or QDIA, which for 77.5% of them is a TDF.

Target-date funds continue to increase in both availability and usage. Compared to 2007, availability of TDFs rose from 44.4%, reaching 73.1% in 2016. Average allocation was just 6.4% in 2007, compared to 22.2% by 2016.1

You can read more about 2016 trends in defined contribution plan in the PSCA’s Annual Survey of Profit Sharing and 401(k) Plans, 60th Annual Survey. Available for purchase online at psca.org.

1 Figures include 401(k) plans and profit sharing plans of surveyed employers.

September Checklist

August 29th, 2018

 

September Checklist:

• Begin preparing the applicable safe harbor notices to employees, and plan for distribution of the notices between October 2 and December 2 (calendar-year plans).
• Distribute the plan’s Summary Annual Report by September 30 to participants and beneficiaries, unless an extension of time to file Form 5500 applies (calendar- year plans).
• Send a reminder memo or email to all employees to encourage them to review and update, if necessary, their beneficiary designations for all benefit plans.

Financial Terms To Know: Municipal Bonds

August 23rd, 2018

Municipal Bonds
These are debt securities that are created when a state, county or municipal government embarks on a new project like a new school, water treatment plant, or road, and looks for investors to help finance it. Municipal bonds are exempt from federal income taxes and many are issued with exemptions from state and local taxes, meaning that investors keep more of the income generated from the securities.

Credit Card Debt Getting Out Of Control?

August 21st, 2018

As featured in Bernews.com.

I think I speak for most people when I say that at some point in our life we put something on our credit card and didn’t pay it off in full, leading to a vicious circle of recurring payments and mounting interest on the balance! Most of us get “stung” once and learn the lesson of how to use a credit card sensibly, but unfortunately some of us don’t learn and we begin to develop an unhealthy relationship with our credit card.

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