IPS Advisors July Retirement Report

Q2'16 Market Review: Brexit Takes Center Stage
U.S. equity finished positive for the quarter, after another bout of market volatility reverberated throughout the capital markets. Britain's close and unanticipated vote to exit the European Union ("Brexit") was a big reason for much of the volatility to the downside, contributing to widespread losses in both the U.S. and international equity markets in the days following its announcement. Capital markets rallied shortly afterward, recovering most (if not all) of their losses by the end of the second quarter. As measured by the Russell 3000 Index, the U.S. equity market ultimately ended the quarter positive, up 2.6 percent. International equities, including countries more directly impacted by Brexit, did not fare as well, posting a negative 1.2 percent (MSCI EAFE) for the quarter. Amid the increased market volatility, long-term rates fell over the quarter, allowing U.S. fixed income to post a strong positive 2.2 percent (Barclays Aggregate Bond Index). 
The 10-year Treasury yield brushed up against all-time lows over the quarter, landing at 1.49 percent. A future Fed short-term rate hike is now not expected to happen until the end of the year, at the earliest. Overseas, monetary policy continues to be easy as foreign central bankers begin to deal with the uncertainty of Brexit and its impact to those markets. To the extent yields go lower remains to be seen. In fact, global yields are now so low that in many cases they are negative, with well-known countries like Japan, France and Germany having debt priced at negative yields.
Lower yields did not prevent investors from flocking to fixed income, with bond funds taking in an estimated $54.8 billion in contributions. Despite a strong overall quarter for U.S. equities, mutual funds witnessed an estimated $39.2 billion in outflows (Investment Company Institute). This activity reminds us that in times of increased volatility, it is helpful for investors to maintain a long-term view. 
Index returns provided by Morningstar. For a copy of the complete second quarter market report, please contact your IPS Advisors retirement plan consultant. 
Compliance Calendar Reminders
July 28 is the deadline for sending Summary of Material Modification (210 days after end of plan year in which the amendment was adopted).
August 1 is the deadline for filing your Form 5500 (without extension) for all calendar year plans. Form 5558 needs to be filed by August 1 for an extension to October 15.
August 1 is also the deadline for filing Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, used to report and pay excise taxes on prohibited transactions and excess 401(k) plan contributions that occurred in prior year. 
Agencies Propose to Modernize and Improve the Form 5500
The U.S. Department of Labor's Employee Benefits Security Administration, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation are seeking public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. The Form 5500 is the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the U.S. The proposed revisions are intended to:
  • Update the reporting requirements for service provider fee and expense information.
  • Enhance accessibility and usability of data filed on the forms.
  • Require reporting by all group health plans covered by Title I of ERISA.
  • Improve compliance under ERISA and the Internal Revenue Code through new questions regarding plan operations, service provider relationships, and financial management of the plan.  
The proposed regulations also would make improvements to the certification requirements for the limited scope audit requirements under 29 CFR 2520.103-8, and allow group health plans to use the Form 5500 to satisfy certain reporting requirements in the Affordable Care Act. Under the proposal, the form revisions would begin with the Plan Year 2019 Form 5500 series returns/reports. Click here to learn more about this proposal.
Are You Excluding Part-Timers from the Retirement Plan?  
Many plan sponsors mistakenly believe that they are not required to offer the retirement plan to part-time employees. Regardless of what type of retirement plan you have, all employees, including part-time employees that work 1,000 hours in a year, must be offered the retirement benefit. Though your plan may contain a service requirement that essentially prevents "part-timers" from ever becoming eligible (such as a one year and/or 1,000 hours requirement), part-time employees may NOT categorically be excluded as a class of employees. If you have not informed your part-time employees that they are eligible to participate in the retirement plan if they complete 1,000 hours during the year, please contact your IPS Advisors plan consultant to discuss immediate corrective measures.
Employee Communication Corner
Our July sample employee memo examines how small lifestyle changes (like skipping that coffee-to-go) can add up to big savings. Consider the facts: more than 82% of Americans spend an average of $57 every week on coffee and lunch. That's $21 per week on coffee and $36 per week on lunch, for a total of $2,964 per year!
Click HERE to access the memo and share with your employees.  
If you have questions, please contact your dedicated IPS Advisors Employee Benefit Specialist, or contact one of our Retirement Plan Consultants below:
Tim Thurston, AIF®
Manager, Retirement Plan Services
(214) 443-2410
Tammy Woodman, QKA, AAMS®
Defined Contribution Consultant
(214) 292-4123


The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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