Products January 4, 2024

Investment Product and Service Launches

PGIM launches 2 buffer ETF series; Federated Hermes launches total return bond ETF; and SoFi offers 2% match on IRA contributions.

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PGIM Launches 2 Buffer ETF Series

PGIM has launched two buffer exchange-traded-fund series, the PGIM U.S. Large-Cap Buffer 12 ETF series and the PGIM U.S. Large-Cap Buffer 20 ETF series, listed on the Cboe BZX Exchange. The series will consist of a total of 24 ETFs, with 12% and 20% buffer ETFs launching on a rolling basis the first business day of each month throughout the year.

“The ETFs will be offered at a 0.50% net expense ratio, making them the lowest-cost one-year target-outcome buffer ETFs in the marketplace,” PGIM wrote in a statement.

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The buffer ETFs provide exposure to an ETF that tracks the performance of the S&P 500 Index. The ETFs seek to match the return of the underlying fund up to a predetermined upside cap, while providing a limited downside buffer against the first 12% (for the PGIM U.S. Large-Cap Buffer 12 ETF series) or 20% (for the PGIM U.S. Large-Cap Buffer 20 ETF series) of the underlying fund’s losses over a one-year target-outcome period.

“Buffer ETFs provide investors with a more narrowly defined outcome range, which can offer more predictability in volatile markets,” Stuart Parker, president and CEO of PGIM Investments, said in a statement.

Federated Hermes Launches Total Return Bond ETF

Federated Hermes Inc., an investment manager headquartered in Pittsburgh, announced the launch of the Federated Hermes Total Return Bond ETF.

The new actively managed ETF seeks to provide total return by investing in a broad mix of bond sectors that the portfolio management team believes will benefit from changes in economic and market conditions, a process similar to the core-plus investment strategy of the Federated Hermes Total Return Bond Fund.

The Total Return Bond ETF combines top-down decisionmaking with bottom-up security selection to build a diversified, risk-managed portfolio. The ETF invests primarily in U.S. government, mortgage-backed and investment-grade corporate fixed income with additional exposure to sectors such as high yield and emerging markets debt.

“During times of market volatility, fixed-income securities can be an important part of a diversified portfolio,” John Fisher, president and CEO of Federated Advisory Companies, said in a statement. “By offering the rigorously vetted approach used for our recognizable fixed-income products in an ETF structure, Federated Hermes remains well-poised to deliver on investment client mandates in a variety of formats.”

SoFi Accelerates Retirements With 2% Match on IRA Contributions 

SoFi Technologies Inc., a digital personal finance company, announced that SoFi Invest will offer a 2% match on all eligible IRA contributions through Tax Day on April 15. SoFi members can earn the IRA match on all new ACH transfers into IRA accounts.

“This new offer doubles the previously announced 1% IRA match offered in late 2023, and empowers SoFi Invest members to make the most of their IRA contributions and accelerate their retirement savings during tax season,” according to a company statement.

Brian Walsh, head of advice and planning at SoFi, said in an email response that for years research has shown that employer matches are positively associated with employee contributions.

“We know that saving money for retirement serves two benefits: growing a nest egg for retirement and reduced living expenses which leads to less money needed to retire,” Walsh said. “An IRA match simply applies the valuable lessons learned from employer sponsored plans to help people save for the future. For employees that already have an employer match this is nice additional incentive to save, but for those without matching contributions this can somewhat level the playing field as they save for their future.”

Administration January 4, 2024

Form 5500 Modifications Announced for Plan Year 2023

Several schedules have been updated to reflect regulatory changes from both the DOL and IRS.

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The Department of Labor released on Monday changes to Form 5500 for plan year 2023 reporting. Form 5500 is updated annually to account for statutory and regulatory changes affecting pension and retirement plan disclosure.

Schedule DCG

Section 202 of the SECURE 2.0 Act of 2022 required the DOL and the IRS to modify Form 5500 to permit some groups of defined contribution plans to file a single consolidated report, referred to as Schedule DCG, for defined contribution group.

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To be eligible to file the consolidated report, all plans in a group must be individual account plans with the same trustee; have the same named fiduciaries; have the same plan administrator under the Employee Retirement Income Security Act; file in the same plan year; and have the same investments or investment options available.

Small Plan Audit Participant Counting Methodology

Form 5500 and Form 5500-SF were modified to accommodate a change in the methodology for counting the number of participants in a plan for determining small plan status and an independent qualified public accountant audit waiver. For 2023, existing plans must count participants who have account balances at the start of a plan year. New plans will count participants who had account balances at the end of the year.

Schedule H Administrative Expenses

Schedule H was updated to add new categories to the “Administrative Expenses” category of the Income and Expenses section. This change is intended to provide a more detailed and transparent disclosure of plan expenses related to service providers, administration, recordkeeping, management and other sources of fees.

Schedule MEP for Multi-Employer Plans

A new Schedule MEP was added to consolidate reporting required by the Setting Every Community Up for Retirement Enhancement Act of 2019 and other MEP reporting into one schedule.

For 2023, questions intended to satisfy the SECURE Act’s reporting requirements for pooled employer plans and questions to link the Form PR (pooled employer registration) and the Form 5500 for each plan operated by a pooled plan provider are also found on the Schedule MEP.

Schedule R

New IRS tax compliance questions have been added to Schedule R. The changes add questions in three areas: non-discrimination testing, ADP testing and pre-approved plan letters.

Line 19a was also modified. It now requires that defined benefit plans with 1,000 or more participants at the beginning of a plan year show end-of-year distribution of assets, broken down into seven categories of plan assets.

Schedule SB

Schedule SB was revised to include the following:

  • Changes to Line 6 (target normal cost) and its instructions to address a possible, albeit unlikely, situation in which the amount reported on Line 6c would not be consistent with IRS regulations and the statute if the calculation was done in accordance with the instructions;
  • A revision to the current instructions for Line 26a; and
  • Changes to the current instructions for the Line 26b attachment (projected benefit payments) for situations when a plan assumes some, or all, benefits are paid in a lump sum and uses the annuity substitution rule (26 CFR 1.430(d)– 1(f)(4)(iii)(B)) to determine the funding target.

Other Changes

On Part II, Line 8a for plan characteristics, Code 3D was updated to include pre-approved 403(b) plans.

Schedule MB was revised to add notes that clarify how to report special financial assistance received by multiemployer plans.

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