Benefits July 23, 2013

Around the World, City Living Is Costly

July 23, 2013 (PLANSPONSOR.com) – The cost of living can be quite expensive for employees who live outside of the United States.
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The “2013 Cost of Living Survey,” conducted by Mercer and designed to help multinational companies and governments determine compensation allowances for their expatriate employees, found Luanda, Angola, is the most expensive city, followed by Moscow, Russia.

Rounding out the top five most expensive cities for expatriate living are Tokyo, Japan; Ndjamena, Chad; and the city-state of Singapore.

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“Recent world events, including economic and political upheavals, which resulted in currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices have impacted these cities making them expensive,” said Barb Marder, senior partner and Mercer’s Global Mobility practice leader. “Despite being one of Africa’s major oil producers, Angola is a relatively poor country yet expensive for expatriates since imported goods can be costly.”

The survey covered 214 cities across five continents and measured the comparative cost of over 200 items including housing, transportation, food, clothing, household goods and entertainment. These costs varied greatly from city to city. For example:

  • A cup of coffee in Managua, Nicaragua, cost $1.54, compared with $8.29 in Moscow, Russia;
  • A fast food hamburger meal cost $3.62 in Kolkata (Calcutta), India, versus $13.49 in Caracas, Venezuela; and
  • A movie ticket cost $5.91 in Johannesburg, South Africa, compared with $20.10 in London, UK.

The cost of expatriate housing was found to be the biggest expense for employers. Moscow and Luanda topped the list because of high costs for rental accommodation, as well as imported goods and services purchased by expatriates. A luxury two bedroom unfurnished apartment rental for one month in Moscow is $4,600 a month or 14 times as much than Karachi, Pakistan.

The Swiss cities of Geneva, Zurich and Bern made Mercer's top 10 list for most expensive cities for expatriates (at numbers seven, eight and nine, respectively). The city-state of Hong Kong ranked at number six and the Australian city of Sydney, New South Wales at number 10.

"Overall, the cost of living in cities across parts of Europe have gone up in the ranking as a result of the slight strengthening of local currencies against the U.S. dollar, whereas in Asia about half of the cities went down in the ranking, especially Japan, due to local currencies' weakening against the U.S. dollar," said Nathalie Constantin-Métral, a principal at Mercer who compiled the survey ranking.

According to the survey findings, Switzerland remains one of the costliest locations for expatriates despite decreasing or stable accommodation costs and a robust Swiss franc.

In the Americas, cities in South America are the most expensive locations for expatriates. Some locations, such as Brazilian cities, dropped in the ranking due to local currencies weakening against the U.S. dollar, while others jumped as a result of high inflation on goods and services and rentals. New York, New York, the base city for the ranking, is the most expensive city in the United States.

"Overall, U.S. cities either remained stable in the ranking or have slightly decreased due to the movement of the U.S. dollar against the majority of currencies worldwide," explained Constantin-Métral. "Yet several cities, including New York, moved up in the ranking due to a rise in the rental accommodation market."

The survey also found that Canadian cities generally moved down in the ranking this year as a result of a slight decrease of the Canadian dollar against the U.S. dollar, and because the prices of goods and services increased at a lower pace than in New York.

More information about the survey, including a seven-minute video, can be found here.

Ask the Experts July 23, 2013

(b)lines Ask the Experts – Different Dates for Fee Disclosures

July 23, 2013 (PLANSPONSOR (b)lines) - "We sponsor an ERISA 403(b) plan with two vendors and are in the process of preparing our annual participant fee disclosure notice.
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“One of our vendors wishes to provide information for the disclosure as of the close of the most recent quarter (6/30/13), but our other vendor is unable to comply with that request; the latest information it can provide is as of 3/31/2013. Can I provide data as of one date for one vendor, and as of a different date for the other?” 

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:

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Your question is quite timely, since many plan sponsors are in the midst of preparing their annual participant fee disclosures as required under the Employee Retirement Income Security Act (ERISA) 404(a)(5). Specifically, such a disclosure is required to be distributed to all plan participants every 12 months. Since the initial fee disclosure deadline was 8/30/12, if a plan sponsor provided its disclosure precisely on the deadline date last year, it would need to provide another fee disclosure by 8/30/13, and every 12 months thereafter (if the disclosure was provided earlier than 8/30/12, the deadline would be 12 months from the date the prior disclosure was provided).

However, a U.S. Department of Labor temporary enforcement policy issued July 22, allows retirement plan sponsors to reset their annual due date for providing the investment comparative chart (see “Plan Sponsors Can Reset Disclosure Date”).

The final rule indicates that data for fee disclosure should be provided for the periods "ending on the date of the most recently completed calendar year". Thus, it would appear that all data must be provided as of 12/31/2012 for the fee disclosures distributed in 2013. However, in Field Assistance Bulletin 2012-02R, Q&A 23 provided an exception to the final rule, as follows:

Q23: For designated investment alternatives with variable rates of return, may a plan administrator furnish on the comparative chart average annual total return information that is more recent than the end of the most recently completed calendar year?

A23: Yes. The Department would consider a plan to be in compliance with paragraph (d)(1)(ii)(A) of the regulation if the plan administrator furnished the average annual total return of each designated investment alternative with variable rates of return for 1-, 5- and 10-year periods (or for the life of the alternative, if shorter) as of the date of the most recently completed calendar month or quarter. However, to ensure appropriate comparability, the same ending date for a particular period ordinarily would have to be used for all designated investment alternatives under the plan, and the associated benchmark information would have to correspond to the same time period.

 

Thus, data may be provided as of a more recent date than 12/30/12 for the fee disclosure due in 2013, but if data is provided for one vendor as of 3/31/13, data for the other vendor MUST be provided as of the same date. So the scenario you outline would NOT be permissible, due to this subtle difference between the final rule and the Field Assistance Bulletin. 

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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