Investing May 9, 2018

BNY Mellon Master Trust Universe Sees First Negative Result in 10 Quarters

Corporate and health care plans fared the worst, with quarterly returns of -1.14% and -0.71%, respectively.

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The BNY Mellon U.S. Master Trust returned a median -0.39% in the first quarter of this year, the first negative result in 10 quarters. The BNY Mellon U.S. Master Trust consists of 626 corporate, foundation, endowment, public, Taft-Hartley and health care plans with a total market value of $2.1 trillion and an average plan size of more than $6 billion.

For the trailing one year, the Trust’s return was 10.13%, surpassing its three-year annualized return of 6.37% and five-year annualized return of 7.64%.

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In a reversal from the fourth quarter of 2017, corporate and health care plans underperformed, with quarterly returns of -1.14% and -0.71%, respectively.

“Endowments benefited from higher allocations to alternatives and lower allocations to U.S. fixed income investments versus other plan types,” says Frances Barney, head of global risk solutions at BNY Mellon. “These plans overweighted alternatives at a 44% allocation versus 21% for the Master Trust Universe as a whole and underweighted U.S. fixed income at 9% versus 27% for the whole. Non-U.S. equity was the top-performing asset class, with double-digit gains over the one-year period of 17.58%, followed by U.S. equity continuing its run of positive returns (13.85%) [and] non-U.S. fixed income (8.57%).”

The data also indicated that more than 29% of plans posted positive results in the first quarter. Endowments saw the highest median return (0.52%) followed by foundations (-0.12%). The median return for public plans was -0.14%, and the median return for Taft Hartley plans was -0.19%.

Compliance May 9, 2018

IRS Warns Nonprofits Not to Lose Tax-Exempt Status

Organizations that fail to file annual Form 990 returns for three consecutive years will see their federal tax exemptions automatically revoked, which will have an effect on offering 403(b) retirement plans.

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The Internal Revenue Service (IRS) issued a reminder for certain tax-exempt organizations that the Tuesday, May 15 filing deadline for Form 990-series information returns is fast approaching.

Form 990-series information returns and notices are normally due on the 15th day of the fifth month after an organization’s tax-year ends.

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Small tax-exempt organizations with average annual gross receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard). This form requires only a few basic pieces of information. Tax-exempt organizations with average annual gross receipts above $50,000 must file a Form 990 or 990-EZ, depending on their receipts and assets. Private foundations must file Form 990-PF.

Organizations that need additional time to file a Form 990, 990-EZ or 990-PF may obtain an automatic six-month extension. Use Form 8868, Application for Extension of Time to File an Exempt Organization Return, to request an extension. The request must be filed by the due date of the return. No extension is available for filing the Form 990-N (e-Postcard).

Organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third year for which they are required to file an annual report. The Pension Protection Act (PPA) mandates that most tax-exempt organizations file annual Form 990-series information returns or notices with the IRS. The law also imposed a new annual filing requirement for small organizations. Churches and church-related organizations are not required to file annual reports. Losing tax-exempt status will have an effect on offering 403(b) retirement plans.

The IRS also urges tax-exempt organizations to file forms electronically to reduce the risk of inadvertently including Social Security numbers or other unnecessary personal information. Electronic filing also provides acknowledgement that the IRS has received the return and reduces normal processing time, making compliance with reporting and disclosure requirements easier.

More information can be found in the Instructions for Form 990, Return of Organization Exempt from Income Tax.

The IRS offers a search tool, called Tax Exempt Organization Search (TEOS), with which users can find key information about the federal tax status and filings of certain tax-exempt organizations, including whether organizations have had their federal tax exemptions automatically revoked and if an organization is eligible to receive tax-deductible contributions.

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