Participants July 7, 2016

Brexit Causes Swing in 401(k) Participant Trading

Despite a slow start to the month, there were three days of above-normal 401(k) participant trading activity—mostly coming after the Brexit news, according to the Aon Hewitt 401(k) Index.
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A total of 0.19% of 401(k) participant balances traded in June, with 18 out of the 22 days favoring inflows to fixed income instruments, the Aon Hewitt 401(k) Index shows.

Despite a slow start to the month, there were three days of above-normal trading activity—mostly coming after the Brexit news caused a swing in the equity market, Aon Hewitt says. The Index shows $138 million in inflows to GIC/Stable Value funds, $118 million into Bond funds, and $51 million into Money Market funds.

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Company stock funds led outflows ($117 million), while Target-Date funds posted $72 million in outflows and Large U.S. Equity funds saw $47 million in outflows.

After combining contributions, trades, and market activity in participants’ accounts, the percentage in equities at the end of June was 64.6% a slight decline from 64.8% in May. New contributions continue to favor stocks, with 65.6% of employee contributions invested in equities—a decrease from 65.7% in May.

NEXT: Q2 2016 Review

As a percentage of balances, 0.50% of balances traded in the second quarter of 2016, which is lower than the 0.82% percentage of balances traded in the first quarter of 2016.

Trading activity favored fixed income over equities. The Index shows Bond funds received the highest amount of inflows in Q2, at $369 million. GIC/Stable Value funds received $311 million in participant transfers, and Money Market funds posted $114 million in inflows.

Large U.S Equity funds posted $265 million in outflows during Q2, while Company Stock funds saw outflows totaling $195 million, Target-Date funds had outflows of $102 million, and International funds posted $100 million in outflows.

More information is here.
Compliance July 7, 2016

DOL Adjusts ERISA Civil Monetary Penalties

The Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act of 2015 requires agencies to adjust civil monetary penalties annually for inflation.
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The Department of Labor’s (DOL) has issued an interim final rule to adjust for inflation the civil monetary penalties enforceable by the agency.

The DOL explains that the Federal Civil Monetary Penalties Inflation Adjustment Act of 1990, required Federal agencies, including the DOL, to adjust their civil monetary penalties for inflation. In 1997 and 2003, the Department adjusted a number of civil monetary penalties enforceable by the Department under Title I of the Employee Retirement Income Security Act (ERISA).

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In 2015, the Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act amended the Inflation Adjustment Act of 1990. The 2015 amendments require federal agencies to issue an interim final rule by July 1, 2016, adjusting their civil monetary penalties for inflation through October of 2015. After this initial “catch-up” adjustment, the agencies must adjust their civil monetary penalties annually for inflation.

The interim final rule sets forth the catch-up adjustments for the penalties enforced by the various agencies in the DOL, including the Employee Benefits Security Administration (EBSA). The rule’s catch-up adjustments apply to penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015, the enactment date of the 2015 Inflation Adjustment Act. Violations of Title I of ERISA occurring on or before November 2, 2015, and assessments made on or before August 1, 2016, for violations occurring after November 2, 2015, will continue to be subject to the civil monetary penalty amounts set forth in the DOL’s existing regulations.

Beginning in 2017, the DOL will adjust the new ERISA Title I penalty amounts annually for inflation no later than January 15 of each year. For example, by January 15, 2017, the Department will adjust penalty amounts to reflect any increase in inflation from October, 2015, to October, 2016. EBSA will post any changes to ERISA Title I penalty amounts on its website. Annual inflation adjustments are not subject to notice and rulemaking.

A fact sheet including a chart with the adjusted civil monetary penalties is here.

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