Products October 27, 2016

Investment Products and Services

SSGA launches new ESG strategies, and Millennium Trust expands Fund Custody Solution.
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SSGA Launches New ESG Strategies 

State Street Global Advisors (SSGA), the asset management business of State Street Corporation, announced that the SPDR MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX) and the SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF (EEMX) began trading on the NYSE Arca.

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Developed to address growing client demand for environmental, social and governance (ESG) strategies and help investors divest from companies owning fossil fuel reserves while maintaining the benefits of core exposures to key benchmarks, the newest additions to SSGA’s ESG line-up are the first MSCI EAFE and Emerging Markets ex Fossil Fuel Reserves Free ETFs, the firm contends.

The SPDR MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX) seeks to track the MSCI EAFE ex Fossil Fuels Index. The Index is designed to measure the performance of companies in the MSCI EAFE Index that do not own fossil fuel reserves. Fossil fuel reserves are defined as economically and technically recoverable sources of crude oil, natural gas and thermal coal but do not include metallurgical or coking coal, which are used in connection with steel production.

The SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF (EEMX) seeks to track the MSCI Emerging Markets ex Fossil Fuels Index. The Index is designed to measure the performance of companies in the MSCI Emerging Markets Index that do not own fossil fuel reserves, as defined above.  The MSCI Emerging Markets Index captures large and mid-capitalization representation across 23 emerging market countries.

The gross expense ratio for EFAX is 0.30% and the net expense ratio is 0.20%. The gross and net expense ratio for EEMX is 0.30%.

“With governments across the world committed to addressing climate change, investors have been increasingly looking to minimize the potential negative impact that exposure to companies owning fossil fuel reserves could have on their portfolios as traditional market-cap based passive strategies that do not screen out certain industries or business practices may not account for this risk,” says Christopher McKnett, managing director and head of ESG at State Street Global Advisors. “SSGA has managed ESG portfolios for 30 years and with client demand for these strategies higher than it’s ever been, this suite of SPDR funds is designed to provide investors with passively managed tools to divest from companies owning fossil fuel reserves while maintaining exposure to core US, international and emerging markets benchmarks.” 

NEXT: Millennium Trust Expands Fund Custody Solution

Millennium Trust Expands Fund Custody Solution 

Millennium Trust Company, a provider of custody solutions for institutions, advisers, and individuals, has expanded the offering of its Fund Custody Solution to include custody for registered investment companies ('40 Act Funds) as well as verification services.

"Millennium's Fund Custody solution was created in late 2010 to address advisers' need to comply with the SEC Custody Rule 206(4)-2, and to create much-needed transparency for the end investor," says Gary Anetsberger, CEO of Millennium Trust. "The services quickly attracted adviser-controlled funds investing in alternative assets such as marketplace loans, private equity, hedge funds as well as traditional assets.”

Millennium's Fund Custody expanded its services to support funds leveraging their loan portfolios by providing verification and certification services required by the funds' credit facilities. "This new service offers the ease of having custody and verification services with one service provider," notes Meg Zwick, Millennium Trust's director of Alternative Custody Services. In addition, Millennium expanded its services to include providing custody for '40 Act Funds. Assets under custody within the fund custody division surpassed $10.8 billion as of September 30.

Compliance October 27, 2016

Retirement Plan Deferral Limit Unchanged for 2017

Other limits also remained unchanged according to an IRS Notice, but the annual 415 limit increased.
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The Internal Revenue Service (IRS) announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017 in Notice 2016-62. 

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000. In addition, the catch-up contribution limit for employees age 50 and older who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

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Other limits also remain unchanged. The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000, and the dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $125,000.

The limit on annual contributions to an individual retirement account (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals age 50 and older is not subject to an annual cost-of-living adjustment and remains at $1,000.

However, some limits have changed. Effective January 1, 2017, the limitation on the annual benefit under a defined benefit (DB) plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000.  For a participant who separated from service before January 1, 2017, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2016, by 1.0112. The limitation for defined contribution (DC) plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $170,000 to $175,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1,070,000 to $1,080,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $210,000 to $215,000.

NEXT: Other limitations

Other limitations announced include:

  • The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $395,000 to $400,000.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.
  • The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $45,000.
  • The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $215,000.
  • The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) remains unchanged for 2017 at $1,012,000,000.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return remains unchanged at $37,000; the limitation under Section 25B(b)(1)(B) remains unchanged at $40,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $61,500 to $62,000.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household remains unchanged at $27,750; the limitation under Section 25B(b)(1)(B) remains unchanged at $30,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $46,125 to $46,500.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers remains unchanged at $18,500; the limitation under Section 25B(b)(1)(B) remains unchanged at $20,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,750 to $31,000.
  • The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
  • The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increased from $98,000 to $99,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased from $61,000 to $62,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $184,000 to $186,000.
  • The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $184,000 to $186,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $117,000 to $118,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
  • The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,106,000 to $1,115,000.

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