Compliance June 22, 2023

PBGC Publishes Q3 Liability, Discount Rates

Interest rates assessed to late payments and discount rates have been adjusted for Q3, the PBGC announced Wednesday.

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The Pension Benefit Guaranty Corporation announced on Wednesday quarterly updates to four interest rates for the year’s third quarter.

The late or defaulted rate liability will increase to 8.25% from 7.75%. Bruce Cadenhead, partner in and global chief actuary for Mercer’s wealth business, explains that when an employer leaves an underfunded multiemployer plan, they are assessed their share of the plan’s deficit when they withdraw. That liability can be paid all at once or on a payment schedule over 20 years. If the employer misses a payment, there is a late charge, which will now be 8.25% of the deficit on an annualized basis.

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The late premium payment interest charge will remain at 7% for the next quarter. According to ERISA Section 4006, late insurance premiums made by pension plans to the PBGC are charged interest on the shortfall. This rate is set quarterly by the IRS.

ERISA 4044 annuity discount rates were also adjusted. The rates rest on PBGC assumptions which are based on market pricing for annuities used in order to calculate the present value of an annuity, Cadenhead explains.

There are two interest rates used for valuation: one for annuity payments occurring within 20 years and another for payments more than 20 years into the future. The rate for the first 20 years will decrease to .0524 from .0538, and the rate for payment dates more than 20 years away will decrease to .0458 from .0509.

Lastly, the PBGC published the monthly adjustment to the variable rate premiums. Cadenhead says the Treasury Department derives a monthly average of corporate bond yields. The rates are used to value vested benefits for calculating variable-rate premiums. The rates vary depending on the plan year and can be read here.

Products June 22, 2023

Investment Product and Service Launches

Betterment launches tax-smart transitions features; Broadridge secures patent; Vanguard announces cash distributions.

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Betterment Unveils Tax-Smart Transitions Features for Advisers 

Betterment announced that Betterment for Advisors, its registered investment adviser custody division, has launched an integrated suite of tools providing financial advisers with granular control over how client assets are managed, transferred and sold. 

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The new features will allow advisers to set specific capital gains allowances. Advisers can more easily turn rebalancing on and off for clients, transitioning client assets to new portfolio models with greater precision and tax optimization. 

“Our tax-smart trading technology takes what was once a burdensome task and automates it, saving advisors time and effort that can be better spent growing their businesses,” Tom Moore, senior director of Betterment for Advisors, said in a statement. “This ultimately delivers a better experience for the advisors’ clients.” 

Broadridge Secures Patent for Machine Learning Technology  

The U.S. Patent and Trademark Office has granted Broadridge Financial Solutions a patent for its machine learning technology.  

The technology powers the firm’s ability to provide financial advisers with engagement-predicting scores and other valuable insights on securities-based lending.  

“This patent supports Broadridge’s commitment to providing wealth management firms and their advisers with innovative and personalized products in wealth lending to meet increasing demand,” Mike Alexander, president of wealth and capital markets solutions at Broadridge, said in a statement.  

Broadridge partnered with client The Bancorp Bank NA to train and productionize machine learning models to deliver borrower insights at the enterprise and adviser level. 

Vanguard Announces Cash Distributions for ETFs 

Vanguard Investments Canada Inc. announced the final June cash distributions for certain Vanguard ETFs that trade on the Toronto Stock Exchange. Unitholders of record on June 30 will receive cash distributions payable on July 10.  

 

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