Sales not Enough to Counter Losses to Mutual Funds

February 27, 2009 (PLANSPONSOR.com) - The combined assets of the nation's mutual funds decreased by $191 billion, or 2%, to $9.411 trillion in January, according to the Investment Company Institute (ICI).

However, market losses were at fault for the decrease, as most fund categories reported sales in excess of redemptions for the month. Long-term funds – stock, bond, and hybrid funds – had a net inflow of $25.35 billion in January, versus an outflow of $29.43 billion in December, ICI data showed.

Stock funds posted an inflow of $9.05 billion in January, compared with an outflow of $20.43 billion in December. Among stock funds, world equity funds (U.S. funds that invest primarily overseas) posted an inflow of $2.19 billion in January, while funds that invest primarily in the U.S. had an inflow of $6.85 billion.

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Bond funds had an inflow of $16.73 billion for the month, compared with an outflow of $7.01 billion in December. Taxable bond funds had an inflow of $12.87 billion and municipal bond funds had an inflow of $3.86 billion.

Money market funds were still the most popular choice for investors – at least for institutional investors – as ICI data showed the funds had an inflow of $59.52 billion in January, on top of the $109.35 billion inflow in December. Funds offered primarily to institutions had an inflow of $67.62 billion, while funds offered primarily to individuals had an outflow of $8.10 billion.

Hybrid funds posted an outflow of $419 million in January, compared with an outflow of $1.99 billion in December.

The ICI data is here .

IRS Posts Added Info about Employer COBRA Tax Break

February 26, 2009 (PLANSPONSOR.com) - Employers can get some help in implementing the new rules for getting tax credits to cover their additional COBRA premium payments put in place as part of the federal government's economic stimulus package.

Under the stimulus bill, eligible former employees who were enrolled in their employer’s health plan at the time they lost their jobs, are required only to pay 35% of the cost of COBRA coverage, with employers paying the remaining 65%. Employers are able to recoup their share of the cost on their payroll tax return.

The Internal Revenue Service (IRS) says it has posted to its Web site additional information on how the employer tax credit will work, including a series of questions and answers.

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Tax agency officials say they have also posted a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.

The IRS said Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March so employers can claim the credit, beginning with the first quarter of 2009.

“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”

According to the additional IRS information, employers must maintain supporting documentation for the credit claimed including:

  • documentation of receipt of the employee's 35% share of the premium.
  • in the case of insured plans, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
  • declaration of the former employee's involuntary termination.

The additional IRS information is available at http://www.irs.gov/newsroom/article/0,,id=204505,00.html . The Department of Labor also has information about the COBRA subsidy at http://www.dol.gov/ebsa/cobra.html .

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