The Securities and Exchange Commission announced in its spring 2024 agenda that it will likely re-propose its swing pricing proposal for open-end funds. According to the agenda, the target for a re-proposal is April 2025, though the date is not binding.
First proposed in November 2022, the regulatory change would impose mandatory swing pricing on mutual funds. Swing pricing is a method whereby the costs of redeeming shares in a mutual fund are passed on to the redeemer, which can limit the effect of a panic sale in stressful times. The proposal also featured a hard close of trading at 4 p.m. Eastern time, which has been widely criticized as inimical to retirement investors and to any investors in other time zones.
The proposal also contained an alternative based on mandatory liquidity fees, which would impose a redemption fee if a certain net redemption threshold is met. This alternative was actually adopted for money market funds in July 2023. The initial MMF proposal also contained a provision on swing pricing that was dropped.
SEC Chairman Gary Gensler indicated at an Investment Company Institute conference in May that the SEC was considering a similar approach for mutual funds.
The SEC wrote in the regulatory agenda that “the Division is considering recommending that the Commission re-propose changes to regulatory requirements relating to open-end funds’ liquidity and dilution management.”
The Delaware EARNS plan officially opened for registration, Vermont Saves is on track to launch sooner than anticipatedand Rhode Island Secure Choice was signed into law.
State automatic individual retirement account plans continue to gain momentum, as more state legislatures are passing bills to open programs, requiring private sector employers to offer a state plan if they are not already sponsoring their own retirement plan.
Delaware
Registration for the Delaware EARNS program (EARNS stands for Expanding Access for Retirement and Necessary Saving) officially opened on July 1. All Delaware employers who have at least five payroll employees and do not offer a qualified retirement plan, such as a 401(k), must either register for Delaware EARNS or certify for exemption by October 15, 2024.
Delaware EARNS was created to help bridge the state’s retirement savings gap and is sponsored by the office of the state treasurer. There is no cost to employers for facilitating the program and no plan sponsor liability.
Delaware employers can be exempt if they offer a qualified retirement plan, have fewer than five employees or have been in business less than six months.
Before opening statewide, Delaware EARNS was tested in a pilot program involving 12 employers across the state, including My Sister’s Fault, a Puerto-Rican-themed bakery with locations in Milford and Seaford.
“EARNS is an important step forward,” said Angie Robles, co-owner of My Sister’s Fault, in a press release. “It offers small business owners and their employees a chance to be able to save money for their retirement. The way it’s going to help our employees is that it’s going to give them a level of confidence that when they do get to retirement, they will have money set aside that they can count on.”
Vestwell State Savings is the program administrator for Delaware EARNS, as well as similar programs in other states, including Maryland, New Jersey and Virginia.
Vermont
Vermont’s public retirement program, Vermont Saves, joined the Partnership for a Dignified Retirement, an interstate consortium that also includes Delaware and Maine, while agreeing to partner with the Colorado SecureSavings program. Partnering with Colorado could lower costs and position VT Saves to launch sooner, according to Vermont Treasurer Mike Pieciak. Colorado SecureSavings was launched in 2023 and currently enrolls more than 14,000 employers and has accumulated more than $50 million.
With more assets and accounts under management, the consortium will increase returns through economies of scale and reduce costs for savers, according to the office of the Vermont state treasurer.
The partnership will also enable Vermont Saves to launch earlier than anticipated; its launch, now expected by the end of the year, would make Vermont the fastest state to develop and launch a public retirement program, according to the announcement. Before Vermont Saves opens fully, the Vermont state treasurer’s office will launch a pilot program in October involving businesses in various industries and regions across the state.
Vestwell, in partnership with BNY Mellon, again serves as plan administrator, providing recordkeeping, custodial and administrative services to employers and employees in participating partner states.
Rhode Island and New Jersey
Rhode Island Governor Daniel McKee on June 26 signed into law the Rhode Island Secure Choice Retirement Savings Program Act, making it the 17th state auto-IRA program in the nation and the 20th state retirement program for private sector employers.
Under the program, Rhode Island private sector employers with at least five employees will be required to offer a retirement plan to their employees. The office of the general treasurer will administer the plan and determine the plan features, as well as select a third-party administrator. The bill took effect immediately.
New Jersey’s state plan, RetireReadyNJ, also opened for eligible employers on June 30.
