Eric Droblyen, president and COO of Employee Fiduciary, studied the 2,767 small business 401(k) plans for which the firm provides Employee Retirement Income Security Act (ERISA) compliance services and found 68% of plans use a safe harbor 401(k) plan design to avoid annual ADP/ACP and top heavy nondiscrimination testing.
In addition, a new comparability profit sharing contribution is most commonly combined with a safe harbor 3% non-elective employer contribution plan design. Traditional profit-sharing plan designs use either a flat percentage to allocate profits among participating employees, or an approach that is integrated with Social Security. By contrast, new comparability plans permit substantially higher levels of distributions to highly paid employees.
Droblyen’s analysis found pro-rata and integrated profit sharing contributions are most commonly combined with the 3% match-based safe harbor 401(k) plan designs.
Other plan design features among small business 401(k)s the analysis noted include:
Only 8.71% of plans automatically enroll employees that fail to make an affirmative enrollment election;
65.96% of plans permit after-tax Roth 401(k) contributions;
64.37% of plans permit non-safe harbor employer matching contributions; and
85.65% of plans permit employer profit sharing contributions.
T. Rowe Price expands 401(k) brokerage services with Charles Schwab; USAA launches R6 retirement share classes; T. Rowe Price introduces Total Return Fund; and more.
T. Rowe Price Expands 401(k)
Brokerage Services with Charles Schwab
Beginning
in April 2017, Charles Schwab’s Personal Choice Retirement Account (PCRA) will
be available for T. Rowe Price’s recordkeeping clients and their participants
across all market segments. Charles Schwab’s platform is currently available to
T. Rowe Price’s small-market clients.
This
self-directed brokerage account allows plan participants to invest a portion of
their retirement plan savings in a wide range of investments beyond those that
are ‘core’ to the employer’s retirement plan.
“We
believe Schwab’s brokerage platform meets the unique needs of our recordkeeping
clients across all market segments,” says Diana Awed, head of Product &
Marketing at T. Rowe Price Retirement Plan Services. “We look forward to
providing our clients with key product enhancements that are important to them,
such as direct access for a participant’s financial adviser, paperless account
opening, online fixed income trading, and the ability to trade through multiple
channels.
This
service is for T. Rowe Price Retirement Plan Services recordkeeping clients
only, and does not pertain to brokerage services provided by T. Rowe Price to
individual investor clients.
T. Rowe
Price Retirement Plan Services has been a retirement solutions provider for
more than 30 years and currently serves nearly 1.9 million retirement plan
participants across more than 3,500 plans. Retirement-related assets
represent 69% of the firm’s total assets under management.
NEXT:
Wilshire Launches
New EVA Index Family
Wilshire Launches New EVA Index
Family
Wilshire
Associates and EVA Capital Management have launched two new indexes which aim
to gauge the performance of strategies based on an Estimated Value Added (EVA)
weighing of the Wilshire 5000 Total Market Index. The
firm now offers the EVA Wilshire 5000 Index (EVAW5000) and the EVA
Wilshire US Large-Cap Index (EVAWLC).
Wilshire
defines EVA as a “time-tested and well-respected process
designed to identify a company’s true economic profitability.” EVA weightings
are calculated by EVA Capital, using data from evaDimensions, a global leader
in the application of EVA-based solutions. EVA Capital has an exclusive license
to construct indexes based on data from evaDimensions and has collaborated with
Wilshire to create the new indexes based on the EVA of the constituents of both
Wilshire index counterparts.
“Wilshire Analytics is proud to align with EVA innovator,
EVA Capital, to bring these indexes to market,” says Robert J. Waid, Managing
Director at Wilshire Associates. “Wilshire’s well-respected broad market index
heritage combined with EVA Capital’s access to a robust methodology that helps
identify positive economic value for investors is in the true spirit of
Wilshire’s deep commitment to deliver actionable insight to the investor.”
Nick Lobaccaro, founder of EVA Capital added, “We are proud
to align with ... Wilshire, to create these unique
indexes that measure the performance of a strategy that aims to invest in
companies that create value and avoid companies that do not.”
Wilshire
Associates is a global financial services firm providing consulting services,
analytics solutions and customized investment solutions to plan sponsors,
investment managers and financial intermediaries. Based in Santa Monica,
California, Wilshire provides services to clients in more than 20 countries
representing more than 500 organizations with assets totaling approximately $7
trillion, according to the firm.
NEXT:
USAA Launches R6 Retirement Share Classes
USAA Launches R6
Retirement Share Classes
USAA, a financial services organization supporting military
members and their families, will be offering R6 retirement
share classes across six of its mutual funds for eligible investors. The share
classes comprise the USAA Income Fund, USAA High Income Fund, USAA Income Stock
Fund, USAA Short-Term Bond Fund, Intermediate-Term Bond Fund, and the Government
Securities Fund.
The move is a response to member feedback and research,
which indicated that saving for retirement was a financial goal for 70% of USAA
members. Today, more than 2.4 million businesses are majority-owned by veterans
currently representing 9% of the non-farm companies, USAA notes.
Many of these businesses offer a retirement plan such as a 401(k).
“USAA is offering the R6 share class as another financial
solution to provide plan sponsors a lower-cost option with greater fee
transparency for employer-sponsored retirement plans to prepare our members and
the military community for financial security,” the company says.
NEXT: T. Rowe Price Releases New Fixed Income
Fund
T.
Rowe Price Releases New Fixed Income Fund
The recently-launched T. Rowe Price
Total Return Fund will seek to maximize return by investing in a diversified
portfolio composed of U.S. securitized bonds, bank loans, and other debt
instruments. It will be co-managed by Andy McCormick, head of the U.S. taxable
bond team, and portfolio manager Chris Brown.
The Total Return Fund will mainly focus
on intermediate-term bonds and will employ a U.S.-focused, multi-sector
approach. Its risk-balanced framework is supported by T. Rowe Price's research
platform. The firm says the fund will serve as a complement to its existing
multi-sector lineup, and is designed to address the challenges of the current
market environment including low interest rates, volatility potential,
stretched valuations, and impaired market liquidity.
"The importance of high-grade U.S.
bonds to both U.S. and global clients is an enduring feature of fixed income
markets,” says McCormick. “With rates so low, bond investors are seeking more
from their fixed income allocation. They want managers to dig harder to find
higher returns. We've structured this fund to have the flexibility to take
advantage of the best ideas our global research platform produces while still
retaining the characteristics of a high-grade bond portfolio—diversification
of risk away from stocks and steady cash flow from the fund's holdings."
The fund's primary benchmark will be
the Bloomberg Barclays U.S. Aggregate Bond Index, but as a high tracking error
fund, it will seek to differentiate itself from the index and maximize returns.
The fund will be offered with Investor,
Advisor and I Class shares.
"This fund is built on
high-conviction ideas from a wide range of bond markets, so we anticipate being
able to spread risk broadly to protect investors from adverse outcomes while
maximizing risk-adjusted returns,” says Brown. “Andy and I will use the same
process that all of our multi-sector bond portfolios have employed in our
effort to help produce strong risk-adjusted performance for investors; it is
time-tested and built to support this new investment strategy."
To download a prospectus for the fund,
click here.
NEXT: Prudential
Fixed Income Becomes PGIM Fixed Income
Prudential Fixed
Income Becomes PGIM Fixed Income
Currently operating globally under two brand names,
Prudential Fixed Income will consolidate the two to become PGIM Fixed Income.
The change will officially go in effect January 1, 2017, pending customary
regulatory approvals in certain markets.
Prudential Fixed Income is a global asset manager offering
active solutions across all fixed income markets. The company manages assets
for institutional clients and retail investors worldwide with $681 billion in
assets under management as of September 30, 2016.
“As we continue to expand globally, a single name offers better clarity and
consistency across all regions in which we operate,” says Michael Lillard, head
of Prudential Fixed Income and chief investment officer.
NEXT: AllianzGI Acquires Sound Harbor Partners
AllianzGI Acquires
Sound Harbor Partners
Private credit manager Sound Harbor Partners has agreed to
join the Private Debt Platform of active investment manager Allianz Global
Investors (AllianzGI). Under the terms of the transaction, AllianzGI will
acquire Sound Harbor’s assets for an undisclosed sum, and the Sound Harbor team
will join AllianzGI. Following the acquisition, AllianzGI’s clients will have
access to U.S. private credit investment funds managed by a Sound Harbor
team.
“Over the last five years, AllianzGI has invested steadily
in the quality and breadth of its active investment offering,” says AllianzGI
Global CEO Andreas Utermann. “Within our fast-growing Alternatives segment,
private debt stands out as a particularly exciting area, where we’ve clearly signaled
our intent to expand our capabilities to address our clients’ evolving
investment needs. The addition of the team from Sound Harbor is a significant
step in that process, strengthening and complementing our existing capabilities
in this important space.”
Sound Harbor is led by led by Michael Zupon and Dean
Criares.
“Dean and I, along with the entire team, are looking forward
to joining a leading and respected investment manager that shares Sound
Harbor’s commitment to outstanding investment performance and dedication to its
clients’ needs,” Zupon says. “Joining AllianzGI will enhance our ability to
capitalize on trends favoring growth in alternative investment managers with
scale, brand recognition and long-term capital.”
Sound Harbor focuses on alternative investments in corporate
loans, direct lending, distressed debt and opportunistic credit. The firm
manages these investments on behalf of its clients in private limited partnerships,
collateralized loan obligations and separately managed accounts.