The United States stock market currently accounts for about 55 percent of global market cap. While this represents the largest percentage of the world’s market cap held by a single country, it leaves a full 45 percent in markets outside of the U.S.  The U.S. stock market is also the most expensive in the world, with a current (as of June 30, 2019) P/E ratio of 16.7x compared with the global P/E ratio of 13.2x. Though it accounts for 55% of global market value, the U.S. stock market actually only represents about 17 percent of the world’s stocks: approximately 5,000 U.S. companies versus 25,000 non-U.S. companies. Read more »

IMPACT OF EARLY WITHDRAWALS FROM RETIREMENT PLANS AND IRAS

In late April, the Government Accountability Office (GAO) published a report on early withdrawals from retirement plans and IRAs. The report examined and reported on the number and amount of early withdrawals, factors leading up to them, and strategies and policies to limit early withdrawals. Examining individuals in their prime working years (ages 25 to 55), the GAO found that individuals withdrew at least $69 billion of retirement savings, resulting in those plan participants and IRA owners paying more than $6 billion in tax penalties associated with these withdrawals. Read more »

RETIREMENT ENHANCEMENT AND SAVINGS ACT & THE GOVERNMENT SHUTDOWN

As 2018 drew to a close, there seemed to be a real possibility that meaningful retirement legislation would be signed into law. After the November midterms, the prospects for passage of the Retirement Enhancement and Savings Act (RESA) legislation improved. Yet in late December, the stalemate over funding for a border barrier and the failure to reach a spending agreement eliminated the chances for a continuing resolution and resulted in the government shutdown. Another piece of legislation that will need to be reintroduced is the Receiving Electronic Statements To Improve Retiree Earnings (RETIRE) Act, which was designed to amend the Employee Retirement Income and Security Act (ERISA) and the Internal Revenue Code (Code) to allow plan documents required for participants, beneficiaries, and other individuals to be delivered electronically. Read more »

EXPANDING AND RETAINING ACCESS TO WORKPLACE RETIREMENT PLANS

In August, President Trump issued an executive order (EO) designed to broaden the availability of workplace retirement plans, especially for smaller employers who may be limited by rules and regulations, as well as to potentially limit unnecessary costs and burdens that may hinder the formation of the plans, with the ultimate goal being to strengthen retirement security in America. The EO further mandated that the Secretary of Labor examine the regulations on required minimum distributions from retirement plans as they relate to life expectancy and distribution periods. Read more »

Student Loan Repayment Benefit Approved by IRS in Private Letter Ruling

On August 17, 2018, the Internal Revenue Service (IRS) released a Private Letter Ruling (PLR) approving employer 401(k) matching contributions based on an employee making student loan payments. The PLR approves a benefit for a workforce that is increasingly burdened with student loan debt, and is the latest in an overarching effort of government and employers to help relieve this burden. Read more »

THE END OF THE DOL FIDUCIARY RULE

On June 21, 2018, the Court of Appeals for the Fifth Circuit officially vacated the Department of Labor’s (DOL) 2016 fiduciary rule in its entirety, including the related prohibited transaction exemptions and the Best Interest Contract (BIC) exemption. The Court held that the DOL exceeded its rulemaking authority under ERISA in enacting the rule. Read more »

Fifth Circuit Strikes Down Fiduciary Rule

In a two-to-one decision, the Court of Appeals for the Fifth Circuit vacated the Department of Labor’s (DOL) partially implemented Fiduciary Rule, including the “best interest contract” exemption and other exemptions. Read more »

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Tax Reform Efforts Persist

As noted in the second quarter legislative update, President Trump continues to press Congress to join together and pass tax reform. However, delays, distractions, and complications have considerably reduced any potential changes this year. We have seen other legislation take priority over tax reform to address the debt limit; fund the government; provide funds for disaster relief, and also to reauthorize the Federal Aviation Administration. Additionally, the U.S. budget deficit is proving to be a major obstacle to tax reform and could ultimately derail a tax reform plan. The GOP had hoped to use a budget reconciliation bill to move tax reform; however, this process is not likely to be successful, as sixty votes would be needed in the Senate to pass a tax reform package, which would require buy-in from some democrats. Read more »