The average 401(k) plan offers a variety of investment options

The average large 401(k) plan offered 27 investment options — including a mix of equity funds, bond funds, and target date funds, according to a recent study by BrightScope and the Investment Company Institute (ICI). © Shutterstock “Employers recognize the importance of being able to customize the design of their 401(k) plans to suit their […]

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The average large 401(k) plan offered 27 investment options — including a mix of equity funds, bond funds, and target date funds, according to a recent study by BrightScope and the Investment Company Institute (ICI).

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“Employers recognize the importance of being able to customize the design of their 401(k) plans to suit their workforces, which is one of the strengths of the 401(k) system,” Sarah Holden, ICI’s senior director of retirement and investor research, said. “Employers use the flexibility of the 401(k) system—including a wide variety of investment options and the structure of employer contributions—to build plans that encourage employee participation and make it easier for participants to plan and save.”

It also found that plan fees continue to decline.

“The 401(k) marketplace is constantly evolving, and with that, the overall costs of 401(k) plans for participants have declined,” Brooks Herman, vice president of data and research at BrightScope, said. “There are a variety of factors contributing to the decrease of fees and expenses in plans, including increased competition and the growing size of the 401(k) marketplace, as well as public disclosure of plan costs. All of these factors benefit participants and help them continue to grow their retirement nest eggs.”

The study also revealed that 85 percent of large 401(k) plans offered employer contributions. Employer contributions most commonly are structured as a simple matching contribution. Additionally, nearly 60 percent of larger 401(k) plans automatically enrolled their participants.

Finally, all large 401(k) plans included domestic equity funds, international equity funds, and domestic bond funds. Also, 80 percent of large 401(k) plans offered target-date funds while 69 percent offered guaranteed investment contracts (GICs) and 65 percent offered other types of balanced funds. In addition, 44 percent offered money funds, and 30 percent offered international bond funds.

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Bill targets retirement planning simplification

Sen. John Kennedy (R-LA) has crafted a bill designed to enhance retirement savings plan options while simplifying the process.© Shutterstock Kennedy said the measure would make it easier and less expensive for small businesses to offer retirement plans, like 401(k)s, by encouraging small businesses to band together through organized business associations, like chambers of commerce, […]

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Sen. John Kennedy (R-LA) has crafted a bill designed to enhance retirement savings plan options while simplifying the process.

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Kennedy said the measure would make it easier and less expensive for small businesses to offer retirement plans, like 401(k)s, by encouraging small businesses to band together through organized business associations, like chambers of commerce, to sponsor affordable retirement plans for all of the associations’ members.

“Millions of Americans work for small businesses that don’t have the resources to offer their employees retirement plans, which can make saving for retirement challenging and complicated,” Kennedy said. “This bill will make retirement plans more simple and available to people who own or work for small businesses. Americans know the value of hard work, and we work like dogs hoping that one day, we’ll be able to kick back and retire. This legislation will help make those retirement dreams more accessible to many hard-working Americans.”

Bureau of Labor Statistics maintains one-third of private sector employees did not have access to employer-sponsored retirement plans three years ago, and only 47 percent of employees of small businesses with fewer than 50 employees have access to defined retirement contribution plans, such as 401(k)-style plans.

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Insurance association commends Senate for holding hearing on terrorism insurance

The leadership of the American Property Casualty Insurance Association (APCIA) recently commended the Senate Banking Committee for holding today’s hearing on the reauthorization of the Terrorism Risk Insurance Program.© Shutterstock The Terrorism Risk Insurance Program was reauthorized in 2015 by President Barack Obama and was extended through Dec. 31, 2020. It was initiated on the […]

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The leadership of the American Property Casualty Insurance Association (APCIA) recently commended the Senate Banking Committee for holding today’s hearing on the reauthorization of the Terrorism Risk Insurance Program.

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The Terrorism Risk Insurance Program was reauthorized in 2015 by President Barack Obama and was extended through Dec. 31, 2020. It was initiated on the idea that sustaining a viable private market for terrorism insurance depends on a federal backstop.

“APCIA commends Chairman Crapo and members of the Senate Banking Committee for holding today’s hearing. APCIA strongly supports reauthorization of the current TRIA program as quickly as possible, for as long a duration as possible, and without changes to the current thresholds,” Nat Wienecke, senior vice president of federal government relations at APCIA, said.

Wienecke said that although the program does not expire until the end of 2020, it is imperative that TRIA is reauthorized this year.

“This fall, insurers will begin to negotiate new policies with durations running past TRIA’s expiration and have provisions ending terrorism coverage should TRIA lapse. Reauthorizing TRIA as soon as possible also will avoid disruptions and confusion in the marketplace for both insurers and their consumers,” Wienecke said. “APCIA will continue to work with Congress on a long-term reauthorization of TRIA.”

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NAFCU favors reform of the Bank Secrecy Act

The National Association of Federally-Insured Credit Unions (NAFCU) is supporting legislative efforts to strengthen and reform the Bank Secrecy Act (BSA) laws while combating illicit activity.© Shutterstock In correspondence to the House Financial Services Committee, NAFCU Vice President of Legislative Affairs Brad Thaler extended gratitude to lawmakers and urged them to mirror the beneficial ownership […]

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The National Association of Federally-Insured Credit Unions (NAFCU) is supporting legislative efforts to strengthen and reform the Bank Secrecy Act (BSA) laws while combating illicit activity.

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In correspondence to the House Financial Services Committee, NAFCU Vice President of Legislative Affairs Brad Thaler extended gratitude to lawmakers and urged them to mirror the beneficial ownership requirements found in H.R. 2513, which was introduced by Rep. Carolyn Maloney (D-NY).

The NAFCU maintains Maloney’s bill would help financial institutions comply with the new customer due diligence rule by requiring companies to disclose their true beneficial owners, to the Financial Crimes Enforcement Network.

“Credit unions support efforts to combat criminal activity in the financial system,” Thaler wrote, adding the institution works to prevent tax evasion, money laundering, and terror financing.

Under the guidelines of Maloney’s measure, officials said the information would then be used to create a database of beneficial ownership that would be available to law enforcement agencies and financial institutions – adding it recently advanced out of the House Financial Services Committee.

Thaler also maintains BSA requirements are a burden to implement and urged the committee to continue to look for ways to provide credit unions with regulatory relief by reforming and strengthening BSA laws.

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SEC amends rules on determining auditor independence

The Securities and Exchange Commission (SEC) has amended rules on determining whether an auditor is independent when he or she has a lending relationship with certain shareholders of an audit client.© Shutterstock The existing rule states an auditor is not independent if that auditor is in a lending relationship with its audit client.  However, the […]

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The Securities and Exchange Commission (SEC) has amended rules on determining whether an auditor is independent when he or she has a lending relationship with certain shareholders of an audit client.

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The existing rule states an auditor is not independent if that auditor is in a lending relationship with its audit client.  However, the SEC has discovered that in certain circumstances, the existing Loan Provision may not have been functioning as it was intended.

The amendments look to focus the rules on those lending relationships that reasonably may bear on external auditors’ impartiality or objectivity. To do this, the amendments improve the application of the Loan Provision for the benefit of investors while reducing compliance burdens.

Specifically, they focus on beneficial ownership rather than on both record and beneficial ownership; replace the existing ten percent bright-line shareholder ownership test with a significant influence test; add a known through reasonable inquiry standard for identifying beneficial owners of the audit client’s equity securities.  Further, they exclude from the definition of audit client, for a fund under audit, any other funds that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships.

“This rulemaking reflects the staff’s extensive experience and judgment, and I thank them for their continued commitment to retrospective review,” SEC Chairman Jay Clayton said.  “The amendments we are adopting today will more effectively identify debtor-creditor relationships that could impair an auditor’s objectivity and impartiality, as opposed to certain more attenuated relationships that are unlikely to pose such threats.”

These amendments become effective 90 days after they are published in the Federal Register.

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FSB issues report on compensation practices for banks

The Financial Stability Board (FSB) published a progress report on the principles and standards for sound compensation practices in financial institutions.© Shutterstock The report examined how compensation practices have evolved since the principles and standards were first published in 2009. The report confirmed that all FSB jurisdictions had implemented the principles and standards for sound […]

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The Financial Stability Board (FSB) published a progress report on the principles and standards for sound compensation practices in financial institutions.

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The report examined how compensation practices have evolved since the principles and standards were first published in 2009.

The report confirmed that all FSB jurisdictions had implemented the principles and standards for sound compensation. Most banks have put in place practices and procedures to reduce the potential for inappropriate risk-taking, but further work is required to validate that practices and procedures operate effectively.

The report also found that boards appear more active and engaged with oversight of compensation processes. Further, compensation arrangements now have longer time horizons and include mechanisms that better align them with effective risk management practices.

The report said the challenge going forward is developing frameworks for assessing the effectiveness of compensation policies and practices in balancing risk and reward. Supervisors will need to ensure that compensation remains aligned with prudent risk-taking, and reflects risks and vulnerabilities as they emerge.

This is the FSB’s sixth progress report on the implementation of the principles and standards.

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Measure seeks to expand credit access

A bipartisan group of senators recently introduced a bill designed to expand credit access opportunities for Americans.© Shutterstock Sens. Angus King (I-Maine), Joe Manchin (D-WV), Tim Scott (R-SC), Doug Jones (D-AL), Mike Rounds (R-SD), Jon Tester (D-MT) and Tom Cotton (R-AR) said the Credit Access and Inclusion Act of 2019 addresses circumstances in which Americans […]

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A bipartisan group of senators recently introduced a bill designed to expand credit access opportunities for Americans.

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Sens. Angus King (I-Maine), Joe Manchin (D-WV), Tim Scott (R-SC), Doug Jones (D-AL), Mike Rounds (R-SD), Jon Tester (D-MT) and Tom Cotton (R-AR) said the Credit Access and Inclusion Act of 2019 addresses circumstances in which Americans
do not have a history of traditional loan payments, such as student loans, mortgages, and car loans.

“Oftentimes, Americans who struggle with access to credit are able to pay their bills – but the recurring bills they pay are not included in the credit rating process,” King said. “Maine people who pay their phone and utility bills on time every month should be able to point to these bills as an example of credit because these are the major expenses they incur every month. This bill is about giving people the chance to establish themselves and open up new avenues to success – it doesn’t get more common sense than that.”

In April, King wrote a letter challenging the IRS to refocus its limited resources away from disproportionately auditing lower-income households who utilize the Earned Income Tax Credit (EITC) and co-sponsored the Working Families Tax Relief Act, which expands the EITC and Childcare Tax Credit (CTC).

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House advances IRS reform bill

The U.S. House of Representatives advanced last week the Taxpayer First Act, which proposes several changes to the Internal Revenue Service.© Shutterstock The bill would establish an independent office of appeals within the IRS and require the IRS to redesign the structure of the agency to improve efficiency, modernize technology systems, enhance cybersecurity, and better […]

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The U.S. House of Representatives advanced last week the Taxpayer First Act, which proposes several changes to the Internal Revenue Service.

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The bill would establish an independent office of appeals within the IRS and require the IRS to redesign the structure of the agency to improve efficiency, modernize technology systems, enhance cybersecurity, and better meet taxpayer needs.

The bill was introduced by Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR).

“This bipartisan, bicameral bill represents years of hard work and consensus building. It’s a big first step toward strengthening taxpayer protections and turning the IRS into the customer service organization it ought to be,” Grassley said. “I look forward to President Trump signing it into law so the IRS can begin implementing long-overdue reforms that will put taxpayers first.”

The legislation also includes several provisions to protect taxpayers from tax ID theft and improve taxpayer interaction with the IRS should they become a victim of this crime. It expands to all taxpayers an IRS program that currently only allows victims of tax ID theft to obtain a personalized PIN that better secures their identity. Further, it improves the IRS whistleblower program by authorizing the IRS to communicate with whistleblowers during the processing of their claims, while also protecting taxpayer privacy and extending anti-retaliation provisions to IRS whistleblowers. It also modifies the private debt collection program to ensure lower-income Americans are not targeted.

The bill already advanced through the Senate and now goes to President Donald Trump to be signed into law.

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Bill targets corporate board diversity

Rep. Carolyn B. Maloney (D-NY), chair of the House Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, introduced legislation designed to ensure investors and the public have information regarding the gender, racial, and ethnic diversity of corporate boards.© Shutterstock The Diversity in Corporate Leadership Act of 2019 requires public companies to […]

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Rep. Carolyn B. Maloney (D-NY), chair of the House Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, introduced legislation designed to ensure investors and the public have information regarding the gender, racial, and ethnic diversity of corporate boards.

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The Diversity in Corporate Leadership Act of 2019 requires public companies to disclose the gender, racial, and ethnic composition of their boards of directors every year in their proxy statements sent to shareholders and investors.

“I strongly believe that by requiring companies to take a real look at the gender, racial and ethnic makeup of their boards, we will create incentives and inspire change so that these boards better resemble the American public at large,” Maloney said. “By disclosing this information to investors, we are also empowering shareholders to support companies that embody their ideals and pull investment from those that don’t.”

Maloney said increased diversity also makes financial sense in addition to making moral and common sense.

“Studies have repeatedly found that companies with more diverse leadership are better positioned to succeed,” she said. “Why wouldn’t companies want to show off that they’re making smart financial decisions by moving towards more diversity and equality on their boards?”

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Senators urge CFPB not to reduce reporting requirements for HMDA

A coalition of U.S. senators recently demanded that the Consumer Financial Protection Bureau (CFPB) rescind its proposal to reduce reporting requirements under the Home Mortgage Disclosure Act (HMDA). © Shutterstock HMDA requires financial institutions to report and publicly disclose mortgage data, which is used by Federal regulators, local governments, and advocates to ensure that all […]

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A coalition of U.S. senators recently demanded that the Consumer Financial Protection Bureau (CFPB) rescind its proposal to reduce reporting requirements under the Home Mortgage Disclosure Act (HMDA).

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HMDA requires financial institutions to report and publicly disclose mortgage data, which is used by Federal regulators, local governments, and advocates to ensure that all markets have access to mortgage credit and monitor compliance with fair lending laws. However, a proposal to further reduce HMDA data collection would undermine fair lending enforcement and monitoring at the national, local, and institutional level, the senators stated.

“HMDA regulations finalized in October 2015 exempted 22 percent of depositories that were required to report HMDA data prior to the 2015 rulemaking, which resulted in the loss of significant data in certain census tracts,” the senators wrote to CFPB Director Kathy Kraninger. “The latest proposal would reduce data collection beyond these already reduced levels. This would have a disproportionate impact on communities served by smaller lenders, including rural areas.”

The letter was signed by Sen. Sherrod Brown (D-OH), Robert Menendez (D-NJ), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Catherine Cortez Masto (D-NV), Tina Smith (D-MN), Tammy Duckworth (D-IL), Kamala Harris (D-CA), Ed Markey (D-MA), Richard Blumenthal (D-CT), Tammy Baldwin (D-WI), Amy Klobuchar (D-MN), Cory Booker (D-NJ), Dick Durbin (D-IL), Ron Wyden (D-OR), Kirsten Gillibrand (D-NY), Patty Murray (D-WA), Mazie Hirono (D-HI), and Brian Schatz (D-HI).

“We are extremely concerned that the Consumer Financial Protection Bureau has once again put the interests the financial industry above those of the consumers it is charged to protect. We urge you to immediately rescind all proposed changes in reporting thresholds for closed-end and open-end mortgage loans,” the senators added.

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