Compliance May 27, 2011

Lifetime Income Options Scheduled for Review by IRS

Proposed regulations for lifetime income options are under review at the Internal Revenue Service.
Reported by

In its response to President Obama’s January 18 Executive Order on ways government agencies can reduce the burden associated with regulations, the Treasury Department said it is reviewing certain regulations to determine whether any modifications could better achieve the objective of promoting retirement security. This initiative is expected to include projects that would facilitate the delivery of lifetime income in qualified plans and, to some extent, IRAs, and would reduce administrative burdens for retirement plan sponsors that would like to offer retirement income options in their plans.  

Within its plan “designed to create a defined method and schedule for identifying certain significant rules that are obsolete, unnecessary, excessively burdensome, or ineffective,” the Department also listed final regulations that would provide relief to employers facing financial difficulty from certain requirements under the existing regulations on safe harbor contributions to section 401(k) and (m) plans as scheduled for review in the next two years. This is one item identified by commenters responding to the Treasury Department’s Request for Information pertaining to the President’s executive order (see “ASPPA Recommends Streamlined Participant Communications“). The regulations would provide new flexibility to employers sponsoring certain safe harbor 401(k) plans by allowing them to respond to changes in their financial health by suspending required contributions.    

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The Department outlined a plan for “creating a strong, ongoing culture of retrospective analysis.” As part of its plan, on an annual basis, members of the public will be provided with an opportunity to suggest to each bureau of the Department the specific regulations or other guidance that should be updated or amended as part of a targeted revision. In addition, every year, each bureau will conduct a retrospective review of 10% of its regulations. This ten percent review will continue on an annual basis in order for all Treasury regulations to be reviewed at least every ten years.  

The Department’s plan is here.
The Markets May 27, 2011

Foundations, Charities Returns Remain in Double Digits

Investment returns were in the range of 12% in FY2010 – the second consecutive year of double-digit returns and a welcome offset to the 26% portfolio decline experienced by these organizations in FY2008.
Reported by

The average FY2010 total net return earned by the 175 independent/private foundations and community foundations participating in the 2011 Commonfund Benchmarks Study of Foundations was 12.5% (net of fees), compared with 20.9% in FY2009. Meanwhile, the 69 operating charities – comprising cultural, religious and social service institutions – participating in the 2011 Commonfund Benchmarks Study of Operating Charities realized an average net return on investment funds of 11.6% compared with 21.5% in FY2009.  

The 2010 results were the fourth highest in the nine years that the Foundations Study has been conducted and the third highest in the seven years that the Operating Charities Study has been produced. Returns and all other data in the Studies were for calendar 2010 (January 1, 2010 to December 31, 2010).  

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Both independent/private and community foundations returned an average of 12.5%. Domestic equities provided the strongest return, an average of 17.7% for all Study participants. International equities followed, generating a return of 14.5%.  

After that, broad asset class returns were: alternative strategies, 10.6%; fixed income, 8.1%; and short-term securities/cash/other, 9.2%. Within alternative strategies, energy and natural resources, commodities and managed futures provided the highest return, a gain of 22.1%. This was followed by a 15% return from distressed debt; 11.3% from private equity; 9.4% from venture capital and 9.1% from marketable alternative strategies. The only negative return, -2.5%, came from private equity real estate (non-campus).  

At December 31, 20010, participating foundations’ asset allocations were: 

  • Domestic equities: 26%, 
  • Fixed income: 13%, 
  • International equities: 16%, 
  • Alternative strategies: 38%, and 
  • Short-term securities/cash/other: 7%. 

Cultural organizations’ returns averaged 11.5%, religious institutions averaged 11.8% and social service organizations averaged 11%. Domestic equities produced the best return for Study participants, an average of 17.3%, followed by international equities at an average of 12.7%.   

Alternative strategies produced an average return of 8.6%; fixed income, 7.6%; and short-term securities/cash/other, 7.9%. Within the broad alternatives category, energy and natural resources, commodities and managed futures generated the best return, 23.6%. This was followed by an 11.5% return for distressed debt and 11.1% for venture capital. The only negative return, -0.2%, was generated by equity real estate (non-campus).  

At December 31, 2010, participating institutions’ asset allocations were: 

  • Domestic equities: 24%, 
  • Fixed income: 20%, 
  • International equities: 19%, 
  • Alternative strategies: 28%, and 
  • Short-term securities/cash/other: 9%. 
For more information, visit http://www.commonfund.org.

«