Compliance December 9, 2016

Progressive Proposal Offers One Take on Tax Reform

“Rather than taxing income, the Progressive Consumption Tax would generate reasonable revenue by taxing the purchase of goods and services,” suggests Senator Ben Cardin. 
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U.S. Senator Ben Cardin (D-Maryland), a member of the Senate Finance Committee, has reintroduced legislation that would eliminate income tax liability for most Americans and reduce corporate income tax rate to one of the lowest among industrialized nations.

While Cardin’s party remains in the minority in Congress, the senator says his proposal is structured in a way that can agree with both Democrats and Republicans. And it better be, because Cardin’s bill, known as “SB 3529” or the “Progressive Consumption Tax Act (PCTA),” is quite ambitious. It would fundamentally change the way the federal government raises revenue.

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“Rather than taxing income, the Progressive Consumption Tax (PCT) generates reasonable revenue by taxing the purchase of goods and services,” he explains. “Designed to be at least as progressive as today’s tax system, low- and middle-income families would be protected from unfair consumption taxation through a rebate, and important benefits would be retained in a much simpler income tax code.”

Cardin adds that a “revenue circuit breaker,” tied to gross domestic product (GDP), is built into the proposed system to “set reasonable limits on the amount of income generated by the new progressive consumption tax.”

According to Cardin, since the original introduction of the Progressive Consumption Tax Act in 2014, many policymakers, including in Congress, have become increasingly interested in moving to a border-adjustable consumption tax base.

“Our tax code should be fair for families and employers. It should help make American-based businesses more competitive and our nation’s economy stronger. And it should provide a way to responsibly and reliably collect reasonable revenues. Our current, 1980s-style tax code simply cannot accomplish these goals,” he argues.

According to Cardin, the PCT is “not simply an add-on tax.” The revenues generated by the new system would be used to eliminate an income tax liability for most American households.  The proposal’s income tax exemptions, called “family allowances,” are set at $100,000 for joint filers, $50,000 for single filers, and $75,000 for head of household filers.  The family allowances are indexed for inflation.

“Those who do still have an income tax liability would see a much simplified income tax with their marginal rates reduced—the top marginal individual income tax rate, applying to taxable income over $500,000 for joint filers, would be 28% versus the current top marginal rate (applying to taxable income over approximately $450,000 for joint filers) of 39.6%,” Cardin suggests. “Four important tax benefits remain: (1) the charitable contribution deduction; (2) the state and local tax deduction; (3) health and retirement benefits; (4) the mortgage interest deduction.”

In any case, the progress tax proposal comes at a time of deep uncertainty when it comes to the short-term prospects for tax reform. While Republicans technically control both the White House and Congress, it remains to be seen how the unconventional political style of President-Elect Donald Trump will impact the actual processes of governing according to a traditional Republican agenda. 

The text of SB 3529 can be found here.  

Deals & People December 9, 2016

Retirement Industry People Moves

Community Bank Systems to Acquire Northeast Retirement Services; IFM Names Development Director; PGIM Names Head of Research for Institutional Advisory Services; and more.
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Community Bank Systems to Acquire Northeast Retirement Services

Community Bank System announced that it has entered into an agreement to acquire Northeast Retirement Services (NRS). Upon the closing of the transaction, NRS will become a subsidiary of Benefit Plans Administrative Services (BPAS) a wholly-owned subsidiary of Community Bank System.

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NRS is focused on providing institutional transfer agency, master recordkeeping services, custom target-date fund administration, trust product administration and customized reporting services to institutional clients. Its wholly-owned subsidiary, Global Trust Company (GTC) is a non-depository trust company which provides fiduciary services for collective investment trusts and other products.

“We are very excited to be partnering with NRS, a respected and growing provider of customized institutional trust services,” says Community Bank System President and CEO Mark E. Tryniski. “The transaction will strengthen and complement our existing BPAS businesses, and represents an attractive and balanced utilization of our strong currency and existing surplus capital … We are also pleased that Thomas Forese, President and Chief Executive Officer of NRS, and the entirety of the current leadership team will continue in their capacities with NRS after the combination, as an operating subsidiary of BPAS.”

Thomas Forese, president and CEO of NRS adds, “Our Board of Directors and senior management team, in considering various strategic alternatives, placed great value on the compatibility of Community Bank System’s culture, employees, strategy and leadership with those of NRS.” 

The deal’s cash and stock transaction is valued at approximately $140 million and is expected to close in the first quarter of 2017, subject to certain shareholder and regulatory approvals. The transaction has been unanimously approved by the boards of directors of both companies.

NEXT: IFM Names Development Director

IFM Names Development Director

IFM Investors has appointed Paul Burraston as business development director for North America. He will be responsible for developing new business opportunities and managing significant relationships for all asset classes including infrastructure, debt investments, listed equities and private capital.

Burraston will report to Brian Clarke, head of Global Relationship Group.

“We welcome the addition of a seasoned veteran like Paul to oversee our work in serving our valued investment partners,” Clarke says. “We are particularly pleased to now have a full-time presence on the West Coast.­”

Burraston brings more than 20 years of industry and financial services experience to the team. He was most recently director of asset management at Credit Suisse Group, where he managed West Coast institutional distribution for CSAM Alternatives. He first joined the firm in 2004 as VP of investment banking, prime services. Prior to that, he worked as VP of institutional coverage for Metropolitan West Securities. He held roles in client services management and global custody and securities lending for Citigroup between 1995 and 1999.

This appointment marks another addition to IFM Investor’s North American Business Development team. In September, the company named Joe Tremblay and Dan Kim as business development directors with the team.

Burraston holds bachelor’s degrees in commerce and economics from the University of KwaZulu-Natal in South Africa.

NEXT: PGIM Names Head of Research for Institutional Advisory Services

PGIM Names Head of Research for Institutional Advisory Services

Bruce Phelps has joined PGIM as a managing director and head of research for its Institutional Advisory Services group. PGIM is the global investment management businesses of Prudential Financial.

PGIM’s Institutional Advisory & Services group advises on a variety of asset allocation, portfolio construction, and risk management topics to the firm’s institutional clients and global prospects. Phelps will report to Karen McQuiston, who was named head of the Institutional Advisory Services group earlier this year.

“PGIM’s advisory platform is a strategic priority as we look to bring our institutional clients differentiated insights that leverage the full breadth of PGIM’s expertise across our multiple manager boutiques,” says McQuiston. “Bruce brings exceptionally deep analytic expertise and a global institutional perspective, which are critical to address clients’ pressing cross-asset challenges.”

Phelps was most recently a managing director in the Quantitative Portfolio Strategy Group at Barclays Capital Research. Previously, he was a senior portfolio manager and co-head of fixed income at Ark Asset Management. Phelps was also a senior economist for the Chicago Board of Trade. He started his investment career as a credit analyst and foreign exchange trader for Wells Fargo Bank. Phelps received an A.B. in economics from Stanford University and a Ph.D. in economics from Yale University. He is a CFA charter holder.

NEXT: Mercer Appoints New Orleans Office Business Leader

Alliance Benefit Group Financial Services Adopts New Identity

Alliance Benefit Group Financial Services has reimaged itself as Intellicents. The firm will focus on insurance consulting, retirement plan design, fiduciary investment consulting, and personal wealth management services.

“Our mission of financial confidence for the American worker continues to be the heartbeat of our organization,” says Brad Arends, CEO. “Our aim is that this new identity will only heighten our ability to drive home our mission, bringing to you the most progressive ideas and technology.”

Intellicents President Grant Arends adds, “We’ve always prided ourselves in being pioneers within the investment management and employee benefits community. Our firm is cutting edge, combining the newest and best ideas that are supported by most innovative technology. The name intellicents speaks perfectly to this legacy and our mission as a company.”

The decision to fully rebrand came amidst the sale of the recordkeeping and administration division, Alliance Benefit Group North Central States, to Alerus Financial, at the beginning of 2016. The Intellicents brand went operational on December 1.

NEXT: Delaware Investments Appoints Head of Equities

Delaware Investments Appoints Head of Equities

Macquarie Group’s Delaware Investments has appointed John Leonard as head of equities, effective March 3, 2017. He will provide strategic oversight of the firm’s nine U.S.-based equity investment teams.

Leonard will report to Shawn Lytle, president of Delaware Investments, and will serve as a member of the firm's senior leadership team. In addition, he will become part of the global management committee led by Ben Bruck, global head of Macquarie Investment Management and chairman of Delaware Investments.

Leonard will also serve as global chair of equities for Macquarie Investment Management. “In this chair position, we are looking to John to find ways to improve how we support all the equity teams in our asset management platform,” says Bruck. “John embraces our multiboutique approach to investing, and we are confident he will help us maintain best-practice support to our teams, as well as selectively add to our equities capabilities globally.”

Leonard joins Delaware Investments from UBS Asset Management, where he spent 18 years in several roles including global head of equities.

“Our multiboutique structure allows us to offer diverse equity styles that are best suited for clients’ varying investment needs,” says Lytle. “John has a track record of investment excellence as both a portfolio manager and as a global leader that puts him in an elite class of investors. His extensive experience leading equity teams with different investment styles is a strong fit for our culture and focus on high-conviction strategies.”

Lytle will continue as interim head of equities until March 3, 2017.

NEXT: Global Retirement Partners Welcomes Alpha Pension Group 

Global Retirement Partners Welcomes Alpha Pension Group

Alpha Pension Group, a fiduciary adviser to ERISA retirement plans based out of Lexington, Massachusetts, has joined forces with Global Retirement Partners (GRP).

Alpha services over 350 retirement plan clients nationally.

With $2.3B assets under advisement, Alpha is known for its strategic diagnostic review process of current programs to measure the effectiveness of design, investment integrity and cost structure. Alpha’s services allow for independence and objectivity.

GRP’s partnership with Alpha was founded on a shared goal of providing small, medium to large companies with flexible, robust plan options that benefit participants.

“We are honored to partner with Alpha Pension Group and its truly elite group of advisers,” adds Geoff White, managing partner at Global Retirement Partners. “Alpha’s unique perspectives and expertise combined with their leadership and visionary thinking are what makes them one of the most successful retirement advisory firms nationally.”

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