Compliance September 16, 2010

Roth 401(k) Provision in Broader Senate Bill

U.S. Senators on Thursday approved a provision allowing 401(k)s to handle Roth conversions within the plan rather than force participants to roll converted assets into a Roth IRA.

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Business Insurance reported that the Roth provision, contained in the Small Business Jobs and Credit Act of 2010 (HR 5297), was approved on a 61 to 38 vote.

According to a statement released after the vote by the American Society of Pension Professionals & Actuaries (ASPPA), the provision permits participants to take advantage of Roth conversion rules without forfeiting the protection and advantages of an employer-sponsored retirement program.

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ASPPA pointed out that under current law, the Roth conversion can only be accomplished by moving the assets out of the plan with income tax on the transferred amount typically paid in the year of conversion. A special rule allows tax on amounts converted in 2010 to be deferred until 2011 and 2012.

Once rolled over into the Roth 401(k) plan, the money would earn tax-free investment income and participants would not be taxed when they receive a distribution.

“ASPPA has worked closely with several members on the Roth conversion provision and applaud the Senate for recognizing how this key change will preserve retirement savings,” said ASPPA Director/CEO Brian H. Graff, in the statement. “We urge the House to pass the Small Business Jobs and Credit Act of 2010.”

 

 

 

Products September 16, 2010

J.P. Morgan Enhances Money Market Fund Regulatory Reporting Services

 

J.P. Morgan has enhanced its regulatory reporting services for money market funds to assist asset managers in complying with the Securities and Exchange Commission(SEC) revised Rule 2a-7 requirements.

 

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The firm said ithas enhanced its accounting and compliance monitoring services to comply with new money market rules for higher credit quality, improved liquidity, and shorter maturity limits, including the calculation of the new weighted average life.  J.P. Morgan is also prepared to help advisers meet enhanced disclosures of fund level, class level,and security level data required in the new monthly public Web site posting and Form N-MFP filing, according to a press release.    

The revised SEC Rule 2a-7 also requires funds to establish procedures for stress testing and periodic testing of a funds ability to maintain a stable NAV.  J.P. Morgan’s enhanced services for money market funds features a suite of stress tests, including: an increase in short-term interest rates; an increase in shareholder redemptions; a downgrade of or default on portfolio securities; a widening or narrowing of spreads between yields on an appropriate benchmark selected by the fund for overnight interest rates and commercial paper and other types of securities held by the fund; and a combination of events. 

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The firm anticipates that it will offer additional stress test scenarios that can provide moreinsight into how adverse market conditions can affect money market fund performance.

 

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