Transamerica Sheds Light on Value of Saver’s Credit

Retirement plan advisers can assist plan sponsors in boosting awareness of the Saver’s Credit.

Transamerica Center for Retirement Studies (TCRS) research shows that only 25% of American workers with annual household incomes of less than $50,000 are aware of the Saver’s Credit, also known as the Retirement Savings Contributions Credit.

TCRS President Catherine Collinson explains to PLANADVISER that the Saver’s Credit is a tax credit available to eligible low- to moderate-income tax filers who save for retirement through a qualified 401(k) or 403(b) plan, IRA, or myRA.

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“Plan sponsors can play an important role in raising awareness about the Saver’s Credit by incorporating it into their communications campaigns to their employees,” Collinson says. “Examples include: posting information on their websites, sending informative emails, and hanging posters in break rooms and bulletin boards.”

Transamerica Center for Retirement Studies has dedicated a section of its website to the Saver’s Credit that includes materials that employers can use. A fact sheet is available that explains the Saver’s Credit, including eligibility requirements and how to claim it, and is available in both English and Spanish. TCRS also has a sample newsletter article and infographic/posters available for employer use that can be downloaded from the website.

Workers may qualify for the Saver’s Credit of up to $1,000 ($2,000 if married filing jointly) for contributions made to a qualified retirement plan, IRA, or myRA. And they have until April 18, 2016, to make contributions to an IRA or myRA for 2015. Unlike a tax deduction, a credit is a dollar-for-dollar reduction of the tax filer’s federal income tax liability. This credit can reduce the amount of tax owed or increase a refund for taxes already paid.

For details about eligibility for the credit, refer to this fact sheet.

MassMutual Sued Over Stable Value Fund Fees

The lawsuit is filed as a class action on behalf of the Arthur J. Gallagher & Company 401(k) plan and all other similarly situated plans.

A 401(k) plan participant has filed suit against Massachusetts Mutual Life Insurance Company, alleging the firm collects tens of millions of dollars annually in undisclosed compensation due to the way it values the crediting rate for stable value funds offered to 401(a) and 403(b) retirement plans.

According to the complaint, MassMutual markets a number of stable value funds, or SVAs, to retirement plans, each of which utilizes group annuity contracts issued by MassMutual. The contracts periodically credit a certain amount of income to retirement plans and the participants in such plans who invest their retirement plan accounts in SVAs. This income, generally expressed as a percentage of the invested capital, is determined pursuant to a crediting rate. The crediting rate varies in that in each crediting period, MassMutual sets a crediting rate for all money added to its SVAs in that period.

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The lawsuit says MassMutual has the sole and exclusive discretion to determine the crediting rate for a given crediting period. MassMutual sets the crediting rate well below its internal rate of return (IRR) on the invested capital it holds in the SVAs, creating a substantial profit for itself, according to the complaint.

The lawsuit also alleges that MassMutual does not disclose to its retirement plan clients and their respective participants the difference between its IRR and the crediting rate, and that it collects tens of millions of dollars annually in undisclosed compensation from the retirement plans and participants in violation of the Employee Retirement Income Security Act.

In a statement to PLANADVISER, MassMutual said: “MassMutual Retirement Services has a long history of delivering exceptional products and service to retirement plans and their participants.  MassMutual regards the Bishop-Bristol complaint as meritless and will vigorously defend against it.”

The complaint is here.

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