Products November 8, 2018

Investment Product and Service Launches

The Standard Grows Stable Value Fund Options, and First Trust Creates Dow Jones International Internet ETF.

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Standard Insurance Company (The Standard) has expanded its lineup of stable value funds, offering plan sponsors and advisers flexibility and a range of yields and liquidity options.

The Standard’s Guaranteed Rate Stable Value Fund, Capital Preservation Income Fund and Guaranteed Fixed Interest Fund are now available in addition to the existing Stable Asset Fund. Most of the products are approved for qualified retirement plans, including 401(k), 403(b) and defined benefit (DB) plans. Most of the products are also available for nonqualified plans.

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Fourth-quarter 2018 guaranteed annual net crediting rates are 3.15% for the Guaranteed Fixed Interest Fund; 2.95% for the Capital Preservation Income Fund (not available for 403(b), 409A or 457(f) plans); 2.65% for the Standard Stable Asset Fund (also available to health savings accounts (HSAs) and health reimbursement accounts (HRAs)); and 2% for the Guaranteed Rate Stable Value Fund.

“The Standard’s new stable value funds offer a compelling alternative to money market funds and cash equivalent options, as they fully guarantee principal and interest, and provide daily liquidity to participants at book value,” says Chris Conklin, vice president of Individual Annuities and Asset Management Group Sales at The Standard. “By offering a broader range of solutions, available for both large and small plans, we are better able to meet the needs and preferences of plan sponsors, participants and the advisers who serve them.”

“A key benefit of the low-cost funds is that they easily trade through the National Securities Clearing Corporation and are available through major recordkeeping and trading platforms,” adds Conklin. “NSCC trading capabilities provide daily price values and daily liquidity for plan participants.”

First Trust Creates Dow Jones International Internet ETF

First Trust has launched a new exchange-traded fund (ETF), the First Trust Dow Jones International Internet ETF, which began trading on November 6.

The fund seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the Dow Jones International Internet Index. The index is a float-adjusted market capitalization weighted index designed to measure the performance of the 40 largest and most actively traded non-U.S. international companies that generate a majority of their sales and revenue from internet-based activities.

The fund provides an easy way to gain exposure to international companies that may benefit from rapid technological changes as more people and devices across the globe connect to the Internet.

“The Internet continues to be one of the most disruptive forces in the global economy, fueling growth by increasing efficiency in many different industries,” says Ryan Issakainen, CFA, senior vice president, exchange-traded fund strategist at First Trust. “Just as the First Trust Dow Jones Internet Index Fund (FDN) provides exposure to U.S. e-commerce and Internet services stocks, this new ETF does so for international developed and emerging markets, where we see potential for robust revenue growth.”

Compliance November 8, 2018

DOL Asks for Input on Retirement Plan Auto-Portability

The request comes in a notice of proposed exemption from prohibited transactions for Retirement Clearinghouse's auto-portability solution.

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The Department of Labor (DOL) has issued a notice of a proposed exemption from certain prohibited transaction restrictions of the Employee Retirement Income Security Act (ERISA) to Retirement Clearinghouse (RCH) for use of its auto-portability solution.

RCH has developed an Auto-Portability Program that is designed to help employees who may have multiple job changes over their careers consolidate small accounts held in prior employers’ individual account plans and rollover IRAs into their new employers’ individual accounts or 401(k) plans. The notice says the objective of the RCH program is to improve overall asset allocation, eliminate duplicative fees for small retirement saving accounts, and reduce leakage of retirement savings from the tax-deferred retirement saving system. RCH uses a ‘‘locate, match, and transfer’’ technology that performs periodic queries of cooperating recordkeepers’ systems to ascertain if the IRA owner has become a participant in an individual account plan through re-employment.

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The DOL says Section 4975(c)(1)(D) of the Internal Revenue Code prohibits a fiduciary from causing a plan to engage in a transaction, if he or she knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party in interest of any assets of a plan. Section 4975(c)(1)(E) of the Code prohibits a fiduciary with respect to a plan from dealing with the assets of the plan in its own interest or for its own account. Without an exemption, RCH’s receipt of an additional fee in connection with transferring assets from a default IRA to an individual’s new plan account, without the individual’s affirmative consent, violates these Code sections.

However, the DOL says it has tentatively determined that the proposed exemption is protective of affected plan participants. “The RCH program, service providers, and associated fees are fully disclosed and approved by independent plan fiduciaries. All fees and compensation associated with the program are fully subject to the protections of section 408(b)(2) of ERISA and section 4975(d)(2) of the Code. In addition, RCH represents that it has no financial incentives that would lead a reasonable person to believe that it is steering accounts to custodians, service providers, or investment providers based on its own financial interests, as opposed to the interests of the plan participants and IRA owners,” the notice says.

Results from the firm’s product use by one plan sponsor found that upon consolidation, workers’ median plan account balance increased by 46% and the combined future value of their preserved savings was more than $3 million at normal retirement age.

The DOL is inviting public comment on the proposed exemption. “The Department welcomes innovation in the area of retirement asset portability, and encourages additional proposals,” it said in a press release.

Last year, in a letter to DOL Secretary R. Alexander Acosta, U.S. Senator Tim Scott, R-South Carolina, and other lawmakers requested that the DOL issue an advisory opinion or other appropriate guidance regarding application of ERISA to auto-portability of retirement savings.

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