Barclays Lists First ETFs to Launch on NASDAQ ETF Market

The Nasdaq Stock Market, Inc. (NASDAQ) has listed five new exchange-traded funds (ETFs) sponsored by Barclays Global Investors, N.A. on its ETF Market.

NASDAQ is the most liquid U.S. market for ETFs, capturing 37.9% of all U.S. ETF volume in October, a record high for the second consecutive month, an announcement said. The NASDAQ ETF Market is designed specifically to support ETFs and Index Linked Notes (ILNs) during their critical period of incubation. The Barclays ETFs are the first new ETFs to list on the NASDAQ ETF Market since its October launch.

Effective Friday, November 16, the following Barclays-sponsored ETFs listed on NASDAQ:

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  • iShares FTSE Developed Small Cap ex-North America Index Fund (IFSM),
  • iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL),
  • iShares FTSE EPRA/NAREIT Asia Index Fund (IFAS),
  • iShares FTSE EPRA/NAREIT North America Index Fund (IFNA), and
  • iShares FTSE EPRA/NAREIT Europe Index Fund (IFEU).

“These iShares ETFs will provide investors with instant, diversified exposure to a range of investment opportunities in a NASDAQ environment characterized by deep liquidity, speed, and unparalleled transparency,” said NASDAQ President and CEO Robert Greifeld, in the announcement.

The focus of The NASDAQ ETF Market is the Designated Liquidity Provider, a Market Maker who has been selected to maintain liquidity in qualified ETFs. Designated Liquidity Providers receive price incentives to support ETFs during their period of initial listing, when ETFs need to develop more active trading.

Designated Liquidity Providers are selected by NASDAQ based on factors including experience with making markets in ETFs and ILNs, adequacy of capital, willingness to promote NASDAQ as a marketplace, issuer preference, operational capacity, support personnel, and history of adherence to NASDAQ rules and securities laws.

More information about BGI’s iShares ETFs is at http://www.ishares.com.

IRS Publishes Sample Notice for Auto Enrollment Arrangements

The IRS has posted a sample notice to be used to notify participants about their rights and obligations under automatic enrollment and automatic contribution arrangements.

The sample notice can be used for plan sponsors looking to satisfying the requirements of the IRS’s proposed regulations for qualified automatic contribution arrangements (QACAs) and eligible automatic contribution arrangements (EACAs). The sample notice applies a hypothetical QACA that permits EACA withdrawals that satisfies notice requirements under Code sections 401(k)(13) and 414(w).

An IRS announcement said the DOL has indicated that use of this sample notice also satisfies the notice requirements under Employee Retirement Income Security Act (ERISA) sections 404(c)(5) and 514(e)(3) and the Department of Labor’s (DoL) default investment regulation for a hypothetical plan for which a fiduciary may wish to obtain relief. A plan sponsor will need to add to or subtract from the sample notice to the extent a plan’s form and operations differ from the hypothetical QACA described in the sample notice, to accurately reflect the provisions of the plan.

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The plan sponsor will also need to provide details about a plan’s QDIA, as directed in italicized notes to plan sponsors in the sample notice, and will need to fill in any blanks in the sample notice, the announcement said.

The hypothetical QACA described in the sample notice includes the following characteristics:

  • The QACA is effective January 1, 2008. It is part of a calendar-year defined contribution plan that, before January 1, 2008, provided only for elective contributions under Code section 401(k) (but not for automatic elective contributions.
  • The QACA provides for automatic elective contributions at the minimum level permitted under Code section 401(k)(13), and does not restrict employees’ ability to elect other elective contribution levels, except to the extent required under other Code provisions (e.g., Code section 402(g)). The plan does not provide for designated Roth contributions described in Code section 402A.
  • The QACA provides for matching contributions for all eligible participants at the minimum level permitted under Code section 401(k)(13), and does not provide for additional employer matching or nonelective contributions. The matching contributions are contributed to the plan on a payroll-by-payroll basis (based on the same definition of eligible compensation used to make elective contributions), and are subject to the minimum vesting schedule described in Code section 401(k)(13)(D)(iii)(I) (that is, full vesting upon completion of 2 years of service).
  • Employees are eligible to participate in the plan on their date of hire.
  • Participants make elective contribution and investment elections under the plan by returning specified election forms to the plan administrator, and may change their elections at any time without restriction.
  • Affirmative contribution elections under the plan, whether made before or after the effective date of the QACA, continue in force until changed by the participant.
  • The plan permits participants to withdraw automatic elective contributions during a 90-day window period described in Code section 414(w), and treats a withdrawal request as an election to not make further elective contributions to the plan (absent a contrary affirmative election).
  • Plan participants may affirmatively choose among various available investment funds. Automatic elective contributions and related employer matching contributions are, absent contrary affirmative election, invested in a QDIA.
  • The plan permits distributions and loans to the extent distributions and loans are permitted under Code sections 401(k)(2)(B) and 72(p)(2). Hardship distributions are permitted to the extent the deemed hardship requirements described in Treas. Reg. § 1.401(k)-1(d)(3)(iii)(B) and (iv)(E) are satisfied.
  • The plan administrator has provided summary plan descriptions to participants that accurately describe eligible compensation, contribution limits, service crediting rules, investment election procedures, the investment funds available under the plan, and hardship withdrawal and loan rules.

The IRS said plan sponsors may also find the sample notice to be helpful in drafting an employee explanation for an automatic contribution arrangement that is neither a QACA nor an EACA.

The IRS Web site is www.irs.gov and the announcement is here.

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