Compliance February 4, 2007

NQDC Provision Passes Senate

U.S. Senators may have overwhelmingly approved a bill that includes a provision limiting non-qualified deferred compensation programs (NQDC), but the NQDC provision may still be changed in a later legislative conference committee, according to one lawmaker.
Reported by

According to news reports regarding the 94 to 3 approval of the Senate version of H.R. 2, the NQDC limit as it now stands would apply to too many executives and should be restricted to only top officials, Senator Ron Wyden (D-Oregon) told reporters in Washington.

Wyden suggested House-Senate negotiators could agree to scaling back the existing provisions limiting executives’ compensation deferrals to $1 million per year and making any deferred comp over the lesser of $1 million or average taxable compensation for last five years immediately includible in income and subject to 20% additional tax as under the 409A rules.

The NQDC item was contained in a larger bill raising the federal minimum wage to $7.25 an hour from $5.15 over two years – the first such hike in early a decade.

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To attract Republican support, Senate leaders agreed to extend tax credits and expand deductions for businesses that would be hit hardest by the minimum-wage hike. Those tax breaks, worth $8.3 billion over 10 years, were coupled with provisions raising taxes – such as the NQDC provision – to pay for the tax breaks.

The Markets February 4, 2007

International Funds Top Among Strong December Flows

Stock and bond funds experienced net inflows of $39.4 billion in December, following a low net intake of $17.4 billion in November, according to data from the Financial Research Corporation (FRC).
Reported by

International/Global funds continued to be the top draw with a net inflow of $26.5 billion for the month. Corporate funds drew in a net $8.2 billion in December, while Domestic Equity funds posted $5.6 billion in net inflows. Government funds were the only asset category which saw a negative net flow for the month, decreasing $1.9 billion.

By Morningstar Category, Foreign Large Blend funds led the way taking in a net $5.4 billion, followed closely by Intermediate-Term Bond funds which took in just under that amount. Foreign Large Growth funds (net intake $4.1 billion), Diversified Emerging Markets funds ($3.6 billion), and Large Value funds ($3.6 billion) rounded out the top five.

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As in November, American Funds was the top selling fund group with a net inflow of $9.2 billion. Barclays Global Investors Funds took the second spot with net inflows of $7.9 billion, and the Vanguard Group came in third with a $4 billion net intake.

Jumping to the top of the best selling funds list was Barclays’ iShares Russell 2000 Index fund, which took in a net $2.3 billion in December. The American Funds Capital Income Builder fund followed with a $1.8 billion net inflow, and the American Funds Capital World Growth & Income fund posted a net inflow of $1.6 billion.

FRC data can be found at www.frcnet.com.

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