The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in New York is representative of a common question regarding upcoming money market reform measures. The advisor asked:
“How do the upcoming money market reform measures affect plan sponsors?”
Highlights of Discussion
- The October 2016 implementation deadline for the Securities and Exchange Commission (SEC) money market reform is still a year away, but large money market fund providers have already started to put reform-influenced lineups in place. There are a number of important changes in the SEC's money market reform measures that will impact retirement plan sponsors, such as greater disclosure on holdings, stronger diversification and new stress testing requirements. The two biggest changes from a defined contribution plan sponsor's perspective involve:
— Pricing adjustments for institutional money market funds
— The potential implementation of liquidity fees and redemption gates for institutional and retail money market funds, under certain conditions
- Plan sponsors have much to consider when making an appropriate decision with respect to their plans' capital preservation investment options, including considering alternatives to money market funds.
- Defined contribution plans can offer capital preservation options not available to individual investors —such as stable value funds, which are not affected by the SEC's money market reform measures.
- To help plan sponsors and financial advisors who assist plan sponsors in the decision-making process, Columbia Threadneedle Investments has released a white paper entitled "Navigating Pending Money Market Reform." The paper provides background information on what the reform measures are, what new definitions apply, key points to consider when evaluating whether money market funds are the right capital preservation option for a plan and why stable value products might be a viable alternative.
The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.
Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.
Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.
©2015 Columbia Management Investment Advisers, LLC. Used with permission.
