Steve Montagna Roth Revisited The NAGDCA Board conducts an annual visit to Washington D.C. to hold meetings with various regulatory agencies and offices of governmental officials. The purpose of these meetings is to present NAGDCA’s annual legislative priorities and discuss issues that may impact administration of our plans. This year’s meetings took place April 3-4, 2017. Our legislative priorities were streamlined around a..." />

Steve Montagna Roth Revisited The NAGDCA Board conducts an annual visit to Washington D.C. to hold meetings with various regulatory agencies and..." />

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NAGDCA Newsletter - The Contributor

NAGDCA accepts article submissions from all members. To submit an article for the NAGDCA Contributor, please click here.

2018 due dates for newsletter articles:

  • Winter:       January 10
  • Spring:       April 11
  • Summer:    July 11
  • Fall:           October 10
The Contributor - Spring 2017
Published on : Wednesday, April 19, 2017

Steve Montagna
Roth Revisited
The NAGDCA Board conducts an annual visit to Washington D.C. to hold meetings with various regulatory agencies and offices of governmental officials. The purpose of these meetings is to present NAGDCA’s annual legislative priorities and discuss issues that may impact administration of our plans. This year’s meetings took place April 3-4, 2017. Our legislative priorities were streamlined around a theme of asset consolidation within governmental plans, including in particular responding to the growing popularity of “Roth” retirement saving.

Some may not be familiar with how Roth has evolved as a savings option. It began with the Roth Individual Retirement Account (IRA), named after Senator William Roth from Delaware (its chief architect), which was created by Congress in 1997. The first Roth IRA contributions were permitted in 1998. Initially the Roth IRA limit was set at $2,000; that limit has increased, along with limits for Traditional IRAs, to the current $5,500 for those below age 50, and $6,500 for those age 50 or older.

According to the Investment Company Institute (ICI), as of year-end 2016, approximately 21.9 million, or one quarter, of U.S. households, held assets in Roth IRAs, compared to 32.1 million, or one third, of U.S. households holding Traditional IRAs. Total Roth IRA assets as of year-end 2016 were estimated by ICI to be approximately $660 billion, compared to $6.7 trillion in Traditional IRAs.

The ability to save Roth dollars in a defined contribution plan was established when then President Obama signed the Small Business Jobs Protection Act of 2010. The bill included provisions that, beginning January 1, 2011, allowed governmental defined contribution plans to offer a Roth contribution feature.

As more plan sponsors have incorporated this option and Roth savings have grown, certain disparities in how Roth assets are treated have revealed themselves. As a result, NAGDCA supports legislative changes to place Roth and pre-tax assets on an equal footing. NAGDCA’s proposed legislative improvements related to Roth savings include:

  • Permitting Rollovers of Roth IRAs into Defined Contribution PlansCurrent law permits traditional IRAs to be rolled into a defined contribution plan, but not Roth IRAs; NAGDCA proposes permitting Roth IRA rollovers so that participants can consolidate their Roth assets within their (typically lower cost) defined contribution accounts.
  • Elimination of Required Minimum Distribution (RMD) Rules for Roth Balance in Defined Contribution Plans - Presently contributory Roth assets in 401(k), 457 and 403(b) plans are subject to Required Minimum Distribution (RMD) rules at age 70½. Roth IRA assets, however, are not subject to RMD rules. This creates an incentive for those participants looking to avoid RMD distributions to roll their assets out of defined contribution plans and into generally higher-cost Roth IRAs. NAGDCA proposes equalizing the treatment of all Roth assets relative to the RMD rule in order to eliminate this rollover incentive.
  • Permitting Roth Assets for Purchase of Service Credit - Presently contributory Roth defined contribution assets are not permitted to be used for purchase of service credit with a defined benefit plan, while pre-tax contributory assets can be used for this purpose. NAGDCA’s proposed legislative change would place both pre-tax and Roth assets on equal footing with respect to purchase of service credit.

Should these proposed changes be enacted, our plan participants will have even greater flexibility for utilizing Roth assets to enhance their retirement readiness. The NAGDCA Board will monitor legislative developments closely and advise our members as we move forward.

In the meantime, it may be helpful for plan sponsors and industry providers to review their participant behaviors and preferences relative to Roth savings. This information may be helpful if an opportunity for legislative advancement presents itself.

Benchmarking – Perspectives in Practice
Survey responses are due May 1! All government primary members have been sent an email with the survey link and your login information. If you need to have it resent, please contact Carly Miller at

We encourage all plans, small and large, to complete the survey. For plans that responded last year, prior year data will be show upon logging in.

Plans that respond will receive complimentary access to the online benchmarking tool and will be entered into a drawing for a free membership (value $600).

Your participation helps NAGDCA build powerful trend data about DC plans!

Arthur N. Caple Scholarship
Applications for the 2017 scholarship program are currently being accepted. The deadline to apply is May 8.

The ANC Foundation, in partnership with the International Foundation for Retirement Education (InFRE), developed the criteria for the scholarship. To be considered, applicants must be enrolled as a full-time student at a university or college, be a junior or senior, be enrolled to continue university studies for the following semester, and be a U.S. citizen.

The scholarships commemorate the lifework of Arthur N. Caple, former Executive Director of the State of Maryland Supplemental Retirement Plans and NAGDCA Past President, who passed away in 2004.

For additional information about the scholarship program, please visit the ANC Foundation.

NAGDCA Leadership and Media Awards Nominations Now Being Accepted
NAGDCA Leadership Awards will recognize best in class in the following six categories:

  • Participant Education/Effective Communication

  • Plan Design & Administration 
  • National Retirement Security Week - General Campaign
  • National Retirement Security Week - Your Whole Story Campaign
  • Technology and Social Media
  • Excellence in 403(b) Plans

For further information or to nominate a government member for a NAGDCA Leadership Award, please click here.

The NAGDCA Media Award recognized a member of the media for outstanding coverage of pension and retirement issues in newspapers, magazines, newsletters, or research reports. For more information or to make a nomination, 
click here.
All award applications are due Friday, May 19, 2017.

2017 NAGDCAST Series
You won’t want to miss the upcoming Legislative Webinar on May 23 at 2 p.m. ET. This webinar will highlight NAGDCA's legislative priorities and offer a debrief from the Board's visit to Capitol Hill. Click here to register today!

NAGDCA would like to thank the sponsors of the 2017 NAGDCAST series. Without their support these events would not be able to take place. Sponsorship opportunities are available for the 2017 NAGDCAST series; bundled conference sponsorships include webcast sponsorship! If you are interested in sponsoring the 2017 NAGDCAST series, please click here or contact Carly Miller at

Executive Board Visit to The Hill
NAGDCA’s Executive Board traveled to Washington, D.C. April 3-4. They met with key officials from the Departments of the Treasury and Labor as well as majority and minority tax counsel for the House Committee on Ways and Means, majority tax counsel for the Senate Committee on Finance, and staff for Senators Cardin (D-MD) and Enzi (R-WY) and Representative Tiberi (R-OH).  The Board also met with Congressman Richard Neal (D-MA).

At the meetings, the Executive Board discussed NAGDCA’s priorities including the following:

  • Create more portability by allowing participants of 457(b), 401(k), 401(a) and 403(b) plans to elect to roll assets from Roth IRAs to these plans and by permitting non-spousal beneficiaries to roll assets to 457(b), 401(k), 401(a) and 403(b) Plans.
  • Create more equal treatment by exempting designated Roth contributions from the required minimum distribution rule.
  • Create more flexibility by eliminating the “First Day of the Month” requirement in 457(b) plans.

A copy of NAGDCA's legislative priorities letter can be found here.

Callan Associates-DC Trends Survey
One of the most helpful services that NAGDCA provides is the opportunity for plan sponsors to learn how their peers are governing their plans. While each plan is different, and correctly designed to suit the needs of each unique population, plan sponsors routinely face similar challenges, and have the opportunity to learn from their peers.

To help facilitate that peer learning, Callan Associates has surveyed a mixture of government and private sector DC plans each year for the past ten years. The newly published results of that survey yield insights as to how plans are tackling a range of common challenges. The survey has data from plans representing over $100 billion in assets and more than one million participants, and tracks trends over multiple years.

Key survey findings include:

Auto features:
 The use of automatic contribution escalation increased markedly over the past year (63% in 2016 versus 46% in 2015). Caps on automatic contribution escalation have also markedly increased (27% in 2016 from 19% in 2015).

Fund changes: Nearly half (47%) of plan sponsors reported making a fund change due to performance-related reasons. This is the highest in the survey’s history. Large cap equity was the most commonly replaced fund.

Target date funds: Plan sponsors that took action with their target date fund in 2016 most commonly cited evaluating target date suitability (67%) as the most prevalent course of action.

Money market funds: Largely in response to money market reforms going into effect, 64% of respondents have changed to a different money market fund or eliminated their money market fund altogether.

Fiduciary Rule: Respondents believe the Department of Labor’s 2016 Definition of a Fiduciary Rule will primarily impact the plan’s printed materials, website, and other educational materials (43%) and communication regarding plan rollovers (43%). (The survey was conducted before the Trump administration took office.)

Along with the data in our quarterly Callan DC Index™ and Target Date Index™, this survey paints a detailed picture of the challenges and opportunities that are top of mind for DC plan sponsors this year.

Research Brief: Tactical Asset Allocation
Perspectives on Tactical Asset Allocation in Portfolio Construction, a research brief from ICMA-RC, examines the role tactical asset allocation can play in structuring a portfolio.

The paper describes six common quantitative signals that can be used to tactically structure an investment portfolio: 

  • "Fed Model" signals
  • business cycle/macroeconomic signals
  • fundamental-valuation signals
  • momentum signals
  • sentiment signals
  • seasonal signals

One example of a hypothetical tactical asset allocation model is one that ICMA-RC researched and developed in 2011. The hypothetical model stays fully invested at all times and shifts asset allocations between an investment that replicates the S&P 500 and investments in 30-year U.S. Treasury Bonds. The allocation was limited to these two assets based on the organization’s belief that continuous investment in long-duration assets better meets the needs of retirement investors with a long time horizon than a “market timing” model where the investor is in and out of the market.

This model takes multiple factors into consideration, including a “Fed Model” type calculation, medium- and short-term indicators, and a seasonal component. It was tested using available data going back for more than 14 years and then monitored without change to the model going forward for five years. The returns from this model were favorable in both the back-test and monitoring period after the model was developed.

The research brief recognizes that there is no guarantee that a particular manager will be successful in obtaining positive excess returns; and there is evidence that in the aggregate, tactical strategies may add only limited value. In addition, the authors share, "... like other active strategies, tactical models give investors the opportunity to seek returns that 'beat the market.'"

See the research brief at this link.

This article is intended for educational purposes only and is not to be construed or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice and shall not have any liability for any consequences that arise from reliance on this material. It is recommended that you consult with your personal financial adviser prior to implementing any new tax or retirement strategy. AC: 33175-0417-0000

The Senate has confirmed most of President Trump’s cabinet. His original choice for Secretary of Labor had to withdraw his nomination.  The new nominee is Alexander Acosta who is currently the dean at Florida International University College of Law.  Previously, he had served in the Department of Justice as a US Attorney.

Meanwhile, there have been very few nominations for assistant secretary positions, including the Assistant Secretary for Tax Policy.
  While this may mean that new priorities may not be set for some time, there are still efforts underway in the Departments.  The NAGDCA board recently met with the Department of the Treasury to discuss NAGDCA’s legislative priorities.

Republicans do not have 60 seats in the Senate.  This will make it more difficult to pass legislation, but it is not impossible. 60 votes are needed to cut off debate on legislation.  However, legislation can be passed via reconciliation and which requires only a simple majority of 51 votes.  There are strict rules for what can included in a reconciliation bill, but it is likely that most of tax reform can be passed through this process.

In the House of Representatives legislation can pass with a simple majority of 218 votes. Tax legislation must originate in the House.  That makes it more likely that proposals will start being released soon and it is possible that they will be based on previous proposals. 

Before Congress can pass tax reform through reconciliation it must first complete health care reform.  Health reform is being moved through the 2017 budget process.  Before it can move tax reform through the 2018 budget process, Congress must complete the 2017 process.

Executive Board Visit
The NAGDCA Executive Board recently held its annual Washington visit to discuss legislative priorities.  Over two days, NAGDCA met with House Committee on Ways & Means Ranking Member Richard Neal (D-MA), key staff from the Department of the Treasury, Majority and Minority Tax Counsel to the Senate Committee on Finance, Majority and Minority Tax Counsel to the House Committee on Ways & Means, and staff for Senators Enzi (R-WY) and Cardin (D-MD) and Representative Tiberi (R-OH).  Senators Enzi and Cardin are members of the Senate Committee on Finance and Representative Tiberi (R-OH) is a member of the House Committee on Ways & Means.

NAGDCA’s priorities include the National Retirement Security Week resolution.  The staff for Senators Enzi and Cardin said the resolution would be reintroduced in the fall.  Other priorities include allowing non-spousal beneficiaries to roll assets into Roth 457 plans, exempting Roth contributions from required minimum distributions, allowing rollovers for Roth government defined contribution plans and elimination of the 457(b) first day of the month requirement.

Congress is currently funded under a Continuing Resolution (CR) that is set to expire on April 28th.  Both parties would like to avoid a government shutdown, so it is likely that when Congress returns from their Easter recess a deal will be consummated to keep the government open.

President Trump introduced his “skinny budget” last month, but it was only meant as a blueprint for a more detailed budget that has not yet been released.  The skinny budget did not contain any provisions that pertained to NAGDCA and we await a more complete budget proposal to be released later this year.

Tax Reform
President Trump has indicated that he has interest in tax reform, but no proposals have been released and it is not known if he has interest in pensions as part of tax reform.  Health care reform is also still being discussed, and it will have an effect on any pending tax reform legislation as many of the tax cuts that are being considered would have been paid for with cuts to health programs, specifically Medicaid.

During NAGDCA Hill meetings Congressional staff indicated that tax reform legislation will be introduced this year.  However, there is no time frame on when it will be introduced or what will be included in the legislation.  


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