Castle Rock Investment Company

Independent Guide, Trusted Partner.

Katherine Brown

Declaration of Independence

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“Can you be more specific?”

Embarrassing, but true: the retirement industry is asking that of the US government.

The definition of a Fiduciary needs to be more specific because of cases where Plan Sponsors are legally charged unreasonable fees for a long time, but the Department of Labor’s interpretation is undesirable to Wall Street. Of course, Wall Street is on the receiving end of these unreasonable fees.

As an investment advisory firm who identifies in writing as a fiduciary to our clients, we uphold the interests of our client above those of any other interest, because we have no other interested parties. The unfortunate reason that other investment advisors will not agree to sign a fiduciary agreement with a client is because they are “promised” to a large company, who profits from a retirement plan through hidden fees.

While the Plan Sponsor is unaware of this other agreement, and often the Investment Advisor is not entirely upfront about this agreement with the Plan Sponsor’s representatives, it comes out in the end through hidden fees and a whole mess of ugly policies.

The sort of game run here should be illegal. Not because the Plan Sponsors are not careful, instead they often are smart and diligent, but because they are simply not protected by the law. Up to this point, the law is unclear. The Independent Advisor they supposedly hire is not, after all, independent according to a stricter definition now proposed by the Department of Labor, led by Phyllis Borzi.

Insist upon a clear definition of an independent advisor so that you know your advice comes for the interest of your retirement plan, and not for the interest of someone else’s quasi-legal activity. Sign the petition at http://www.thepetitionsite.com/414/401/760/tell-washington-to-stand-up-to-wall-street/

 

Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com

Water Cooler Wisdom: Fourth Quarter 2014

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Water Cooler WisdomMajor events at the close of 2014, specifically the fourth quarter of 2014, included: the abnormally low prices of oil; the unique position of the Federal Reserve and the US dollar; US Treasury Rates poised (still) to rise; and American manufacturing ramped up to march on ahead of other world leaders, while an embroiled Europe awaits the coming year.

“Returns and Valuations by Style”

Significantly improved from the previous quarter, overall market growth was strong in the final quarter of 2014; though the annual return was less than half of the growth from 2013’s phenomenal success.

“Energy Price Impacts”

By a landslide, the most compelling story of the closing chapter of 2014 was the low oil prices brought upon by OPEC with ferocious Saudi leadership striving to re-establish control of global oil markets. Oil production outpaced consumption, therefore supply outpaced demand, and led to a build in inventories. The supply is not uniformly distributed, though, and the United States is responsible for the fastest supply growth since 2013; however, consumption in the US did not grow nearly as much, and China continues to contribute to the most global demand growth. Notably, Europe and Japan’s consumption declined.

The population most effected by gasoline prices, of course, is the lowest quintile of the population. If oil production declines, and global demand growth picks up, then oil prices could move higher, but if the demand trends persist, and supply growth remains robust with neither the US nor OPEC yielding any production, then oil prices could move further down. Economists overall are split either way, but most agree that the current low prices are abnormal. The Federal Reserve expects that any resulting deflationary pressure from current low oil market prices will be transitory, rather than permanent, and that the economy will achieve the 2% target inflation over time.

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In-plan Roth Rollovers: the latest topic

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Get out your red pen, folks: serious revisions to the rollover options for your plan. Today we’re looking at how you will need to revise your Plan Document in order to offer in-plan Roth rollovers and a few highlights.

In-plan Roth rollovers of otherwise non-distributable amounts are treated as eligible rollovers, meaning that no withholding applies. Since this amount is not distributable, no part of the rollover may be withheld for voluntary withholding. An employee making an in-plan Roth rollover may need to increase his or her withholding or make estimated tax payments to avoid an underpayment penalty. Concerning the rollover process, here is a critical section to know from IRS Notice 2014-74:

 

If you do a rollover to a designated Roth account in the Plan

You cannot roll over a distribution to a designated Roth account in another employer’s plan. However, you can roll the distribution over into a designated Roth account in the distributing Plan. If you roll over a payment from the Plan to a designated Roth account in the Plan, the amount of the payment rolled over (reduced by any after-tax amounts directly rolled over) will be taxed. However, the 10% additional tax on early distributions will not apply (unless you take the amount rolled over out of the designated Roth account within the 5-year period that begins on January 1 of the year of the rollover).

If you roll over the payment to a designated Roth account in the Plan, later payments from the designated Roth account that are qualified distributions will not be taxed (including earnings after the rollover)…

Remember, if you’re making revisions to your Plan Document, then Best Practices direct you to get an ERISA attorney, and make sure you’re fulfilling your fiduciary responsibility.

 

Katherine Brown is a Research Associate at Castle Rock Investment Company with a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. She can be reached at Katherine@castlerockinvesting.com.

How May I Help You?

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Castle Rock is dedicated to making retirement transition easy for you. One of the best ways to do that is to be with you in retirement transition and throughout the different stages of your retirement. We are excited to announce that we will soon offer a Retirement Transition Service to ease the retirement process for individuals, and to provide our clients with the piece of mind that all participants are taken care of.

Because we want you to have a part in how we build this new service, please reach out to me at Katherine@CastleRockInvesting.com with your comments and goals for retirement. We will try to incorporate as much as we can into the best service for you.

Stay tuned as we introduce the details of this program!

Water Cooler Wisdom

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Water Cooler Wisdom

September 30, 2014

Nothing is private anymore: celebrity photos are leaked across the Internet, everyone knows that Ben Bernanke was unable to refinance his mortgage and we can even follow professional football players’ misconduct. This technology, which allows us to follow the economy more closely than ever, shows that our economy is growing. Over the last quarter, the economy grew 4.6% and it is poised to continue this growth in the long run.

Here is what we expect: the US economy will continue to grow in the short and long term, interest rates will eventually rise (which is a good thing!), and you will be able to manage your money more effectively in a stable U.S. economy.

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Sometimes life isn’t fair…for a fiduciary.

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Sometimes the law isn’t fair.

But sometimes, it seems unfair because you don’t know the rules.

In the recent case of Santomenno v. John Hancock, poor understanding led plan sponsors to agree to terms that led to excessive fees charged by the service provider to the plan. Either the plan sponsors were unaware of what they signed up for, or the service provider duped them. On September 26, 2014, the Third Circuit Court of Appeals affirmed the District Court’s decision to grant John Hancock’s motion to dismiss, ruling that John Hancock was not a fiduciary – therefore, it was not required to watch out for imprudent or disloyal activities such as excessive fees.

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Much Ado About Fracking

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On Tuesday, September 17th, I attended a luncheon with the Denver Association of Business Economists (DABE) to hear Garret Nülle, an expert in Oil and Gas Economics speak. Mr. Nülle presented us with a comprehensive overview of the field, including projections of where fracking will go in the future. A few days later, I met with David Tameron, Senior Analyst for Wells Fargo Securities, regarding the role of fracking in the economy. The following post is the product of these conversations. 

From slides of Mr. Nülle's presentation
From slides of Mr. Nülle’s presentation

The popular term for Shale Drilling or Hydraulic Fracturing, “Fracking”, polarizes as many groups of people as other hot-button topics. But, like it or not, the energy investment community sees shale drilling as a permanent part of our energy source. The US has actually used fracking since the 1940s; as a part of oil and natural gas resources for the last 60-odd years, about 35,000 wells use the hydraulic fracturing method. An estimated 80% of natural gas is estimated to require hydraulic fracturing for extraction in the next decade. So, the number of rigs currently involved in production and the US market should continue as the most established for the next two decades.

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Retirement Security with Simplicity and Ease

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While “Retirement Security with Simplicity and Ease,” is Castle Rock Investment Company’s tagline. nothing is actually easy or simple about figuring out retirement plans. To give an example, we are in the trenches this week – up to our ears in work.

Our team works tirelessly because we care about our clients’ employees’retirement accounts that they have worked a lifetime to save. We admire institutions that find the best way to organize their plans and we love what we do becausewe believe thatfinancial futuresshould not be dependent on the rats and super-rats of finance.

  • We have the highest quality assurance procedures. Michele Suriano, President of Castle Rock, and Kristen Sanchez, Director of Communications, read and ask questions about every piece of material that is posted to our website or that is distributed to our clients.
  • We solve problems in a collaborative work environment. There simply isn’t enough space or time to sweat the small stuff here and we are always available to clients for resolving issues with their funds or for responding to their concerns about economic conditions, etc.
  • We complete projects on a timely basis.
  • Our flexible framework makes accurate work a top priority. Once I misunderstood an assignment and wrote about the wrong topic. Michele, our President, helped me re-organize my workflow to avoid such errors in the future. Not only do we strive for our work to be timely, it is also consistent and accurate.
  • We have strong working relationships with our clients. We spend time sharing information with our participants. Outside of our quarterly visits, we also offer educational services and comprehensive investment advising.
  • We utilize our resources efficiently and thoroughly. If we don’t know an answer, we will find one. We meet monthly to discuss improvements to our communications strategy and to brainstorm new ways to improve our client experience.
  • More than anything, we encourage our clients to know where we stand among our fellow pension advisors. We strongly believe in the work that we do and we are proud of our unique fiduciary role with our clients. A good fiduciary will re-evaluate their professional relationships at least every three years and we encourage our clients to challenge us and do the same.

We work very hard to make retirement simple and easy. So, from the bottom of a heap of binders, sticky notes, and pages – thank you for the opportunity to work for you. If there’s anything we can do to make planning easier, please let us know.

 

Katherine Brown completed a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. She can be reached at Katherine@castlerockinvesting.com.