Administration
Independent Audit Time for Large Retirement Plan Filers
Now that the retirement plan nondiscrimination testing season is wrapping up for calendar year retirement plans, steps should be taken toward completion of the annual independent audit. The independent audit report must be included with the 2023 Form 5500 filing, due on July 31, 2024, or by October 15, 2024, for plans that are on the extended filing due date.
The independent audit requirement applies to employers who sponsor “large” plans – those with over 100 participants on the first day of the Plan Year (January 1st for Calendar Year plans). There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement, and thereafter continue to be subject to the requirement while staying above the 100-participant threshold.
Please contact Vita Planning Group if you have questions about whether the independent audit applies to your plan. For other important dates on the horizon, download our online Compliance Calendar.
Market Update1
While equity and bond markets moved in tandem during 2023, we saw a separation in returns between these two major asset classes in Q1 2024. US equity markets continued to rise on the expectation of a “soft landing” with positive GDP growth through 2024, while bond markets declined on the expectation of “higher rates for longer” with delayed and/or fewer FED rate decreases in 2024. Overseas equity markets also started the year positively, with both the developed market MSCI EAFE index up 5.9% for the quarter (in USDs) and the MSCI Emerging Markets index up 2.44%, despite a decline of 2.2% in Chinese equities in Q1 (in USDs). While US economic conditions appear favorable for the remainder of 2024, the biggest unknown will be the US presidential election which has historically heightened volatility during an election year.
The US Bureau of Economic Analysis (“BEA”) announced that the US economy grew at an annual rate of 3.4% in Q4 2023 resulting in 2.5% growth for all of 20232. The Philadelphia Federal Reserve Bank’s survey of forecasters median forecast for Q1 2024 GDP growth is 2.1% (up from last quarter’s 0.8% estimate), while the median forecast for the full-year 2024 has risen slightly to 2.4%3. The labor market continues to be strong. March 2024 saw non-farm payrolls grow by 303,000, and US unemployment was 3.8%, making this the longest period with unemployment below 4% since the 1960s4. The American consumers, who account for 68% of US GDP, are expected to maintain their level of spending in 2024 with the continued improvement in personal finance and wealth accumulation; American businesses have increased fixed investment spending, due in part to legislation (the CHIPS and Infrastructure Acts) as well as the AI revolution and productive capacity due to labor shortages.
Inflation in the US continues to trend downward, despite hiccups such as the rise in March 2024 to 3.5% (annualized), up from 3.2% in February. Shelter accounts for approximately 38% of the Consumer Price Index (“CPI”), which along with gasoline and automobile insurance appear to be the main factors for the bump up in inflation. But with shelter a lagging indicator and gasoline prices notoriously volatile, there is still the expectation that inflation will decline through 2024 bringing us closer to the FED’s target of 2%. The FED is on record to cut rate three times in 2024, but bond markets are nervous whether the strength of the US economy and the stickiness of inflation may cause the FED to delay or to limit rate cuts this year.
The first quarter of 2024 seemed to indicate that the US can maintain economic growth even in the face of continued inflation. For US equity markets to continue to rise, it will be important to see whether the rally in large cap tech stocks can be broadened to include other sectors. The FED’s apparent willingness to cut rates to counteract any decrease in GDP growth should continue to support equities until corporate earnings can catch up to currently high multiples. Conversely, US Bond markets are expected to continue to be under pressure, as indicated by the inverted US bond yield curve (yield on short-term bonds higher than long term bonds), given the possibility of the FED keeping rates higher for longer if it is not comfortable with progress on inflation. The biggest unknown is the US presidential election, which can impact markets quite separately to the economic factors discussed above.
Sources:
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Unless otherwise indicated, data and commentary for the Market Update is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 2Q 2024, December 31, 2024, and 2) the “2Q 2024 Guide to the Markets Webcast” on April 1, 2024.
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https://www.bea.gov/data/gdp/gross-domestic-product
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https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q1-2024
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https://www.bls.gov/news.release/pdf/empsit.pdf
Disclosures:
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.
+The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.
++ Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.
The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.
The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.
