Don’t Throw That Away - Changes to Money Market Accounts Are Coming Soon

You may receive a letter from your investment provider concerning the SEC Mandated Changes to Money Market Accounts. This is not your normal throw away and don’t think “I will read it later.” Read the letter carefully as it may require an action on your part and it is time sensitive. It will describe changes that could impact your investments in your retirement plan.

In 2014, the Securities and Exchange Commission released new rules governing the operation of money market funds that will go into effect by October 2016. The biggest changes pertain to their liquidity and who can hold certain funds.

Money markets must designate their funds as either “retail” or “institutional.” Institutional money markets are required to have floating net asset values (NAVs). Retail money markets are not subject to this requirement and may seek to have a stable $1 NAV. Retail funds must be held by individuals and are not open to institutions, businesses and other organizations.

If your plan is a pooled account either for a defined benefit plan or a defined contribution plan, your account is a considered an institutional account and can no longer invest in Retail Money Market Funds.

Both retail and institutional funds could be subject to liquidity fees or redemption gates once the new rules go into effect. These new tools are designed to prevent runs on the fund during periods of high stress. All prime and municipal money markets will be subject to the potential fees or gates. A prime fund is one that does not fit into the government or municipal category. As an example, if prescribed liquidity levels fall below a certain threshold, the fund could impose a 2 percent liquidity fee on redemptions. The fund may also suspend redemptions for up to 10 days while markets settle.

U.S. Treasury and government funds are exempt from the floating NAV, liquidity fees and redemption gate requirements. Because of this, there will be no retail or institutional designation for these funds.

Investment Providers are taking different approaches in dealing with clients. So please read the communication carefully.

  Don’t Throw That Away -
Changes to Money Market
Accounts Are Coming Soon

Email Scam about the Electronic
Federal Tax Payment System

The 2018 IRS Limits on Benefit
and Compensation have
been released!

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1045 Crosspointe Drive
Suite 2
Naples FL 34110
239.598.9812 Fax

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