This report contains the 2020 Q4 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator and the international trend indicator were both positive. The Balance of Strength Signal was also positive. Models will remain in their maximum High Risk Category exposure with no changes to the model holdings. To read the full report, use the link below.
Alerus Money Market Rate
Notice from Alerus
Effective October 1st, 2020, the Alerus money market interest rate will reset from .23% to .04%, which equates to an APY of .04%. As of September 30th, the 1-year yield on Alerus money market is 1.30%.
Our Thoughts
With the Federal Reserve targeting extremely low short-term rates, rates of money markets, bank savings accounts, and bank checking accounts have dropped to minimal levels. Like bank accounts, the Alerus Money Market fund is FDIC insured.
If you were looking for an alternative investment that provides a higher yield without taking on a lot more risk, you may want to consider the Vanguard Short-Term Bond Index Fund Adm. Moving up from money market investments, I consider short-term bonds to be the second most conservative investment in the plan. Short-term bonds are less affected by interest rate movements than long term bonds, and this fund focuses on high quality bond issuers. Now it is not FDIC insured, but it is a consideration if you are looking for a higher yield than what money markets are now offering.
To learn more about the fund, you can access Vanguard’s website using the link below:
https://investor.vanguard.com/mutual-funds/profile/VBIRX
If you would like to discuss your account, Contact Us.
We moved...
As of September 1, 2020; our office will be located in the building next door. The new address is 2040 Linglestown Road, Suite 100, Harrisburg, PA 17110. When entering the building from the entrance facing Linglestown Road, we are the first suite on the left. Because of the pandemic, we mostly use the office for client meetings, which are by appointment only. You can schedule a meeting by visiting the Contact Us page.
Tactical Models Updating
The report below contains the 2020 Q3 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator and the international trend indicator were both positive. The Balance of Strength Signal was also positive. Models will move from roughly a third of their maximum High Risk Category exposure to fully invested in the High Risk Category. Market conditions are divorced from the broader economy as the Federal Reserve has flooded the financial system with trillions of new U.S. dollars and the U.S. economy is ravaged by the global pandemic. The key will be whether the economy will catch up to the rising financial markets or whether the economy will bring the financial markets down to reality. If the indicators change during the quarter, we will update the models and send out an intra-quarter report. Model changes are targeted to occur around July 14th. If you have questions, please Contact Us.
Quarter Statements Available on Participant Website
Alerus is changing their default method for delivering statements. Starting with the 2020 Q2 statements delivered in July, quarterly statements will be posted to the Alerus participant website. You can Access the Site Here.
Statements can still be mailed. Call Alerus at 800-433-1685 to request that statements be mailed. As always, if you have questions, Contact Us.
Upcoming Fund Changes Scheduled for Week of June 8th
During the week of June 8, 2020; the Dauphin County, PA Deferred Compensation Plan will be adding a short-term bond fund and a high yield bond fund to the investment lineup. The Plan will also be replacing some funds that have not been meeting the monitoring process with ones that are. A memo of the changes is being distributed with the 5/8/2020 paychecks. You can also read it by using the link below, or by accessing it on the Alerus participant website or the Dauphin County intranet site’s HR Section.
CARES ACT
The Coronavirus Aid, Relief and Economic Security (CARES) Act is an estimated $2 trillion federal relief package designed to combat the harmful economic effects of the COVID-19 pandemic. The law looks to provide cash infusions to individuals, businesses, health care organizations and state/local governments through payments, loans and tax credits.
The act also allows retirement plans, like the Dauphin County, PA Deferred Compensation Plan, to have more liberal distribution and loan provisions for participants affected by the COVID-19 pandemic. Retirement plans do not have to adopt these provisions; however, the Dauphin County Commissioners voted to add these provisions the Dauphin County, PA Deferred Compensation Plan to help employees who may be impacted by the pandemic. The plan document will be amended with these new provisions, but they will go into affect now so that relief can be provided when needed. For more information select the button below.
2020 Q2 Tactical Model Report
As of this quarterly review, the U.S. equity trend indicator and the international trend indicator were both negative. The Balance of Strength Signal was negative in March, but recently turned positive on March 26th after the stock market’s quickest bull market. Our concern is that there could be minimal upside gains in the near term with the potential to retest the recent lows in the coming quarter, so the models will move from slightly above their minimal exposure to their minimal high risk category exposure. Model changes are schedule to be made the week of April 6th. You can access the full report below.
If you have questions about your account or the Tactical Models, please Contact Us.
Update to Loan Interest Rate
PLAN LOAN INTEREST RATE DECREASED FROM 5.25% TO 4.25%
The Dauphin County, PA Deferred Compensation Plan offers participants the opportunity to take loans against their account value. So that you do not fall behind with your retirement income goals, you are required to pay interest on the loan. The plan's loan interest rate is 1%+ the prime interest rate. The key point is that you are paying yourself the interest. Essentially, you are acting as your own bank. Below is more information on how the loan interest rate is calculated and the plan's loan provisions. These new rates take effect on March 4, 2020.
THE PRIME INTEREST RATE
You might have heard that the Federal Reserve Bank (Fed) decreased its Federal Funds Target Rate (Target Rate) recently. The Target Rate is the suggested range of interest which one bank may charge another for overnight lending. In late October, the Fed set the range at 0% to 0.25%. This is a decrease of 1.0% over the prior Target Rate. The Fed does not set the prime interest rate. However, once the Fed establishes the Target Rate, then U.S. banks take action to set the rate for their best or "prime" customers. Generally, a bank's prime rate is linked to the Target Rate and moves in lockstep with it. Each U.S. bank can determine its own "prime" rate that it offers customers. However, there is no central authority which sets "prime."
The loan interest rate is based upon the prime interest rate. The Wall Street Journal (WSJ) publishes the prime rate, which is determined by surveying the thirty largest banks in order to come up with a consensus amount. The WSJ reports changes to the prime rate when the surveyed banks have adopted a new rate, which occurred when the Fed changed its Target Rate.
PLAN LOAN PROVISIONS
Any active employee may borrow money from his/her account for any reasonable purpose. Provisions of the loan program are as follows:
You may borrow up to half of your total vested account balance for any purpose, with a minimum loan of $1,000 and a maximum loan of $50,000.
The maximum number of loans a participant may leave outstanding at any time is two.
You may choose a repayment schedule of up to five years, except if the loan is used to acquire your principal residence (up to 15 years). All loans will be paid back through payroll deduction.
The interest rate charged on your loan will be 1% above the prime interest rate. All interest that you pay on your loan is credited to your account.
A one-time, non-refundable fee of $75 plus a $25 per year administrative fee will be deducted from your loan proceeds.
It may take three to four weeks to process your loan application, so plan accordingly.
If you have questions regarding the plan loan provisions, Contact Us.
2020 Q1 Intra-Quarter Tactical Model Report
That didn’t take long. Last week’s historic market decline was the quickest market correction from a stock market high. With mounting concerns over the severity and duration of the coronavirus pandemic, most stock indexes were down 10% or more. As of the week ending 2/27/20, the U.S. and International trend indicators closed negative. The Balance of Strength Signal is still positive but could easily turn negative in the near future. Because half of the High Risk Category investments were allocated to the T. Rowe Price Capital Appreciation Fund, the models were positioned slightly conservative, but with the indicators turning negative, they will become more conservative, moving half of the High Risk Category investments to stable value and keeping the other half in the T. Rowe Price Capital Appreciation Fund. Model changes should take place the week of 3/8/2020. If you are uncomfortable with your selected model moving to a reduced High Risk Category exposure, we recommend that you look at other plan investment options or a more aggressive tactical model.