Indiana Ranked Top 10 in Retirement Plan Participation

19159583The Pew Trusts recently issued a report showing Indiana has the seventh best participation among employees eligible for employer-sponsored plans of 50 states. Indiana is also in the top twenty in providing access to plans by employers.

Comparatively, Hoosiers are near the top in participation but there is still room to go. In Indiana, 63% of workers have access to an employer-sponsored retirement plan and of these employees, only 57% participate.

Thirty-seven percent of employees in Indiana do not have access to a retirement plan. If you, as an employer, don’t offer a retirement plan, 100% of your employees may have to rely on social security for their sole retirement benefit.

In 2015, the average social security benefit for all retired workers in the United States was $15,936 per year. If the 43% of your employees who are not participating in the retirement plan are planning on being supported solely by social security in retirement, they would be living on less than minimum wage.

If employees cannot retire because of lack of savings and instead continue working, what are the long term costs to employers? Some things to consider might be higher wage costs, higher medical and long term disability costs, to name a few. A recent report from Mercer says, “If 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.” This suggests that for each workers delay in retirement can insight five or more promotion delays.

As Hoosier employers, here is what you can do to improve retirement savings:

  • If you do not have a plan, consider sponsoring a plan.
  • If you do have a plan, encourage participation and realistic savings rates. You can do this by implementing changes in the administration of your plan to automate participation and deferral increases, essentially putting these choices on autopilot for your employees.

Great job, Indiana on being one of the leaders in the country with retirement plan participation. Now is the time to get to work on helping more employees save for retirement. – Indiana a State that Works.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.

Paving the Way for Good Roads

PollQuestion

We’ve got a new poll question (top right) asking about a strategy to pay for long-term infrastructure funding. The current House Republican plan calls for a modest gasoline tax increase and higher cigarette taxes (that would go toward Medicaid spending, with sales tax funds currently used in that area shifting to transportation).

More details on the legislation: HB 1001

The most recent poll asked for your top legislative priority. Civil rights expansion (36%) topped the list, followed by increased transportation funding (28%) and education testing reform (16%).

Protecting the 401(k) Plan Sponsor

Money safety concept

According to Groom Law Group, since 2007 there have been nearly 40 lawsuits about fees and expenses paid by employees in 401(k) plans. Of the 40 fee and expense lawsuits filed since 2007, a few have actually been adjudicated through the courts, some have been dismissed and several have been settled out of court. For the lawsuits that have been settled or adjudicated, the amounts have been in the tens of millions, not to mention the legal fees that are incurred.

What should companies do?

Below are items that we believe are prudent processes that plan sponsors should follow:

  1. There should be a clear governance structure that delineates who appoints retirement plan committee members and also a process to monitor the plan’s fiduciary committee.
  2. Fiduciaries should look, at least annually, for lower cost investment options for the plan. The same investment option may have several ways it can charge fees which come with different requirements that can change over time. This makes the process of conducting a regular review so very important.
  3. A review of service providers on a regular basis helps keep costs and services in line with industry changes.
    a. Service provider fees should be benchmarked on a regular basis.
    b. Requests for Proposals should be conducted at least every five years to make sure that fees and services are in line with industry standards.
    c. Service providers should be skilled and have adequate experience in providing the needed services.
    d. Service providers would include (but are not limited to) record keepers, advisors, trustees, custodians, and plan auditors.
  4. A regular review of the investment options and categories offered to participants should be conducted.

A 401(k) plan is a great vehicle to help employees prepare for retirement and, for most employees, it is one of the only vehicles available to them (other than social security). In my opinion, the 401(k) is one of the most successful wealth accumulation vehicles created in history. Americans have accumulated trillions of dollars toward retirement simply by taking money from their paychecks on a regular basis and putting it away for their retirement years.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.

Speculations on Tax Matters for the 2016 Session

What’s in store for 2016 relating to tax issues? Nothing is too clear just yet, but there are a couple significant areas of speculation:

Revisiting “Big Box” Commercial Assessment: This issue was addressed last session in SB 436. But most expect it to be brought back up again in some fashion in 2016. The Indiana Board of Tax Review (IBTR) has raised several legitimate questions about exactly how the changes in SB 436 should be interpreted. Ambiguities will make application of the new laws difficult for the IBTR. This has led some to conclude that a different approach may be better than what was passed last year.

The focus has remained on what is properly considered a “comparable sale” for appraisal/assessment purposes when evaluating a special-built commercial structure. The discussion has turned to an appraisal concept referred to as “market segmentation”, essentially a method for narrowing the field of sales that should be considered reflective of the value of these more limited purpose buildings. Other ideas revolve more around how the IBTR goes about its adjudicatory work and whether some additional procedural adjustment and guidance from the Legislature would be beneficial.

Push for Combined Reporting: Sen. Brandt Hershman (R-Buck Creek), chairman of the Tax and Fiscal Policy Committee, is apparently entertaining the idea of changing the requirements relating to how a corporation must report its income. Under current law, a corporation files its return based on the separate, independent status of each corporate entity, without regard to its affiliation or business relationship with other entities. Nevertheless, the Department of Revenue (DOR) is authorized to require a corporation to combine its income with that of an affiliated/related company in a “combined reporting” if there is such a connection between the companies that the DOR views them as having a unitary business purpose and believes they should be treated as one for taxation.

A good number of states make such combined reporting mandatory in all cases, and the speculation is that Sen. Hershman is thinking about putting Indiana in that category. But this would be a very controversial move and is fraught with a myriad of economic, political and practical issues. Not the kind of matter typically taken on in a non-budget year; perhaps he wants to float it this year to spur discussion. The Indiana Chamber has a long-standing position against combined reporting.

Rochester’s Appraisal Management Research Co. Maximizes Its Chamber Investment Through Helplines

Cook_DavidDavid Cook has called Rochester home since 1989. One year later, he incorporated property tax consulting firm Appraisal Management Research Company (AMRC) — an Indiana Chamber member since 1993.

Its core team of six employees works with a variety of companies. “We’re small, but we accomplish a lot,” remarks Cook, who serves as president.

Remaining informed on state and local laws is critical. He describes how AMRC has benefited from the expertise of Bill Waltz, Indiana Chamber vice president of taxation policy.

“I’ve known Bill for a long time,” Cook shares. “He (on many occasions) would help us keep up-to-date on various changes in the property tax laws.”

In addition, Cook seeks free, confidential guidance on human resources matters by calling the HR Helpline.

“I like to get an opinion,” he asserts. “We do, as necessary, work with an attorney also, but Michelle (Kavanaugh, human resources director at the Chamber) was very helpful in reviewing our personnel policy guidelines and helping us update those. That saves quite a bit of money rather than an attorney doing that. It’s very helpful.”

Indiana Chamber, Pete the Planner Partner to Promote Money School

PTP Newsletter BannerThe Indiana Chamber of Commerce is proud to partner with Peter Dunn a.k.a. Pete The Planner® in offering his new service, Pete’s Money School, to Indiana businesses.

Pete’s Money School is a financial wellness curriculum delivered via a mobile-friendly e-learning platform. Each course includes videos, quizzes and a downloadable workbook. These tools will help your employees build a realistic path to a healthy financial future. Indiana Chamber member companies will receive 20% off their registration fees for the program.

“The Indiana Chamber has been helping businesses and their employees for nearly 100 years,” Dunn says. “I’m thrilled to be able to help them educate Hoosiers, in regards to their personal finances. Together, we’ll help hard working folks take control of their finances so they can focus on their futures.”

“Financial concerns are one of the leading causes of workplace stress,” adds Jennifer Elkin, Chamber senior vice president of marketing. “Partnering with Pete the Planner is a perfect opportunity to promote financial wellness – benefiting individual employees and enhancing overall productivity.”

A variety of courses, each which can be completed at the users’ own pace, is available.

Simply mention the code INCHAMBER when registering to receive the discount. For pricing and course information or to register, call (317) 762-3240 or visit www.petesmoneyschool.com.

Property Tax Assessment Appeal Issues Continue

Last session, county officials sought drastic changes to Indiana’s property tax assessment methodology in reaction to two decisions from the Indiana Board of Tax Review (IBTR) involving “big-box” retail stores (e.g., a Meijer and a Kohl’s store). Officials complained that assessment appeals were being wrongly decided because the IBTR allowed the consideration of the sale price of like buildings that had been closed and were vacant at the time of the transaction as evidence of the value of the operating stores. Assessing officials called these transactions “dark sales” and contended such sales should be precluded from being considered in determining the assessment of like structures that remain open and occupied by large retail entities. The legislative result was something of a standoff between county officials and affected taxpayers. The ultimate legislation (SB 436) left a lot to be desired since the interested parties maintained such disparate viewpoints. They were – and remain – fundamentally divided on how real estate should be valued under Indiana law.

The issue came to the forefront again last month when the IBTR issued another decision that resulted in a significant reduction to a large commercial entity; this time, a CVS Pharmacy store in Bloomington. Interestingly enough, this case did not involve a “big-box” and was not based on the application of “dark sales” (even though you would have thought so from the way it was being publicly described by many.) Nevertheless, it was cited as another case where the IBTR had somehow gotten it wrong and was making a bad decision.

The situation essentially reveals: Assessors and county officials believe that large national chains should be taxed more because they are large national chains (and refuse to acknowledge the state of the law which just doesn’t support their higher assessments.) The IBTR has merely been doing its job, applying case law that has developed from Tax Court decisions issued since 2010 and before.

What’s more, assessors and county officials do not want to assess the property based on its fair market value, they want to assess it based on the value of the business operations that take place on the property — what I call “value to the user.” Property tax is supposed to be a tax on the value of real estate, not a tax on the investment value that real estate has to the owner. This debate arises out of the statutory and administrative rule definitions that govern our assessment system. Indiana defines true tax value as something different than the market value-in-exchange (what the property could sell for); instead it creates a hybrid standard referred to as “market value-in-use”. This hybrid was created to protect some properties from higher taxes. The best example is when a highly valuable piece of prime commercial real estate is actually used for agricultural or residential purposes.

But now there is a movement to interpret market value-in-use as a means for taxing the value the property has to its specific user, i.e., the national retail chain owner. This is not only subjective, unfair and inequitable; it is unworkable. It would result in nearly identical buildings being assessed at widely differing values based on the financial status and circumstances of the particular owner. Such a standard is contrary to our Indiana Constitution and would effectively undermine the integrity of our entire assessment system.

It is an important issue and appears it is going to be taken back up next month by the Interim Committee on Fiscal Policy, which has scheduled meetings for October 7, 13 and 21.

Chamber Promotes Life Sciences in D.C.

7324001The Indiana Chamber is a proud partner in Hoosiers Work for Health, which promotes the biopharmaceutical and life sciences industry, and visited with Indiana’s elected representatives in Washington, D.C. July 15-16 to discuss issues such as patent
reform, taxation and FDA regulatory procedures.

The Chamber joined several other Hoosiers Work for Health representatives for office visits on Capitol Hill. The group met with Reps. Susan Brooks (R-5th District) and Larry Bucshon (R-8th District), both members of the House Energy and Commerce Committee, as well as Rep. Todd Young (R-9th District), who serves on the House Ways and Means Committee. The group also visited with key staff members for Sens. Dan Coats (R) and Joe Donnelly (D) while the Senate held floor votes on an education bill.

It is clear from the conversation with Indiana’s elected officials that they understand the importance of the biopharmaceutical/life sciences sector to the economic health of Indiana. This sector directly supports more than 20,000 jobs across the state and generates $19 billion in economic output. By creating high paying jobs, biopharmaceutical companies build a strong foundation from which we can grow our state economy – providing stability and prosperity into the future.

A Look at Indiana State Budget Estimates

19145168The monthly revenue estimates referenced in connection with Indiana’s state budget and commonly used to evaluate how Indiana is doing can be confusing because they change periodically and result in different baselines. First, there are the estimates on which the budget is formed – those established by the revenue forecasters in mid-April each year that a two-year budget is put together by the Legislature. And then there are the most recent revised estimates – updated by the forecasters each December.

If you look closely enough at the reports from the budget agency each month, you can discern the differences. Appropriately, the budget agency compares the actual monthly collections to the most recent updated estimate. But if you go beyond their summary, commentary and main chart you can find out how the monthly revenues compare to the original numbers on which the budget was formed.

Since we are now into the last month of fiscal year 2015 and the last month of our current two-year budget that was written in April of 2013, it seems a good time to look at just how well those forecasters did. While the numbers fluctuate considerably from month to month, with 11 of 12 months actual collections known, they are off by less than 1% (just .8 of a percent.) They projected collections of $13,152,600,000 and actual year to date collections were $13,042,800,000. They were off by $109.8 million, or eight-tenths of a percent, statistically as good as anyone can reasonably expect. In fact, it is pretty extraordinary and the forecasters are to be commended for such accurate work. Good, reliable projections are important to the fiscal integrity of our state.

And our fiscal picture doesn’t look bad at all right now. The collections now stand at $211.3 million or 1.6% above the revised/updated projections (those made in April of this year.) But it is not the estimates that are the real indicator of how the state is doing. It is a comparison of actual year-to-date collections that show actual growth. Those same monthly reports also show how the current fiscal year-to-date collections compare to the actual collections through the same period of the prior fiscal year. With the fiscal year nearly complete, Indiana is 3.6% above the prior fiscal year collections. And most encouraging is the 4.4% year-to-date growth in sales tax (our biggest revenue stream) and the 6.9% growth in individual income tax (the next biggest).

Boiling all this down there are two points: (1) the state forecasters do a great job, and 2) the present fiscal picture of the state looks good.

Highway Trust Fund Has Some Potholes

36601064The Congressional Budget Office asserts the national Highway Trust Fund would need $3 billion in ADDITIONAL revenue to keep funding transportation projects through the end of September. And it would need $8 billion if Congress chose to extend funding authority until the end of 2015. Read more via The Hill.

Obviously, there are serious challenges facing America’s road infrastructure.

Cam Carter, the Indiana Chamber’s vice president of economic development and federal relations, outlines the main problem.

“Congress needs to get its act together and summon the political will to fashion a long-term solution to the insolvency of the highway trust fund,” he asserts. “We’ve had our fill of short-term patches. Some will say that the highway fund is insolvent because today’s vehicles are more fuel efficient and that is depressing revenues going into the fund – and there is some truth to this. But, the greater truth is that Congress hasn’t raised fuel taxes to keep up with inflation since 1993 and that, more than anything, is the root of the problem.”