The Bureau of Labor Statistics tracks all manner of information, including consumer prices. Each month, they release a Consumer Price Index Summary, which you can find, for December, at https://www.bls.gov/news.release/cpi.nr0.htm. A few highlights are:
The CPI for All Urban Consumers, or CPI-U, increased 0.3% in December, and 2.1% for 2016. The shelter index was up 0.3% for the month, while gasoline was up 3%. The food at home index declined again, while the food away from home index increased, with these two changes offsetting each other. We have found that it is cheaper to eat at home than to eat out, regardless of the fluctuation in the prices of either. And generally, it’s healthier as well.
Excluding food and energy, the CPI-U was up 0.2% in December. Of course, housing, food, and transportation are the three largest expenses for most households, so it seems appropriate to pay attention to those prices and costs.
The FairTax Act of 2017, H.R. 25, was introduced in the House on January 3, 2017. The bill is a tax reform proposal which imposes a national sales tax on the use or consumption, in the U.S., of taxable property or services. This national sales tax would be in lieu of the current personal and corporate income tax, employment and self-employment tax, and estate and gift tax. There are exemptions from the tax for used and intangible property, property or services purchased for business, export, or investment purposes, and for state government functions. The sales tax rate will be 23% in 2019, with rate adjustments in future years.
Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate, known as a Family Consumption Allowance, based on criteria related to family size and policy guidelines. The states have responsibility for administering, collecting, and remitting the tax to the Treasury.
Tax revenue would be allocated among 1) general revenue, 2) the old-age and survivors’ insurance trust fund, 3) the disability insurance trust fund, 4) the hospital insurance trust fund, and 5) the federal supplementary medical insurance trust fund. No funding is authorized for IRS operations after FY 2021.
Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution, which authorized an income tax, is not repealed within seven years after the enactment of this bill. We shall see. This is akin to the Impossible Dream, and I’m not certain Congress has the intestinal fortitude to actually do this.
If your company sponsors a 401(k) plan, and you are an owner or a member of the executive team which oversees the plan, the first six weeks of the year is a good time to review plan operations. Following are some items you may want to review, as it relates to the plan.
PLAN DESIGN – Does the plan continue to accurately reflect why you installed the plan initially? Common reasons are either to maximize benefit to ownership, or to offer a meaningful benefit which enhances your ability to recruit, retain, and reward employees.
PLAN ADMINISTRATION – Have all required notices been sent to participants, in a delivery form which meets guidelines? Are contributions made on a timely and consistent basis? Is loan management working as it should? If an auto-enroll feature is used, does this feature work in practice as it’s described in the plan? Does the ownership questionnaire continue to reflect the ownership and relationship status of the employee population?
PLAN INVESTMENTS – Does the plan offer a Qualified Default Investment Alternative, or QDIA? Does the array of investment choices meet 404(c) guidelines, and if not, is it intended to? Have the plan decision makers chosen to use age based or risk based investment options, which in many cases make it simpler for employees to participate? Is investment performance of the available funds and options in line with their respective benchmarks?
PARTICIPANT EDUCATION AND INFORMATION – Is there a well thought out, and consistent approach, to educating eligible employees about the plan, how it works, how to access it, and how they can benefit from it? If so, is this plan executed consistently? Does it communicate with participants and eligible employees in a manner that reflects how most consumers receive information?
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PLAN COSTS – Are costs charged to participants benchmarked for type and amount? Are fund fees at or below averages? Has the investment committee reviewed participant costs, and affirmed cost appropriateness for the benefits received by participants? Are compliance, administrative, and advisory costs in line with norms? Are types of costs charged to participants appropriate, or should some of them be considered “settlor” costs, and instead be paid by the company?
REGULATORY – Has the plan filed its 5500 on a timely basis? If an audit is required, is the audit completed on a timely basis? Are there proposed changes to ERISA guidelines which could impact plan management?
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Enough of all that. It looks as if that, here in Georgia, the weather will be cooling off, and the sun will be shining, for the next week or so. As it does, take a few minutes, and simply step outside to enjoy the day. Your work will be there when you return.
Quote of the week:
“You can discover more about a person in an hour of play, than in a year of conversation.”