FOR IMMEDIATE RELEASE
Lexington, KY, April 2, 2024—Ongoing coverage of the Fed’s actions related to interest rates reveal that interest rates have risen dramatically since March 2022 due to the Fed’s efforts to tame a surge in inflation. As of the last meeting of the FOMC in March, interest rates were kept unchanged to provide the Fed with additional time to evaluate whether current rates are succeeding in its efforts to keep inflation at bay without too seriously impeding economic growth.
In response, Matt Petersen, Executive Director of NAGDCA, says “A new addition to NAGDCA’s Fees Guide for public sector DC retirement plans addresses float income, which, given the current higher interest rate environment, has relevance for plan sponsors. Current higher interest rates may provide plan sponsors with the opportunity to garner short-term earnings from assets held within a retirement system’s interest-bearing accounts.”
Section author Andee Gravitt informs readers that “float income can be generated by contributions and distributions, investment delays, and check disbursements. Some recordkeepers utilize non-interest-bearing accounts to temporarily hold cash, intentionally avoiding the generation of float income. Plan sponsors should collaborate with their recordkeeper and consultant to gain a comprehensive understanding of float income specific to their own retirement plan.” Gravitt, who is serving as President of NAGDCA’s 2024 Industry Committee, is AVP of Institutional Client Relations for Nationwide Retirement Solutions.
The NAGDCA Fees Guide, including the section on float income, may be accessed here.
ABOUT NAGDCA
NAGDCA provides education, information, and training in all aspects of public plan administration to support members in creating plans that enable secure retirement outcomes for their participants. Additionally, NAGDCA is a co-founder with the Employee Benefit Research Institute of the Public Retirement Research Lab, a retirement industry-sponsored collaborative effort. The PRRL mines data from the PRRL Database, the first-ever database specific to public sector plan- and participant-level defined contribution data, to produce research aimed at enhancing understanding of the design and utilization of public sector defined contribution retirement plans. NAGDCA also conceived National Retirement Security Week to encourage retirement saving among government workers. Through its efforts, National Retirement Security Week evolved into National Retirement Security Month, a national effort to inspire American employees to save adequately for a secure retirement that is observed throughout the retirement industry during the month of October. It has received bipartisan Senate resolution since its conception in 2006. To learn more about NAGDCA, visit https://www.nagdca.org/.
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