401(k) Update: Q3 2021


Form 5500 Season

For calendar year plans, the 2020 Form 5500 and Form 8955-SSA (if applicable) remains due July 31, 2021, unless an application for extension has already been submitted. In most cases, the extension will be automatically prepared and filed by your retirement plan service provider on your behalf and the extended filing deadline is October 15, 2021. If you are unsure as to the status of your Plan’s Form 5500, please contact our team for assistance. 


It’s Independent Audit Time for Large Retirement Plans

“Large” plans – those with over 100 participants on the first day of the Plan Year – should have their mandatory audits well underway. There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement, and thereafter continue being subject to the requirement while staying above the 100-participant threshold.

Please contact Vita Planning Group if you have questions about whether the independent audit requirement applies to your Plan. For other important dates on the horizon, please check out our online Compliance Calendar.


401(k) News

Withdrawal Option for Birth or Adoption

The SECURE Act of 2019 permitted penalty-free withdrawals of up to $5,000 for the costs associated with the birth or adoption of a child. As with any new legislation, it takes time for recordkeepers to update their systems and processes, and we are just now starting to see this new withdrawal provision being made available to retirement plans.


In most cases, plan sponsors will have to request a plan amendment to allow their retirement plan to accommodate this new withdrawal option. For your convenience, we have surveyed our top recordkeepers and below is an overview of where they are at in the process of allowing for this new withdrawal option:


  • Fidelity Investments: Request a plan amendment via email
  • Empower Retirement: Request a “Birth and Adoption Plan Election” form
  • Money Intelligence: Available automatically as part of standard plan document
  • The Standard: Not yet available, expect to roll this out in 2022
  • ADP Retirement: Not yet available, no timeframe
  • Ascensus/ Vanguard: Not yet available, no timeframe
  • BlueStar Retirement: Not yet available, no timeframe

Please contact us should you have any questions or if you are interested in adding this provision to your plan.


Market Update1

Economic activity both in the US and overseas continued to surge in Q2 2021. The speed and forcefulness of the economic recovery has turned investor attention toward the possible rise of inflation and the end of accommodative government economic policies. While inflation concerns did seem to cause a sell-off halfway through Q2, capital markets continued to appreciate during the quarter. US equity markets were up with the S&P 500+ rising 8.5% in Q2 and 15.3% YTD. US bond markets also rose in Q2 taking away some of the YTD losses. The BarCap US Aggregate Bond Index++ was up 1.42% in the quarter but remained down 1.6% YTD. Overseas equity markets were also buoyant with the MSCI All Country World ex US Index++ up 4.4% in Q2, extending the gains made in Q1 to finish up 9.4% YTD. What markets will be focused on going forward is the shape of the economic recovery without the benefit of government support and in the face of possibly rising interest rates.

The fading of the Pandemic and the growth of demand in the US has fueled expectations for high GDP growth in 2021 and beyond. Q1 2021 US GDP grew at an annual rate of 6.4% and may have accelerated in Q2 to as much as 10% annualized. Full year 2021 US GDP growth is being estimated at around 7.5% with 2022 expectations between 4.0% and 5.0%. The economy seems to have been fueled by an 11% annualized rise in consumer spending in Q2 along with productivity growth (non-farm output per hour) of 6%. Consumers are increasingly confident as shown in the Conference Board’s Consumer Confidence Index+++ rising to 127.3 in June, just below pre-pandemic 2019 levels2. Labor shortages may have helped fuel the rise in productivity as businesses find ways to make do with less. Unemployment stood at 5.9% in June and the JOLTS (Job Openings and Labor Turnover Survey Survey) report, an indicator of labor scarcity, came in at its highest level since 19753. While there might be a slight rise in unemployment as COVID-related benefits end, the FED has already reduced its forecast for unemployment at the end of 2021 to 4.5%.

The increase in economic activity in the US has given rise to expectations of higher inflation and the possible end of Government economic support. The tight labor market has had an impact on wages, with June wages up 4.6% YOY, the strongest monthly increase since1983. Supply in other areas has also not kept up with demand with bottlenecks in the supply chains of a variety of goods and shortages of some primary products. The Producer Price Index++ rose 0.8% in the month of May, a 6.6% increase YOY.4 Surging commodity prices have markets increasingly wary of any indication of a change in policy away from accommodation. So far, the FED has stressed that recent inflation numbers are transitory. However, its preferred measure of inflation, the Personal Consumption Expenditures (“PCE”) stood at 3.9% in May, well above the FED’s target of 2%. The FED estimates PCE to finish the year at 3.4% and to decline to 2.1% by the end of 2021. While the FED continues to say it is committed to the current level of interest rates until 2023, the market is increasing wary that the FED will go back to fighting inflation much more quickly. This can be most clearly seen in the spread between the 30-year and 5-year Treasury Bond falling 20% in June.5 This wariness extends to fiscal support. It is still not clear whether President Biden’s attempt to have Congress pass a slimmed-down infrastructure spending bill along with a reconciliation bill to extend COVID-related tax credits and aid to state and local governments will be passed. This could mean the end to COVID-related economic support and fiscal spending.

GDP growth outside the US is also expected to be strong in the second half of 2021 as countries catch up to the vaccination rates of the US and the UK. The IMF is predicting global GDP to rise 6.0% in 2021 and another 4.4% in 2022, with much of the non-US growth coming from China (8.4% and 5.6%) and India (12.4% and 6.9%). In Europe, the UK is estimated to grow at 5.3% in 2021 and 5.1% in 2022, with the Euro area growing at 4.4% and 3.8%, respectively.6 This global rebound is also reflected in the Global Purchasing Managers Index++. Global manufacturing and services in June stood at 58.3 globally (50 or above is considered accelerating economic growth), with the US at 63.9, the UK at 61.7 and China at 52.9. This is very good economic news compared to what the world faced just a few months ago, but markets globally may soon have to adjust to higher interest rates and less government economic support.


This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.




1 Unless otherwise indicated, data and commentary is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 3Q 2021, June 30, 2021, and 2) the “3Q21 Guide to the Markets Webcast” on July 6, 2021. 

2 https://conference-board.org/data/consumerconfidence.cfm

3 https://www.bls.gov/news.release/pdf/jolts.pdf

4 https://www.bls.gov/news.release/pdf/ppi.pdf

5 https://fred.stlouisfed.org/graph/?g=Ina#

6 https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021


+The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

++Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

++The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

++The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

++The Producer Price Index (PPI) is a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller.

++Purchasing managers' indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. The three principal producers of PMIs are the Institute for Supply Management (ISM), which originated the manufacturing and non-manufacturing metrics produced for the United States, the Singapore Institute of Purchasing and Materials Management (SIPMM), which produces the Singapore PMI, and the Markit Group, which produces metrics based on ISM's work for over 30 countries worldwide.

+++The U.S. consumer confidence index (CCI) is an economic indicator published by The Conference Board to measure consumer confidence, which is defined by The Conference Board as the degree of optimism on the state of the U.S. economy that consumers are expressing through their activities of savings and spending. Global consumer confidence is not measured.

Post a comment