Independent Guide, Trusted Partner

In-plan Roth Rollovers: the latest topic

December 3rd, 2014

Get out your red pen, folks: serious revisions to the rollover options for your plan. Today we’re looking at how you will need to revise your Plan Document in order to offer in-plan Roth rollovers and a few highlights.

In-plan Roth rollovers of otherwise non-distributable amounts are treated as eligible rollovers, meaning that no withholding applies. Since this amount is not distributable, no part of the rollover may be withheld for voluntary withholding. An employee making an in-plan Roth rollover may need to increase his or her withholding or make estimated tax payments to avoid an underpayment penalty. Concerning the rollover process, here is a critical section to know from IRS Notice 2014-74:


If you do a rollover to a designated Roth account in the Plan

You cannot roll over a distribution to a designated Roth account in another employer’s plan. However, you can roll the distribution over into a designated Roth account in the distributing Plan. If you roll over a payment from the Plan to a designated Roth account in the Plan, the amount of the payment rolled over (reduced by any after-tax amounts directly rolled over) will be taxed. However, the 10% additional tax on early distributions will not apply (unless you take the amount rolled over out of the designated Roth account within the 5-year period that begins on January 1 of the year of the rollover).

If you roll over the payment to a designated Roth account in the Plan, later payments from the designated Roth account that are qualified distributions will not be taxed (including earnings after the rollover)…

Remember, if you’re making revisions to your Plan Document, then Best Practices direct you to get an ERISA attorney, and make sure you’re fulfilling your fiduciary responsibility.


Katherine Brown is a Research Associate at Castle Rock Investment Company with a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. She can be reached at

Water Cooler Wisdom

October 13th, 2014

Water Cooler Wisdom

September 30, 2014

Nothing is private anymore: celebrity photos are leaked across the Internet, everyone knows that Ben Bernanke was unable to refinance his mortgage and we can even follow professional football players’ misconduct. This technology, which allows us to follow the economy more closely than ever, shows that our economy is growing. Over the last quarter, the economy grew 4.6% and it is poised to continue this growth in the long run.

Here is what we expect: the US economy will continue to grow in the short and long term, interest rates will eventually rise (which is a good thing!), and you will be able to manage your money more effectively in a stable U.S. economy.

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Sometimes life isn’t fair…for a fiduciary.

October 8th, 2014


Sometimes the law isn’t fair.

But sometimes, it seems unfair because you don’t know the rules.

In the recent case of Santomenno v. John Hancock, poor understanding led plan sponsors to agree to terms that led to excessive fees charged by the service provider to the plan. Either the plan sponsors were unaware of what they signed up for, or the service provider duped them. On September 26, 2014, the Third Circuit Court of Appeals affirmed the District Court’s decision to grant John Hancock’s motion to dismiss, ruling that John Hancock was not a fiduciary – therefore, it was not required to watch out for imprudent or disloyal activities such as excessive fees.

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Coming Up: Recently Announced Money Market Reform

August 22nd, 2014

Friday, August 15, Michele Suriano (President of Castle Rock Investment Company) and I spoke with an industry insider and expert about the recently adopted SEC money market funds reforms. We covered the following key subjects:

  • Floating Net Asset Value
  • Redemption fees (discretionary and default)
  • Discretionary redemption restrictions
  • Disclosures to retirement plan participants
  • Definition of “retail” MMFs

Look for our blog post Tuesday about the reforms.

Do you have questions about what the “key subjects” even mean? Are you an expert with your own opinion about these reforms? Reach out to me at! We look forward to sharing more with you.

— Katherine Brown, Research Associate at Castle Rock Investment Company

Water Cooler Wisdom

July 26th, 2014

By: Katherine Brown, Research Associate, Castle Rock Investment Company

Water Cooler WisdomThe end of the 2nd quarter of 2014 left the global banking sector bracing from the fallout of a weak quarter. In moments of weak growth, we are reminded of the need to diversify our portfolios. Just as it is important to eat a balanced meal, it is important to balance your investment plate.

The US economy grew only 2.9% during the second quarter, which was a result of costly weather conditions, negative global trade relationships, and state and local government spending habits (often due to the extreme weather conditions). An investment portfolio is challenged – but not inherently devastated – by this kind of quarterly strife. For our purposes, more reliable data come from cyclical indicators because they provide more dependable data on economic behavior and trajectory. Capital spending, consumer confidence, orders vs. inventory and PMI indices all indicate good conditions for the economy to pick up. In other words, our markets are doing well, despite the special difficulty in the second quarter.

The Federal Reserve reoriented its goals to respond to the significant gain in jobs this past quarter. Unemployment, which reached 6.1%, is ever-nearing the long-run full employment waterline of 5.4%. While we should expect that economic growth is consistent with unemployment, if we push past full employment at 5.4%, we could face inflation. Instead, the government will work to improve total factor productivity in addition to the labor market’s full employment. This means more capital equipment and greater output per worker.

Since we have already attained 6.1% unemployment, the unemployment goal for 2014, the Fed downgraded the growth forecast for the next year to 2.2% from 3%. The comparison between Inflation and Core Inflation indicates pressures for wage growth and an increase in rental cost that creates a condition where a shift in policy will be necessary. Core inflation is at 1.95%, while bond yields are 0.6%. The economy is tightening and inflation is rising, so long-term rates should go up.

Concerns in the bond market are that Owners of US Treasury Bonds are not as concerned with the pricing of bonds as natural actors would be in an unimpeded market. The Federal Reserve adjusts investments in the bond market monthly through Quantitative Easing (QE2), which is anticipated to end in October 2014. The tapering out of Fed bond purchases means that bond rates will go up. Other distortions in the market will be due to major investors such as the Bank of Japan, which maintains excessive bond holdings that can destabilize the market should it sell off a significant amount. However, these behaviors are unlikely because of the impact it would have on their own economies, not to mention on diplomatic relations.

The bond market is a good place to invest as a defensive structure since a sharp rise in bond yields is unlikely in the future. Quantitative Easing is designed by the Fed to keep bond rates low for the long term, approximately 2% interest rate goals for this coming year. The bond market should be a reliable part of your portfolio this year, but as the economy grows, the equities market will likely exceed bond market growth.

The equities market has the best potential for year-to-year growth, despite holding the greatest risk to investors. The returns and valuations by style indicate the year-to-year earnings remain strong. The fourth quarter has the greatest potential to be the strongest of all this year. Overall recovery from 2009 market lows indicate continued recovery as the expanding data available to research stable market activity show greater returns, but do not indicate bubbles similar to the boom and bust of the last recession.

The rise in interest rates and confidence show that both should rise even further over the next 12 – 18 months, although cyclical sectors are best offset by investment in 10-year treasury bonds as a stabilizing measure to varying performance in equity markets.

Other economies spent the last quarter dealing with their own problems. In a unique twist, the EU’s growth was softened by France’s macroeconomic strife, while the European periphery provided the hopeful signs for growth. China picked up market growth after a rough first quarter, as Japan similarly indicated recovery from the sales tax increase, though neither will likely overcome the first quarter’s poor growth unscathed.

As we approach full employment, traditional investment strategies generally begin to hedge against inflation by including investments in commodities and real estate where GDP growth is perceived to be less influential than in other sectors. Quantitative Easing provides some “carbohydrates” to the US economy, thus allowing bond and equity markets to both grow in the short run. However, this promise is impermanent and may lead to trouble ahead. For a balanced meal, we turn to the foreign bond and equity markets. Thus, we foresee that the most robust investment palette will diversify not only across markets, between American equities and bonds, but across borders to take advantage of equities and bonds abroad.

Katherine Brown completed a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. Her research and writing focus on international monetary economics and central banking. She can be reached at

Life Lessons: the Fable of Argentina and the Used Car

July 18th, 2014

By: Katherine Brown, Research Associate, Castle Rock Investment Company

“Best is the enemy of better,” Dad reminded me patiently, as I visited the sixth used car in two days.

It sure is: my carless condition went on for about three weeks. All the while, I toiled over used car data while bumming rides off of my friends and attempting to find the perfect car within the perfect budget. Unfortunately, a used car in perfect condition does not exist for under $10,000 – at least by the time I needed to commute to my new job at Castle Rock Investment Company.

My experience reminded me of Argentina, which cannot get out of its debt negotiations within a reasonable amount of time. The country is at risk of further serious consequences to its national well-being, and further strained relationships with significant financial partners. The comparison between one young woman’s attempt to purchase a car and a nation’s attempt to alleviate $100 billion worth of legacy debt defaults is clumsy, at best, but hasn’t Argentina stalled for years to repay the now twice-adjusted default?

A sovereign debt crisis looms if this issue is not resolved. Amid recession, dwindling supplies of foreign reserves and the highest inflation rate in the world, Argentina chokes and puffs toward the goal: one more timeout. At the moment, coupon payments to bondholders are due July 30. The total first payment due amounts to $907 million. And where is that going to come from?

The US is central to the Argentine sovereign debt crisis and even appears to be more involved than the Argentine government itself. The minister of economy and public finance, Axel Kicillof, is not attending the latest meetings to restructure Argentina’s debt to Aurelius Capital Management LP and Elliot Management Corporation. Argentina may default for the second time in 13 years on its debt, previously amid $100 billion in debt in 2001. US Judge Greisa’s 2012 ruling bans Argentina from using the US financial system should it fail to meet its deadline. Perhaps further communication would be useful to avoid this significant economic threat?

Perhaps, after 2.5 years of further appeals, Argentina should realize that delaying negotiations is not likely to significantly improve the country’s chance of a better economic situation. The shadow of doubt is lengthening at the twilight of Argentina’s latest extension.

While many sympathize with the Argentine government’s unfavorable position, further delays are improbable – especially with poor communication between the debtors and indebted. In order to identify a desirable outcome, Argentina should attend the mediating process to find the “better” at the table rather than continuously press for the “best” with a megaphone outside.

NB: My dream car is, alas, still at large; however, I do possess my own set of wheels to get from point A to point B without the trials of the carless masses. Thank you, Dad, for your help in finding a good deal!

Katherine Brown completed a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. Her research and writing focus on international monetary economics and central banking. She can be reached at

Castle Rock Announces Hiring of Katherine Brown as a Research Associate

July 17th, 2014

Castle Rock Investment Company is pleased to announce the hiring of Katherine Brown as a research associate. In her new role, Katherine will prepare quarterly economic updates, aid with investment research and provide insight on issues impacting Castle Rock’s clients and their employees.

Katherine, a M.A. Candidate for a Master of Arts in Global Finance, Trade and Economic Integration at the Josef Korbel School of International Studies at the University of Denver, brings in-depth knowledge of macroeconomic theory and policy, econometric and statistical analysis, government public policy and finance and applied economic theory to the firm. Her research and writing concentrate on international monetary economics and central banking.

Katherine served in multiple research capacities at the University of Denver, CDR Associates and the Columbus Council on World Affairs. She holds a Dual Bachelor of Arts in International Studies and Latin American Studies from Miami University, along with a minor in Spanish.

Laurel Mazur, Castle Rock’s former research associate, was recently hired as a research assistant for the Baltimore branch of the Richmond Federal Reserve. “We congratulate Laurel on her new role with the Federal Reserve and we are thrilled to welcome Katherine to our firm,” said Michele Suriano, President of Castle Rock Investment Company. “Katherine’s experience collecting and interpreting data, researching contemporary economic issues and generating accessible articles will be invaluable to our clients.”

Castle Rock Investment Company is an entirely woman-owned registered investment adviser serving plan sponsors in Colorado, Nebraska, and Texas. Castle Rock focuses exclusively on workplace retirement plans to help plan sponsors meet their fiduciary obligations and increase retirement readiness for their employees. More information can be found at

Please contact Katherine at (303) 719-7523, or via e-mail at

Read the Official Press Release

Water Cooler Wisdom – First Quarter 2014

April 16th, 2014

Water Cooler Wisdom 1Q12Water Cooler Wisdom 1Q12A great deal happened in the world during the first quarter of 2014. The ECB may be pursuing quantitative easing, the Federal Reserve continues to send mixed messages about tapering, China is slowing down, the U.K. is set to grow the faster than any other advanced nation, and Gwyneth and Chris have split…or have they? According to the International Monetary Fund, the global growth outlook is positive, although the recovery is somewhat shaky and uneven. While there is a widespread fear of deflation worldwide, the hawks still stand by their position that uncontrolled inflation may still be in the future. In this economic environment, it is necessary to sift through a significant amount of noise to see the real economic picture.

The United States economy continues to grow but it is not going gangbusters. The polar vortex, along with the seemingly unending winter weather in the Eastern part of the United States, slowed economic growth during the first quarter of 2014. Regional economic indicators, including vehicle sales and employment, increased during the somewhat more temperate month of March, undoubtedly leaving residents and businesses looking forward to sunnier weather ahead. The unemployment rate remained unchanged at 6.7% and GDP increased by 2.6%. According to some analysts, the current inflation rate of 1.6% (see: Consumer Price Index) represents a lower bound to US inflation, The Federal Reserve continues to be committed to tapering but it seems somewhat reluctant to say ‘when’ due to continued concern about inflation. While the market will likely continue to experience spasms at every word Janet Yellen breathes, it may be more business as usual for the Fed in the near future.

Equities (see: Returns and Valuations by Style) have increased slightly but remain in what some would consider normal territory. It is important to note, however, that some sectors of the equities market have increased by 275.2% since the market low in March 2009. Overall, the market growth is not enough to risk substantial changes in inflation or interest rates but also not slow enough to decelerate overall growth. Essentially, it’s smooth-sailing.

As of April 9, 2014, the Office of the Comptroller of the Currency, the Federal Reserve and the FDIC approved a new rule requiring the eight largest U.S. banks to greatly increase their leverage ratio (essentially, they need to hold more capital). This rule is in response to the increased emphasis on macro-prudential regulation and the fact that many are still shaking in their boots from the aftershocks of the Global Financial Crisis. This rule will help to ensure that systemically important banks have the capital to lend in any economic environment, guarding against a credit contraction if market conditions were to negatively change. This may mean easier lending for smaller banks whose leverage ratio is not quite as high but since this rule does not take effect until 2018, the real results are yet to be seen.

Since the start of 2014, the discussion of unconventional monetary policies has been more, well, unconventional. The European Central Bank may be in the process of become policy bedfellows with the Federal Reserve, Bank of Japan and Bank of England by implementing quantitative easing as a monetary policy tool. The ECB has been considering this as well as negative interest rates to protect from decreasing inflation. These negative interest rates would affect deposits at the ECB since these banks would be required to actually pay to park their money. The monetary policy motive for this would be that these banks, avoiding the extra ‘tax,’ would rather lend out their money to the private sector. This would spur growth and ideally protect against the low inflation. Quantitative easing is a little trickier for the Eurozone. Whereas the US and UK can purchase bonds from their own individual markets, the ECB has 18 countries to choose from. Buying from France could give an unfair advantage, whereas purchasing bonds from Greece could throw Germany into an uproar. Some economists suggest that the ECB purchase Treasuries from the Fed to help unwind our rounds of quantitative easing. What a ‘taper tantrum’ that might cause.

While the economy is improving, there is still a long road ahead. However, given that holding cash yields a 0% return, it is still an attractive time to invest, regardless of the current interest rate climate (see: Asset Class Returns). So, go out, get invested, become diversified and have a wonderful spring.

Laurel Mazur is Castle Rock Investment Company’s Research Associate. Laurel Mazur is a graduate student at the University of Denver pursuing a dual Master’s degree in Economics and Global Finance, Trade, and Economic Integration. Most of her research and writing focuses on international monetary economics and central banking. She can be reached at


Water Cooler Wisdom – 4th Quarter

January 15th, 2014

Everyone should be delighted by the balances on their quarterly account statements and we hope the values hold steady throughout 2014. When including price changes and dividends:

  1. Standard & Poor’s 500 Index gained 32.39%.
  2. Nasdaq Composite Index gained 40.12% Russell 2000 Index gained 38.82%

As we know, the market runs ahead of the economy and most economists are optimistic for the coming year. In the J.P. Morgan charts that follow, you’ll see that the current price to earnings ratio for domestic stocks have exceeded the twenty-year average with the exception of large cap blend and growth. See “Returns and Valuations by Style.” Traders are looking for earnings growth to support last year’s market rise. See “Sources of Total Return.”
Consumers are positioned well if interest rates rise slowly and avoid dramatic shifts that affect home sales activity and overall consumer net worth. See “Consumer Finances.” Since there appears to be a consensus among experts, we have included Bob Doll’s predictions for the year ahead. He is the Chief Equity Strategist at Nuveen and former top strategist at BlackRock, the world’s largest asset manager.

  1. The U.S. economy grows 3% as housing starts surpass one million and private employment hits an all-time high
  2. 10-year Treasury yields move toward 3.5% as the Federal Reserve completes tapering and holds short-term rates near zero (see “Fixed Income Yields”)
  3. U.S. equities record another good year despite enduring a 10% correction
  4. Cyclical stocks outperform defensive stocks
  5. Dividends, stock buy-backs, capex, and M&A all increase at a double-digit rate
  6. The U.S. dollar appreciates as U.S. energy and manufacturing trends continue to improve (see “Manufacturing Momentum”)
  7. Gold falls for the second year and commodity prices languish
  8. Municipal bonds, led by high yield, outperform taxable bond counterparts
  9. Active managers outperform index funds
  10. Republicans increase their lead in the House but fall short of capturing the Senate

The risks to Mr. Doll’s predictions were highlighted in a January 6th, 2014 article in the Wall Street Journal posed as five questions:

  1. Will businesses finally shed their caution? (See “Corporate Profits and Leverage”)
  2. Will Washington’ s tentative truce continue?
  3. Will the Fed’s path out of bond buying get bumpy?
  4. Will the housing adjust easily to higher interest rates? 5. Will the rest of the world cooperate?

If you’ve watched the news over the past five years, it seems naïve to withhold doubt for 2014, but deep down…don’t you want to believe?

View Entire Document with Charts

Water Cooler Wisdom – Third Quarter 2013

October 23rd, 2013

During the last week in September, I was having another conversation about the economic ailments of the global economy with a long-time client. It seems that these conversations always turn depressing, so I promised him that I would write a cheerful commentary this quarter.

Then the U.S. government shut down.

Hmm, well that threw a wrench into the whole plan. We can’t talk about unemployment claims dropping because we’re not getting any government reports during the shutdown. We can’t talk about the projected GDP because we won’t know the impact until it’s over (forecasters are predicting a 0.1% drop in GDP for each week of the shutdown).

But then again, the day before the shutdown, the President signed a law that the 1.4 million active duty service members would continue to get paid. Then Hagel ordered back just under half of the 800,000 furloughed federal workers who are civilian workers for the Department of Defense while the House voted to provide back pay to furloughed workers once the now partial government shutdown ends. So, are we really shutdown or just giving a paid vacation to half a million Americans?

By the time you read this, we’ll have hopefully wrapped up the showdown on the debt ceiling and the budget impasse. If not, we have good news for wine drinkers. California is having a bumper crop of wine grapes this season.

If Congress was functional, we could celebrate the resiliency of the economy in the face of the sequester and end of the payroll tax holiday. During the third quarter, marginal revenue growth was strong, inflation low, the Fed accommodating, and personal net worth hit an all-time high. If we ignore for a moment the unwieldy Fed balance sheet and the eventual unwinding of one the largest financial experiments of our time, there would be enough good news to ring in the holidays with more cheer than we’ve had in over six years.

There still appears to be a big elephant in the room though…Obamacare. The time has come for the red headed step child of employee benefits, group healthcare insurance, to have her day. There are rising insurance rates, imploding exchanges, a new individual mandate, and questions about adverse selection. All of this is much more riveting than GDP growth and inflation hovering around 1.9% or the measly yields on cash. But then I regress…it’s still not cheerful.

So here is my top 5 list of reasons to be cheerful this holiday season:

  1. The return of Snooki and JWoww
  2. Thanksgiving, football, and beer
  3. We’re not Greece, yet.
  4. Tax on pot, unemployed stoners finally have to pay tax
  5. And yes….Denver has Peyton.

Hope you have wonderful holiday season!