October 14, 2016 is an important date for anyone who currently holds a Money Market Account. On this date, a couple very important regulations will go into effect surrounding how Money Market Accounts are handled.
Back in 2014, the US Securities and Exchange Commission (SEC) adopted new money market fund rules. The rules were designed to reduce the risk of investor runs on money market funds should another financial crisis occur the likes of 9/11. The new rules require institutional money market funds to float the net asset value (NAV) (share price) in such a manner that it reflects the fair value of the investments the fund holds. This creates the possibility that an investor could lose money on this type of fund.
The newly adopted rules also permit a board of directors of a fund to impose liquidity fees and so-called “gates on redemptions.” The fees and gates do not apply to government money market funds, although governing boards of those funds may impose them if they feel it is in the best interest of the funds. The SEC rules also require increased transparency. Daily and weekly liquid asset values and market-based NAVs will be required.
So what does this mean to you? Quite frankly, now is the time to review your plan’s current money market fund holdings and make decisions on what to do going forward. If you haven’t already made plans to do so, sit down with a trusted adviser (we recommend fee-only, like the team here at Financial Fiduciaries) so they can explain the rules and show you if and how they will affect your retirement plans.