S ESOPs – An

C O N T E N T SPAGE 2Swerdlin Service Spotlight:Money Market Fund Changes Effective Soon

PAGE 3Say Good-bye...

PAGE 5ESOP SPOT

S ESOPs - An Amercian Dream

In Every Issue

DORN’SCORNER

Dorn Swerdlin

PAGE 1Dorn’s Corner

PAGE 4What’s Happenin’

continued on back cover 1

continued on page three

continued from front cover

Newsletter CoordinatorSusan Petrirena

Editorial Assistance:Dee Robbins

Actuaries and Employee Benefit Consultants5901 Peachtree Dunwoody RoadBuilding B, Suite 170Atlanta, GA 30328

6

C O N T R I B U T O R S

p: 770.396.6601 f: 770.396.0067

contact@swerdlin.com swerdlin.com

Swerdlin & Company is taking an active role in conserving the world’s resources by printing on FSC®-certified paper with environmentally-friendly ink. Please recycle this newsletter.

Newsletter Committee Members:Donna Martin, Dorn Swerdlin, Jeffrey Groves, Joanne Swerdlin,

Kim Hall, Nina Goralnik

Additional Contributors:Adrian Farnon and Elaine Dotson

DORN’SCORNER

ESOPSPOT

Third Quarter 2016 • Volume 22 • Issue 3

s e r v i c e s

5

As you may remember, I declared 2016 to be the Year of Resilience at Swerdlin & Company.

Last quarter I talked about Gregg Braden’s book, Resilience from the Heart. I’d like to summarize from last quarter some key points. Braden talked about how we can increase coherence between our hearts and brains and how this can result in increased resilience in our lives. Braden describes in the two steps below how you can do this.

Here are the 2 Steps:• Step 1: Heart Focus. Focus your attention on your heart rate and breathe a little deeper than normal (in for 5 or 6 seconds, and out for 5 or 6 seconds) as if your breath is coming from your heart. Picture yourself slowly breathing in and out through your entire heart area.

• Step 2: Activate a Positive Feeling. The key is to focus on something you truly appreciate. Make a sincere attempt to recall

a time you felt really good inside, and try to experience the feeling. Remember a special place or when you felt especially appreciative about someone or something in your life.

The Heartmath Institute (HMI), discussed in a previous Dorn’s Corner, has proven scientifically that increasing your heart rate variance (HRV) increases the coherence between your heart and brain.

In addition, HMI proved that increased coherence results in increased resilience and enhanced intuition, among other benefits.

In order to measure my resilience, I was curious to track my own (HRV). I wanted to see if the 2 steps above would really change my own heart rate. I ordered from the HMI a tool called Emwave, to measure my resilience.

This tool measures your heart rate variance. As your HRV increases, so does your resilience. Your intuition can also become enhanced.

Emwave is a small unit which attaches to a computer. You then attach a clamp to your ear which is also connected to the unit. The

computer screen shows your HRV as you breathe, while doing the two steps above: heart focus and positive feelings.You do this exercise for 5 minutes at a time.

I have been practicing with this tool for the past few months.

Here are some takeaways from my experience:• It is very clear that when I lose focus on the area around my heart, my HRV goes down. When I return to focusing on my heart, the HRV goes up.• The same thing happens when I lose focus on positive feelings. When I focus on those things for which I am grateful, my HRV goes up. • I can see some improvement in my resilience.

• On the other hand, I haven’t noticed any change in my intuition. Do you think my intuition is so good I can’t improve it? Probably not.

I’ve also been measuring my blood pressure before and after my emwave session. My blood pressure tends to go down after my emwave session; however, I am not finding the differ-ence to be statistically significant enough to claim cause and effect. I will continue to monitor this.

Hope you have had a great summer and enjoyed our discussions about resilience over the last few quarters.

I’ll be back next quarter for my 2017 Declaration for Swerdlin & Company!

Pension and 401(k) plans have to cover a broad swath of employees and vest their benefits (once earned, they cannot be forfeited). However, retiree medical plans can limit coverage and reduce or eliminate benefits at any time. Generally, an employee has to retire to be covered; there is none of this “quit when you are 45 and have the right to a benefit 20 years from now.” If a retiree medical plan gets too expensive, or if business conditions change, the employer can simply wind it up with little effort. Most retiree medical plan sponsors do not just wind them down; they turn them off slowly, allowing no more future retirees to benefit, but keeping the current retirees covered.

Forecasting Long-Term Healthcare Costs

Of those surveyed, 68% say they “support the concept of companies being owned by their employees.”

The poll also found that nearly 60% of Americans would favor legislation which would make it easier for employees to own a part of the business where they work. Moreover, 70% of respondents consider employee ownership of their companies to be All-American, like baseball, hot dogs and apple pie.

A Sub-chapter S corporation is a business entity that provides flow-through tax treatment to its shareholders. In the mid-90s, Congress “blessed” the S corporation ESOP structure.

Please let us know if you have any questions, or if there is a particular ESOP topic you would like us to discuss in a future newsletter article.

The intent was to encourage and expand retirement savings by giving hundreds of thousands

of American workers the opportunity to be given equity in the companies where they work. Today,

S corporation ESOPs do exactly what Congress intended: create jobs, generate economic activity, and promote retirement savings.

Both houses of Congress are currently considering bipartisan legislation,

expanding tax incentives to S corporations for establishing ESOPs. ESOPs provide

employees with ownership of their companies and a stake in its success!

So, no matter who ends up in the White House next January, the future

looks bright for S ESOPs.

a sampling of 853 registered voters were surveyed. The survey was performed for Employee-owned S Corporations of America (ESCA), an organization that both promotes and protects the interests of S corporations and, in particular, those with Employee Stock Ownership Plans (ESOPs).

According to a recent Public Policy Polling,

Many employers, including some of our clients, provide medical benefits to their retirees. These benefits come in all shapes and sizes. Some employers allow their retirees (and spouses or other dependents) to continue in the employee medical plan throughout their retirement. Other employers cover retirees only until they become eligible for Medicare. Some pay their retirees’ (and maybe the spouses’) Medicare Part B premium. Instead of medical coverage per se, some employers provide a fixed dollar monthly payment, much like a traditional pension. Usually, the retirees contribute towards their coverage.

It’s Fall, Ya’ll!

Swerdlin sponsors various charity events throughout the year to help raise money for families in need during the holidays. Swerdlin went through an expansion and renovation of its offices earlier this year. As a result, we discovered furniture and accessories that we were no longer going to use in the office. We held a silent auction for our employees to bid on these items and raised $1,100 for our charity fund.

2

WE CAN HELP YOUWITH THE FOLLOWING:

1. Actuarial services, including: • Defined Benefit • Cash Balance • Supplemental Executive Retirement Programs (SERPs) • Actuarial Expert Witness • Medicare Part D Actuarial Attestation • Post-retirement medical calculations: ASC 715-60 • Actuarial studies for Health & Welfare Plans • Compliance testing for self-funded plans

2. ESOP administration, including: • Publicly traded • Privately held • Leveraged • Non-leveraged • KSOPs • Repurchase Liability Studies 3. Other Defined Contribution Plans, including: • 401(k) • TPA & Recordkeeping Services • Cross-tested & age-weighted • 403(b), 401(a), 457

4. Cafeteria (Section 125) Plan Administration, including: • FSAs • POPs • HRAs • QTPs

5. Other consulting services, including: • Comprehensive Employee Benefit Statements • Plan Design • Employee Communication • Regulatory Compliance • Special Studies

Each retirement plan must retain anoutside broker or investment advisor.We are not investment advisors.

S W E R D L I N S E R V I C E S P O T L I G H T

How is our service? Communication is critical to any successful relationship. It is our goal to ensure you receive quality, timely service. If you have any comments concerning the service you have received from Swerdlin’s staff, or if you have suggestions for improvement, please contact us at suggestions@swerdlin.com

Give us a call at 770-396-6601 or800-507-9373 www.swerdlin.com

Glenda Gine – 21 yearsKathy Latour – 18 yearsAlicia Turner – 8 years

Graeme Hefner – 8 years Lorene Pierre – 8 years

Rita Teague – 8 yearsGary Anderson – 6 yearsScott Foreman – 6 years

Ana Marenco – 5 yearsDee McKnight – 4 years

Emily Kopp – 2 yearsLinda Brown – 2 years

Michael McHugh – 2 yearsRich Strom – 2 yearsDee Sidney – 1 year

Shayna Wallace – 1 yearLeah McNamara – 1 year

4

WHAT’S HAPPENIN’

Anniversaries We Celebrate this Quarter:

2424MELISSA SPENCER

3

On June 7-8, Joanne Swerdlin and Susan Petrirena sponsored and attended a Tri-State ESOP Conference in Providence, R.I.

We celebrated Barbara Sneed’s retirement on June 24. Barbara was a long-term employee of Swerdlin & Company and we will miss her. We hear that she is traveling, relaxing, and enjoying her retirement!

As an employer with an employee healthcare plan, every year you face new underwriting and cost increases; shopping your plan sometimes helps keep the increase to tolerable levels. As actuaries for our clients’ retiree medical plans, we need to consider not just next year’s increase in healthcare costs, but the yearly cost increase for decades to come. Employers with retiree medical benefits may be able to end their plans at will, but they still need to understand their potential commitment. If they prepare audited financial statements, those statements need to show a retiree medical plan liability that incorporates a best estimate of future healthcare costs.

How do we estimate those future healthcare costs? We do it in two steps. First, next year’s costs are based on the employer’s costs this year. Second, we estimate the percent increase in healthcare costs from now until forever. The healthcare industry publishes estimates of next year’s percentage increase in costs. We use these to estimate next year’s costs.

Our multi-year estimate of future healthcare cost increases starts with next year’s healthcare cost increase (2017 costs are expected to be about 6½% greater than 2016) and gradually reaches an ultimate level of about 2% over the Consumer Price Index (CPI). Based on surveys and data from the Federal Reserve Bank of Cleveland, we expect the long-term CPI to increase about 2–2¼% annually.

Since the 1960s, healthcare costs have increased at a much faster rate than overall consumer prices, as measured by the CPI. This was particularly true in the 1980s and 1990s. As overall inflation has decreased to its current 1½–2% level, healthcare cost inflation has also come down, but is still 4–5% higher than the CPI. As a percent of the total economy, the healthcare sector has grown from about 5% of Gross Domestic Product in 1960 to 17½% in 2014, the last year of available data.

“What next?” we ask. “How much of the economy can be dedicated to healthcare? How long can the increase in healthcare costs outpace the CPI?” Of course, we don’t know those answers, but many models of healthcare growth build in resistance at about 25%. In other words, once the healthcare sector is a quarter of the economy, economic forces (taxpayers, employers) will push back more firmly than today.

At its current rate of growth, healthcare will be 25% of the economy in the mid-2040s. Eventually, we would expect healthcare costs to grow only as fast as the economy grows. Since the economy is growing in real terms (i.e., faster than the CPI), healthcare costs will continue to grow faster than the CPI, unless the healthcare sector shrinks.

Healthcare growing to be one-quarter of the economy may seem unimaginable, but its growth so far has brought marked progress in the treatment of cardiovascular disease, infectious diseases, and cancer. Some people believe those advances to be worth the cost of a growing healthcare sector.

Money Market Fund Changes Effective SoonMany 401(k) plan participants like their money market funds. Money market funds (MMFs) hold very short-term fixed income investments and have historically been able to keep their net asset value (NAV) at $1.00 per share. Interest earned is immediately reinvested and the MMF account holders are credited with additional units. The typical 401(k) plan participant ignored the net asset value and the number of units and just focused on the dollar value of their account. Account values would only go up and there was never a risk of loss.

In 2008, the financial crisis serpent entered this Eden when one of the oldest MMFs was caught holding investments in bankrupt Lehman Brothers and its NAV dropped below $1 to 97¢. Account holders panicked, and there was a run on the fund. The SEC stepped in to re-write its money market fund rules, which they finalized in July 2014, now becoming effective October 14, 2016.

These rules will require many MMFs to have a fluctuating NAV, instead of the stable $1. For 401(k) plan participants, this is not a good situation. Allocating some of my account to a money market fund is like putting it in interest-earning cash and who wants to have cash lose its value? Other MMFs are still allowed to keep their stable $1 net asset value, but some can impose redemption fees of up to 2% or suspend redemptions temporarily during times of market stress. The only exemption is if an MMF is invested entirely in US government or Treasury notes.

Sponsors of 401(k) and other defined contribution plans need to decide whether and how these changes will affect their money market investment choices. Governmental MMFs are least affected by the new SEC rules—they may be the only MMFs that survive in these employer plans.

We welcome three new employees this quarter: Brittany Anderson joins our ESOP Team, Katrina Reustle, our DC Traditional

Team, and Stacie Green, our Cafeteria Department. We also welcome a new

summer intern this quarter, Kevin Lieu.

January, 2016, the IRS issued a notice of changes to the Determination Letter Program. Due to resource constraints in the IRS, effective January 1, 2017, there will only be three instances in which you can apply for a determination letter for your Plan Document. • The plan has never received a letter;• The plan is terminating; or• If resources are available, the IRS may make a special exception.

Forecasting Long-Term Healthcare Costscontinued from cover

It is time to put on your fiduciary hat and investigate the options.

In 2008, the financial crisis serpent entered

this Eden

Say Good-bye…

This ruling to change the Determination Letter Program does not have an impact on how the plan should operate. All Qualified Plans need to be operated in compliance with their plan document. The IRS will annually provide a Compliance List to employers to identify changes in qualification requirements that are effective during the calendar year.

Effective January 1, 2017

Barbara Sneed

Barbara Sneed’s retirement party, Michael McHugh,

Rigbe Hailesellassie, Adrian Farnon, and Barbara Sneed.

At our monthly STARs lunch on August 12, we decided to honor the anniversary of Hawaii becoming a state in August of 1959. We decided to dress up in our Hawaiian attire to celebrate this occasion!

Bucket List Dream fulfilledfor Steve Smith of Krieg

DeVault at Controlled Blasting, a Swerdlin client.

Several Swerdlin employees began the 4th of July celebration early by dressing in red, white and blue at the office on July 1.

Swerdlin has introduced a new initiative: monthly Cross-Team lunches. The goal is the hope of building stronger employee relationships. The first was held on August 9. Two teams were selected to be first. Lunch was served, the teams discussed the services provided by their teams for the company, as well as some personal information about themselves. Each month, two different teams will be selected for this event.

Congratulations to Platinum Team member, Tianna Barran, who married Duane Barret on July 1st.

July 12-15, Cynthia Navan and Oksana Pineiro attended EBIA’s 18th Annual Advanced Cafeteria Plans and Benefits Conference in Seattle, Washington.

August 3-4, Joanne Swerdlin and Susan Petrirena sponsored and attended the 15th Annual Tri-State ESOP Conference in Louisville, KY.

Swerdlin sponsors various charity events throughout the year to help raise money for families in need during the holidays. Swerdlin went through an expansion and renovation of its offices earlier this year. As a result, we discovered furniture and accessories that we were no longer going to use in the office. We held a silent auction for our employees to bid on these items and raised $1,100 for our charity fund.

2

WE CAN HELP YOUWITH THE FOLLOWING:

1. Actuarial services, including: • Defined Benefit • Cash Balance • Supplemental Executive Retirement Programs (SERPs) • Actuarial Expert Witness • Medicare Part D Actuarial Attestation • Post-retirement medical calculations: ASC 715-60 • Actuarial studies for Health & Welfare Plans • Compliance testing for self-funded plans

2. ESOP administration, including: • Publicly traded • Privately held • Leveraged • Non-leveraged • KSOPs • Repurchase Liability Studies 3. Other Defined Contribution Plans, including: • 401(k) • TPA & Recordkeeping Services • Cross-tested & age-weighted • 403(b), 401(a), 457

4. Cafeteria (Section 125) Plan Administration, including: • FSAs • POPs • HRAs • QTPs

5. Other consulting services, including: • Comprehensive Employee Benefit Statements • Plan Design • Employee Communication • Regulatory Compliance • Special Studies

Each retirement plan must retain anoutside broker or investment advisor.We are not investment advisors.

S W E R D L I N S E R V I C E S P O T L I G H T

How is our service? Communication is critical to any successful relationship. It is our goal to ensure you receive quality, timely service. If you have any comments concerning the service you have received from Swerdlin’s staff, or if you have suggestions for improvement, please contact us at suggestions@swerdlin.com

Give us a call at 770-396-6601 or800-507-9373 www.swerdlin.com

Glenda Gine – 21 yearsKathy Latour – 18 yearsAlicia Turner – 8 years

Graeme Hefner – 8 years Lorene Pierre – 8 years

Rita Teague – 8 yearsGary Anderson – 6 yearsScott Foreman – 6 years

Ana Marenco – 5 yearsDee McKnight – 4 years

Emily Kopp – 2 yearsLinda Brown – 2 years

Michael McHugh – 2 yearsRich Strom – 2 yearsDee Sidney – 1 year

Shayna Wallace – 1 yearLeah McNamara – 1 year

4

WHAT’S HAPPENIN’

Anniversaries We Celebrate this Quarter:

2424MELISSA SPENCER

3

On June 7-8, Joanne Swerdlin and Susan Petrirena sponsored and attended a Tri-State ESOP Conference in Providence, R.I.

We celebrated Barbara Sneed’s retirement on June 24. Barbara was a long-term employee of Swerdlin & Company and we will miss her. We hear that she is traveling, relaxing, and enjoying her retirement!

As an employer with an employee healthcare plan, every year you face new underwriting and cost increases; shopping your plan sometimes helps keep the increase to tolerable levels. As actuaries for our clients’ retiree medical plans, we need to consider not just next year’s increase in healthcare costs, but the yearly cost increase for decades to come. Employers with retiree medical benefits may be able to end their plans at will, but they still need to understand their potential commitment. If they prepare audited financial statements, those statements need to show a retiree medical plan liability that incorporates a best estimate of future healthcare costs.

How do we estimate those future healthcare costs? We do it in two steps. First, next year’s costs are based on the employer’s costs this year. Second, we estimate the percent increase in healthcare costs from now until forever. The healthcare industry publishes estimates of next year’s percentage increase in costs. We use these to estimate next year’s costs.

Our multi-year estimate of future healthcare cost increases starts with next year’s healthcare cost increase (2017 costs are expected to be about 6½% greater than 2016) and gradually reaches an ultimate level of about 2% over the Consumer Price Index (CPI). Based on surveys and data from the Federal Reserve Bank of Cleveland, we expect the long-term CPI to increase about 2–2¼% annually.

Since the 1960s, healthcare costs have increased at a much faster rate than overall consumer prices, as measured by the CPI. This was particularly true in the 1980s and 1990s. As overall inflation has decreased to its current 1½–2% level, healthcare cost inflation has also come down, but is still 4–5% higher than the CPI. As a percent of the total economy, the healthcare sector has grown from about 5% of Gross Domestic Product in 1960 to 17½% in 2014, the last year of available data.

“What next?” we ask. “How much of the economy can be dedicated to healthcare? How long can the increase in healthcare costs outpace the CPI?” Of course, we don’t know those answers, but many models of healthcare growth build in resistance at about 25%. In other words, once the healthcare sector is a quarter of the economy, economic forces (taxpayers, employers) will push back more firmly than today.

At its current rate of growth, healthcare will be 25% of the economy in the mid-2040s. Eventually, we would expect healthcare costs to grow only as fast as the economy grows. Since the economy is growing in real terms (i.e., faster than the CPI), healthcare costs will continue to grow faster than the CPI, unless the healthcare sector shrinks.

Healthcare growing to be one-quarter of the economy may seem unimaginable, but its growth so far has brought marked progress in the treatment of cardiovascular disease, infectious diseases, and cancer. Some people believe those advances to be worth the cost of a growing healthcare sector.

Money Market Fund Changes Effective SoonMany 401(k) plan participants like their money market funds. Money market funds (MMFs) hold very short-term fixed income investments and have historically been able to keep their net asset value (NAV) at $1.00 per share. Interest earned is immediately reinvested and the MMF account holders are credited with additional units. The typical 401(k) plan participant ignored the net asset value and the number of units and just focused on the dollar value of their account. Account values would only go up and there was never a risk of loss.

In 2008, the financial crisis serpent entered this Eden when one of the oldest MMFs was caught holding investments in bankrupt Lehman Brothers and its NAV dropped below $1 to 97¢. Account holders panicked, and there was a run on the fund. The SEC stepped in to re-write its money market fund rules, which they finalized in July 2014, now becoming effective October 14, 2016.

These rules will require many MMFs to have a fluctuating NAV, instead of the stable $1. For 401(k) plan participants, this is not a good situation. Allocating some of my account to a money market fund is like putting it in interest-earning cash and who wants to have cash lose its value? Other MMFs are still allowed to keep their stable $1 net asset value, but some can impose redemption fees of up to 2% or suspend redemptions temporarily during times of market stress. The only exemption is if an MMF is invested entirely in US government or Treasury notes.

Sponsors of 401(k) and other defined contribution plans need to decide whether and how these changes will affect their money market investment choices. Governmental MMFs are least affected by the new SEC rules—they may be the only MMFs that survive in these employer plans.

We welcome three new employees this quarter: Brittany Anderson joins our ESOP Team, Katrina Reustle, our DC Traditional

Team, and Stacie Green, our Cafeteria Department. We also welcome a new

summer intern this quarter, Kevin Lieu.

January, 2016, the IRS issued a notice of changes to the Determination Letter Program. Due to resource constraints in the IRS, effective January 1, 2017, there will only be three instances in which you can apply for a determination letter for your Plan Document. • The plan has never received a letter;• The plan is terminating; or• If resources are available, the IRS may make a special exception.

Forecasting Long-Term Healthcare Costscontinued from cover

It is time to put on your fiduciary hat and investigate the options.

In 2008, the financial crisis serpent entered

this Eden

Say Good-bye…

This ruling to change the Determination Letter Program does not have an impact on how the plan should operate. All Qualified Plans need to be operated in compliance with their plan document. The IRS will annually provide a Compliance List to employers to identify changes in qualification requirements that are effective during the calendar year.

Effective January 1, 2017

Barbara Sneed

Barbara Sneed’s retirement party, Michael McHugh,

Rigbe Hailesellassie, Adrian Farnon, and Barbara Sneed.

At our monthly STARs lunch on August 12, we decided to honor the anniversary of Hawaii becoming a state in August of 1959. We decided to dress up in our Hawaiian attire to celebrate this occasion!

Bucket List Dream fulfilledfor Steve Smith of Krieg

DeVault at Controlled Blasting, a Swerdlin client.

Several Swerdlin employees began the 4th of July celebration early by dressing in red, white and blue at the office on July 1.

Swerdlin has introduced a new initiative: monthly Cross-Team lunches. The goal is the hope of building stronger employee relationships. The first was held on August 9. Two teams were selected to be first. Lunch was served, the teams discussed the services provided by their teams for the company, as well as some personal information about themselves. Each month, two different teams will be selected for this event.

Congratulations to Platinum Team member, Tianna Barran, who married Duane Barret on July 1st.

July 12-15, Cynthia Navan and Oksana Pineiro attended EBIA’s 18th Annual Advanced Cafeteria Plans and Benefits Conference in Seattle, Washington.

August 3-4, Joanne Swerdlin and Susan Petrirena sponsored and attended the 15th Annual Tri-State ESOP Conference in Louisville, KY.

Swerdlin sponsors various charity events throughout the year to help raise money for families in need during the holidays. Swerdlin went through an expansion and renovation of its offices earlier this year. As a result, we discovered furniture and accessories that we were no longer going to use in the office. We held a silent auction for our employees to bid on these items and raised $1,100 for our charity fund.

2

WE CAN HELP YOUWITH THE FOLLOWING:

1. Actuarial services, including: • Defined Benefit • Cash Balance • Supplemental Executive Retirement Programs (SERPs) • Actuarial Expert Witness • Medicare Part D Actuarial Attestation • Post-retirement medical calculations: ASC 715-60 • Actuarial studies for Health & Welfare Plans • Compliance testing for self-funded plans

2. ESOP administration, including: • Publicly traded • Privately held • Leveraged • Non-leveraged • KSOPs • Repurchase Liability Studies 3. Other Defined Contribution Plans, including: • 401(k) • TPA & Recordkeeping Services • Cross-tested & age-weighted • 403(b), 401(a), 457

4. Cafeteria (Section 125) Plan Administration, including: • FSAs • POPs • HRAs • QTPs

5. Other consulting services, including: • Comprehensive Employee Benefit Statements • Plan Design • Employee Communication • Regulatory Compliance • Special Studies

Each retirement plan must retain anoutside broker or investment advisor.We are not investment advisors.

S W E R D L I N S E R V I C E S P O T L I G H T

How is our service? Communication is critical to any successful relationship. It is our goal to ensure you receive quality, timely service. If you have any comments concerning the service you have received from Swerdlin’s staff, or if you have suggestions for improvement, please contact us at suggestions@swerdlin.com

Give us a call at 770-396-6601 or800-507-9373 www.swerdlin.com

Glenda Gine – 21 yearsKathy Latour – 18 yearsAlicia Turner – 8 years

Graeme Hefner – 8 years Lorene Pierre – 8 years

Rita Teague – 8 yearsGary Anderson – 6 yearsScott Foreman – 6 years

Ana Marenco – 5 yearsDee McKnight – 4 years

Emily Kopp – 2 yearsLinda Brown – 2 years

Michael McHugh – 2 yearsRich Strom – 2 yearsDee Sidney – 1 year

Shayna Wallace – 1 yearLeah McNamara – 1 year

4

WHAT’S HAPPENIN’

Anniversaries We Celebrate this Quarter:

2424MELISSA SPENCER

3

On June 7-8, Joanne Swerdlin and Susan Petrirena sponsored and attended a Tri-State ESOP Conference in Providence, R.I.

We celebrated Barbara Sneed’s retirement on June 24. Barbara was a long-term employee of Swerdlin & Company and we will miss her. We hear that she is traveling, relaxing, and enjoying her retirement!

As an employer with an employee healthcare plan, every year you face new underwriting and cost increases; shopping your plan sometimes helps keep the increase to tolerable levels. As actuaries for our clients’ retiree medical plans, we need to consider not just next year’s increase in healthcare costs, but the yearly cost increase for decades to come. Employers with retiree medical benefits may be able to end their plans at will, but they still need to understand their potential commitment. If they prepare audited financial statements, those statements need to show a retiree medical plan liability that incorporates a best estimate of future healthcare costs.

How do we estimate those future healthcare costs? We do it in two steps. First, next year’s costs are based on the employer’s costs this year. Second, we estimate the percent increase in healthcare costs from now until forever. The healthcare industry publishes estimates of next year’s percentage increase in costs. We use these to estimate next year’s costs.

Our multi-year estimate of future healthcare cost increases starts with next year’s healthcare cost increase (2017 costs are expected to be about 6½% greater than 2016) and gradually reaches an ultimate level of about 2% over the Consumer Price Index (CPI). Based on surveys and data from the Federal Reserve Bank of Cleveland, we expect the long-term CPI to increase about 2–2¼% annually.

Since the 1960s, healthcare costs have increased at a much faster rate than overall consumer prices, as measured by the CPI. This was particularly true in the 1980s and 1990s. As overall inflation has decreased to its current 1½–2% level, healthcare cost inflation has also come down, but is still 4–5% higher than the CPI. As a percent of the total economy, the healthcare sector has grown from about 5% of Gross Domestic Product in 1960 to 17½% in 2014, the last year of available data.

“What next?” we ask. “How much of the economy can be dedicated to healthcare? How long can the increase in healthcare costs outpace the CPI?” Of course, we don’t know those answers, but many models of healthcare growth build in resistance at about 25%. In other words, once the healthcare sector is a quarter of the economy, economic forces (taxpayers, employers) will push back more firmly than today.

At its current rate of growth, healthcare will be 25% of the economy in the mid-2040s. Eventually, we would expect healthcare costs to grow only as fast as the economy grows. Since the economy is growing in real terms (i.e., faster than the CPI), healthcare costs will continue to grow faster than the CPI, unless the healthcare sector shrinks.

Healthcare growing to be one-quarter of the economy may seem unimaginable, but its growth so far has brought marked progress in the treatment of cardiovascular disease, infectious diseases, and cancer. Some people believe those advances to be worth the cost of a growing healthcare sector.

Money Market Fund Changes Effective SoonMany 401(k) plan participants like their money market funds. Money market funds (MMFs) hold very short-term fixed income investments and have historically been able to keep their net asset value (NAV) at $1.00 per share. Interest earned is immediately reinvested and the MMF account holders are credited with additional units. The typical 401(k) plan participant ignored the net asset value and the number of units and just focused on the dollar value of their account. Account values would only go up and there was never a risk of loss.

In 2008, the financial crisis serpent entered this Eden when one of the oldest MMFs was caught holding investments in bankrupt Lehman Brothers and its NAV dropped below $1 to 97¢. Account holders panicked, and there was a run on the fund. The SEC stepped in to re-write its money market fund rules, which they finalized in July 2014, now becoming effective October 14, 2016.

These rules will require many MMFs to have a fluctuating NAV, instead of the stable $1. For 401(k) plan participants, this is not a good situation. Allocating some of my account to a money market fund is like putting it in interest-earning cash and who wants to have cash lose its value? Other MMFs are still allowed to keep their stable $1 net asset value, but some can impose redemption fees of up to 2% or suspend redemptions temporarily during times of market stress. The only exemption is if an MMF is invested entirely in US government or Treasury notes.

Sponsors of 401(k) and other defined contribution plans need to decide whether and how these changes will affect their money market investment choices. Governmental MMFs are least affected by the new SEC rules—they may be the only MMFs that survive in these employer plans.

We welcome three new employees this quarter: Brittany Anderson joins our ESOP Team, Katrina Reustle, our DC Traditional

Team, and Stacie Green, our Cafeteria Department. We also welcome a new

summer intern this quarter, Kevin Lieu.

January, 2016, the IRS issued a notice of changes to the Determination Letter Program. Due to resource constraints in the IRS, effective January 1, 2017, there will only be three instances in which you can apply for a determination letter for your Plan Document. • The plan has never received a letter;• The plan is terminating; or• If resources are available, the IRS may make a special exception.

Forecasting Long-Term Healthcare Costscontinued from cover

It is time to put on your fiduciary hat and investigate the options.

In 2008, the financial crisis serpent entered

this Eden

Say Good-bye…

This ruling to change the Determination Letter Program does not have an impact on how the plan should operate. All Qualified Plans need to be operated in compliance with their plan document. The IRS will annually provide a Compliance List to employers to identify changes in qualification requirements that are effective during the calendar year.

Effective January 1, 2017

Barbara Sneed

Barbara Sneed’s retirement party, Michael McHugh,

Rigbe Hailesellassie, Adrian Farnon, and Barbara Sneed.

At our monthly STARs lunch on August 12, we decided to honor the anniversary of Hawaii becoming a state in August of 1959. We decided to dress up in our Hawaiian attire to celebrate this occasion!

Bucket List Dream fulfilledfor Steve Smith of Krieg

DeVault at Controlled Blasting, a Swerdlin client.

Several Swerdlin employees began the 4th of July celebration early by dressing in red, white and blue at the office on July 1.

Swerdlin has introduced a new initiative: monthly Cross-Team lunches. The goal is the hope of building stronger employee relationships. The first was held on August 9. Two teams were selected to be first. Lunch was served, the teams discussed the services provided by their teams for the company, as well as some personal information about themselves. Each month, two different teams will be selected for this event.

Congratulations to Platinum Team member, Tianna Barran, who married Duane Barret on July 1st.

July 12-15, Cynthia Navan and Oksana Pineiro attended EBIA’s 18th Annual Advanced Cafeteria Plans and Benefits Conference in Seattle, Washington.

August 3-4, Joanne Swerdlin and Susan Petrirena sponsored and attended the 15th Annual Tri-State ESOP Conference in Louisville, KY.

S ESOPs – An

C O N T E N T SPAGE 2Swerdlin Service Spotlight:Money Market Fund Changes Effective Soon

PAGE 3Say Good-bye...

PAGE 5ESOP SPOT

S ESOPs - An Amercian Dream

In Every Issue

DORN’SCORNER

Dorn Swerdlin

PAGE 1Dorn’s Corner

PAGE 4What’s Happenin’

continued on back cover 1

continued on page three

continued from front cover

Newsletter CoordinatorSusan Petrirena

Editorial Assistance:Dee Robbins

Actuaries and Employee Benefit Consultants5901 Peachtree Dunwoody RoadBuilding B, Suite 170Atlanta, GA 30328

6

C O N T R I B U T O R S

p: 770.396.6601 f: 770.396.0067

contact@swerdlin.com swerdlin.com

Swerdlin & Company is taking an active role in conserving the world’s resources by printing on FSC®-certified paper with environmentally-friendly ink. Please recycle this newsletter.

Newsletter Committee Members:Donna Martin, Dorn Swerdlin, Jeffrey Groves, Joanne Swerdlin,

Kim Hall, Nina Goralnik

Additional Contributors:Adrian Farnon and Elaine Dotson

DORN’SCORNER

ESOPSPOT

Third Quarter 2016 • Volume 22 • Issue 3

s e r v i c e s

5

As you may remember, I declared 2016 to be the Year of Resilience at Swerdlin & Company.

Last quarter I talked about Gregg Braden’s book, Resilience from the Heart. I’d like to summarize from last quarter some key points. Braden talked about how we can increase coherence between our hearts and brains and how this can result in increased resilience in our lives. Braden describes in the two steps below how you can do this.

Here are the 2 Steps:• Step 1: Heart Focus. Focus your attention on your heart rate and breathe a little deeper than normal (in for 5 or 6 seconds, and out for 5 or 6 seconds) as if your breath is coming from your heart. Picture yourself slowly breathing in and out through your entire heart area.

• Step 2: Activate a Positive Feeling. The key is to focus on something you truly appreciate. Make a sincere attempt to recall

a time you felt really good inside, and try to experience the feeling. Remember a special place or when you felt especially appreciative about someone or something in your life.

The Heartmath Institute (HMI), discussed in a previous Dorn’s Corner, has proven scientifically that increasing your heart rate variance (HRV) increases the coherence between your heart and brain.

In addition, HMI proved that increased coherence results in increased resilience and enhanced intuition, among other benefits.

In order to measure my resilience, I was curious to track my own (HRV). I wanted to see if the 2 steps above would really change my own heart rate. I ordered from the HMI a tool called Emwave, to measure my resilience.

This tool measures your heart rate variance. As your HRV increases, so does your resilience. Your intuition can also become enhanced.

Emwave is a small unit which attaches to a computer. You then attach a clamp to your ear which is also connected to the unit. The

computer screen shows your HRV as you breathe, while doing the two steps above: heart focus and positive feelings.You do this exercise for 5 minutes at a time.

I have been practicing with this tool for the past few months.

Here are some takeaways from my experience:• It is very clear that when I lose focus on the area around my heart, my HRV goes down. When I return to focusing on my heart, the HRV goes up.• The same thing happens when I lose focus on positive feelings. When I focus on those things for which I am grateful, my HRV goes up. • I can see some improvement in my resilience.

• On the other hand, I haven’t noticed any change in my intuition. Do you think my intuition is so good I can’t improve it? Probably not.

I’ve also been measuring my blood pressure before and after my emwave session. My blood pressure tends to go down after my emwave session; however, I am not finding the differ-ence to be statistically significant enough to claim cause and effect. I will continue to monitor this.

Hope you have had a great summer and enjoyed our discussions about resilience over the last few quarters.

I’ll be back next quarter for my 2017 Declaration for Swerdlin & Company!

Pension and 401(k) plans have to cover a broad swath of employees and vest their benefits (once earned, they cannot be forfeited). However, retiree medical plans can limit coverage and reduce or eliminate benefits at any time. Generally, an employee has to retire to be covered; there is none of this “quit when you are 45 and have the right to a benefit 20 years from now.” If a retiree medical plan gets too expensive, or if business conditions change, the employer can simply wind it up with little effort. Most retiree medical plan sponsors do not just wind them down; they turn them off slowly, allowing no more future retirees to benefit, but keeping the current retirees covered.

Forecasting Long-Term Healthcare Costs

Of those surveyed, 68% say they “support the concept of companies being owned by their employees.”

The poll also found that nearly 60% of Americans would favor legislation which would make it easier for employees to own a part of the business where they work. Moreover, 70% of respondents consider employee ownership of their companies to be All-American, like baseball, hot dogs and apple pie.

A Sub-chapter S corporation is a business entity that provides flow-through tax treatment to its shareholders. In the mid-90s, Congress “blessed” the S corporation ESOP structure.

Please let us know if you have any questions, or if there is a particular ESOP topic you would like us to discuss in a future newsletter article.

The intent was to encourage and expand retirement savings by giving hundreds of thousands

of American workers the opportunity to be given equity in the companies where they work. Today,

S corporation ESOPs do exactly what Congress intended: create jobs, generate economic activity, and promote retirement savings.

Both houses of Congress are currently considering bipartisan legislation,

expanding tax incentives to S corporations for establishing ESOPs. ESOPs provide

employees with ownership of their companies and a stake in its success!

So, no matter who ends up in the White House next January, the future

looks bright for S ESOPs.

a sampling of 853 registered voters were surveyed. The survey was performed for Employee-owned S Corporations of America (ESCA), an organization that both promotes and protects the interests of S corporations and, in particular, those with Employee Stock Ownership Plans (ESOPs).

According to a recent Public Policy Polling,

Many employers, including some of our clients, provide medical benefits to their retirees. These benefits come in all shapes and sizes. Some employers allow their retirees (and spouses or other dependents) to continue in the employee medical plan throughout their retirement. Other employers cover retirees only until they become eligible for Medicare. Some pay their retirees’ (and maybe the spouses’) Medicare Part B premium. Instead of medical coverage per se, some employers provide a fixed dollar monthly payment, much like a traditional pension. Usually, the retirees contribute towards their coverage.

S ESOPs – An

C O N T E N T SPAGE 2Swerdlin Service Spotlight:Money Market Fund Changes Effective Soon

PAGE 3Say Good-bye...

PAGE 5ESOP SPOT

S ESOPs - An Amercian Dream

In Every Issue

DORN’SCORNER

Dorn Swerdlin

PAGE 1Dorn’s Corner

PAGE 4What’s Happenin’

continued on back cover 1

continued on page three

continued from front cover

Newsletter CoordinatorSusan Petrirena

Editorial Assistance:Dee Robbins

Actuaries and Employee Benefit Consultants5901 Peachtree Dunwoody RoadBuilding B, Suite 170Atlanta, GA 30328

6

C O N T R I B U T O R S

p: 770.396.6601 f: 770.396.0067

contact@swerdlin.com swerdlin.com

Swerdlin & Company is taking an active role in conserving the world’s resources by printing on FSC®-certified paper with environmentally-friendly ink. Please recycle this newsletter.

Newsletter Committee Members:Donna Martin, Dorn Swerdlin, Jeffrey Groves, Joanne Swerdlin,

Kim Hall, Nina Goralnik

Additional Contributors:Adrian Farnon and Elaine Dotson

DORN’SCORNER

ESOPSPOT

Third Quarter 2016 • Volume 22 • Issue 3

s e r v i c e s

5

As you may remember, I declared 2016 to be the Year of Resilience at Swerdlin & Company.

Last quarter I talked about Gregg Braden’s book, Resilience from the Heart. I’d like to summarize from last quarter some key points. Braden talked about how we can increase coherence between our hearts and brains and how this can result in increased resilience in our lives. Braden describes in the two steps below how you can do this.

Here are the 2 Steps:• Step 1: Heart Focus. Focus your attention on your heart rate and breathe a little deeper than normal (in for 5 or 6 seconds, and out for 5 or 6 seconds) as if your breath is coming from your heart. Picture yourself slowly breathing in and out through your entire heart area.

• Step 2: Activate a Positive Feeling. The key is to focus on something you truly appreciate. Make a sincere attempt to recall

a time you felt really good inside, and try to experience the feeling. Remember a special place or when you felt especially appreciative about someone or something in your life.

The Heartmath Institute (HMI), discussed in a previous Dorn’s Corner, has proven scientifically that increasing your heart rate variance (HRV) increases the coherence between your heart and brain.

In addition, HMI proved that increased coherence results in increased resilience and enhanced intuition, among other benefits.

In order to measure my resilience, I was curious to track my own (HRV). I wanted to see if the 2 steps above would really change my own heart rate. I ordered from the HMI a tool called Emwave, to measure my resilience.

This tool measures your heart rate variance. As your HRV increases, so does your resilience. Your intuition can also become enhanced.

Emwave is a small unit which attaches to a computer. You then attach a clamp to your ear which is also connected to the unit. The

computer screen shows your HRV as you breathe, while doing the two steps above: heart focus and positive feelings.You do this exercise for 5 minutes at a time.

I have been practicing with this tool for the past few months.

Here are some takeaways from my experience:• It is very clear that when I lose focus on the area around my heart, my HRV goes down. When I return to focusing on my heart, the HRV goes up.• The same thing happens when I lose focus on positive feelings. When I focus on those things for which I am grateful, my HRV goes up. • I can see some improvement in my resilience.

• On the other hand, I haven’t noticed any change in my intuition. Do you think my intuition is so good I can’t improve it? Probably not.

I’ve also been measuring my blood pressure before and after my emwave session. My blood pressure tends to go down after my emwave session; however, I am not finding the differ-ence to be statistically significant enough to claim cause and effect. I will continue to monitor this.

Hope you have had a great summer and enjoyed our discussions about resilience over the last few quarters.

I’ll be back next quarter for my 2017 Declaration for Swerdlin & Company!

Pension and 401(k) plans have to cover a broad swath of employees and vest their benefits (once earned, they cannot be forfeited). However, retiree medical plans can limit coverage and reduce or eliminate benefits at any time. Generally, an employee has to retire to be covered; there is none of this “quit when you are 45 and have the right to a benefit 20 years from now.” If a retiree medical plan gets too expensive, or if business conditions change, the employer can simply wind it up with little effort. Most retiree medical plan sponsors do not just wind them down; they turn them off slowly, allowing no more future retirees to benefit, but keeping the current retirees covered.

Forecasting Long-Term Healthcare Costs

Of those surveyed, 68% say they “support the concept of companies being owned by their employees.”

The poll also found that nearly 60% of Americans would favor legislation which would make it easier for employees to own a part of the business where they work. Moreover, 70% of respondents consider employee ownership of their companies to be All-American, like baseball, hot dogs and apple pie.

A Sub-chapter S corporation is a business entity that provides flow-through tax treatment to its shareholders. In the mid-90s, Congress “blessed” the S corporation ESOP structure.

Please let us know if you have any questions, or if there is a particular ESOP topic you would like us to discuss in a future newsletter article.

The intent was to encourage and expand retirement savings by giving hundreds of thousands

of American workers the opportunity to be given equity in the companies where they work. Today,

S corporation ESOPs do exactly what Congress intended: create jobs, generate economic activity, and promote retirement savings.

Both houses of Congress are currently considering bipartisan legislation,

expanding tax incentives to S corporations for establishing ESOPs. ESOPs provide

employees with ownership of their companies and a stake in its success!

So, no matter who ends up in the White House next January, the future

looks bright for S ESOPs.

a sampling of 853 registered voters were surveyed. The survey was performed for Employee-owned S Corporations of America (ESCA), an organization that both promotes and protects the interests of S corporations and, in particular, those with Employee Stock Ownership Plans (ESOPs).

According to a recent Public Policy Polling,

Many employers, including some of our clients, provide medical benefits to their retirees. These benefits come in all shapes and sizes. Some employers allow their retirees (and spouses or other dependents) to continue in the employee medical plan throughout their retirement. Other employers cover retirees only until they become eligible for Medicare. Some pay their retirees’ (and maybe the spouses’) Medicare Part B premium. Instead of medical coverage per se, some employers provide a fixed dollar monthly payment, much like a traditional pension. Usually, the retirees contribute towards their coverage.

It’s Fall, Ya’ll!