New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

Navigating Market Challenges: Essential Insights for Southwest Gas Holdings Employees Amidst Tech Sector Volatility

Healthcare Provider Update: Healthcare Provider for Southwest Gas Holdings Southwest Gas Holdings provides healthcare benefits through a variety of insurers, primarily utilizing Aetna for their healthcare plans. This partnership enables employees to access a broad network of healthcare services. Expected Healthcare Cost Increases in 2026 As we approach 2026, healthcare costs are anticipated to soar, significantly impacting those affiliated with Southwest Gas Holdings. This expected surge stems from factors such as the expiration of enhanced federal subsidies for Affordable Care Act (ACA) plans, which could lead to a staggering increase of over 75% in out-of-pocket premiums for many enrollees. Moreover, aggressive rate hikes from major insurers, combined with rising medical costs, suggest that employees and retirees may face a challenging financial landscape in the coming year. Proactive management of health benefits and planning will be crucial for individuals navigating these increasing costs. Click here to learn more

During the intensely volatile first 100 trading days of 2022, the stocks of companies in the S&P 500 index delivered their worst performance since 1970. ¹ The S&P 500 continued to tumble, and the benchmark index descended into a bear market — typically defined as a sustained drop in stock prices of at least 20% — on June 13, 2022. When the market closed, the S&P 500 had dropped 21.8% from its January 3 peak, and the tech-heavy NASDAQ, already in bear territory, had plunged 32.7% from its November 19, 2021 peak. ²

Some investors who are nervous about the future and their portfolios seem to have taken a defensive stance by selling riskier assets, including investments in growth-oriented technology stocks.

What's triggering market volatility?
Throughout 2021 businesses across the U.S., like Southwest Gas Holdings, dealt with unpredictable demand shifts and supply shocks related to the pandemic, but near-zero interest rates and trillions of dollars in pandemic relief supported consumer spending, boosted economic growth, and drove record corporate profits. Companies in the S&P 500 posted profits in 2021 that were 70% higher than in 2020 and 33% higher than in 2019, which helped fuel a stock market total return of nearly 29%. ^3-4

But in the first months of 2022, investors began to worry that the anticipated tightening of monetary policies by the Federal Reserve — intended to cool off stubbornly high inflation — would stifle economic growth and cause a recession. Prices began rising in the spring of 2021 due to high demand, supply-chain issues, and a labor shortage that pushed up wages. Inflation picked up speed in the first quarter of 2022 when China's COVID-19 lockdowns impacted the supply of goods, and Russia's invasion of Ukraine sent already high global food and fuel prices through the roof. In May 2022, the Consumer Price Index rose at an annual rate of 8.6%, a 40-year high. ⁵

The relentless acceleration of price increases puts pressure on the Federal Open Market Committee (FOMC), which meets on June 14 and 15, to act aggressively to tame inflation. At the beginning of May, the FOMC raised the benchmark federal funds rate by 0.5% (to a range of 0.75%–1.00%). This was the first half-percent increase since May 2000, and Fed projections suggest there will be more to come. ⁶

Rising interest rates push bond yields upward, and the opportunity for higher returns from lower-risk bond investments makes higher-risk stock investments less attractive. Moreover, stock investors are buying a portion of a company's future cash flows, which become less valuable in an inflationary environment. Higher borrowing costs can also crimp consumers' spending power and cut into the profits of companies that rely on debt.

The downside of domination
Stocks tracked by the S&P Information Technology Sector Index, which fell 29.2% from a January 3 high, have been hit harder than the S&P 500 as a whole. Plus, like many benchmark indexes, the S&P 500 is weighted by market capitalization (the value of a company's outstanding shares). This gives the largest companies, most of which are in the tech sector, an outsized role in index performance. As of May 31, the information technology sector still accounted for 27.1% of the market cap of the S&P 500, compared with weightings of 14.4% for health care and 11.2% for financials, the next-largest sectors. Apple, Microsoft, Alphabet, and Amazon, respectively, are the four most-valuable companies in the index; Nvidia is ranked ninth and Meta has fallen to number 11. ⁷

For the past several years, tech stock gains drove the market to new heights, but when their share values began to plunge, they dragged the broader stock indexes down with them. A Wall Street Journal analysis of market data through May 17 found that just eight of the largest U.S. companies — the six previously mentioned, plus Netflix and Tesla (in the consumer discretionary sector) — were responsible for an astounding 46% of the S&P 500's 2022 losses (on a total return basis). ⁸

These well-known technology companies have grown into massive multinational businesses that have a major influence on everyday life. Some dominate their respective business spaces — social media, smartphones, online search and advertising, e-commerce, and cloud computing — enough to spark antitrust investigations and calls for stricter regulations in the United States and abroad. They also have plenty of cash on hand, which means they may be in better shape to withstand an economic slowdown than their smaller competitors. ⁹

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Takeaways for investors
Spreading investments among the 11 sectors of the S&P 500 is a common way to diversify stock holdings. But over time, a stock portfolio that was once diversified can become overconcentrated in a sector that has outperformed the broader market. Tech-sector stocks notched huge total returns of about 50% in 2019, 44% in 2020, and 35% in 2021, so Southwest Gas Holdings employees and retirees may want to look closely at the composition of their portfolio and consider rebalancing if they find themselves overexposed to this highly volatile sector. (Rebalancing involves selling some investments in order to buy others. Keep in mind that selling investments in a taxable account could result in a tax liability.) ¹⁰

If you feel shell-shocked after more than five months of market turbulence, we suggest our clients from Southwest Gas Holdings try to regain some perspective. Some market analysts view recent price declines as a painful but long overdue repricing of stocks with valuations that had grown excessive, as well as a reality check brought on by waning growth expectations. The forward price-to-earnings (P/E) ratio of companies in the S&P 500 has fallen from 23.3 at the end of 2021 to 17.8 in May 2022, much closer to the 10-year average of 16.9. ^11-12

It could be a while before investors can better assess how the economy and corporate profits will ultimately fare against fast-rising inflation and higher borrowing costs — and the stock market is no fan of uncertainty. Disappointing economic data and company earnings reports could continue to spark volatility in the coming months.

It may not be easy to take troubling headlines in stride, but if you have a sufficiently diversified, all-weather investment strategy, sticking to it is often the wisest course of action. If you panic and flee the market during a downturn, you won't be in a position to benefit from upward swings on its better days. And if you continue investing regularly for a long-term goal such as retirement, a down market may be an opportunity to buy more shares at lower prices.

The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Investments seeking a higher return tend to involve greater risk. Diversification is a method we suggest to our clients from Southwest Gas Holdings; it's used to help manage risk, but it's also important that Southwest Gas Holdings employees note that it doesn't guarantee a profit or protect against investment loss. The S&P 500 is an unmanaged group of securities that is considered representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary. Dollar-cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of fluctuating prices. Southwest Gas Holdings employees and retirees should consider their financial ability to continue making purchases during periods of low and high price levels. However, this can be an effective way for investors to accumulate shares to help meet long-term goals.

1) SIFMA, 2022
2) Yahoo! Finance, 2022
3) The New York Times, May 31, 2022
4, 7, 10-11) S&P Dow Jones Indices, 2022
5) U.S. Bureau of Labor Statistics, 2022
6) Federal Reserve, 2022
8) The Wall Street Journal, May 19, 2022
9) The New York Times, May 20, 2022
12) FactSet, 2022

How does the Southwest Carpenters Pension Plan accommodate changes in benefits for employees who have been affected by the COVID-19 pandemic, and what specific provisions have been implemented to ensure continuity of pension credit during such interruptions? Employees of the Southwest Carpenters Pension Plan are particularly encouraged to review how these provisions may impact their retirement plans and benefits, especially given the unprecedented circumstances of the pandemic.

The Southwest Carpenters Pension Plan accommodated changes due to COVID-19 by extending various deadlines for participants, such as the 12-month deadline to apply for pension credit for periods of disability, and other deadlines regarding claims and appeals. These extensions were applied from March 1, 2020, to a period of up to one year after the original deadline or 60 days after the end of the COVID-19 national emergency, ensuring continuity of pension credit during the pandemic interruptions(Southwest Carpenters Pe…).

What enhancements to pension benefit calculations have been introduced for the years following January 1, 2021, under the Southwest Carpenters Pension Plan, and how do these changes affect participants working more than 1,800 hours? This question emphasizes the implications of increased benefit accrual rates and the actual processes employees must follow to calculate their pensions effectively.

Enhancements to pension benefit calculations effective January 1, 2021, under the Southwest Carpenters Pension Plan include an increase in the monthly benefit accrual rate for participants working 1,800 hours or more. The rate increased from $100 to $200, and for those working more than 1,800 hours, a maximum benefit accrual rate of $244.44 was introduced(Southwest Carpenters Pe…).

In the context of the Southwest Carpenters Pension Plan, could you explain the eligibility criteria for receiving a Service Pension and how employees can accumulate the necessary Pension Credits more quickly? This consideration is vital for members who wish to understand the retirement options available to them and the strategies they might employ in their careers to maximize their benefits under the Southwest Carpenters Pension Plan.

Employees of the Southwest Carpenters Pension Plan are eligible for a Service Pension after earning 30 years of Pension Credit. Additional Service Pension Eligibility Credit was introduced, allowing employees working over 1,800 hours annually to accumulate credits more quickly, up to a maximum of 2,200 hours(Southwest Carpenters Pe…).

How do temporary disability benefits interact with the accumulation of Pension Credits within the Southwest Carpenters Pension Plan? Specifically, employees may have questions about how their working history and service time might be affected should they take leave for health-related reasons, highlighting the intricate balance between pay and benefits during challenging times.

Temporary disability benefits under the Southwest Carpenters Pension Plan allow participants to accumulate Pension Credits during non-working periods if they are on short-term disability or receiving workers' compensation. Pension Credits can be granted for up to 1,200 hours annually, depending on the nature of the disability and employment history(Southwest Carpenters Pe…).

What are the implications of the revised definitions under the Required Beginning Date as specified by the Southwest Carpenters Pension Plan, particularly in compliance with the SECURE Act (Setting Every Community Up for Retirement Enhancement Act)? Employees should understand how these legislative changes affect their retirement strategies, especially in light of penalties for failing to comply with mandatory commencement dates.

The Required Beginning Date for the Southwest Carpenters Pension Plan was revised to comply with the SECURE Act. Participants born on or after July 1, 1949, must begin receiving benefits by April 1 of the calendar year following the year they turn 72. Failure to comply with this could result in a 50% excise tax(Southwest Carpenters Pe…).

How can employees of the Southwest Carpenters Pension Plan navigate the process for applying for pension credit during periods of Temporary Disability, and what specific documentation is required? This inquiry encourages a deeper understanding of protocol surrounding disability applications and the associated benefits that participants are entitled to under the Plan.

Employees applying for pension credit during periods of Temporary Disability must submit a written application within one year of the onset of the disability, and provide documentation such as state-approved short-term disability certification or workers' compensation benefits(Southwest Carpenters Pe…).

What are the implications of the retroactive increases to the Southwest Carpenters Pension Plan benefits aimed at participants who accrued credit during the years 2011 to 2020, and how can affected employees determine their eligibility for said increases? Employees often seek clarification on how historical contributions can manifest in current benefits.

Retroactive increases to the Southwest Carpenters Pension Plan benefits for the years 2011 to 2020 apply to participants who worked at least 1,000 hours in 2020 or under specific collective bargaining agreements. A 50% increase in benefit accrual rates was applied to these years, and eligible employees can determine their eligibility based on their hours worked(Southwest Carpenters Pe…).

What role does the Southwest Carpenters Administrative Office play in assisting employees who have questions regarding modifiability in their pension plans, and what are the best methods for contacting them for assistance? This question highlights the importance of communication within the organization concerning employee inquiries and issue resolution.

The Southwest Carpenters Administrative Office assists employees with questions regarding modifications to their pension plans. Participants can contact them at (213) 386-8590 or (800) 293-1370 for personalized assistance(Southwest Carpenters Pe…).

Can you detail the factors influencing the Benefit Accrual Rate for participants of the Southwest Carpenters Pension Plan for the calendar years after 2021, and how might employees calculate their expected pension benefits? Participants will want to understand the nuances of how their benefits are computed to make informed decisions regarding their retirement planning.

The Benefit Accrual Rate for participants of the Southwest Carpenters Pension Plan after 2021 increased to $200 for 1,800 hours worked, with higher accrual rates for additional hours. Employees can calculate their benefits by multiplying their benefit accrual rate by the applicable benefit factor(Southwest Carpenters Pe…).

In the event of legal actions regarding benefits under ERISA against the Southwest Carpenters Pension Plan, what venue restrictions apply, and what does this mean for participants seeking resolution in disputes? Employees need to be informed of the legal frameworks governing their benefits and understand their rights and the procedures that affect their claims within the Southwest Carpenters Pension Plan.

Legal actions regarding benefits under ERISA against the Southwest Carpenters Pension Plan must be filed in Federal District Court in Los Angeles County, California. This venue restriction defines the jurisdiction where participants must file claims(Southwest Carpenters Pe…).