IRS Announces 2025 Retirement Plan Limits
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In This Issue
Compliance and Regulatory IRS Announces 2025 Retirement Plan Limits On November 1, 2024, the IRS announced that the contribution limit for 401k plans will increase to $23,500 for 2025, up from $23,000 in 2024. Additionally, the IRS provided technical guidance on cost-of-living adjustments impacting pension plans and other retirement-related items for tax year 2025 in Notice 2024-80. Source: 401khelpcenter.com IRS Announces 2025 Cost of Living Adjustments to Various Retirement Plan Limits The IRS has announced cost-of-living adjustments for retirement plan limitations effective January 1, 2025. While inflation rates have stabilized, resulting in modest increases, these adjustments are still welcomed. The updated limits include slight increases in the 415 and 402(g) limits, as well as new limits for additional catch-up contributions for participants aged 60-63 and deferral limits for Starter 401k Plans. Source: Ferenczylaw.com Four SECURE 2.0 Provisions Plan Sponsors Are Likely to Add Fidelity Investments surveyed 2,000 clients to assess interest in the optional provisions of the SECURE 2.0 Act among plan sponsors. The survey highlighted the top four provisions that plan sponsors are keen to adopt. They are outlined in this article. It also indicated that smaller plan sponsors are likely to have the lowest adoption rates due to the increased complexity of implementing each new provision. Source: Consultrms.com SECURE 2.0 Act: Provisions for Implementation in 2025 The SECURE 2.0 Act introduced several sweeping changes to how Americans can use retirement savings plans. Some provisions have already taken effect, while others are scheduled for implementation in 2025 and beyond. Financial advisors and plan sponsors should be aware of these upcoming provisions, as many will require a decision on whether to opt in or out. This article provides a summary of the key changes for 2025 that financial advisors and plan sponsors need to know. Source: Consultrms.com Consequences to a Participant Who Makes Excess Deferrals to a 401k Plan IRC Section 402(g) limits the amount of elective deferrals a participant may exclude from taxable income in a calendar year. This IRS "snapshot" examines the consequences to a participant who makes excess elective deferrals to a 401k plan. Source: Irs.gov How Are Plans Handling Missing Participants? The article addresses the difficulties plan administrators encounter in locating missing participants and distributing their plan balances, especially for terminated employees. Although there are no specific regulations from the DOL regarding this issue, plan sponsors are expected to show a reasonable effort to distribute funds to these individuals. A survey conducted by the Plan Sponsor Council of America in September 2024 revealed insights from 234 plan sponsors across various sectors about their strategies for managing missing participants and small plan balances. Will Hansen, the Executive Director of PSCA, noted that this concern is prevalent among plan sponsors, who allocate considerable time and resources to the issue. The survey aims to highlight current trends and practices in addressing these administrative challenges. Source: Ntsa-net.org »» Click here for more Compliance and Regulatory Material Insight: Studies, Research, Analysis, and Papers The GAO report emphasizes the significance of employer-sponsored 401k plans for retirement savings, highlighting the role of mandatory fee disclosures by the Department of Labor. Since 2012, 401k plan fees have generally decreased, with various factors -- including fee disclosures -- contributing to this trend. The DOL implemented fee disclosure regulations in 2010 and 2012 to enhance awareness among plan sponsors and participants regarding fees and investment performance. Overall, while fee disclosures have positively influenced the management of 401k plans, enhancing financial literacy among participants may further improve their engagement and understanding. Source: Gao.gov Saving for Retirement Can Be Challenging: Help Your People The article from Segal Consulting discusses the challenges employees face in saving for retirement and emphasizes the crucial role employers can play in alleviating these difficulties. It highlights that many workers struggle with financial literacy and are overwhelmed by competing financial priorities, making it hard to focus on long-term savings. Employers are encouraged to implement strategies such as providing educational resources, personalized financial advice, and robust retirement plan options to assist their workforce. The piece advocates for a proactive approach to retirement planning, underscoring the mutual benefits for both employees and employers in fostering a supportive environment for saving for retirement. Source: Segalco.com Schwab 401k Study: Employers Step Up to Help Workers Manage Financial Stress The Charles Schwab 401k Study reveals that employers are increasingly taking proactive steps to assist employees in managing financial stress, particularly in the context of retirement savings. The study highlights a growing awareness among employers of the impact that financial difficulties can have on employee well-being, productivity, and overall job satisfaction. In response, many organizations are implementing resources and support systems, such as financial wellness programs and educational tools, to empower workers in their financial decision-making. The findings emphasize the significant role that employers play in fostering a supportive environment that promotes financial literacy and stability, ultimately benefiting both employees and the organizations they work for. Source: Schwab.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers and Other Service Providers Most Hybrid RIAs Favor Retirement Fiduciary Standard The article discusses a survey of hybrid registered investment advisors, which are firms that offer both investment advisory and brokerage services. The survey revealed that a significant majority of these hybrid RIAs (68%) prefer a fiduciary standard for retirement advice. The fiduciary standard requires advisors to act in the best interests of their clients, ensuring that the advice given is not only suitable but also beneficial for the client's financial well-being. The findings highlight a growing consensus among RIAs regarding the importance of transparency and ethical standards in retirement planning. Source: Planadviser.com DOL Fiduciary Rule Update -- Where Are We Now and Best Practices for Retirement Investors: Podcast This podcast features a "Lessons From The Front Lines" discussion focusing on the DOL Fiduciary Rule. The panel of experts, including Jason Berkowitz from the Insured Retirement Institute, David Kaleda from the Groom Law Group, and Jason Roberts from the Pension Resource Institute, will share insights on the current status of the rule, future developments, and best practices for firms regarding investment recommendations and services for retirement investors. Source: Complianceincontextpodcast.com 403b Plans 403b Specific Financial Statement Audit Considerations This article outlines the unique aspects of auditing 403b retirement plans compared to 401k plans. It emphasizes that each Independent Qualified Public Accountant (IQPA) audit is tailored due to the diversity in service providers, plan structures, payroll systems, and internal controls. The discussion includes specific audit considerations pertinent to 403b plans, focusing on the types of employers eligible to offer these plans and other relevant factors for IQPAs during the audit process. Source: Belfint.com Plan Automation Automatic Enrollment: Fred Reish on Things I Worry About The article discusses concerns related to automatic enrollment in 401k retirement plans. While automatic enrollment aims to increase participation rates in retirement savings, there are several potential issues that the author, Fred Reish, raises. Overall, the article underscores the need for careful consideration and education when implementing automatic enrollment to ensure it meets the best interests of employees. Source: Fredreish.com Savings Boost From Auto-Enrollment Wanes Over Time The article from the Center for Retirement Research discusses how the benefits of automatic enrollment in retirement savings plans diminish over time. While automatic enrollment initially boosts participation rates, the effect wanes as employees become more accustomed to the system. Over time, individuals often opt out or fail to increase their contributions, leading to insufficient retirement savings. The study highlights the need for additional strategies, such as auto-escalation of contributions, to maintain high savings rates and improve long-term retirement readiness. Source: Bc.edu »» Click here for more on Automatic 401k Plan Features Court and Legal Sixth Circuit Revives Kellogg Excessive Fee Case Over Arbitration Clause Dispute The article discusses a decision by the Sixth Circuit Court of Appeals to revive an excessive fee lawsuit against Kellogg's retirement plan. The court ruled that the arbitration clause in the plan documents was unenforceable because it could prevent plan participants from pursuing their claims effectively. The case centers on allegations that Kellogg's retirement plan charged excessive fees, and the ruling emphasizes the importance of access to legal recourse for employees in retirement plans. The decision is significant as it addresses the balance between arbitration agreements and participants' rights in employee benefit plans. Source: Plansponsor.com Coca-Cola Southwest Faces Lawsuit Over Forfeitures, Target-Date Funds Former participants of the Coca-Cola Southwest Beverages LLC 401k plan have filed a lawsuit alleging that the company breached its fiduciary duties under ERISA. The complaint, known as Ware et al. v. Coca-Cola Southwest Beverages LLC, claims that the company offered "underperforming" target-date funds and mismanaged forfeited 401k funds. Specifically, the plaintiffs allege that the J.P. Morgan TDFs provided by Coca-Cola SW were expensive and underperformed compared to similar funds and benchmarks. The case is being heard in the U.S. District Court for the Northern District of Texas. Source: Plansponsor.com »» Click here for more Court and Other Legal Issues Marketplace News IRS Announces 2025 Retirement Plan Limits 2025 Retirement Plan Adviser of the Year Nomination Period Is Open PensionPro, Finch Join Forces to Streamline Plan Administration LeafHouse Ramps Up Personalization With New BlackRock, iJoin Collaboration
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