Election 2024: What Could the Results Mean for Retirement Policy?
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Legislative and Washington DC Election 2024: What Could the Results Mean for Retirement Policy? The Republican control of the Executive Branch and the Senate could significantly impact retirement and tax policies, although the House of Representatives control is still uncertain due to outstanding races. Former President Donald Trump has regained the presidency but has not proposed substantial policies on retirement security, aside from eliminating taxes on Social Security benefits. His administration is expected to aim at reversing various Labor Department initiatives that were established under Biden. Source: Asppa-net.org ERISA Experts See Regulation Pullback as Key Theme of Trump Rule The return of President-elect Donald Trump and a potential Republican majority in Congress is expected to significantly impact the employer-sponsored retirement plan industry. Experts anticipate several changes, including the likely repeal of the fiduciary rule, a shift in how environmental, social, and governance factors are considered in investments, continued tax cuts, and more relaxed regulations on alternative investments in defined contribution plans. While some changes may enhance services, there are concerns about potential obstacles, such as efforts to find revenue from tax-advantaged savings and the dropping of a proposed national individual retirement account mandate. Source: Planadviser.com »» Click here for more on Legislative and Washington Actions Fiduciary and Plan Governance Understanding Your Role as an ERISA Plan Administrator ERISA Plan administrators and sponsors serve as fiduciaries, carrying a legal obligation to uphold the highest standards of care and service for plan participants. Due to the critical nature of the retirement assets they manage, the Department of Labor demands exceptional standards and accountability from these fiduciaries. To assist in adhering to these complex regulations, a set of best practices has been outlined here to ensure that plans meet these high expectations. Source: Cshco.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, and Papers Difficult Work Pushes More Blacks Into Early Retirement The article explores the factors leading to early retirement among Black workers. It highlights how challenging working conditions, including physically demanding jobs, workplace discrimination, and health disparities, contribute to a higher propensity for early retirement in this demographic. Overall, the article underscores the need to understand the specific challenges faced by Black workers in the retirement landscape. Source: Bc.edu New Research on 401k Loans and Leakage Unveils a Big Surprise A recent paper from researchers at Harvard, Yale, and Vanguard presents a new perspective on retirement plan leakage, particularly regarding 401k loans and withdrawals. Titled "Does 401k Loan Repayment Crowd Out Retirement Saving? Implications for Plan Design," the study examines the impact of legislative changes under SECURE 2.0, especially the provision allowing penalty-free emergency withdrawals of up to $1,000. The authors argue that these changes may increase early withdrawals, highlighting the balance between immediate liquidity needs and long-term wealth accumulation. Source: Asppa-net.org The Pontera 401k survey reveals that financial advisors play a vital role in enhancing the financial knowledge and confidence of retirement savers in the U.S. Key findings indicate that individuals working with advisors feel significantly more prepared for retirement, with higher levels of understanding about 401(k) plans and investment strategies. Advisors help clarify complex financial concepts, leading to more informed decision-making among clients. The survey underscores the importance of professional guidance in effective retirement planning. Source: Prnewswire.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers and Other Service Providers Top 10 Lead Producing Campaigns for 401k Advisors in 2025 The article discusses innovative strategies for 401k advisors to generate leads and succeed in a competitive and evolving landscape. It reviews ten lead campaigns to elevate your practice. Additionally, the article emphasizes understanding the needs of plan sponsors and employees, suggesting topics to address in content creation that resonate with diverse financial challenges. Source: 401k-Marketing.com Common Practices to Question in the Retirement Industry: Part One The article discusses various deeply ingrained practices within the retirement industry that may warrant reexamination. The piece emphasizes that while certain methods have been standard for years, they may not be serving participants' best interests or the broader goals of retirement security. Five examples are provided. Overall, the article urges industry stakeholders to critically assess established practices to ensure they align with the evolving needs of retirement plan participants and promote better financial wellness. Source: Asppa-net.org Court and Legal John Hancock, Not 401k Plan, Receives Fruit of Foreign Tax Credits in Pooled Investments In a certified class action lawsuit, 401k plan trustees accused John Hancock Life Insurance Company of breaching fiduciary duties under ERISA. They claimed that John Hancock did not pass on foreign tax credits to the plans, resulting in a decrease in the plans' asset value, and argued that the company profited from these credits without disclosing this in contract terms. The plaintiffs asserted that this behavior constituted a prohibited transaction since the plans were burdened with double taxation. However, the court ruled that John Hancock was not acting as a fiduciary in managing the separate accounts for the retirement investments or when obtaining the foreign tax credits. Source: Yourerisawatch.com Clorox Wins First Round in 401k Plan Forfeiture Lawsuit A class action lawsuit by former Clorox employee James McManus regarding the company's handling of forfeited 401k funds was mostly dismissed by U.S. District Judge Yvonne Gonzalez Rogers. The judge ruled that McManus's breach of fiduciary duty claim under ERISA was too broad and required more specific details. McManus was given until November 12 to revise his complaint, emphasizing the need to demonstrate "special circumstances" affecting fund management, referencing a U.S. Supreme Court standard. McManus argued that Clorox improperly used forfeited contributions to offset the company's expenses, while Clorox maintained that reallocating forfeitures within the plan is permissible under ERISA. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Compliance and Regulatory What Are the Consequences of Excess Deferrals? IRS Offers a Look When a participant makes excess deferrals to a 401k plan, there are significant implications, as detailed by the IRS in their Issue Snapshot. The IRS outlines the limitations on elective deferrals, their treatment under tax law, and the implications related to catch-up contributions under IRC Section 414(v). Excess deferrals can lead to increased income tax liability for participants, and if mismanaged, could jeopardize a plan's qualified status. The IRS also provides guidance for employers and plan sponsors on how to audit elective deferrals effectively. Source: Asppa-net.org Plan Sponsors Cannot Have Roth-Only Catch Ups for All Employees The IRS will not allow retirement plan sponsors to mandate that all participants make catch-up contributions on a Roth basis for easier plan administration. According to Kelsey Mayo of the American Retirement Association, individuals earning $145,000 or less must still have the option for traditional catch-up contributions. This aligns with the SECURE 2.0 Act, which requires those earning over $145,000 to make catch-up contributions on a Roth basis to generate additional revenue by reducing pre-tax contributions. Previously, catch-up contributions could be made on either a pre-tax or Roth basis, depending on the plan sponsor's terms. Source: Napa-net.org Are Plan Forfeitures Being Properly Utilized in Qualified Retirement Plans? In February 2023, the Internal Revenue Service issued proposed regulations to update the rules regarding the use of forfeitures by qualified retirement plans. Plan sponsors must ensure that plan forfeitures are used appropriately to avoid any operational failures and to comply with their fiduciary duties. The proposed regulations apply for plan years beginning on or after January 1, 2024, and provide a compliance transition period. Source: Icemiller.com Retirement Plan Disaster Relief Recent news highlights the increasing frequency of natural disasters across the United States, affecting many people. Although these catastrophes cannot be prevented, the SECURE 2.0 Act has made it easier for retirement plan participants to access their savings after such events. This federal legislation allows retirement plan sponsors to provide greater access to funds following a federally recognized disaster, streamlining the previous process which required individual congressional measures for each disaster. Once a major disaster is declared by the President, relief options become available for approximately six months, allowing individuals in the affected areas who have suffered economic losses to access their retirement savings. Source: Legacyrsllc.com SECURE 2.0 2025 Catch-Up Contribution Increase The SECURE 2.0 Act of 2022 introduced changes to catch-up contributions under the Internal Revenue Code that have delayed effective dates. Notably, Section 109 increases the limit on catch-up contributions, effective for tax years beginning January 1, 2025. A second provision requires that catch-up contributions for employees earning over $145,000 in FICA wages be made as Roth contributions. Initially set to begin on January 1, 2024, this requirement has now been postponed to January 1, 2026, pending IRS guidance. Currently, catch-up contributions from higher-paid employees do not need to be made as Roth contributions. Source: Ferenczylaw.com Retirement Plan Amendments and 2024 Year-End Action Items The notice advises plan sponsors to prepare for 2024 IRS year-end amendments and outlines key action items. This includes amendments related to qualified plans, catch-up contributions under the SECURE Act 2.0, and the IRS final rule regarding required minimum distributions after death. The advisory emphasizes upcoming deadlines for amending qualified retirement plans and encourages plan sponsors to review other important considerations. Source: Alston.com »» Click here for more Compliance and Regulatory Material Marketplace News Voya Remains on Track for OneAmerica Retirement Integration in 2025
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