Top 10 Highlights from PSCA's Newest Survey of 401k Plans
|
Newsletter Sponsor The Fall Selling Season is Here! The 24th Edition of the 401k Averages Book is essential for evaluating your current and prospective clients' 401k plans. This edition provides crucial insights into advisor compensation, recordkeeping, and investment fees. The data points will give you a deeper understanding of average 401k costs empowering you to make well-informed decisions for your prospects and clients. Click here to order your copy. In This Issue
Insight: Studies, Research, Analysis, or Papers Top 10 Highlights from PSCA's Newest Survey of 401k Plans In 2023, 401k plan contribution rates saw a modest increase as both employers and participants contributed slightly more than the previous year, although they have not yet returned to the record highs of 2021. This information is derived from the 67th Annual Survey of 401k Plans by The Plan Sponsor Council of America (PSCA). The survey indicates a rise in contributions, coinciding with plan sponsors focusing on the implementation of mandatory provisions from SECURE 2.0, along with decisions on optional provisions. Hattie Greenan, PSCA's director of research and communications, noted the dual focus of maintaining contributions while incorporating design features to support participant financial needs. This outlines the top 10 highlights from the survey. Source: 401kspecialistmag.com Retirement Industry Trends to Look Out for in 2025 A recent report from the Institutional Retirement Income Council suggests that as we approach 2025, there will be a significant increase in the adoption and innovation of retirement income solutions. This trend stems from both employers and participants seeking guaranteed income options in response to rising costs and lower savings. According to a 2024 Invesco report, 54% of participants would prefer to remain in their employer's plan post-retirement if it included a monthly payout feature. However, a separate Allianz Life study reveals that only 44% of Americans currently have a strategy for generating retirement income, even as plan sponsors are beginning to incorporate guaranteed income options. With the decline of traditional pensions, there is an anticipated growth in the demand for these retirement income features. Source: 401kspecialistmag.com 34% of Gen Z Canadians Relying on Inheritance to Meet Retirement Goals: Survey A recent survey by Vanguard Group Inc. reveals differing perspectives on inheritance among Canadians. While 34% of Canadians aged 18 to 34 view an inheritance as crucial for retirement, only 31% of baby boomers expect to leave money for their children. Over half of Gen Z respondents anticipate receiving an inheritance, but 39% don't see asset transfer as important. Additionally, 35% of those 55 and older are worried about needing their assets for health care, extended retirement, or living costs. Source: Benefitscanada.com Half of Women Retirees Say Retirement Is Pricier Than They Expected A recent survey by Morning Consult for Corebridge Financial reveals that only 20% of retired women feel their retirement matches their expectations, while 25% find it completely different from what they anticipated. The primary surprise for these women is the cost of retirement, with 50% stating it has been more expensive than expected. Despite 51% reporting their financial health as good or very good, 63% wish they had started saving earlier. Corebridge Financial's retirement services president, Terri Fiedler, noted the disconnect between expectations and reality in retirement experiences. Source: Hrdive.com What the Crystal Ball Says for 2025 Retirement Industry Trends As the new year begins, industry experts are sharing predictions for the retirement sector, with a key trend being the rise of in-plan retirement income solutions. The Institutional Retirement Income Council expects a significant wave of innovation and adoption of these solutions by 2025, driven by growing interest from plan sponsors, providers, and participants. Additionally, a report from Mercer highlights that retirees face challenges in managing their savings throughout retirement, particularly in dealing with unexpected financial issues and sustainable spending. The IRIC also identified a few additional trends it believes will have a significant impact on retirement plans and participants in 2025. Source: Napa-net.org »» Click here for More Studies, Research, and White Papers Fiduciary and Plan Governance SECURE 2.0 in 2025: Here Comes a Big Plan Design Change As we approach 2025, new provisions from SECURE 2.0 will be implemented, impacting plan design, administration, and costs. Understanding these provisions will enable you to better advise your clients on how they may affect their plans. This knowledge will help you strategize necessary administrative changes and effectively communicate with participants. This article provides a detailed review of these provisions. Source: Penchecks.com Cryptocurrency in Retirement Plans Bitcoin surpassed $100,000 in early December 2024, prompting a renewed discussion on the inclusion of cryptocurrency in retirement plans. Despite the appeal of adding crypto to such plans, concerns regarding its speculative nature and associated risks persist. In 2022, the DOL warned against including cryptocurrencies in 401k plans. The Employee Benefits Security Administration also advised plan fiduciaries to exercise caution when considering cryptocurrency options for investment menus. The article aims to detail these concerns, along with insights from industry experts. Source: Conradsiegel.com »» Click here for more Fiduciary and Plan Governance Material Items of Special Interest to Advisers or Other Service Providers GAO Analysis Misrepresents Case for DOL Fiduciary Rule The Government Accountability Office released a report supporting the DOL's Fiduciary rule, claiming that investors could lose significant sums by buying mutual funds through brokers, particularly highlighting that bundled funds (those compensating brokers) yield lower gross returns compared to unbundled funds. The Investment Company Institute expressed doubt about the GAO's findings, suggesting that performance differences are negligible and unrelated to the compensation structure. Further investigation using standard financial models confirmed this, indicating no significant difference in gross risk-adjusted returns between bundled and unbundled funds, thus disputing the claim that investors face substantial financial risks when purchasing mutual funds through brokers. Source: Ici.org Court and Legal A Modest Proposal for Solving (At Least Part of) the ERISA Class Action Litigation Crisis The article discusses the ongoing tension between legitimate excessive fee class actions against plan sponsors and fiduciaries and the high costs associated with defending such claims, particularly when they are deemed to have little merit. The author proposes a balanced approach: while encouraging plan sponsors and fiduciary liability insurers to take cases to trial, there is an alternative strategy that could be less costly in the short term. This strategy involves implementing a thoughtful litigation campaign that raises barriers to lawsuits and reduces costs for those that proceed. Additionally, the author suggests treating class action ERISA litigation as a commoditized type of litigation, allowing for more efficient and cost-effective handling of these cases. Source: Bostonerisalaw.com Plan Sponsors Face Legal Challenges Over 401k Plan Forfeiture Use ERISA was established to protect plan assets and impose legal responsibilities on fiduciaries. Typically, employers and their delegates are considered fiduciaries and must act in the best interests of the plans and their participants. Recently, several lawsuits have emerged against plan sponsors concerning the use of a plan's forfeiture account to lower future employer contributions in 401k plans, with around two dozen such cases currently pending. Although the future of these lawsuits is uncertain, employers may want to consider protecting themselves by amending their plan document to provide a predetermined, specific order in which forfeiture funds shall be used. Source: Phelps.com »» Click here for more Court and Other Legal Issues Legislative or Washington DC Bipartisan Bill Introduced to Simplify Retirement Savings Distribution Options The "Retirement Simplification and Clarity Act," a bipartisan bill introduced by Reps. Jimmy Panetta and Darin LaHood, aims to enhance flexibility and provide clearer guidance for Americans on retirement savings. The legislation addresses existing barriers and complexities, empowering individuals with better options and straightforward information for securing their financial futures. It specifically aims to reform the complicated 402(f) Notice process, which is issued to individuals leaving their employers and seeking distributions from their 401k plans, based on recommendations from the Government Accountability Office. Source: 401kspecialistmag.com A Deeper Dive Into the DOL's "CIA" Activities Rep. Virginia Foxx has called for an investigation into the DOL's use of common interest agreements (CIAs) to share information from its investigations with plaintiffs in ERISA-related litigation. However, many ERISA attorneys, including those from both sides of the legal spectrum, expressed unfamiliarity with this practice and the associated statute. Alex Ryan, a partner at Willkie Farr & Gallagher, stated he learned about CIAs only through recent reports and noted that speculation existed about their use. Jerry Schlichter, a prominent attorney, confirmed that his firm has never utilized CIAs with the DOL and generated information independently. Similarly, Nate Ingraham from Thompson Hine also reported a lack of awareness regarding the DOL's use of these agreements. Overall, the responses suggest that CIAs may not be a widespread practice within the DOL. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Planning for 2025: Employee Benefit Plan Changes Taking Effect As the new year approaches and a new administration begins, changes to employee benefit plans will be implemented in 2025 due to existing laws like ERISA and the Setting Every Community Up for Retirement Enhancement Act of 2022. This summary highlights these upcoming changes and provides insights to help plan sponsors stay informed. It's important for plan sponsors to proactively review and adjust their plans to remain compliant with the new mandates. Source: Bdo.com 2025 Is Right Around the Corner: What's Lurking There for You? In the past five years, retirement plans have faced numerous legal and regulatory changes, and more are expected in 2025. The upcoming year will bring obligations due to new laws and government guidance that may impact existing options. This summary aims to highlight key issues that plan sponsors should prepare for in 2025. Source: Ferenczylaw.com IRS Delays Application of Certain RMD Final Regs to 2026 Distribution Calendar Year The IRS announced in Announcement 2025-02 that certain future regulations regarding required minimum distributions will take effect in the 2026 distribution calendar year. This follows concerns raised by commenters about the proposed regulations amending specific Treasury regulations. Until these amendments are applicable, the IRS advises that taxpayers should apply a reasonable, good-faith interpretation of the existing statutory provisions. Source: Asppa-net.org DOL Launches Retirement Savings Lost and Found The SECURE 2.0 Act of 2022 introduced a new Section 523 to ERISA, mandating the creation of an online database called the Retirement Savings Lost and Found. This database aims to assist individuals in locating unclaimed retirement benefits by identifying the current plan administrators of employer-sponsored plans. On November 18, 2024, the DOL launched a Voluntary Information Collection Request to retirement plan administrators and recordkeepers to start populating the RSLF. The current RSLF is narrower in scope compared to earlier proposals and serves as a starting point for the database, while also addressing key concerns regarding data security and fiduciary responsibilities that were not fully resolved in previous proposals. Source: Verrill-law.com »» Click here for more Compliance and Regulatory Material Marketplace News BlackRock Makes TDF With Annuity Option Its Plan QDIA New 2024 NAPA Black Book Announced NFP Acquires Salus Group, Expanding Its Employee Benefits Offerings for the Middle Market
This eNewsletter is a digest of information published by a variety of web-based sources on 401k and related issues and is published as a service to our users. 401khelpcenter.com, LLC is not the author of the material unless specifically noted. Articles are copyrighted to their publishers. If you believe that your work has been copied in a way that constitutes copyright infringement, please contact the source site immediately. Hyperlinks in this document are provided as a convenience and we disclaim any responsibility for information, services, or products found on websites linked hereto. All links were tested before this eNewsletter was e-mailed to you to ensure that they are still functional, but publishers do move or delete articles. Therefore, we can't guarantee that the links provided will remain operational. 401khelpcenter.com does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com. Opinions expressed are those of the author of the article and do not necessarily reflect the positions of 401khelpcenter.com. THIS NEWSLETTER IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE INVESTMENT, TAX, ACCOUNTING, OR LEGAL ADVICE. Copyright © 2024 by 401khelpcenter.com, LLC. All rights reserved. No reproductions without prior authorization, but you are free to email this copy (in its entirety) along to colleagues or clients. This newsletter may not be posted on any website. 401khelpcenter.com, LLC
|
