2023 Trends and Predictions for Retirement Plan Sponsors
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General Items 2023 Trends and Predictions for Retirement Plan Sponsors In the wake of the pandemic and the great resignation, maybe the only thing we can be sure of is that 2023 will be a year of uncertainty. Along with an increased focus on financial wellness and employee retention, CAPTRUST's retirement plan experts predict several current themes will persist. Source: Captrust.com Shareholder Activist Targets Target-Date Funds The BlackRock Lifepath target-date funds have been targeted again, not in litigation, but by a shareholder activism group for their inclusion on a 401k menu. Source: Napa-net.org Fiduciary and Plan Governance A Plan Sponsor's Duty to Search for Missing Participants Most people don't plan to stay in touch with their former employer after they change jobs or retire. But employers that lose contact with participants who maintain a balance in the company's retirement plan risk breaching their fiduciary duties and jeopardizing the tax-qualified status of their plan. The plan sponsor retains fiduciary responsibility for these participants and must take reasonable measures to locate them. Source: Newportgroup.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers How Does the Threat of Litigation Shape Trends in DC Plan Design? At this year's Center for Retirement Initiatives Policy Innovation Forum, industry and legal experts gathered to consider how the threat of litigation affects innovation in DC plan design. How does such litigation shape the actions of plan providers, sponsors, and those who advise them, and where is the balance between protecting plan participants and allowing sponsors to innovate and improve outcomes? Source: Georgetown.edu In the Wake of COVID-19, Retirement Savings Surge Benefits have long been a powerful recruiting and retention tool, and amid a tight labor market, the Plan Sponsor Council of America's 65th Annual Survey of 401k and Profit Sharing Plans found record-high rates of retirement savings alongside innovative plan designs. The survey found participant and employer contribution rates were at all-time highs in 2021 with a combined average savings rate of 13.9% of pay, and 2021 saw the highest employer contribution rate in the history of the survey (5.6% of pay). Source: Napa-net.org Morningstar Raises "Safe" Retirement Withdrawal Rate to 3.8% Morningstar's annual model of how much a retiree with a balanced portfolio should withdraw over a 30-year time horizon increased to a starting point of 3.8% on the back of higher bond yields and lower equity valuations. Morningstar researchers say higher interest rates and lower equity evaluations will make starting with a 3.8% withdrawal rate safe for a balanced saver over a 30-year time horizon. Source: Planadviser.com Survey Shows More Employees Contributing to Retirement Plans, Receiving Matches A PSCA study shows plan participant and employer contribution rates in 2021 combined to produce an average savings rate of 13.9% of pay, an all-time high. Source: Investmentnews.com »» Click here for More Studies, Research, and White Papers 403b Plans IRS Expands Determination Letter Program for 403b Plans IRS is expanding its determination letter program for individually designed plans to include many 403b plans. Rev. Proc. 2022-40 provides the first opportunity for 403b plan sponsors to get a determination letter, which gives assurance that their plan documents comply with all applicable IRC and regulatory requirements. IRS is also updating the program to incorporate changes for qualified plans made since the program's overhaul in 2016. Source: Mercer.com »» Click here for More 403b Material Court and Legal Court Voids ERISA Plan's Arbitration Provision A district court in New York recently refused to enforce an arbitration provision in an ERISA fiduciary breach lawsuit challenging the valuation of an ESOP. The ruling exposes the continued uncertainty as to the enforceability of arbitration provisions when applied to ERISA fiduciary breach claims. Source: Erisapracticecenter.com Employment Law Firm Files Another Excessive Fee Suit Another multi-billion-dollar 401k plan has been sued for "grossly excessive" fees. This time the target is the 16,000-participant, $2 billion plan of NCR Corporation. The plaintiffs in this case claim that "over the past six years, Plan participants have paid more than $20,000,000.00 (twenty million) in administrative fees," a sum that they allege is "nearly eight times what they should be." Source: Napa-net.org Aon Hewitt Carves Out Settlement in Fiduciary Suit After over four years of hard-fought litigation, the parties in a suit involving fund menu construction have come to a partial settlement with Aon Hewitt Investment Consulting as part of a suit relating to the FirstGroup America Retirement Savings Plan and the Aon Hewitt Funds. Source: Napa-net.org »» Click here for more Court and Other Legal Issues Legislative and Washington DC Expert Consensus: SECURE 2.0 May or May Not Pass Passage of the retirement reform legislative package known as SECURE 2.0 hinges primarily, if not entirely, on whether Congress can pass a budget by January 3, which is not a foregone conclusion. January 3 is when the next Congress is sworn in, and any unfinished bills under consideration must be proposed again. Source: Planadviser.com »» Click here for more on Legislative and Washington Actions Compliance and Regulatory 2023 ERISA Plan Compliance Calendar Being a retirement plan sponsor involves juggling many tasks, one of the more important is to make sure your plan complies with all pertinent federal legislation and regulations. A compliance calendar like this one helps you keep track of your company's required filings, their due dates, and related details so you can avoid incurring any fines or other penalties for late filings or missing information. Source: Plansponsor.com The Unsung Importance of Self-Correction Memos Self-correction of operational errors arising in qualified retirement plans is a critical means for plan sponsors to retain their plans' tax-qualified status. Self-correction has been promoted by the Internal Revenue Service as part of the Employee Plans Compliance Resolution System for approximately twenty years, but the rules for self-correction have evolved over that period, and some essential requirements of self-correction are still little understood. One recommended component of self-correction that can tend to be overlooked is the preparation of a self-correction memo. Source: Eforerisa.com DOL Proposes Self-Correction Option and Other Changes to Voluntary Fiduciary Correction Program The DOL proposed changes to its Voluntary Fiduciary Correction Program in November for the first time since 2006. The most significant change is the addition of a self-correction option for delinquent deposits of participant contributions and loan repayments. The other changes clarify and expand certain existing aspects of the VFCP. The DOL also proposed conforming changes to the prohibited transaction class exemption, PTE 2002-51, associated with the VFCP. Source: Erisapracticecenter.com DOL Announces Form 5500 Changes The DOL announced changes to Forms 5500 and 5500-SF (short form) and released updated instructions on December 8. The DOL updates Form 5500 annually to keep it up-to-date with various regulatory changes. Every defined contribution and pension plan sponsor is required to file a 5500 to the IRS and DOL annually. Source: Plansponsor.com »» Click here for more Compliance and Regulatory Material Marketplace News Edelman Financial Engines Acquires Erman Retirement Advisory
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