401ks Increasingly Under Attack in Wake of SECURE 2.0 Passage
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In This Issue
General Items 401ks Increasingly Under Attack in Wake of SECURE 2.0 Passage Despite SECURE 2.0's passage, 401ks face increasing attacks, with the latest salvo coming from an opinion piece published in Politico. Social Security is just one part of the retirement system, notes the provocatively titled "Before Slashing Social Security, Cut 401ks." Talk of cuts to the others, including defined-benefit and defined-contribution plans, rarely occurs, something author Matthew Bruenig argues should change. Source: Napa-net.org Treatment of Student Loan Payments as Elective Deferrals for Purposes of Matching Contributions Many employees have to choose between saving for their retirement or making payments on their student loans. Those employees may have a new way to accumulate retirement savings, thanks to a provision included in the SECURE 2.0 Act. Section 110 allows employers to treat qualified student loan payments as elective deferrals for the purposes of matching contributions. Source: Schneiderdowns.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers CITs and Lower-Cost Funds Drive Down 401k Plan Fees Investment fees for 401k participants fell to .02% from .05% in 2021, according to a Baltimore-based research firm, with smaller plans incurring slightly higher fees than larger ones with more than 50 employees. The biggest driver for the decline was an uptick in 401k investments being put into lower-cost-fund share classes and collective investment trusts, which also tend to carry lower fees as pooled investment vehicles. Source: Plansponsor.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers CPA Dismay Over Form 5500 Changes May be Misplaced Final changes to Form 5500 reporting requirements were announced that are estimated to result in almost 20,000 fewer retirement plans having to file independent qualified public accountant reports with their Form 5500 returns. The changes, which take effect for reporting for the 2023 plan year, were met with dismay by CPA firms that provide the IQPA reports, often referred to as audit reports. However, their concerns may be short-lived, as certain provisions of SECURE 2.0 will likely increase plan participation levels over the next few years and result in more plans that are of the size that must file. Source: Eforerisa.com Court Overturns DOL Guidance on Rollover Advice A federal court has vacated part of the 2021 DOL rollover guidance for invest. advice fiduciaries. In one of those FAQs, DOL said a recommendation to roll over a participant's retirement plan account to an individual retirement account may be fiduciary invest. advice when the advisor expects to give ongoing advice after the rollover. According to the court, this guidance contradicts the agency's current regulation. Source: Mercer.com Legislative and Washington DC Five Most Meaningful Provisions of SECURE 2.0 While there are over 90 provisions in SECURE 2.0, Northern Trust Asset Management has identified what they believe are the top five most meaningful provisions that seek improved access to workplace-sponsored retirement plans, as well as help improve engagement and savings. These "Top Five" are summarized here. Source: 401kspecialistmag.com Congressional Rejection of DOL ESG Rule Casts Pall Over Measure The regulation is safe thanks to a pending veto of the resolution approved by the House and Senate, but the vote adds some political uncertainty for plan advisors. Source: Investmentnews.com »» Click here for more on Legislative and Washington Actions Compliance and Regulatory How Does the SECURE 2.0 Act Affect Qualified Distributions? Experts from Groom Law Group and CAPTRUST answer questions about how the SECURE 2.0 Act modified Qualified Birth or Adoption Distributions, or QBADs. Source: Plansponsor.com IRS Proposes Rules That Require Retirement Forfeitures Be Used in 12 Months The proposal would more clearly define how plan administrators should handle money forfeited by participants when they leave an employer before the end of a vesting schedule, when they die, or when other factors result in funds going back to the plan sponsor. While the rule likely will not change how plan advisers and administrators are currently operating, it would make those processes clearer. Source: Planadviser.com SECURE 2.0 Act: Provisions Related to Required Minimum Distributions The legislation contains 92 provisions that are retirement plan related. Section 107 of the Secure 2.0 Act increases the age for Required Minimum Distributions from 72 to 73 and eventually up to 75. Here is a review of the details. Source: Consultrms.com IRS Proposed Regulation Addresses Rules Relating to Plan Forfeitures Historically, the topic of forfeitures has raised many questions for qualified plan administrators- specifically, how and when they can be used. But there has been little formal guidance regarding requirements relating to the use of, and timing to use such forfeitures. Treasury took a step toward addressing some of those questions by issuing proposed regulations on February 27, 2023. Source: Groom.com Proposed IRS Regulations Make Handling Forfeitures Less Burdensome The IRS issued proposed regulations regarding the use of forfeitures in qualified retirement plans, including 401k plans. The proposed regulations include a deadline for the use of forfeitures in defined contribution plans and clarify the purposes for which forfeitures can be used in a defined contribution plan. The regulations are proposed to apply for plan years beginning on or after January 1, 2024, but plan sponsors may rely on them in the interim. Source: Graydon.law DOL Issues Final Rules on Changes to 2023 Form 5500 Plan sponsors must generally file 5500 forms on the last day of the seventh month after their plan year ends. The 2023 plan year reports, which will be filed beginning in mid-2024, include changes reviewed here. Source: Eisneramper.com SECURE 2.0: Safe Harbor for Corrections of Employee Elective Deferral Failures The SECURE 2.0 Act contains a provision that provides guidance on the correction method relating to automatic enrollment and automatic escalation failures. Source: Schneiderdowns.com Change in Participant Count Methodology for Plan Audit Threshold The DOL has amended the Form 5500 forms and instructions for 2023 and significantly changed how a plan sponsor counts participants for determining whether it is eligible for the small plan simplified Form 5500 reporting. Source: Poynerspruill.com SECURE 2.0: Catch-up Changes and After-Tax Employer Contributions SECURE 2.0 makes several important changes to catch-up and after-tax contributions in tax-qualified plans. Plan Sponsors will need to evaluate carefully how these changes affect their Plans. Although these changes may bring more opportunity and flexibility to participants, they may also bring challenges to the administration of catch-up and Roth contributions that did not exist before SECURE 2.0. Source: Kilpatricktownsend.com »» Click here for more Compliance and Regulatory Material
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