2024 Benefit and Contribution Limits
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In This Issue
Compliance and Regulatory 2024 Benefit and Contribution Limits The IRS announced in Notice 2023-75 that many of the key retirement plan limits will increase next year. These limit increases are more modest than the 2023 increases, with some limits remaining the same. The Social Security Administration and PBGC also recently announced adjustments for the Social Security wage base, PBGC premiums, etc., for next year. This chart reflects the key limits for 2024, along with other frequently used benefit and compensation items. Source: Groom.com IRS Bumps 2024 401k Contribution Limit to $23,000 The IRS today issued technical guidance regarding all of the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024 in Notice 2023-75. As predicted in forecasts earlier this year, the Internal Revenue Service announced that the amount individuals can contribute to their 401k plans in 2024 has increased to $23,000, up from $22,500 for 2023. Source: 401kspecialistmag.com Converting a SIMPLE IRA to 401k Midyear Although SIMPLE IRAs may initially be the best fit for certain small businesses, they may not continue to be the best fit over time. With SECURE 2.0, starting in 2024, a SIMPLE IRA can be replaced with a safe harbor 401k plan mid-year. The replacement plan can be either a traditional safe harbor plan or a Qualified Automatic Contribution Arrangement safe harbor 401k plan. Source: Consultrms.com Secure an Employee Plan's Future by Proactively Self-Correcting Retirement plan sponsors can take advantage of new and expanded self-correction remedies under the Employee Plans Compliance Resolution System even before the IRS releases updated guidance on it under SECURE 2.0. SECURE 2.0 provides retirement plan sponsors an avenue to control the narrative in resolving any compliance issues under EPCRS, say Grant Shuman and Anne Tyler Hall of Hall Benefits Law. Source: Hallbenefitslaw.com »» Click here for more Compliance and Regulatory Material Fiduciary and Plan Governance IBM Plans to End 5% Employer Matching in 401k Plan IBM plans to end 5% matching contributions to employees' 401k accounts in favor of an automatic 5% retirement benefit provided to all employees, starting January 1, 2024. The technology corporation will still allow employees to make deferrals into a 401k, but it will direct 5% of each employee's salary into what it terms a "Retirement Benefit Account." Source: Plansponsor.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers CITs Continue to Erode Mutual Fund Dominance in DC Market This issue of The Cerulli Edge -- U.S. Monthly Product Trends analyzes product trends as of September 2023, including mutual funds and exchange-traded funds, and explores the rise of collective investment trusts. Source: Cerulli.com Roughly three-quarters (74 percent) of Canadian employees say it's important for their employer to offer a retirement savings option, according to the latest mental-health index by Telus Health. The survey, which polled 3,000 respondents, found that 70 percent reported not knowing or being unsure of how much savings they'll need to maintain their desired standard of living in retirement. Forty-four percent said they're concerned about being able to purchase or rent a home and 30 percent said they want benefits packages with financial planning solutions. Source: Benefitscanada.com Pooled Employer Plans (PEPs): The Basics A PEP is a type of multiple-employer plan that allows unrelated employers to participate in a single, shared defined contribution plan, which is treated as a single plan for purposes of satisfying ERISA requirements. This is a nice overview of PEPs. Source: Belfint.com Small Business Retirement Plans: The Importance of Employer Perceptions of Benefits and Costs This 2023 Small Business Retirement Survey provides an in-depth look at why small firms do or do not offer a retirement savings plan. Some key findings are: Firms that believe retirement plans help with hiring and retention are much more likely to offer a plan now or soon. The main barriers to offering a plan are concerns about the stability/size of the firm and the perceived costs of a plan. Concerns about costs are driven by misperceptions; many firms are unaware of lower-cost options for employers and tax credits. The survey results also suggest that state auto-IRA programs do not deter firms from offering a plan and may even encourage it. Source: Bc.edu Employees Expect Workplace Plans to Completely Fund Retirement Employees are banking on their DC plans to entirely fund their retirement, finds a new survey by human resources and benefits consulting firm Buck. The report surveyed employees' attitudes on top workplace features and found that 70% of workers expect their workplace plan to completely finance their retirement. Nearly half of all employees (45%) believe they need more than $1 million to retire, and 10% believe they need more than $2 million. Source: 401kspecialistmag.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL Releases Proposed Fiduciary Rule The Department of Labor has released a new proposed rule updating the definition of an invest. advice fiduciary under ERISA. According to a Biden Administration fact sheet, the proposal expands the definition of fiduciary in several ways which are reviewed here. Source: Ascensus.com DOL Fiduciary Rule Released: Industry Reaction Pours In The text of the DOL's new fiduciary rule is out, and the reactions from around the retirement industry are streaming in. Aligned with the Biden-Harris administration's efforts to protect retirement investors the proposal would require trusted investment advisors to adhere to high standards of care and loyalty when they make investment recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers. Source: 401kspecialistmag.com Biden Administration Previews Fiduciary Rule Rollout The Biden Administration has issued a fact sheet previewing the content of the new fiduciary rule. The fact sheet focuses on the issue of conflicted advice, specifically calling out what it calls "junk fees" and the impact they have on retirement security. Acknowledging that while "responsible retirement advisers deserve to be paid for their important work," it continues that "when a firm pays a retirement adviser more to recommend a specific investment product, that creates a conflict of interest that often leads to Americans selecting an investment product recommended to them that generates lower returns." Source: Asppa.org DOL Publishes New Adviser Fiduciary Rule for Public Comment The DOL published a widely anticipated proposal that will redefine when retirement advice triggers fiduciary status under ERISA. The proposal would scrap the traditional five-part test for determining if an adviser is acting in a fiduciary capacity and replace it with a three-part test in which satisfying any one of the three conditions would make the adviser a fiduciary. The change, if implemented, would effectively create a stricter regulatory environment for financial professionals advising or selling investment products related to retirement savings. Source: Planadviser.com Breaking Down the DOL's Five-Part Test When word got out that the DOL was issuing its proposed fiduciary rule this week -- and that President Joe Biden would speak on its framing -- the retirement planning advisory industry had a lot to say. Almost all concluded with the idea that if enacted into law, the proposal would cause several changes to the DOL's five-part test. This article breaks those changes down. Source: 401kspecialistmag.com Court and Legal Has ERISA Class Action Litigation Made a Positive Difference for Plan Participants? The author writes, "A recent article this month in Pension & Investments asked ERISA lawyers whether class action litigation has made a positive difference for plan participants. The premise of the article was that while many critics issue harsh assessments about class action litigation, plan participants have nevertheless seen positive changes and fee reductions from the litigation.... Plan administration and investment fees are universally lower for nearly every plan, and large plans have adopted best fiduciary practices that include advice and monitoring of investments by sophisticated investment advisors. [But] the current slate of cases have an entirely different agenda." Source: Euclidspecialty.com »» Click here for more Court and Other Legal Issues Marketplace News Creative Planning Buys Mesirow's $13B Retirement Services Team
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