Key Action Points for Advisors to Consider Ahead of Final Fiduciary Rule
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In This Issue
Items of Special Interest to Advisers and Other Service Providers Key Action Points for Advisors to Consider Ahead of Final Fiduciary Rule The retirement planning industry is about to see an influx of fiduciaries later this year thanks to the DOL's proposed rule. Retirement plan advisors have an opportunity here to set themselves apart from the rest. Panelists at the VCI Industry Leaders Summit touch on the next steps for advisors to review. Source: 401kspecialistmag.com The Fiduciary Rule's Foray Into Uncharted Territory Generating over 19,000 written comments, the DOL's proposed fiduciary rule changes hit a "vein." Though the proposed changes are complex and multi-tiered, there are two of them that are particularly garnering most of the attention. Source: Businessofbenefits.com Insight: Studies, Research, Analysis, and Papers Auto-Accounts: The Next 'Nudge' From Shlomo Benartzi In a new op-ed for The Wall Street Journal, behavioral economist Shlomo Benartzi, known for his research on retirement savings, says his idea of an auto-pilot for 401k plans that makes it easy to save, but avoids concerns about excessive paternalism from employers, would work for three reasons: because it's a mental reminder that 1) you should save; 2) you haven't started saving yet; and 3) the paperwork has been done for you. Source: 401kspecialistmag.com Having access to an employment-based retirement plan is one of the most important factors in having income adequacy in retirement. However, employees working for small businesses (those with 100 or fewer employees) are much less likely to be covered by these retirement plans. This has been a persistent issue. The Employee Benefit Research Institute surveyed small businesses to give a more current understanding of their attitudes, concerns, and knowledge about retirement plans. This article highlights the findings from this survey. Source: Ebri.org How Sponsors Can Get the Most Out of DC Plan Design Changes Building the optimal defined contribution plan design to support participant retirement readiness requires integrating flexible options to account for the consistent income stream workers will lose in retirement. Guaranteed lifetime income features -- annuity products -- are useful to sponsors, but retirement experts recommend that sponsors instead focus on Social Security optimization, automatic features, and other high-value and low-cost features to alter plan designs before moving on to annuities. Source: Plansponsor.com American Views on Defined Contribution Plan Saving, 2023 This survey polled respondents about their views on defined contribution retirement account saving and their confidence in 401k and other DC plan accounts. Survey responses indicated that Americans value the discipline and investment opportunity that 401k plans represent and largely oppose changing the tax preferences or investment control in those accounts. A majority of respondents also affirmed a preference for control of their retirement accounts and opposed proposals to require a portion of retirement accounts to be converted into a fair contract promising them lifetime income from either the government or an insurance company. This 24-page report presents survey results that reflect individuals' responses collected during November and December 2023. Source: Ici.org »» Click here for More Studies, Research, and White Papers 403b Plans Whatever Happened to CITs in 403bs? 403b plans still may not use collective investment trusts, an investment similar to a mutual fund that is subject to fewer regulations and requirements and often carries lower fees for defined contribution retirement plans. This is despite other defined contribution plans, such as 401ks and 457s, being able to use CITs and, according to recent data, doing so in greater volume every year. At the moment, the best chance in the near term for 403bs to access CITs is a bill in the U.S. House of Representatives that could come up for a vote in early March. Source: Plansponsor.com »» Click here for More 403b Material Legislative and Washington DC Federal Auto-IRA Bill for Uncovered Workers Introduced in the House House Ways and Means Committee Ranking Member Richard Neal introduced a bill to establish a federal auto-IRA for employers with more than 10 employees who do not currently sponsor a retirement plan. The Automatic IRA Act of 2024 (H.R.7293) would require employees to be automatically enrolled in either an IRA or some other "automatic contribution plan or arrangement," like a 401k. It would apply to plan years beginning after 2026. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Puerto Rico Announces 2024 Limits on Qualified Retirement Plans On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 announcing the applicable 2024 limits for Puerto Rico qualified retirement plans. Here are the applicable 2024 limits for qualified retirement plans in Puerto Rico. Source: Littler.com Business owners and Highly Compensated Employees are often shocked to hear that they cannot contribute the maximum 401k or 403b deferral because their plan did not pass the discrimination tests. Much to their surprise, through the Actual Deferral Percentage and the Aggregate Contribution Percentage tests, the Internal Revenue Code prevents HCEs from benefiting from tax deferrals significantly more than NHCEs, unless the plan is a safe-harbor plan. Maria T. Hurd, CPA, provides a full review of the issue. Source: Belfint.com IRS Confirms Same Hours-Counting Rules Still Add Up for Long-Term, Part-Time Employees The new long-term, part-time employee rule has generated questions about whether all employers will now be required to track the actual hours all employees work to ensure compliance with this rule. The recently proposed regulations released by the IRS confirm that the answer is no. Employers do not need to change how they count periods of service toward plan eligibility. However, employers should revisit how such service is currently counted under their plans and consider the impact that may have on if and how the long-term, part-time employee rules apply. Source: Mwe.com DOL Guidance: Pension-Linked Emergency Savings Accounts (PLESAs) On January 17, 2024, the DOL issued guidance in the form of Q&As on PLESAs. Under the SECURE 2.0 Act, employers are permitted (but not required) to offer PLESAs in conjunction with their 401k plans, effective for plan years beginning after December 31, 2023. The DOL separately issued a news release generally describing the Q&As. Among other things, the release discloses that the DOL and the IRS consulted with each other in developing their respective guidance. Source: Compliancedashboard.net New Guidance on Pension-Linked Emergency Savings Accounts Over the past several years, there has been a growing interest in enhancing employee benefit programs to help employees save for emergencies. To facilitate this, Congress included a provision in the SECURE 2.0 Act of 2022 intended to provide a framework for integrating emergency savings accounts into defined contribution plans. The IRS and DOL recently released guidance intended to clarify several open legal questions related to pension-linked emergency savings accounts. The guidance is summarized here. Source: Groom.com You Don't Have To Go Home, But You Can't Stay Here It's 2024, which means a new batch of provisions from SECURE Act 2.0 have gone into effect. One of the more significant ones is an increase in the "cashout" limit that a qualified plan can impose to kick former employees with small balances out of their plans. For a while, this limit was $3,500 and was increased to $5,000 by the Taxpayer Relief Act of 1997. SECURE Act 2.0 bumps it up to $7,000 as of January 1, 2024. Plans aren't required to have a force-out provision, but nearly all do, and for good reason. Source: Benefitslawadvisor.com Form 5500 Updates: Participant Count Win and Large Plan Filer Warning The Form 5500 series was recently updated with a key change to the participant counting methodology for determining if the plan is a small plan filer or a large plan filer. Not as widely publicized but affecting all filers, the Department of Labor released adjusted penalty rates effective January 15, 2024, which include an increase of $84 per day for failure to timely file a complete Form 5500. Are you prepared for the changes to the filing requirements? Source: Newfront.com »» Click here for more Compliance and Regulatory Material Marketplace News Inspira Simplifies Structure, Targets More Holistic Market Approach Ascensus Restructures Retirement Business and Its Leadership Team A Pooled Employer Plan With Personalized TDFs Is Landing Soon
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