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All News > 401(k) Plans

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How Starter 401(k) Plans Compare to Safe Harbor and Traditional Plans
Employee Fiduciary Link to more items from this source
[Guidance Overview]
Mar. 13, 2024

"[SECURE 2.0] created a new type of automatic enrollment 401(k) plan called the 'starter 401(k) deferral-only arrangement'  ... meant to be an entry-level option for small businesses who do not already offer a retirement plan. A starter plan is not subject to annual testing like a traditional 401(k) plan or mandatory employer contributions like a safe harbor 401(k) plan. The trade-off is lower contribution limits for plan participants. Small businesses can adopt a starter 401(k) plan starting January 1, 2024."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

Text of IRS Publication 560: Retirement Plans for Small Business (SEP, Simple, and Qualified Plans), for Use in Preparing 2023 Returns (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Mar. 12, 2024

44 pages; Mar. 7, 2024. "What's New: [1] Compensation ... Elective deferral ... Defined contribution ... Defined benefit ... SIMPLE plan salary reduction contribution ... [and] Catch-up contribution limits for 2023 and 2024 ... [2] Required minimum distributions (RMDs).... [3] Plans established after end of taxable year.... [4] Increased small employer pension plan startup cost credit.... [5] Employer contributions credit.... [6] Small employer military spouse participation credit.... [7] Designated Roth nonelective contributions and designated Roth matching contributions."

Tags: 401(k) Plans  •  SIMPLE 401(k), SIMPLE IRA Plans  •  Simplified Employee Pensions (SEPs)

DOL and IRS Issue Guidance on DC Plan Emergency Savings Accounts
Mercer Link to more items from this source
[Guidance Overview]
Mar. 12, 2024

"DOL's guidance takes the form of 20 wide-ranging FAQs posted on the agency's website covering multiple aspects of PLESA administration. IRS's guidance in Notice 2024-22 focuses on reasonable measures sponsors can take to limit employees' manipulation of the employer match on PLESA contributions. IRS is accepting written comments on its notice through April 5, and both agencies have indicated that more PLESA guidance is coming."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

IRS Issues Favorable Initial PLESA Guidance on Match Restrictions (PDF)
Groom Law Group, via Taxes the Tax Magazine Link to more items from this source
[Guidance Overview]
Mar. 12, 2024

"[Notice 2024-22] is the first step into making these accounts viable, providing for allowable and prohibited restrictions for anti-abuse measures. But there remain a number of complexities and open issues to be addressed for these accounts that would benefit from simple, flexible rules, with a good faith implementation standard to bring these accounts into existence for 2024."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design

A Look at the Proposed Long-Term Part-Time Employee Regs
Hodgson Russ LLP Link to more items from this source
[Guidance Overview]
Mar. 8, 2024

"Plans that are already subject to the LTPTE rules should already be working with their service providers to be certain administrative processes, if necessary, are in place to ensure compliance ... Plan amendments may be needed to reflect plan operations with respect to the LTPTE rules. Technically, plan amendments are not required until December 31, 2026, but the adoption of plan amendments prior to the final amendment deadline might be prudent.... [P]lans should be maintaining records as to how they are complying with the LTPTE rules."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE 2.0

Employer Simplifies 'Confusing' 401(k) Match Formula to Boost Employee Savings
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 8, 2024

"Dawn made the change based on feedback from employee surveys -- in two successive years -- which showed its 401(k) plan participants were confused by the employer's old formula ... Using Dawn's prior formula, the 401(k) matched 100% of a participant's first 3% of retirement contributions and 50% of the next 2% ... Confused participants were less engaged with the retirement plan and 'more hesitant to come participate,' [Dawn Foods' Brian Coleman] says"

Tags: 401(k) Plans  •  Retirement Plan Design

SECURE 2.0 Defined Contribution Retirement Plan Provisions Snapshot (PDF)
Multnomah Group Link to more items from this source
[Guidance Overview]
Mar. 6, 2024

8-page chart lists and describes SECURE 2.0 provisions and effective dates.

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

New Clarity Regarding Plans Affected by the Automatic Enrollment Requirements Beginning in 2025
KLB Benefits Law Group Link to more items from this source
[Guidance Overview]
Mar. 4, 2024

"The statute provides that if the multiple employer plan was established before the enactment date, then the participating employer is not required to include an EACA, even if the employer joins the multiple employer plan after December 31, 2024. In many situations, the date of a plan's establishment may be hard to ascertain. What is the establishment date for merged plans, or for plans that result from a spinoff of assets? Does 'established' refer to the adoption date or to the effective date of the CODA feature?.... RS issued some clarification on these conundrums in the form of Q&As in Notice 2024-02"

Tags: 401(k) Plans  •  Retirement Plan Administration

SECURE 2.0 Adds Flexibility for Switch from SIMPLE IRA to Safe Harbor 401(k)
Conrad Siegel Actuaries Link to more items from this source
[Guidance Overview]
Mar. 1, 2024

"Before SECURE 2.0, an employer had to wait until the end of the year to switch from a SIMPLE IRA to a 401(k) plan.... Now, under SECURE 2.0, an employer can replace its SIMPLE IRA with a safe harbor 401(k) at any point during the year. For a mid-year transition, the employer contribution obligation for the year is prorated. Any employee SIMPLE IRA deferrals count toward the 401(k) limit."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0  •  SIMPLE 401(k), SIMPLE IRA Plans

Plan Sponsor Considerations for Roth Employer Contributions
Watkins Ross Link to more items from this source
Mar. 1, 2024

"Even if you currently allow Roth deferrals, you are not required to offer Roth Employer contributions. You can offer this option even if your plan does not offer Employee Roth deferrals. An employee must irrevocably elect Roth treatment for matching and nonelective contributions before they are allocated to their plan account."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Design  •  SECURE 2.0

IRS Provides Guidance on Hodgepodge of Secure 2.0 Provisions
Morgan Lewis Link to more items from this source
[Guidance Overview]
Feb. 29, 2024

"[Notice 2024-02] was issued just days before some of the provisions were first effective and includes guidance on a wide range of matters.... This [article] focuses on the changes most relevant to large plan sponsors with more than 100 participants -- i.e., automatic enrollment changes, de minimis financial incentives, an exception to the 10% tax for terminally ill participant withdrawals, an automatic enrollment error correction, the Rothification of employer contributions, and amendment deadlines extensions."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

Addressing the Burden of Missing Participants
Definiti Link to more items from this source
Feb. 29, 2024

"Plan sponsors must distribute retirement benefits, per the plan document's lost-participant and distribution language, regardless of whether the terminated participant has completed and returned the associated forms.... [The authors] recommend tackling missing participants proactively -- per the plan document and in compliance with IRS and DOL requirements -- and implementing best practice activities[.]"

Tags: 401(k) Plans  •  Retirement Plan Administration

Should You Be Judging Your Plan’s Success Based on Benchmarks?
PlanPILOT Link to more items from this source
Feb. 29, 2024

"As a fiduciary, plan sponsors are required to ensure the plan is working and meets the needs of its participants. Does your plan? It may meet certain benchmarks, but what is the basis for these benchmarks? In other words, the benchmarks may be measurable, but are they meaningful for you and the participants in the plan?"

Tags: 401(k) Plans  •  Retirement Plan Administration

The Price of New York Life's 401(k) Lawsuit: $19M
InvestmentNews; subscription may be required Link to more items from this source
Feb. 28, 2024

"New York Life has agreed to pay $19 million to end a lawsuit over the company's use of its own investment products in its 401(k) plans. The agreement ... will bring to a close a three-year old case that accused the insurance company of breaching its fiduciary duty to its employees." [Krohnengold v. New York Life Ins. Co., No. 21-1778 (S.D.N.Y. Aug. 10, 2022; proposed settlement agreement filed Feb. 26, 2024)]

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Pension-Linked Emergency Savings Accounts: An Overview for Plan Sponsors
Reinhart Boerner Van Deuren s.c. Link to more items from this source
[Guidance Overview]
Feb. 27, 2024

"When added to a defined contribution plan, PLESAs can allow non‑highly compensated employees to contribute to short‑term 'side car' accounts for use in financial emergencies. Although PLESAs are intended to encourage greater plan participation and retirement savings among lower‑income workers, plan sponsors have thus far been reluctant to add the feature over questions on implementation and administration."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

PLESA, Can I Have Some More?
Jackson Lewis P.C. Link to more items from this source
[Guidance Overview]
Feb. 27, 2024

"[T]he DOL recently issued guidance regarding PLESAs in the form of FAQs. There are no earth-shattering revelations ... but there are a few nuggets to glean ... Although this guidance is welcome, it is unclear whether employers will embrace PLESAs given the administrative burden associated with them and the difficulty of explaining them to participants."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

IRS Provides Proposed Regulations for Long-Term Part-Time Employees
TRI-AD Link to more items from this source
[Guidance Overview]
Feb. 26, 2024

"Even though written plan amendments do not have to be made until the end of the 2026 plan year, plan sponsors are required to operate their plans in compliance with these LTPT employee requirements starting with the 2024 plan year. Section 403(b) plans must implement these provisions for plan years beginning in 2025."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0  •  SECURE Act

Proposed Regs Issued for Long-Term Part-Time Employee Participation in 401(k) Plans
Boutwell Fay LLP Link to more items from this source
[Guidance Overview]
Feb. 26, 2024

[P]eriods beginning before January 1, 2021, are not taken into account; the preamble to the regulations explains that this a mandatory requirement, and plan sponsors may not voluntarily credit additional service to employees for purposes of an LTPT employee determination.... ... If a plan sponsor mistakenly did not provide LTPT employees eligible as of Jan. 1, 2024, the opportunity to defer on that date, the plan sponsor may need to take corrective action under [EPCRS]."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE 2.0  •  SECURE Act

Retirement Plan Tax Credits Help with Costs of Starting a 401(k) Plan
Guideline Link to more items from this source
Feb. 23, 2024

"[T]hanks to the SECURE Act and SECURE 2.0, eligible businesses may be eligible to receive up to $16,500 in tax credits over a plan's first three years. These credits include:[1] Startup tax credit; [2] Automatic enrollment credit; [3] Employer contribution cost credit; [4] Military spouse credit.... [N]early 50% of benefits decision-makers are unaware of the retirement tax credits their companies may qualify for."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

ARA Comment Letter to IRS on Notice 2024-2: Miscellaneous Changes Under the SECURE 2.0 Act of 2022 (PDF)
American Retirement Association [ARA] Link to more items from this source
[Opinion]
Feb. 22, 2024

"[Regarding the] Section 414A requirement, [Notice 2024-02] left significant questions unanswered -- particularly information necessary for an employer to accurately determine whether its plan is subject to the EACA mandate and guidance on how to comply with the mandate when an employer maintains a plan before the arrangement becomes subject to the mandate.... [T]he Notice provides that a de minimis financial incentive may only be offered to an employee who does not have a deferral election in effect. This interpretation is far too restrictive, as the statutory language itself is not so narrow."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

A Crystal-Ball View of Retirement Plans in 2024: A Plan Sponsor Priority Checklist
BenefitsPro; free registration required Link to more items from this source
Feb. 22, 2024

"Expect more emphasis on participant services ... [L]ifetime income within defined-contribution plans on the rise  ... 403(b) plans will continue influencing 401(k) plans ... [C]hanges in plan design."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE 2.0

IRS Provides Guidance on Self-Correcting Auto-Enrollment and Auto-Escalation Failures
Trucker Huss Link to more items from this source
[Guidance Overview]
Feb. 21, 2024

"[Notice 2024-02] generally provides that to self-correct under the Act, employers would follow the rules under the expired safe harbor of EPCRS. However, [the Notice] provides guidance on: [1] the effective date of the Act's safe harbor correction; [2] how to self-correct for failures relating to terminated employees; and [3] when corrective matching contributions must be made."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE 2.0

SPARK Institute Comment Letter to IRS on SECURE 2.0 Grab-Bag Guidance (Notice 2024-2) (PDF)
The SPARK Institute Link to more items from this source
[Opinion]
Feb. 21, 2024

14 pages. "[T]he SPARK Institute is providing comments regarding the following sections of SECURE 2.0: [1] Section 101 (expanding automatic enrollment in retirement plans); [2] Section 113 (small immediate financial incentives for contributing to a plan); [3] Section 326 (exception to the additional tax on early distributions from qualified plans for individuals with a terminal illness); [4] Section 501 (provisions relating to plan amendments); and [5] Section 604 (optional treatment of employer contributions or nonelective contributions as Roth contributions)."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

Comments Challenge IRS Interpretation of Automatic Features, Roth Matching, Other Provisions
PLANSPONSOR; free registration may be required Link to more items from this source
Feb. 21, 2024

"[Notice 2024-02] provisions on de minimis incentives and terminally ill distributions also received some pushback from the industry.... The 'grab bag' notice, issued in FAQ format, sought to clarify various provisions including: automatic features, de minimis incentives, tax credits, Roth matching contributions, and distributions to the terminally ill."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

GAO Report on 401(k) Plans: Additional Federal Actions Would Help Participants Track and Consolidate Their Retirement Savings
U.S. Government Accountability Office [GAO] Link to more items from this source
Feb. 20, 2024

"401(k) participants face challenges tracking and consolidating their accounts.... 401(k) participants who recently completed a plan-to-plan rollover faced challenges understanding and complying with their plans' requirements.... GAO recommends that Congress consider granting authority to a federal agency to [1] establish a pension dashboard and [2] establish a system for automatic plan-to-plan rollovers. GAO is also making four recommendations to federal agencies to help 401(k) participants, including improving the information participants receive about options for their plan savings and the process they must undergo to consolidate their savings after changing jobs." [GAO-24-103577; pub. Jan. 18, 2024, rel. Feb. 20, 2024]

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Policy

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