PLANSPONSOR - January - February 2024 - 18

COVER STORY
Auto-Portability
WHERE WE ARE: Neal Ringquist, executive vice president
and chief revenue officer of Charlotte, North Carolina, firm
Retirement Clearinghouse, reports that the Portability Services
Network automatic portability program began operating this
past October, with Alight, Fidelity Investments and Vanguard
completing the implementations. Those three recordkeepers
are now live with PSN and focused on onboarding plan sponsor
clients, Ringquist says.
WHAT'S AHEAD: The focus in 2024 will be on expanding
the network of plans and recordkeepers on PSN. Empower,
Principal Financial Group and TIAA will look to complete
their respective implementations by the end of this year
or in early 2025 and begin onboarding plans, Ringquist
says, noting that the network intends to grow.
Both the auto-portability provision and the
mandatory distribution-limit increase to $7,000
under SECURE 2.0 took effect at the end of last
year, Ringquist adds. Consequently, plan sponsors
have been reviewing their processes for handling
small-balance terminated participant accounts. These
reviews will help them " utilize the new regulations
to find a better way to balance administrative needs with
participant outcomes for former employees who have left their
accounts behind, " he says.
SECURE 2.0
WHERE WE ARE: According to Amber Brestowski, a principal in
and head of institutional product advice and client experience
at The Vanguard Group in Malvern, Pennsylvania, financial
wellness and financial advice programs within defined contribution
plans will continue to mature under SECURE 2.0. " Over
the past several years, we've seen the scope of 401(k) plan offerings
expand beyond an exclusive focus on retirement savings, "
she says. " Plans increasingly offer tools to help participants
with emergency savings, debt relief and other financial goals.
Policymakers have added fuel to this trend with SECURE 2.0. "
WHAT'S AHEAD: SECURE 2.0's implementation will continue
ramping up in 2024, Brestowski says. With the IRS granting
more time to add the mandatory Roth catch-up provision, plan
sponsors will review their plan data this year to determine
the level of urgency for adopting the act's optional provisions,
Brestowski says. " Many of the provisions, such as the emergency
savings and student loan repayment provisions, reflect
the broadening view of defined contribution plans' role in
supporting employees' comprehensive financial wellness. "
Fred Reish, a partner in law firm Faegre Drinker in Los
Angeles, reports that SECURE 2.0 is already influencing small
companies' adoption of new plans and the design of larger ones.
18 PLANSPONSOR.COM January - February 2024
That trend will continue into this year and beyond, he observes.
" For example, SECURE 2.0 mandated that all new 401(k) plans
use automatic enrollment and deferral increases, meaning that
more workers will be saving, and they'll be saving more, " Reish
says. " For small employers, the tax credits for administrative
costs and contributions will mean that plans will be close to
free for the first three years. "
Reish highlights a plan option starting new this year.
For all 401(k) plans, employers will be able to make matching
contributions for qualified student loan payments. He says this
change will help employers recruit college students and help
young college-educated employees save for retirement.
" The Department of Labor's new proposed fiduciary
regulation and exemptions will, if finalized [this
year], provide additional protections for plan
sponsors and their participating employees, "
Reish says. " Because of the fiduciary definition,
virtually all investment-related recommendations
to plan sponsors will be subject
to a fiduciary standard-the highest standard
in the law. Investment, distribution and
rollover recommendations to participants will
be similarly protected. "
Defined Benefit Plan Structures
WHERE WE ARE: IBM's decision to halt its 5% matching contributions
and 1% automatic contributions to employees' 401(k)
accounts in favor of an automatic 5% retirement benefit for all
employees, as of this January 1, made headlines. John Lowell, an
Atlanta-based partner in plan consultancy October Three, notes
that, although IBM's decision to reopen its DB plan grabbed the
headlines, he saw multiple companies adopt market-return cash
balance defined benefit plan designs last year.
Beth Ashmore, managing director of retirement with WTW
in St. Louis, reports seeing an uptick in sponsors aligning plan
design with their employees' financial well-being last year. The
inflationary environment, continued talent challenges and abundance
of defined contribution plan-related provisions in SECURE
2.0 have been critical drivers of that activity, she says. " We've also
seen a renewed focus on how best to deliver retirement benefits
to employees, as many sponsors with defined benefit plans have
improved funded positions that may lead them to be more comfortable
with managing the financial risk of employees' retirement. "
WHAT'S AHEAD: October Three predicts that, just as companies
followed IBM's lead 15 years ago when it froze its DB plan, many
others-particularly those with overfunded frozen plans-will
consider following IBM's lead again. " By using existing surplus
and MRCB [market return cash balance] designs allowed by
SECURE, [firms] can do so at low and stable cost while giving themselves
tools to help with their workforce management challenges
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