Q: Based on employee feedback, our plan committee is considering adding lifetime income options to our plan in 2025. Do you have any advice on how to begin evaluating the pros and cons of available options and assessing the fiduciary responsibilities and risks involved?
A: Lifetime income options come in a variety of flavors. Some simply provide guidance to participants in drawing down their balances, whereas others provide guarantees backed by state-licensed life insurance companies. Different options require different levels of participant engagement. Check out Groom Law Group’s recent white paper, “Is Your DC Plan Retirement Ready? Helping Participants Get To and Through Retirement,” which includes a comprehensive section on lifetime income options that summarizes the types of products currently offered, the varying features and benefits, as well as fiduciary and other considerations.
Q: Our plan advisor has done an excellent job of keeping us informed and updated on both mandatory and optional SECURE Act 2.0 provisions, along with the timing of each. How are other plan sponsors faring?
A. Given that it’s the largest retirement legislation in history (with more than 90 provisions), it’s not surprising that many plan sponsors continue to need support and guidance regarding SECURE Act 2.0. According to a recent edition of UBS Workplace Voice, less than half of employers know which provisions are mandatory versus optional. In addition, UBS found that 52% of employers did not understand the timeline of when certain provisions would go into effect. To review the key provisions and their timing, check out T. Rowe Price’s “Secure Act 2.0: What Plan Sponsors Need to Know.” One of the provisions that go into effect in 2025: plans must be ready to accept deferrals from part-time employees with at least 500 hours of service in two consecutive years
Q: Following a recent educational campaign, employee uptake of the Roth contribution option in our workplace retirement plan increased to just over 20%. How does this compare with the industry average?
A: According to Vanguard’s “How America Saves 2024,” 82% of employers offer a Roth 401(k) option in addition to a traditional 401(k) option. However, just 17% of employees contribute to a Roth. While offering a Roth option in your workplace retirement plan makes great sense, employees may not take advantage of it without a little nudge. Implementing an education campaign focusing on Roth versus traditional options is a great way to promote awareness and give your employees an informed choice.
Kmotion, Inc., 12336 SE Scherrer Street, Happy Valley, OR 97086; www.kmotion.com
©2024 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher.
.png)
-optimized.jpg)