Fiduciary Hot Topics | Q1 2023

Welcome to the RPAG Fiduciary Hot Topics for Q1 2023 where we discuss the potentially most relevant topics for the quarter and get you ready to advise your clients. In this review, we will examine the challenges of ESG investing, SECURE 2.0 becoming law, expanding coverage and increasing retirement savings and much more.

Summary

Managing Director, John Nelson, discusses the most significant topics for the quarter, such as ESG investing and SECURE 2.0.

ESG investing aims to generate returns by picking stocks based on environmental and social concerns and issues of corporate governance, in addition to looking at the financial metrics of companies. ESG investing has grown rapidly as investors have become increasingly concerned about issues like climate change.

As administrators have changed, the Department has gone back and forth over the years on its position regarding ESG investing. New proposed rules for ESG investing were published in 2021. This past November, the Department of Labor issued final regulations.

Nelson highlights that fiduciaries cannot sacrifice returns or take on additional risk in pursuit of other goals. The same standard applies to QDIAs as to other investments. Overall, considering ESG factors is appropriate, though the core ERISA principal remains the same.  

In December, Congress passed the Consolidated Appropriations Act, 2023, which contains a large section covering retirement referred to as SECURE 2.0. Nelson thoroughly breaks down the Act in segments.

New 401(k) and 403(b) plans are required to include automatic enrollment. That said, if a plan was in place prior to the effective date of SECURE 2.0, it is not subject to automatic enrollment.

In addition, Nelson emphasizes a new withdrawal rule for emergency expenses. A 10% excise tax does not apply to distributions used for emergency expenses that are unforeseeable or immediate financial needs (personal or family emergency expenses). One distribution per year, up to $1000, and repayable within 3 years. This is effective for distributions after December 31, 2023.

To conclude, Nelson underlines a few revenue provisions. The first provision deals with catch-up contributions. All catch-up contributions will be subject to the Roth treatment (unless employee has compensation equal to or less than $145,000 indexed). This is effective for taxable years after December 31, 2023.

Download a copy of this Fiduciary Hot Topic document by clicking here, or contact us at the email address below.