Fiduciary Hot Topics | Q1 2024
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For this quarter's potential hot topics to discuss with your plan sponsors, we are giving you insight to the DOL's new fiduciary advice proposal, legislative updates, potential government-run plans, and the possibility of lowering the retirement participation age to 18.
DOL Releases New Fiduciary Advice Proposal
On October 31, 2023, the Department of Labor (DOL) released its “Proposed Retirement Security Rule: Definition of an Investment Advice Fiduciary,” along with proposed revisions to Prohibited Transaction Exemptions (PTEs) 2020-02, as well as other fiduciary-advice-related PTEs (i.e., 84-24, 75-1, 77-4, 80-83, 83-1, and 86-128).
If finalized, a new definition of an “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) would apply, likely resulting in more individuals becoming fiduciaries. Amendments to certain PTEs would provide pathways for fiduciaries to receive otherwise prohibited compensation and fees.
Q4 2023 Retirement Legislative Update
On December 6, 2023, the Senate’s committee on Health, Education, Labor and Pensions (HELP) and two House
committees (Ways and Means and Education and the Workforce) released a “discussion draft” of proposed technical
corrections to SECURE 2.0 legislation passed at the end of last year.
The issues addressed – some of which were raised in a May 2023 letter from Congressional leaders to the Department of the Treasury and IRS – are technical and are not intended to change the substance of SECURE 2.0 as passed.
Retirement Savings for Americans Act would Create a Government-Run Plan
U.S. Senators John Hickenlooper (D-CO) and Thom Tillis (R-NC) and Representatives Lloyd Smucker (R-PA) and Terri Sewell (D-AL) introduced HR 6065, the Retirement Savings for Americans Act (RSAA) of 2023. If the bill were to be enacted, it would establish a new savings program, “The American Worker Retirement Plan” (AWRP), which would give eligible workers access to federally-sponsored, portable, tax-advantaged retirement savings accounts.
While the provisions in the bill have bipartisan support, there is some skepticism in the industry as to whether a government-run retirement savings plan would be in the best interest of investors. Even more reason for business owners who do not offer a retirement plan to consider sponsoring their own workplace retirement plans now before a federally- mandated plan takes form.
New Bill Would Allow Employees to Participate in 401(k) Plans as Early as Age 18
On November 17, Senator Bill Cassidy (R-LA), the Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Senator Tim Kaine (D-VA), a member of that committee, introduced the Helping Young Americans Save for Retirement Act. If the bill is enacted, the changes would take effect in 2026. While this proposal is unlikely pass as a standalone bill, odds are that it will be considered in the next round of broad-based, bi-partisan retirement policy legislation. The bill would require 401(k) plan sponsors to allow employees as young as 18 to make contributions.
PBGC Announces 2024 Maximum Benefit Limits
The Pension Benefit Guaranty Corporation (PBGC) has updated its maximum monthly benefit guarantees for 2024 in a table published on its website. For example, a 65-year-old whose pension benefit is payable from the PBGC in the form of a straight-life annuity for 2024 would receive a monthly maximum of $7,107.95. The PBGC maximum guarantee is determined using a formula in federal law tied to the Social Security index. The formula provides lower amounts for younger ages because younger people are expected to receive more monthly pension checks over their lifetime.
Conversely, amounts are higher for older ages. In addition, amounts are lower for retirees who choose an annuity with survivor benefits.
2023 Forms 5500 Released
The U.S. Department of Labor’s Employee Benefits Security Administration, the IRS and the Pension Benefit Guaranty Corporation recently released informational copies of the 2023 Form 5500, Form 5500-SF, IRS Form 5500-EZ, IRS Form 5558 and their related instructions online. The IRS will release paper copies of the 2023 Form 5500-EZ and its instructions separately and provide the form’s instructions on the agency’s website after January 1, 2024.
Download the full Q1 2024 Fiduciary Hot Topics here.
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