Fiduciary Hot Topics | Q3 2023

Welcome to the RPAG Fiduciary Hot Topics for Q3 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 assets in retirement plans that top $35 trillion, allocation of unused balances in forfeiture and revenue credit accounts, impacts from changes to Form 5500, and technical corrections to SECURE Act 2.0.

Summary

Managing Director, John Nelson, discusses the most significant topics for the quarter, such as SECURE 2.0 changes and $35 trillion assets in retirement plans.

US retirement assets grew to over $35 trillion, accounting for about 31% of households' net worth. Private sector mostly uses defined contribution plans, while public sector still relies on traditional pension plans. Despite market volatility, investors have remained steady. Mutual funds, especially target date funds, are popular investment choices. IRA rollovers have been increasing yearly, with $618 billion rolled over in 2020.

Previously, there was limited official guidance on forfeiture and revenue credit accounts. However, the Treasury Department's proposed regulation, mostly aligning with industry practices, now addresses the use and timing of forfeitures. It stipulates that forfeiture account balances must be allocated within 12 months after the plan year-end. The regulation takes effect on January 1, 2024, and may lead to increased IRS enforcement. While it doesn't explicitly mention revenue credit accounts, similar timing rules are expected to apply. Clarity on this matter is desired in the final regulation.

Form 5500 has been revised to reflect changes from the SECURE Act. The updates aim to improve financial reporting and plan expense disclosure. Notably, the methodology for determining small plan status has changed, considering only participants with account balances. The 80/120 rule allows plans with close to 100 participants to stay exempt from the audit requirement if they have less than 120 participants.

Legislation drafting mistakes are common, especially in complex tax laws. Technical corrections are proposed for SECURE Act 2.0 to fix minor glitches and align with Congress's intent. The changes address issues with catch-up contributions, minimum required distribution age, and Roth contributions to SEP and SIMPLE IRAs. Additionally, the new tax credit for employer contributions will not count toward the start-up tax credit limit.

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