IRS increases retirement contributions for 2020

Recently, the Internal Revenue Service (IRS) announced that workers contributing to 401(k), 403(b), 457 and the federal government’s Thrift Savings Plans will be able to add up to $19,500 in 2020. Read this blog post to learn more about this increase in retirement contributions.


The IRS said this week that workers contributing to 401(k), 403(b), 457 and the federal government’s Thrift Savings Plans plans can add $19,500 next year, an increase from $19,000 in 2019.

The move could help workers save more for retirement, but it may be inconvenient for employers who’ve already started open enrollment, experts say. Employees are now able to set aside $500 more for retirement.

“Every penny counts when you’re saving for retirement, and the higher contribution limit is definitely going to help,” says Jacob Mattinson, partner at McDermott, Will & Emery, a Chicago-based law firm. “But since companies are in the midst of open enrollment, employers may have to go back in and change the entries for employees who want to contribute the max.”

There are about 27.1 million 401(k) plan participants using roughly 110,794 employer-sponsored 401(k) plans, the Employee Benefit Research Institute says. Ninety-three percent of employers offer a 401(k) plan, and around 74% of companies match workers’ contributions, according to data from the Society for Human Resource Management.

While the vast majority of employers do offer retirement savings plans, employees may still be struggling to sock away money. Around 70% of workers say debt has negatively impacted their ability to save for retirement, EBRI says.

“Thirty-two percent of workers with a major debt problem are not at all confident about their prospects for a financially secure retirement, compared with 5% of workers without a debt problem,” says Craig Copeland, EBRI senior research associate.

The IRS also upped contribution limits on Savings Incentive Match Plan for Employees plans, or SIMPLE retirement accounts, to $13,500 from $13,000. The agency did not change the contribution limits to IRAs, which remain at $6,000 annually.

SOURCE: Hroncich, C. (7 November 2019) "IRS increases retirement contributions for 2020" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/irs-increases-retirement-contributions-for-2020


10 Retirement Lessons for 2019

There are lessons to be learned from recent decisions and settlements about the best ways to protect yourself in 2019. Here are some important takeaways from recent litigation activity.

1. Your Process Matters.

New York University recently got a lawsuit dismissed by a district court because it provided evidence that it followed a prudent process when selecting investments. If a case goes to trial, you will also need to demonstrate that you made prudent decisions in order to prevail.

2. Put It in Writing.

It’s hard to prove that you followed a prudent process if you don’t write down what you did. People change jobs, die or simply forget the details of what was done if there are not minutes explaining the reasons for decisions. Have clear written policies showing what you will consider when selecting or replacing investments and reviewing fees, and make sure to follow those policies.

3. Know and Review Your Options.

Complaints have alleged that fiduciaries failed to consider alternatives to common investments, such as collective trusts as an alternative to mutual funds and stable value funds as alternatives to money market funds. Employees of investment giants such as Fidelity have sued because they claimed that these companies filled their plans with their own in-house investments even though better performing alternatives with lower fees were available. Even if you don’t select these options, you should investigate them and record the reasons for your decisions. Be especially careful about choosing your vendor’s proprietary funds without investigation.

4. Understand Target Date Funds.

They have different risk profiles, performance history, fees and glide paths. Don’t take the easy way out and automatically choose your vendor’s funds. In fact, you need to have a prudent process to select these.

5. Benchmark Plan Fees.

Be able to demonstrate that your fees are reasonable for plans of your size. But don’t compare apples to oranges. Select an appropriate peer group. Remember, though, that it is not a violation of ERISA to pay higher fees for better service, so long as the fees are reasonable.

6. Retain an Expert to Help You.

Don’t be penny wise and pound foolish. If you don’t have internal investment expertise, hire an outside fiduciary to assist you. Insist on written reports of recommendations if the fiduciary is a co-adviser, and that the fiduciary attend committee meetings to answer questions and explain the recommendations.

7. Consult Outside Counsel When Necessary.

See No. 6. Don’t try to guess what the law requires, and listen to counsel’s recommendations about best practices. While both advisers and ERISA counsel are available to provide fiduciary education, your ERISA counsel can give you a better handle on your legal responsibilities as ERISA fiduciaries.

8. Hold Regular Committee Meetings.

The days when committees met once a year are over. Many committees now meet quarterly. These should be formal meetings where committee members sit down together with the plan adviser and, where appropriate, with ERISA counsel.

A secretary should take formal minutes. Plan fiduciaries shouldn’t be meeting over the water cooler or making decisions by exchanging emails without face-to-face discussion in a misguided effort to save time.

9. Review Your Providers.

At least once a year, review whether your vendors are performing in accordance with their proposals and their services agreements, and survey your committee members to determine whether they are happy with the provider’s performance. Follow up to request changes or start an RFP to find a new vendor if necessary.

10. Schedule Regular RFPs.

Even if you are happy with your current providers, new RFPs will give you the opportunity to renegotiate your services agreements and fees and will also let you know whether additional services are available in the marketplace.

content resource: https://401kspecialistmag.com


DOL changes timing of required employer 401(k) and 403(b) disclosures

Originally published by Brian M. Pinheiro and Robert S. Kaplan on http://ebn.benefitnews.com

The U.S. Department of Labor yesterday released Field Assistance Bulletin 2013-2 granting employers that sponsor participant-directed individual account plans (such as 401(k) and 403(b) plans) the ability to delay this year’s disclosure of annual investment-related information to plan participants and beneficiaries. Employers were required to provide the original notice by August 30, 2012. The DOL regulations require that the notice also be distributed “at least annually thereafter.” This means each annual notice would have to be distributed within 12 months of distribution of the prior year’s notice.

Critics of the annual notice requirement have complained that August does not correlate with any other annual participant disclosures for calendar-year retirement plans. Consequently, the DOL is permitting employers a one-time delay in distributing the annual notice. For 2013, the plan sponsor may wait up to 18 months from the date of distribution of the prior notice to distribute the new annual notice. This delay will allow employers to put the annual notice on the same schedule as other annual participant disclosures, such as notices for Qualified Default Investment Alternative or safe harbor status.

Recognizing that some employers have already prepared or mailed notices in anticipation of this August 2013 deadline, the DOL also permits employers who do not take advantage of this relief during 2013 the same 18-month period for 2014 annual notices.

Most third-party administrators and vendors prepare these annual notices for employers. Employers should keep in mind that the notice is an obligation of the plan sponsor and not the vendor. Plan sponsors should carefully review the notice to ensure that it is accurate and meets all legal requirements.