While a wide range of topics were on the agenda at last weekend’s Viking Cove Institute Industry Leaders Summit in Carlsbad, Calif., it’s no surprise that the recently passed SECURE 2.0 legislation permeated many of the sessions and was the sole focus of one session in particular.
An elite group of retirement advisors and investment professionals gathered at the Omni La Costa Resort for the three-day event, discussing key issues including guaranteed income, managed accounts, financial wellness, DE&I, ESG and 401(k) plan design. Weekend highlights also included an intense Ethics CE course led by retired Navy Seal Jon Fussell and several Friday sessions devoted to financial wellness from Financial Finesse.
Certainly another highlight was the SECURE 2.0 session featuring a heavyweight lineup of industry subject matter experts in Pete Swisher of Group Plan Systems, Endeavor Retirement Founder Bonnie Treichel, and Candidly Founder and CEO Laurel Taylor, moderated by Greg Ward of Financial Finesse.
Complexities of SECURE 2.0
The panelists stressed that although there aren’t really any bad provisions among the 92 included in the recently passed encore to 2019’s SECURE Act, there is a whole lot of complexity around timing as well as what’s allowed and what’s required for which plans.
Swisher said it’s so complicated that he was compelled along with colleague Cherisha Chapman to create a plain-language summary (posted on the GPS website) to help advisors better understand the big picture.
“You need a SECURE implementation plan for clients,” Swisher said. “Part of what you’re going to be doing over the course of this year is going to every client and saying, ‘Let’s talk about how this affects you, and the decisions you’re going to be forced to make in the next two years,’ because it’s mostly going to be in the next two years. And then let’s talk about how this is going to be implemented and whether the recordkeepers will be ready.”
Treichel told the audience there are four main action items that need to be considered when she’s thinking through it with advisors and plan sponsors.
“One is what’s permissive and what’s required, because when you think about there being 90+ provisions, that’s a lot to get your arms around. So it’s breaking it down into what do you have to do versus what you know you could do but you don’t have to do today,” Treichel said.
The second is what’s the timing, exactly? Some things are based on the enactment date and some are many years into the future.
Third, Treichel mentioned whether a provision actually applies to the plan. “There are some that are just provisions that apply to 403(b) plans or 457(b) plans, some that actually apply to all plans, and then also some based on plan size,” she said, adding that some are just for small employers.
“So making sure you figure out what is actually applicable to that plan, and then finally probably most important is figuring out how are you going to monitor as you go forward the technical guidance and the technical corrections coming.”
Generally, make sure you have good resources to rely on to help guide you through complicated provisions such as tax credits.
“Look for that additional guidance, because I feel like SECURE [2.0] is just the framework, and so many of the provisions—it’s actually just setting that framework for something more to come.”
Swisher noted that the start-up tax credits in the legislation for small retirement plans are incredibly complicated, and urged advisors to get their “back of the napkin version” down, making sure the information they share with plan sponsors and participants is accurate.
He added that SECURE 2.0 is a step toward the new paradigm in plan design of auto-everything, and singled out one group in particular that is sure to be substantially impacted by the coming wave of SECURE 2.0 provisions: the “HTPTS” crowd, which stands for high-turnover part-time and seasonal workforces.
“Groups like this really struggle with these types of provisions. They never have safe harbors, and they don’t do auto-enroll/auto-escalate,” Swisher said. “They are going to have to get used to enrolling a lot more people.”
There was plenty of talk about auto-enrollment—where a mandate doesn’t go into effect until 2025, but Treichel noted that there’s nothing stopping 401(k) plan sponsors from adopting it earlier.
Student debt provision brings opportunity
For her part, Taylor noted that offering benefits that address student debt will become the new normal in the workplace—something that got a big nudge with the student loan repayment matching provision in SECURE 2.0.
“If you’re not talking about student debt benefits within the workplace, you’re missing a huge opportunity to answer a question that the plan sponsor is thinking about”
Candidly’s Laurel Taylor
“As an important takeaway, if you’re not talking about student debt benefits within the workplace, you’re missing a huge opportunity to answer a question that the plan sponsor is thinking about,” Taylor said.
She added that it is a great way to help employers attract and retain good employees, and rolled out an alarming statistic: “Historically about 30% of the workforce has had student debt. Fast-forward about three years from now, over 70% of the workforce will have student debts.”
Effectively engaging that population is a riddle that needs to be solved.
“How can we help them know that there is a retirement match that they can claim and take advantage of, because of course plan sponsors want to maximize utilization of the benefits they are investing in.”
Another question she’s hearing from plan sponsors is, “How can you help me understand the ROI?”
The answer? Analytics. With today’s advanced analytics, you can drill down to see exactly who’s taking advantage of the benefit.
“What we see across the plan sponsors we serve is that we are the highest utilized benefit of diverse workers,” Taylor said. “That’s a home run.”
SEE ALSO:
• 6 Important SECURE 2.0 Provisions Retirement Advisors Should Know
• 401(k) Specialist SECURE 2.0 Guide
• Bonnie Treichel Talks Retirement Income Solutions, New ESG Rule and SECURE 2.0