Secure Act 2.0: Navigating the Future of Retirement Planning
Lately, Secure Act 2.0 has dominated discussions within the retirement industry, emerging as a buzzword, particularly during various TPSU Fiduciary Education Programs, where plan sponsors have been actively engaging. These sponsors appear to be acutely attuned to the importance of Congress’ recent legislative actions, which were passed in December 2022. Nevertheless, while awareness is high, many sponsors aren’t fully versed in the intricacies of this complex legislation, prompting a growing need for comprehensive education and guidance on its implications for retirement planning and fiduciary responsibilities.
So, what is Secure 2.0? According to surveys conducted by the Federal Reserve, just 75% of non-retirees have managed to set aside any retirement savings, with only 40% feeling confident that their retirement nest egg is on the right track. The Secure Act 2.0 represents Congress’ latest endeavor to confront this urgent issue. Enacted into law in late December 2022, this comprehensive set of retirement reforms intends to build upon the foundation laid by the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. Version 2.0 of the Secure Act introduces numerous provisions aimed at enhancing retirement prospects. These encompass improvements in catch-up contributions, the implementation of automatic 401(k) enrollment, and a host of other changes.
At the conclusion of The Plan Sponsor University (TPSU) Fiduciary Education Program held on the campus of The University of Denver, Fred Barstein, founder and CEO of TPSU, and Adjunct Lecturer, Mark Tonelli, discuss the implications of the Secure Act 2.0 on retirement planning. Mark, a Senior Vice President at Hub International, highlights that this sweeping legislation introduces over 90 changes affecting retirement plans, with a focus on exceptions to the early withdrawal penalty and provisions related to student loans. He emphasizes the need for vendors, record keepers, and plan sponsors to adapt to these changes, with plan sponsors advised to collaborate with specialists who understand the intricacies of the legislation.
Read the Full Transcript Here:
Fred Barstein:
Greetings. This is Fred Barstein, CEO, and founder of TPSU and 401K TV and trial. I am here at the University of Denver, where we just completed a TPSU program with our adjunct lecturer, Mark Tonelli. Welcome, Mark.
Mark Tonelli:
Thank you, Fred.
Fred Barstein:
Okay, if we ask you a few questions?
Mark Tonelli:
You bet.
Fred Barstein:
So before we start, tell us a little bit about yourself and your organization.
Mark Tonelli:
I’m Mark Tonelli, senior Vice President with Hub International. We have a large office here in Denver, although we’re the fifth-largest retirement plan consulting firm on a national basis. And within our service team, we have 23 people that work with plan sponsors all across the US.
Fred Barstein:
Fifth going to four soon. Right?
Mark Tonelli:
Soon. That’s right.
Fred Barstein:
So today, and at a lot of our programs, we get a lot of questions about Secure 2.0. It’s major legislation in 2023. Give us a couple of highlights and things that you’re having your clients ask you about.
Mark Tonelli:
Right. So Secure Act 2.0 was sweeping, very large piece of legislation that’s going to span over the next five years and have 90 plus changes affecting retirement plans. Some of the most common that we are talking about these days are related to early withdrawal penalties for retirement plans. There are three exceptions to the 10% withdrawal penalty that people can qualify for. And these are good things, getting access without any restrictions to their money if you qualify under disaster, birth and adoption, and terminal illness. So those are good provisions that are coming down the pike.
Fred Barstein:
Right. And then we were also talking about questions today about student loan provisions. What’s new in the Secure 2.0 about that?
Mark Tonelli:
So this is really going to help from a recruiting perspective and helping employers become more strategic in how they recruit their younger candidates who may have college student loan debt, where an employee that they hire who is not actually deferring to the retirement plan, but ultimately paying their student loan debt, that employer now can still calculate their match as if the employee was participating in their 401K plan. But the employer can put their match appropriately in the 401K plan.
Fred Barstein:
And it’s also, I think, self-reporting, so you don’t have to follow up and make sure they’re doing it.
Mark Tonelli:
That’s true. It makes it easy.
Fred Barstein:
So I know there’s a lot of changes doing it, and it’s affecting advisors and providers. What are you seeing?
Mark Tonelli:
So this is really going to be a major change for the vendors in the Marketplace, and the record keepers. So the record keepers really do have a process where they have to understand what the changes are that they need to implement and what their prioritization is for those changes. Some of these changes are going to be mandatory for the plan sponsor to take advantage of. Others will be optional and the employer can decide whether to utilize that. But when it comes to the plan sponsors, they really should work closely with not only their vendors, record keepers, but their advisors as well, to ensure they understand the things that they’re confronted with in making the best decisions for them and their employees,
Fred Barstein:
Which means they really need to work with a specialist, not somebody who dabbles in this?
Mark Tonelli:
That’s true.
Fred Barstein:
Very good. So final question for you, Mark. I know you’ve done TPSU. Why should a plan sponsor attend a TPSU program?
Mark Tonelli:
Educational, supportive, the comradery that people experience when dealing with other peers and having these discussions really is a tremendous experience for them. They come out feeling very positive, plan of action, and they really do appreciate the openness and the overall education that they get.
Fred Barstein:
Great. Well, thank you for supporting TPSU.
Mark Tonelli:
My pleasure.
Fred Barstein:
And thank you for watching 401K TV. Please stay tuned.
