Practice Management January 18, 2024

How to Properly Document 2024 Plan Meetings

A retirement plan auditing expert provides a primer for recording minutes accurately and with maximum value for retirement plan committee meetings this year.

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The Form 5500 filing deadlines are in the rearview mirror, and you and your plan sponsor clients are into the new year in earnest.

Now you can focus on the current plan year and start making sure your client’s 401(k) plan house is in order and operating at the best possible standards.

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Maybe you represent 401(k) plan clients with thousands of participants, hundreds or a dozen. No matter what your practice focus, there is a key task that all plan sponsors need to perform: documenting minutes from the meetings of the 401(k) plan oversight committee.

Bradley Bartells

Keeping detailed minutes from the meetings of your client’s 401(k) plan oversight committee serves two important purposes. First, in the event your 401(k) plan is selected for a Department of Labor examination, detailed meeting minutes will show DOL examiners that you are performing your plan oversight duties required by DOL regulations.

Second, if your client or the 401(k) plan is sued by participants, detailed meeting minutes will support your defense that the plan fiduciaries are performing their duties with respect to the plan. Generally speaking, this mostly applies to larger plans, but the slew of 401(k) litigation in recent years has even small plan sponsors aware of legal risks.

To get your 401(k) plan advisement off to a good start in 2024, here are a few simple tips to either use with or provide to your clients on how to keep detailed and effective 401(k) committee meeting minutes.

1. The 401(k) oversight committee should be meeting no less than quarterly to effectively monitor the plan and perform oversight duties. If that’s with you, the adviser, terrific. If not, make sure you discuss and help your client with appropriate scheduling and setup.

2. Make sure the client has someone designated to take minutes during the meetings. Ideally, this person should not be a member of the committee so this person can focus only on taking minutes, rather than participating in committee discussions.

3. On a quarterly basis, meeting minutes should include the following, many of which can benefit from a plan adviser’s expertise:

  • Review and approval of the meeting minutes from the prior meeting;
  • Discussion and review of economic activity at a national level and impacts to the plan;
  • Review and discussion of significant 401(k) articles and publications for hot-topic issues;
  • Review plan financial activity during the most recent quarter;
  • Review applicable regulatory guidance issued by the DOL and IRS and its impact on the plan;
  • Review and approval of required plan amendments;
  • Review investment performance with the plan’s investment adviser;
  • Discussion and analysis of investments on the watch list;
  • Decisions to add/remove investments from the watch list; and
  • Ensure fiduciary educational and training sessions are on track.
4. In addition to the above, the following items should be documented annually:
    • Review of the SOC-1 reports for the plan’s key service providers. Typically this will consist of the custodian of the plan’s assets and the payroll provider;
    • Review and approval of the annual compliance testing results, including discussion of any corrective actions needed;
    • Review and approval of the annual Form 5500 filing;
    • If applicable, review and approval of the annual financial statement audit report;
    • Annual review noted of service providers (TPA, custodian, investment adviser, CPAs, etc.);
    • Cybersecurity training for employees and fiduciaries noted; and
    • Review and update of 401(k) plan policies and procedures for needed updates and ratification noted.

    Remember, minutes do not need to include a transcript of every word spoken during the meeting. Minutes should document key discussion topics, actions taken and decisions made.

    In more than 25 years of helping clients with audits in the employee benefit plan, not-for-profit, and city and local government industries, I know the importance of running well-documented and consistent retirement plan committee meetings. In 2024, let’s help as many plan sponsors as possible follow the best practices for their organizations and, ultimately, their participants.

    Bradley Bartells, CPA, is a partner with MUN CPAs in Sacramento, California.

    Data & Research January 17, 2024

    Advisers Prioritizing Roth Provisions From SECURE 2.0

    According to Escalent research, advisers are more likely to focus on immediate or traditional plan provisions with sponsors.

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    The majority of plan advisers are intent on implementing provisions from the SECURE 2.0 Act of 2022 with plan sponsors, but their top areas of focus are more bread-and-butter implementations than the headline-grabbing innovations, according to the recent Retirement Plan Advisor Trends report from Cogent Syndicated and Escalent.

    In a September 2023 survey of defined contribution plan advisers, the research firm found general enthusiasm for recommending SECURE 2.0 offerings to plan sponsors, but with a focus on areas that might be considered more administrative than innovations. The sampling of 503 advisers said they were extremely likely or already discussing with plan sponsor clients the following areas:

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    • Catch-up contribution to Roth accounts (now due in 2026) (67%);
    • Roth account employer matching (56%);
    • 529 college savings account rollovers (40%);
    • Expanded penalty-free withdrawals (36%);
    • Automatic rollovers amount increase (33%);
    • In-plan emergency savings accounts (22%);
    • No-fee emergency plan withdrawals (22%);
    • Disaster relief withdrawals (21%);
    • Student loan employer matching (20%); and
    • Out-of-plan emergency savings accounts (20%).

    Many advisers, according to Sonia Davis, a senior product director for Escalent, are focused on areas that can show real growth in participant saving.

    “In general, there is a lot of excitement for SECURE 2.0’s behavioral plan design changes because, as you know, participants tend to be a little bit inertia prone,” says Davis. “Plan advisers really see this as encouraging participants to save more and offering greater flexibility.”  

    Davis does note relatively high enthusiasm among advisers for less traditional areas such as emergency savings accounts (22%) and student loan payment matching in 401(k) plans (20%). But those items tend to fall a little further down the list as advisers face challenges both in technical implementation and first-mover hesitancy.

    “It will take some education and some convincing that it’s worth it and [it’s] going to help with overall participant engagement and employee retention,” Davis says. “Those are the kind of things that advisers need to be communicating.”

    Patience Needed

    Terri Fiedler, president of retirement services at Corebridge Financial, agreed that implementation of certain provisions will take time.

    “Adoption timelines of the optional provisions will vary based on several factors, including the ease or complexity of the implementation, regulatory clarity and the potential value for the participant,” she says. “The plan sponsor’s market segment may also impact the pace of adoption.”

    Fiedler pointed to two provisions newly in effect in 2024 related to emergency expenses that may take some time to be widely adopted. Section 115 allows for $1,000 per year to be accessed from retirement funds without penalty for emergencies, and Section 127 gives employers the option to offer a pension-linked emergency savings account.

    “We believe that Section 115 will be the more immediate opportunity for plan sponsors,” she says. “Because most plans already allow emergency distributions, Section 115 is able to utilize existing withdrawal and administrative capabilities. This makes implementation and administration simpler than establishing a separate, employer-based emergency savings account, which is the case with Section 127.”

    The IRS provided further guidance on emergency savings earlier this month.

    Easier Implementation

    Meanwhile, Fiedler notes that there are some provisions that are teed up for smoother implementation.

    “Section 304, which increases the involuntary cash-out limit; Section 314, which provides penalty-free withdrawal in cases of domestic abuse; and Section 602 conforming 403(b) distribution rules to 401(k) rules [can] leverage past withdrawal and administrative capabilities,” she says. “This once again makes the implementation process simpler, potentially driving plan sponsor consideration in the near-term.”

    2024 alone brings no less than 20 potential changes for plan advisers and sponsors, according to a roundup from Groom Law Group, Chartered.

    Even with the many potential add-ons, Escalent’s Davis continues to see bread-and-butter automatic enrollment and auto-escalation aspects of SECURE 2.0 as crucial for increased retirement saving.

    “From my seat at the table, having the automatic enrollment and auto-escalation will be huge to drive that initial engagement and keep people increasing their contributions,” she says.

    She is also interested in tracking student loan matching.

    “We hear a lot from participants who are struggling to pay back student loans while simultaneously saving for retirement,” she says. “But we also don’t want to see contribution levels take a hit. This alleviates some of that tension.”

    Successful implementation will require continued discussion of the provisions among plan sponsors, recordkeepers, and plan advisers and consultants, Corebridge’s Fiedler notes.

    “Together,” Fiedler says, “we can ensure the full scope and impact of all the available provisions are understood, make the best decisions for each particular plan, and educate employees on any plan updates so they are best-positioned to utilize the available benefits of SECURE 2.0 and take actions that improve their retirement outcomes.”

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