Top Retirement Plan Advisers Weigh In on Potential, Pitfalls of SECURE 2.0
PLANADVISER’s top retirement adviser pulse survey finds optimism about the legislation, alongside a healthy dose of questions and advice for policymakers.
As further SECURE 2.0 deadlines approach in 2024, industry players and policymakers are weighing in and asking for more clarity.
In a May survey conducted among PLANADVISER’s top retirement plan advisers, participants showed optimism for the legislation’s potential, along with some frustration at the challenges of implementing provisions in the real world.
Great Potential
The majority (86%) of retirement plan advisers are familiar with the provisions in SECURE 2.0, while another 14% pled “somewhat familiar.” No advisers said they were unaware of the provisions.
How familiar are you with the provisions of SECURE 2.0 which was signed into law on December 23, 2022?
It’s hard in some ways to “gauge” what success will be for SECURE 2.0, and the reality is that we may not know for years or more than a decade. That said, when asked about their bullishness on SECURE 2.0 boosting workplace retirement plan access across the U.S., a rather large 71% said they are optimistic.Do you believe SECURE 2.0 will boost workplace plan access from its current 52 percent of workers according to the AARP to at least 70 percent by 2033?
That’s the future. When it comes to the present, plan advisers are generally focusing, by a wide margin, on the required Roth-only catch-Up contributions for those with income greater than $145,000 coming into effect in 2024.
Less prevalent, but still in discussion, are issues such as emergency savings and mandatory automatic enrollment for new retirement plans.
In the “Other” section, Roth continued to dominate the discussion. Multiple advisers pointed to employer matching via a Roth IRA, as SECURE 2.0 allows plan sponsors to give participants the chance to take employer matches on an after-tax Roth basis, rather than only a pre-tax basis.
We also asked the advisers what areas of SECURE 2.0 need the most guidance and clarification from regulators. The Roth-only catch-up contributions came up big once again, tied for the highest percent in the multi-answer response.
Equally as pressing are answers to questions about the student loan debt matching contribution at 56.4%, followed by emergency savings accounts at 40%. Provisions providing incentives for startup plans (7.3%) and mandatory auto-enrollment for startups (3.6%) seem better understood.
In the ‘Other’ section, advisers pointed again to clarity about employer matching to a Roth, but they also raised a widely discussed industry request for collective investment trusts—a popular investment option in 401(k) plans—to be made available in 403(b) retirement accounts. Legislation for CIT inclusion in 403(b) plans has been introduced in the House.
Straight Talk
Finally, we gave advisers the chance to weigh in on what they would like to see next from government regulators (or SECURE 3.0) when it comes to the retirement saving industry. Responses included:
“Automatic enrollment should apply to all existing plans. … There should be no ‘grandfathering.’ If the government feels auto-enroll is the best approach for all new plans, then it should be the best approach for all existing as well. “
—Matthew Compton, Brio Benefit Consulting Inc.
“Better and more clear ways to perform plan testing (ADP/ACP). Updates to HCE [highly compensated employees] and key employee definitions for more reasonable compensation.”
—Noel Wolfe, Morgan Stanley
“National mandate. The state mandates are great but have created confusion and an unlevel playing field.”
—Steve Scott, Retirement Solution Group
“I would like to see a national IRA rather than 50 state auto-IRA programs for employers who do not run a plan. I would like to see an automated mandatory former employee rollover from one plan to another and make this an easy process.”
—Joe Connell, Sikich Financial
“Expansion of new cash balance plan rule allowing market rate plans to use a reasonable fixed rate for evaluating backloading. The fixed rate should also be available for other projections, such as projected 415 limits, while the actual market rate would still be used for income credits.”
—Jon Chambers, SageView Advisory Group
“Mandate using ACH for loans and making them portable. Many participants have bad outcomes when they have a loan outstanding and change jobs or get laid off.”
—Leif Springer, UBS
“Provide plan sponsors more flexibility with respect to terminated employees. Raise the threshold to $15k-$20k for force-outs.”
—Chris Giovinazzo, Accelerate Retirement
“Clear up the startup credit ambiguity on the $5,000. RMD clarification for those who turn 73 after Dec 31, 2032. Make a technical correction to the removal of catch-up provisions in 2024.”
—Mike Kane, Plan Sponsor Consultants
“Wow, Secure 3.0. Before we go there, let’s get clarity on provisions in Secure 2.0 from regulations and when recordkeepers and payroll companies will be ready to implement.”
—Kristi Baker, CSi Advisory Services
The PLANADVISER Top Retirement Adviser Pulse Survey took place from May 11 to May 31 and received responses from more than 50 advisers designated as 2023’s top retirement plan advisers, requiring a minimum of 50 plan clients or retirement plan assets under management of at least $400 million.