Compliance January 19, 2024

Regulators Seek Comment on ERISA Disclosure Requirements

The IRS, PBGC and EBSA are accepting suggestions on how to simplify disclosures to benefit fiduciaries and participants.

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The Employee Benefits Security Administration, IRS and Pension Benefit Guaranty Corporation issued a request for information on Friday, seeking advice on how to improve the reporting and disclosure regime for retirement plans governed by the Employee Retirement Income Security Act.

Section 319 of the SECURE 2.0 Act of 2022 requires the three agencies to publish a report by December 29, 2025, on improvements that can be made to retirement disclosures by plan sponsors and fiduciaries acting on their behalf. This RFI, with a 90-day comment period that commences when it is entered into the Federal Register, will be used to inform that report.

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The final report “will include recommendations on consolidating, simplifying, standardizing, and improving” the current disclosure regime. The regulators will aim to both reduce compliance burdens for plan sponsors and ensure plan participants’ receipt and understanding of the information “they need to monitor their plans, prepare for retirement, and get the benefits they have earned.”

According to the RFI, commenters should not make recommendations on how to improve Form 5500 because it already has an annual review and comment process. Instead, commenters should focus on areas related to participant comprehension and overall regulatory burden on sponsors. Those areas include:

  • The number, timing and content of participant disclosures, all factors that influence participant understanding;
  • Issues related to foreign languages, physical access and physical retention of disclosure documents and participant engagement with disclosures; and
  • Feedback on how to collect participant contact information and how to most effectively deliver documents.

On the compliance side, the RFI asks for feedback on the cost of reporting and disclosure; timing and frequency of reports; the clarity of reporting requirements; the necessity of reporting certain material; and improving agency assistance with filing.

The agencies included instructions on how to submit comments, which will be received by all agencies, according to the alert, so commenters should avoid sending duplicates.

Client Service January 19, 2024

Few in ‘Active Generation’ of Americans Have Planned for Their Retirement Pastimes 

Only 11% of Americans have planned for post-retirement passions and pastimes, according to Lincoln research.  

 

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Among Americans in their 50s and 60s, 77% view retirement as a phase in life when they can finally pursue passions and pastimes neglected during their working years. However, only 11% of pre-retirees claim to have extensively planned for their post-retirement leisure activities, according to Lincoln Financial’s Consumer Sentiment Tracker, released Tuesday. 

The study indicated that 87% of individuals in their 50s and 60s who engage with financial professionals have discussed an investment strategy for retirement. Yet significantly fewer individuals (53%) have delved into budgeting for their preferred activities, perhaps because nearly half of respondents did not discuss budgeting for retirement pastimes expressed heightened financial concerns. 

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“As an adviser or plan sponsor, providing more effective tools and technology is key—but what this research shows us, above all, is that taking a human-first approach when talking to employees about their retirement goals is critical,” says Ralph Ferraro, president of retirement plan services at Lincoln Financial Group. 

According to Lincoln’s study, pre-retirees and retirees want to spend retirement pursuing passions like travel, volunteering, experiencing the arts, exploring outdoor activities and socializing. While most pre-retirees in their 50s and early 60s expect to devote more time to retirement planning (87%), only 30% of retirees believe their preparation years earlier adequately planned for their post-retirement activities. 

“The upcoming group of retirees is the most active generation of 50+ yet: They have places they want to go, family and friends they want to spend time with and pastimes they want to continue exploring,” says Ferraro. “Retirement planning shouldn’t just be personalized; it’s personal.” 

He recommends that participant educators and advisers start the “action plan” conversation by asking thought-provoking questions. 

“Encourage employees to dive deep into the specifics of what they want to do in retirement,” he says. “Challenge them to think about the things that bring them mental and physical wellness and how that translates to their financial wellness. That is how we help people find clarity and gain the confidence they need to make decisions now and through retirement.” 

The inability to properly prepare for retirement can also be seen in Bank of America’s 13th annual “Workplace Benefits Report,” which found employees are prioritizing short-term financial needs rather than retirement savings. The study, released in September 2023, revealed a decline in the number of employees prioritizing long-term retirement savings, dropping to 31% in 2023 from 45% in 2022.  

This shift was accompanied by a rise in short-term financial needs, with 16% reporting a need to pay off credit card debt (compared with 11% in 2022), and 13% reporting a need to save for unexpected expenses (up from 8% in 2022). 

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