Q: Can you clarify the U.S. Department of Labor’s new 401(k) audit rule for Form  5500?

A: For Form 5500 purposes, 401(k) plans with 100 or more participants at the beginning of the plan year are considered a “large plan,” whereas plans with fewer participants are considered a “small plan.” Large plans must file an audit report with their Form 5500 while most small plans do not. 

Recent U.S. Department of Labor (DOL) changes to the Form 5500 now allow plans to count fewer participants when determining the need for an audit. Under the previous method, 401(k) plans had to count all eligible participants, regardless of whether they had an account balance. With the new method (which is effective for plan years beginning on or after January 1, 2023), plans must only count participants with an account balance. The DOL expects the change to eliminate the audit requirement for 20,000 small business 401(k) plans. This is good news considering the cost, time and effort of an audit for employers. Small businesses should understand how the method will affect their 401(k) plan's audit status this year. 

To view a summary of the DOL’s changes to Form 5500, go to: https://tinyurl.com/3a95jakb.

Q: We are in preliminary discussions with our recordkeeper about adding the SECURE 2.0 provision allowing employers to make matching contributions connected to student loan repayments. Is there any data available yet to help us determine the value of offering this to our employees?

A: Following a pause for three years during the COVID-19 pandemic, federal loan repayments resumed on October 1 of last year. After surveying more than 2,100 federal student loan borrowers, Corebridge Financial found that 75% said that resuming student debt payments will impact their ability to save for retirement. In order to make payments, 22% said they plan to reduce how much they save for retirement, and 29% plan to reduce their emergency savings. And while many assume younger employees are impacted the most by student loans, a new survey by Nationwide found that more than 1 in 10 employees aged 45 and older currently have student loan debt. Most of these individuals (61%) agree that the reinstatement of student loan repayments has negatively impacted their financial stability and long-term planning. 

For more in-depth discussion, including considerations for plan sponsors, check out this article: “Student Loan Repayments Expected to Derail Employees’ Retirement Savings” (PLANSPONSOR, September 27, 2023.” (https://tinyurl.com/2p8yrd69).

Q: We are working closely with our plan advisor to establish some priorities to focus on this year. Are there any recent studies that shed light on the services plan sponsors value most from their advisor?

A: An excellent resource is Fidelity’s annual Plan Sponsor Attitudes survey. The 2023 research report, released in August, revealed plan sponsors value improved participant outcomes (44%) over any other service offered by their plan advisor. Other notable drivers of value were time spent on plan and administrative support (43%) and providing objectivity when making plan choices (41%). The survey covers a number of other topical areas, including evolving investment menus and plan designs, as well as additional ways advisors can have an impact with plan sponsors and their employees.

For more on the 2023 study, go to: https://tinyurl.com/53fy4r44