lutz logo
lutz logo
  • Services
  • News & Insights
  • About
  • Client Portal
Search
  • Services
  • Accounting
  • Consulting
  • Financial
  • M&A
  • Talent
  • Tech
  • Accounting Services
Services
  • Audit & Assurance
  • Employee Benefit Plans
  • Client Advisory Services
  • Outsourced Accounting
  • Tax
  • State & Local Tax
View All
Industries
  • Agribusiness
  • Construction
  • Family Office
  • Healthcare
  • Manufacturing & Distribution
  • Nonprofit
View All
News & Insights
Website Featured Content Images-2
Blog
Are You Prepared? Financial Access Checklist for Spouses

Share this checklist with your spouse to assure you each have access to manage important financial tasks independently.

Read More
  • Consulting Services
Services
  • Business Valuation
  • Healthcare Consulting
  • Internal Control Assessment
  • Litigation Support & Forensic
  • Risk Assessment
View All
Resources
Website Featured Content Images (1)-1
Guide
What is a Comprehensive Risk Assessment?

To start managing your business's risk, you will need to conduct a comprehensive risk assessment.

Read More
Business Insights
Website Featured Content Images (2)-1
Blog
Top 3 Financial KPIs Every Business Owner Should Track

Key Performance Indicators (KPIs) can help illustrate your business’s financial health and show whether your business will turn a profit.

Read More
  • Financial Services
Services
  • Financial Planning
  • Investment Advisory
  • Retirement Plan Services
  • Pooled Employer 401(k) Plan
View All
Resources
  • Lutz Financial Blog
  • Our Team
  • Client Portal
  • Charles Schwab Login
  • TD Ameritrade Login
Contact Us
NEWS & INSIGHTS
Website Featured Content Images
MARKET COMMENTARY
Financial Market Updates

Want to receive financial market updates straight to your inbox? Sign up below!

Subscribe
  • M&A Services
Services
  • Sell-Side Representation
  • Transaction Advisory
  • Exit Planning
View All
Resources
Website Featured Content Images (3)
Ebook
7 Factors to Consider Before Selling Your Business

We give you exclusive insights on the business sale transaction process to help you answer seven important questions.

Read More
Business Insights
Website Featured Content Images (5)
Blog
Key Items to Review During Financial Due Diligence
The due diligence phase is critical for a Buyer to better understand the Target’s business operations and the overall quality of the financial information.
Read More
  • Talent Services
Services
  • Search & Staffing
  • Outsourced HR
  • HR Strategy & Coaching
  • HR Consulting
View All
Candidate Resources
  • Job Seeker Process
  • Current Opportunities
  • Lutz Internships
Contact Us
News & Insights
Website Featured Content Images-3
Blog
5 Benefits of Using Gallup's StrengthsFinder in Your Company

Gallup’s StrengthsFinder assessment can help you identify the strengths of the people working in your teams.

Read More
  • Tech Services
Services
  • Data Analytics & Insights
  • Outsourced IT
  • Technology Strategy
  • Software Consulting
View All
Resources
Website Featured Content Images (1)-2
Guide
Introducing Data Analytics into Your Business

Integrating data analytics into your business can help your revenue grow, the organization mitigate risk, or gain insight into your business operations.

Read More
Business Insights
Website Featured Content Images (2)-2
Blog
17 Tech Tips & Tricks

We’ve listed 17 shortcuts and hacks that will help you use tech to your advantage and make your daily life a little easier.

Read More
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
Webinars & Events
Events
Register Today

Register for an upcoming event or access our library of on-demand recordings.

View All
Lutz Talk Business
PODCAST
Tune In

Subscribe today for entrepreneurially spirited episodes of witty commentary for young professionals.

View All
Resources
EBOOKS & GUIDES
Download Now

Take a deep dive into challenging business topics with these free educational resources. 

View All
  • News & Insights
  • Business Insights
  • Webinars & Events
  • Lutz Talk Business
  • Resources
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
  • About
About

Lutz is a business solutions firm for people seeking a partner to help energize and heighten economic and organizational success.

Our Company
Our Team
Offices
Careers
Internships
Contact Us
  • Contact
Client Portal

Log in to your relevant client portal to access your account, upload documents, or make a payment.

Make a Payment
Accounting Client Portal
Financial Client Portal
Charles Schwab Login
TD Ameritrade Login
Send Files Securely
Contact Us
  • 401(K)

May Retirement Plan Newsletter 2023

May 17, 2023
May Retirement Plan Newsletter 2023

Is Your Retirement Plan "Catchy?"

By offering — and encouraging — catch-up contributions, plan sponsors can demonstrate a heightened commitment to employee retirement readiness. Over a five-year period ending in 2020, nearly 15% of participants utilized catch-up contributions when they were offered, according to a report by Vanguard. And those who did were more likely to be higher earners with larger portfolio balances.

Employers can help close the retirement savings gap by deploying several smart strategies aimed at increasing catch-up contributions. Here are a few ideas to consider implementing at your organization.

Match-up the catch-up. Instead of simply allowing participants to make catch-up contributions, employers can consider offering or ensuring a company match on those contributions to further incentivize older workers.

Would they rather Roth? With SECURE 2.0 signed into law, employers can consider offering their participants the ability to make matching contributions (including those on the catch-up) in the form of a Roth contribution.

Make a day of it. Create a “Catch-up Contribution Day” (or week) dedicated to educating participants about the important benefits of catch-up contributions for their retirement readiness. Provide additional support to workers aged 50 and over, such as special group sessions or one-on-one meetings with plan advisors.

Burst ahead. SECURE 2.0 also allows for a short-term catch-up “burst” from ages 60 to 63, where participants can elevate their catch-up contributions from an indexed $5,000 ($7,500 for 2023 plan year) to an indexed $10,000. This can help workers nearing retirement who may have fallen behind on their savings goals make up lost ground more quickly.

Bring home the benefits. Develop online resources and educational materials geared toward various levels of financial literacy around the benefit of catch-up contributions. Include easy-to-digest video content and infographics — and provide timely reminders to participants aged 50 and over.

Take a multichannel approach. Use all communication channels at your disposal as a plan sponsor, including employee newsletters, email, the company intranet, social media, and in-person events. Spread the word in as many ways as you can about the advantages of making catch-up contributions.

Provide the right tool for the job. Give participants access to online retirement planning tools to help them evaluate whether catch-up contributions could help them achieve their savings goals and to adjust their savings targets accordingly.

A Catch-As-Catch-Can Strategy

The retirement readiness end game has high stakes for workers. That’s why it’s so important to take a multi-pronged approach to reach as many of your participants as possible and encourage them to make catch-up contributions as necessary to stay on track for retirement. SECURE 2.0 provides sponsors with an even wider array of options to assist workers who’ve fallen behind in their retirement preparedness — and help catch-up contributions catch on among those they might benefit the most.


Sources:
https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf 


Leveraging ChatGPT in Retirement Plan Management: Opportunities, Concerns, and Best Practices

The advent of generative artificial intelligence (AI) technology, such as ChatGPT, promises to transform the way businesses operate across sectors. Yet as quickly as novel applications and abilities surface, so does more evidence of the limitations and shortcomings of large language models. Plan sponsors can harness the immense power and utility of generative AI to provide better support to plan participants, but they must do so only after putting prudent processes and safeguards in place.

 

Identify Appropriate Applications

ChatGPT could be used to help streamline the retirement plan onboarding process by giving employees detailed instructions on how to enroll. Sponsors could use it to help provide information about plan options, as well as answers to employees’ frequently asked questions regarding their retirement plan benefits. The technology could also help craft customized messaging around more routine tasks such as:

  • Informing participants of investment menu changes.
  • Providing instructions for updating beneficiary designations.
  • Giving eligible participants timely information regarding catch-up contributions.
  • Helping workers access their account statements and other plan information.
  • Reminding employees of contribution limits and important deadlines.

However, at present, it is advised that such technology be limited in use to non-legally required communications. Because ChatGPT is only as effective as the directives it receives, it is possible it may not generate a complete document meeting legal requirements. Thus, at present, it is advisable to avoid using this technology for legally required disclosures, notices, or legal documents.

 

Transparency, Security, and Oversight

While the opportunities for gains in efficiency are significant, it’s critical to address potential concerns when implementing nascent generative AI systems into your plan.

Training 

Employers must establish clear guidelines about which employees can access ChatGPT — and for what purposes. Appropriate training regarding the limitations of the technology should be given to those authorized to use the platform. Workers should be instructed how to handle complex or sensitive issues that require human intervention.

Data Integrity & Security

At all times, participants’ personal and financial information must be protected by strict adherence to privacy standards. Establish clear protocols for sensitive data handling and retention. Implement and document oversight processes to protect information from unauthorized access, disclosure or misuse.

Compliance

Designated individuals should review and approve all generative AI outputs for compliance with regulatory and internal requirements before they’re communicated. Their review should include ensuring that all information provided to participants is accurate and consistent with plan provisions. Audit generative machine learning systems regularly to identify potential issues or vulnerabilities and take any necessary corrective action.

Transparency

Employers should be transparent with workers regarding the use of ChatGPT with respect to their retirement benefit. This includes how their personal information is being used — and protected.

 

A Prudent Path Forward

Plan sponsors should regularly review and evaluate generative AI integrations to flag any potential issues and identify ways to optimize their use of the technology while ensuring they remain compliant with all pertinent industry regulations and standards. With guardrails in place and adherence to prudent processes, appropriate use of AI-powered generative tools in retirement plan management presents an opportunity for sponsors to increase efficiency and enhance outcomes for plan participants.


Dear Prudence: What is Prudence Anyway?

When it comes to monitoring and selecting investments, the responsibility lies with the ERISA fiduciary for managing your company’s 401(k) plan, and this means the fiduciary is subject to ERISA’s prudent man rule (sometimes referred to as the “prudent expert rule”). What exactly is a prudent expert?

With respect to investments, the fiduciary is responsible for selecting and monitoring the investment alternatives that are available under the plan. Acting on behalf of the plan in this way means that someone is exercising the care, skill, prudence, and diligence that a prudent person familiar with such matters would exercise in similar circumstances. This expert is giving “appropriate consideration” to all the facts and circumstances that they know, or should know, are relevant to either the investment itself or to the course of action the investment requires.

This prudent expert is also selecting investment options as laid out in ERISA section 404(a). Furthermore, a prudent expert should maintain and follow a written investment policy statement (IPS). Although ERISA doesn’t require a written IPS, it is considered best practice to maintain one and follow it because it will be requested by the DOL in any audit situation, and it provides evidence that a prudent process has been adopted by fiduciaries.

A person or entity can be considered a prudent expert if they possess enough expertise to accept full personal responsibility for managing long-term investments. This is a sizable liability, and if you’re not completely confident in your ability to take on that responsibility, then you can (and ERISA says you should) engage a trusted advisor to assist with this responsibility and act solely in the best interest of the plan participants.

A qualified advisor will accept, in writing, the fiduciary responsibility for their recommendations as a 3(21) fiduciary investment advisor or for their actions as a 3(38) fiduciary investment manager. The nuance here is that a 3(21) fiduciary is making recommendations to the employer or to the Plan Committee, who will then consider and make the final say and therefore retain fiduciary responsibility. But in a 3(38) engagement, the fiduciary investment manager has transferred discretion to select and monitor (via prudent process with the IPS, etc.) investments for the plan and then reports back to the employer or committee the actions they took and why it was prudent to do so.

The 3(38) scenario is where the language above is so important that it bears repeating: Acting on behalf of a plan means the entity monitoring and selecting investments exercises everything a prudent person familiar with such matters would exercise. A third-party 3(38) fiduciary is often hired when there is no in-house “prudent expert” available to assume the full financial responsibility of selecting and monitoring investments, and the plan sponsor wishes to outsource the responsibility.

We hope this clarifies ERISA’s prudent man rule. If you have questions about which lanes 3(21) or 3(38) fiduciaries follow—or about any other ERISA nuance—reach out, and we will be happy to walk through it with you.


Participant Corner: The Advantage of Saving Early

The early bird really could get the worm! In the chart below, you will find no secret tips or tricks to investing that cite prior market events: just plain old math.

The amount of your total nest egg is exponentially influenced by the duration of time it has to compound. In other words, the earlier you start saving, the better, by leaps and bounds. Of the four scenarios, please focus on the two profiles in the middle.

Capture-1

The “early saver & investor” invests ($200/month) for only 10 years, while the “late saver & investor” saves ($200/month) for 30 years. Both portfolios earn the same amount in this example (7%), but the early saver has a higher amount at retirement by nearly $30,000!

Of course, we all want to be the “consistent saver & investor,” and there is much to be said about the importance of staying invested for the long term. However, as some have been told when beginning their working career, it’s not about “timing the market” but much more about “time in the market.”

Chances are that you are already on a path of saving for your retirement or playing a little catch-up. That does not preclude you from stressing the importance of saving to all your younger colleagues, family, and friends! The math shows that individuals could be significantly better off starting as early as possible.

 

RPAG

 

Recent News & Insights

Accounting
Nebraska + Iowa Enact Pass-Through Entity Tax Laws
Iowa and Nebraska enacted Pass-Through Entity Tax (PTET) legislation during the 2023 ...
Read More
Market Commentary
A Few Large Growth Stocks Have Driven the Market in 2023 + Market Update
Story of the Week A Few Large Growth Stocks Have Driven the Market in 2023 After an incredibly ...
Read More
Data Analytics
Bots for Small Businesses + Power Automate
For small businesses, the idea of implementing Robotic Process Automation (RPA) or bots may ...
Read More
401(K)
May Retirement Plan Newsletter 2023
Is Your Retirement Plan "Catchy?" By offering — and encouraging — catch-up contributions, plan ...
Read More
module-bg-desktop module-bg-mobile

Let’s get you where you want to go.

We work to simplify complexities, help make critical business decisions, and confidently focus on the things that are truly important to you. We embrace your business as our own to spark the right solutions and help you thrive.
Contact Us
Lutz-Logo-white
  • Services
    • Accounting
    • Consulting
    • Financial
    • M&A
    • Talent
    • Tech
  • About
    • Our Company
    • Our Team
    • Offices
    • Careers
    • Internships
    • Current Opportunities
  • Client Portal
    • Make a Payment
    • Accounting Client Portal
    • Financial Client Portal
    • Send Files Securely
    Submit RFP
TOLL-FREE: 866.577.0780 | © Lutz & company, PC 2023 | Privacy Policy
Follow us on Facebook Follow us on LinkedIn Follow us on Twitter Follow us on Instagram Follow us on Facebook