Impact of the SECURE Act on business retirement plans

Ted Benna, called “the father of 401(k)s” was one of my first business mentors when I left Wall Street in 1997 and started my own firm serving small businesses in the Doylestown, Pennsylvania area. His comments today in ThinkAdviser on the impact of the new SECURE Act are ‘spot on’:

• “Hopefully the operating efficiencies a multiple employer plan can provide will result in reduced fees rather than increasing service provider profits.
• MEPs should help increase coverage among smaller employers.
• MEPs don’t impact the two major compliance issues that make 401(k)s undesirable for many small employers — top heavy and the non-discrimination testing.
• A 401(k) isn’t the best option for many small employers that don’t have retirement plans. As a result, many small employers are likely to be pushed into 401(k)s via MEPs instead of one of the better alternatives.
• There has been a lot of negative reaction to eliminating the stretch IRA. I am in agreement with this change because the reason employees are given tax breaks is to help them accumulate what they need for retirement rather than to pass money to their heirs.”

I agree with Benna that for small firms, the big issues are:

  1. product fees: balancing out benefits to to small firms with benefits to financial service companies
  2. pushing 401(k)s vs other (better) types of MEPs that won’t be promoted
  3. top-heavy and non-discrimination rules that affect the smallest firms the most.

The best solution is to have an experienced benefits professional representing your interests in the employee benefit plan rather than someone who draws a paycheck from the financial services industry to manage investment assets. Freedom Benefits has already added all of the new options to its small business retirement plans for 2020. See this blog post on the likely impact of the law on small businesses.


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