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Benefit Plan Trends - Volume 63, Issue 1

Lundstrom Insurance Agency, Inc.

2205 Point Blvd., Suite 200
Elgin, Illinois 60123
Phone: (847) 741-1000
Fax: 847-428-8857

This publication intends to provide accurate information pertaining to the subject matter covered, however, it should not be considered as legal or tax advice. It is published and distributed with the understanding that neither the publisher nor Lundstrom Insurance Agency is rendering legal or tax advice. Before taking any action, you should always obtain specific advice and assistance from a competent attorney or tax advisor.

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A report covering plan design and legislative changes


Passage of The SECURE Act Brings Major Changes To Retirement Plans

The Setting Every Community Up for Retirement Security Act, or the SECURE Act, was approved by Congress as part of a broader 2020 fiscal year appropriations bill, and was signed into law by President Trump on December 20. The most far-reaching retirement legislation passed by Congress since the Pension Protection Act of 2006, the SECURE Act incentivizes employers to offer defined contribution (DC) plans, promotes lifetime income options, and improves retirement plan design and administration. While some of the provisions of the SECURE Act will not go into effect until later years, most changes are effective for taxable years beginning after December 31, 2019.

Among the most significant reforms included in the legislation are provisions that remove barriers to unrelated small businesses and employers to join together and participate in "open" multiple employer plans (MEPs), also referred to as "pooled employer plans" (PEPs). These changes, which will go into effect in 2021, are expected to lower the costs and administrative burdens associated with sponsoring retirement plans for small employers.

The SECURE Act also provides a new tax credit of up to $500 per year for small employers (100 or fewer employees) to offset the startup costs for new 401(k) plans or SIMPLE IRA plans that include automatic enrollment. In addition, the legislation increases tax credits for small employers that offer new retirement plans from $500 per year currently to up to $5,000 per year for the first three years.

For DC plan participants and individual retirement account (IRA) owners, the legislation raises the age at which required minimum distributions must be taken from 70½ to 72. The SECURE Act also repeals the age limit for contributions to IRAs, and requires non-spouse beneficiaries of inherited IRAs and certain other qualified plans to receive their benefits over a period of just 10 years, rather than stretching the required minimum distributions over the beneficiary's life expectancy.

Moreover, the SECURE Act enhances automatic retirement plan features by permitting DC plan
sponsors to automatically enroll employees in a plan at a 6% rate of salary contribution, up from a limit of 3% currently. The legislation also includes a safe harbor for employers to increase employee contributions to the retirement plan to a maximum of 15% of an employee's annual pay, up from a current cap of 10%. In addition, the legislation prohibits the distribution of DC plan loans through credit cards or similar arrangements, and provides penalty-free distributions from retirement plans of up to $5,000 within a year of the birth or adoption of a child to cover associated expenses.

Whereas under current law 401(k) plan sponsors may exclude part-time employees from participation if the employees do not complete 1,000 hours of service in a year, the SECURE Act requires plan sponsors to allow any part-time employee who has worked at least 500 hours in each of the immediately preceding three consecutive 12 month periods to make elective contributions. However, 401(k) plans will not be required to provide matching or other employer contributions to part-time employees, and special nondiscrimination relief is provided.

The SECURE Act also includes several provisions designed to encourage DC plan sponsors to provide lifetime income options, by, for example, reducing fiduciary exposure for plan sponsors that offer participants annuities within the plan, and allowing DC plans to make direct trustee-to-trustee transfers of lifetime income investments to another retirement plan or IRA. The legislation will further require that retirement plan statements include a lifetime income disclosure at least once a year that estimates how much monthly income participants could expect to receive if their total account balance were used to provide a lifetime income stream.


Working Remotely Is Becoming the Norm among Knowledge Workers

Companies looking to attract and retain talent should review their remote work policies, as most knowledge workers now say that they want the opportunity to work remotely, the results of a recent survey conducted by business automation consultancy Zapier indicate.

The survey of 886 U.S. knowledge workers—defined as workers who primarily work in a professional setting and use a computer as part of their job—was conducted October 25-29, 2019. The aim of the survey was to explore the reasons why people want to work remotely, and how this trend is shaping the ways people work.

The results showed that 95% of the knowledge workers surveyed want to work remotely, and 74% would be willing to quit a job to do so. According to the survey, 26% of respondents have quit a job because the company did not offer the option to work remotely or to have a flexible work schedule.

When asked what perks they would most like to be offered by an employer, 57% of respondents cited the option to work remotely; a larger percentage than the shares of respondents who cited being provided with free daily lunch (42%) or unlimited vacation time (39%). The findings further indicated that 62% of the female knowledge workers surveyed, but just 53% of their male counterparts, cited the option to work remotely as one of the perks they would most want an employer to offer.

The survey also found that there are generational differences in the likelihood of working remotely, with 31% of millennials, 27% of Gen Xers, and just 11% of the baby boomers polled saying they work remotely on a full-time basis.

When asked why they would like to work remotely, 48% of the knowledge workers said that they see it as a way to save money, while 47% indicated that they view it as an opportunity to work from anywhere, and 44% said they believe it would allow them to spend more time with their family. Among the other reasons cited by respondents for wanting to work remotely are that they are more productive at home (35%), and that working remotely is better for their mental health (29%) and is more environmentally sustainable (23%). Smaller shares of the knowledge workers surveyed said they would like to work remotely in order to spend more time with pets (18%), relocate somewhere more affordable (16%), or care for aging parents (16%).

The survey also showed that 42% of respondents believe they are most productive when working from home, while only 32% think they get more done in an office, and just 11% believe they get the most work done in a co-working space. When asked how many hours of each workday they spend doing meaningful work, the full-time remote knowledge workers surveyed said they typically spend 6.2 hours, whereas their office-bound counterparts reported spending just 5.7 hours.


Many Workers Prefer Early Access to Wages

A majority of employees would like to have access to their wages before their scheduled payday, signaling that flexible pay is an attractive benefit for many workers, according to the findings of a survey conducted by the Workforce Institute at Kronos Incorporated.

The survey of 1,180 employed U.S. adults was conducted October 3-7, 2019. The aim of the survey was to gain a better understanding of how immediate access to earned wages, or on-demand pay, and financial wellness can support recruitment and retention. Nearly three-quarters (72%) of the workers surveyed said they would like to have access to their wages before their scheduled payday, but only 6% reported that they currently have such access.

The results also showed, however, that 57% of respondents said they would work harder and stay longer at a company that offers on-demand pay, and 51% reported that they consider on-demand pay a more attractive benefit than additional paid time off.

Broken down by industry, the survey found that 65% of retail workers, 61% of health care workers, and 54% of manufacturing/construction employees think they should not have to wait until their scheduled payday to access their earned wages. The findings also indicated that respondents with an annual household income of less than $50,000 were more likely than those with an annual household income of more than $50,000 to say they would like to have early access to their earned wages (87% vs. 67%).

When asked why they would like early access to their earned wages, 66% said they would use the money to cover bills, especially emergency expenses such as car repairs (32%) or unplanned medical care (19%). By contrast, relatively small shares of respondents said they want to access their wages early to pay for a night out (11%) or Black Friday/Cyber Monday/holiday shopping (10%), or to cover student loan repayments (6%).

In addition, 70% of the workers surveyed said they believe the five-day/40-hour pay period is outdated, including 72% of respondents in health care, 66% of those in retail, and 59% of those in manufacturing/construction.

The survey also asked employees what fees for accessing their wages before their scheduled payday they would consider reasonable. Around three-quarters of hourly (75%) and salaried (71%) respondents said they would be willing to pay a fee of up to $5 to access $50 of their wages early.

The findings further revealed that large shares of employees are under financial pressure, with 53% of respondents reporting that financial stress distracts them from their work. Broken down by age group, 67% of respondents aged 35-44, 65% of respondents aged 18-34, but just 39% of respondents aged 45+ indicated that financial stress distracts them from their work.


HR Leaders and the Fourth Industrial Revolution

As the Fourth Industrial Revolution (4IR) blurs the lines between people and technology, an initial response, HR4.0, is being developed by companies to support employees through this rapid transformation of the workplace, according to a white paper recently released by the World Economic Forum.

Published in December 2019, "HR4.0: Shaping People Strategies in the Fourth Industrial Revolution," was based on a series of consultations with chief human resources officers and other experts. The paper explored why the 4IR is creating the impetus for transformation in people strategies and HR practices, what businesses leaders can do to respond, and how organizsations are currently reacting to the pressure to change.

"HR leaders will increasingly need to develop skills related to data analytics, understanding and helping others understand technology, systems thinking, design thinking, story-telling, understanding the emerging field of mapping jobs, skills and tasks, and conducting strategic workforce planning," researchers predicted.

The paper identified six key imperatives that business and HR leaders will need to implement to help their organization adapt to the 4IR. First, researchers said, as companies operate more distributed business models, leaders will have to develop new leadership capabilities. The second imperative for businesses is to manage the integration of technology in the workplace.

The third critical task is to enhance the employee experience. The authors pointed out that the increasing complexity of the workforce and the use of technology is changing the way work is experienced, and that HR has an important role to play in defining, measuring, and enabling the meaningful employee experience in the 4IR.

The fourth imperative is building an agile and personalized learning culture. According to researchers, HR can play a leading role in fostering a culture of lifelong learning as the demand for certain skills declines and the demand for new skills emerges.

The fifth critical task of HR leaders is to establish metrics for valuing human capital. The authors observed that the mutually beneficial relationship between the workforce, the organization, and society will make it essential for HR to build a compelling case for establishing viable and scalable measures of human capital as a key performance driver, and to continuously demonstrate that there is a clear business case for valuing human capital.

Finally, the authors said, the sixth imperative is for organizations to embed diversity and inclusion, while emphasizing that social, economic, and political changes represent an opportunity for organizations to advance inclusion and diversity goals. Researchers called upon HR to go beyond compliance requirements to create a culture of diversity and inclusion that focuses on changing behaviors, attitudes, and mindsets; and that is integrated into every aspect of the organization, including recruitment, rewards, and performance management.


The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2020 Liberty Publishing, Inc. All rights reserved.




2205 Point Blvd. Suite 200 | Elgin, IL 60123
p 847.741.1000 | f 847.428.8857