#42 - Q423 Retirement Plan Update w/ Todd Zempel

In today's episode, Todd Zempel will recap 2023 market performance, touch on relevant retirement plan regulatory updates and discuss trends shaping up for plan sponsors in 2024.

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Intro

Intro 0:04

Welcome to the quarterly retirement plan update with Gordon asset management . In today's episode , Todd Zempel will recap 2023 market performance , touch on relevant retirement plan regulatory updates and discuss trends shaping up for plan sponsors in 2024 . Please stay tuned until the end for important disclosures about our firm .

Todd Zempel 0:26

This is Todd Zempel , retirement Plan Services , director and Partner at Gordon asset management . Thanks for joining me today .

2023 Market Recap

Todd Zempel 0:34

2023 was yet another very interesting year in the markets . The S&P 500 index , which represents the US's large cap sector , ended the year up just over 24% . What's wild , though , is how we got there . Through October 27th , the market was up a respectable 7.24% . From there , the Santa Claus rally kicked in and sent stocks up over 16% in the last two months of the year . The S&P 500 equal weighted index , which weights all 500 stocks equally , was actually down over 5% through October 27th , but ended the year up just shy of 12% . To me , this illustrates just how tough the year was for the average stock . However , if you stayed invested and maintained a diversified portfolio , you ended up doing pretty well . The story was the same in bonds . The Bloomberg US aggregate bond index was down 2.5% to 3% through late October , but as inflation began to fade , the index closed the year up roughly 5.5% . International and emerging markets also did well , with most indexes ending the year up 15% to 20% . Target data investors also had a great year , with the nearer term Vintages ending the year up 7% to 12% , while the further out , more aggressive Vintages ended up 15% to 20% . So , in short , despite all the turmoil in the world , it was a great year to be invested . If you stayed the course and or used a managed portfolio like a target date or balanced fund , you should be extremely pleased with how your account performed in 2023

2024 401k Contribution Limits

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Todd Zempel 2:27

Switching gears , I'd like to remind you of the 2024 401k contribution limits . For 2024 , the deferral limit was increased to $23,000 , up from $22,500 . For 2023 , the catch-up contribution limit for those age 50 and older stayed at $7,500 . The total 401k contribution limit , which includes both employee and employer contributions , increased from $66,000 to $69,000 for 2024 . Please don't forget to log into your account to update your contributions to take advantage of these higher limits .

401k Litigation Updates

Todd Zempel 3:08

Now let's touch on a critical aspect of retirement planning the legal landscape . During 2023 , the number of new class action lawsuits involving 401k plans dropped , but settlements in the line of litigation reached a record high . Per investment news , there were at least 48 new cases involving fees or investment performance in defined contribution plans last year , down from 89 in 2022 , 60 in 2021 , and 101 in 2020 . There's also been a trend toward pursuing smaller plans and focusing more closely on record keeping fees versus investments . The motivation here is that plan sponsors may be more inclined to quickly settle such cases , as the cost of defending against the claims is often higher than the settlement Gee . Thanks , how sweet . Another thing we've seen is a trend towards cases going to trial , and the defendants have been winning yet again proof that a sound fiduciary governance process can keep you out of hot water . Broadly speaking , the litigation themes haven't changed much from prior years . Most cases revolved around excessive fees and fiduciary breaches . The takeaway it's crucial to regularly review fund performance , ensure fee clarity and prioritize participants' best interests in investment decisions

The Future of 401k

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Todd Zempel 4:44

Let's close out with where the puck is headed in 2024 and beyond For those astute plan sponsors . You'll notice that I didn't even touch on the Secure 2.0 Act yet . We and our record keeper partners have sent volumes of information on this . I'm not going to go into that today , but there will be more changes to come as the IRS and service providers further digest this comprehensive new law . More broadly . In the coming years , I see the company sponsored 401k plan morphing into a more comprehensive employee financial management ecosystem . Not only will the 401k serve as a wealth accumulation vehicle , it will facilitate the future of the company's retirement income . It will also integrate seamlessly into your day-to-day spending . With technology advancements , in AI , everything will be more personalized Personalized investments , personalized advice . Interactions will be tailored to your preferences and even take into consideration your behavioral biases

Potential Health Plan Litigation?

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Todd Zempel 5:47

Lastly , though non 401k related , I'm closely watching health plan litigation . The recently signed Consolidated Appropriations Act of 2021 now requires a determination of reasonableness of vendor fees and services for health plans . This is virtually identical to the reasonableness determination required by 401k plan sponsors that went into effect in 2012 , which subsequently set into motion massive fee compression and a deluge of seemingly endless court cases . Right now , famed retirement plan litigator , jerry Schlickter , who is broadly responsible for pioneering 401k excessive fee litigation , is actively seeking employees at several large companies , including Target and State Farm , to serve as potential plaintiffs for a class action lawsuit . I cannot stress how important this is .

Todd Zempel 6:47

I could see health plans following a parallel path that 401k plans took a decade ago , as I was coming of age in the retirement industry , right as fee disclosure took hold . I can tell you from experience this was a total game changer . In the years following fee disclosure , regs fees compressed 40 to 60% across the board . Low cost index investing took off . Brokers being paid on commission essentially went extinct . Proposal activity hit a fever pitch as plan sponsors sought out lower cost providers . To this day , fees remain the focus of litigation and are often a key driver in service provider selection and , frankly , most benefits brokers have no idea what's coming . Buckle up With that . I hope you enjoyed this quarters update . Please do not hesitate to reach out if you have questions or need assistance with your plan .

Important Disclosures

Intro 7:48

Thanks for tuning in . For more information about Gordon Asset Management , please visit our website , wealthqbcom . Gordon Asset Management LLC is a registered investment advisor . The information presented here is for educational and entertainment purposes only and is subject to change without notice . Opinions expressed are those of the speaker and don't necessarily reflect those of Gordon Asset Management . Information presented should not be construed as tax , legal or investment advice or a recommendation or solicitation for the sale of any product or strategy . Investors are encouraged to seek advice from qualified professionals to determine whether any information presented may be suitable for their specific situation . Investments involve risks . Gordon Asset Management shall not be held liable for losses resulting from decisions based on information or viewpoints presented in this material .