403(b) Implementation Challenges of SECURE 2.0

“When you hear the words SECURE 2.0, what comes to mind?” Sue Diehl, President of PenServ Plan Services, asked panelists at the outset of “Starting “Points: Implementation Implications for SECURE 2.0 and Other Recent Changes," a session dedicated to explaining the 403(b) implementation challenges of SECURE 2.0.

“Brain explosion,” Teresa Ward, CRPC, Senior Director of Retirement Programs with Invesco, said to laughter Feb. 27 in Tampa, FL. “There are 90 different provisions within the bill. It feels like we’re at the starting gate and excited for the race, but the gate is just now starting to be raised.”

Hosted by Diehl, panelists included Ward; Jody Detillier, CEO and a Financial Advisor with Detillier Financial Advisors; and Jim Kelleher, Chief Operating Officer with Carruth Compliance Consulting. The session heavily focused on the new Roth provisions within the measure and how they affect the public sector.

More specifically, it discussed:

• Section 109 — Higher catch-up limits and the ages to which they apply
• Section 601 — SIMPLE and SEP Roth IRAs
• Section 603 — Catch-up contributions that required to be a Roth
• Section 604 — Optional treatment of employer contributions—non-elective or matching as Roth contributions

“Roths have always been nice to have, but I always felt sponsors and participants didn’t really understand them,” Kelleher said. “That feeling has turned into a nightmare.”

Yet, he emphasized that “nightmare” is an opportunity for TPAs and advisors.

“We benefit from the complexity,” Kelleher added. “Participants need us. Anybody educating employees will now be more valuable.”

Detillier advised attendees to focus on the four or five provisions that will affect clients and impact their plans and get hyper-familiar with them.

Calling SECURE 2.0 “Rothification on steroids,” Diehl noted that the industry has talked about it forever and is finally here.

“Your job is to explain how it will be implemented, what payroll has to with it, and where it goes on the W-2,” she said.

Kelleher explained that impact would depend on each state and said, “Washington has a defined benefit plan, in which every school district participates. It has never offered a Roth. Guess what they announced yesterday? They’re going to institute one.”