Compliance August 9, 2023

EBSA Announces Additional Fiduciary Compliance Seminars

The upcoming seminars will be held in Fort Wayne, Indiana, and Omaha, Nebraska. 

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The Department of Labor’s Employee Benefits Security Administration is hosting two more retirement plan compliance assistance seminars as part of its “Getting It Right—Know Your Fiduciary Responsibilities” series.  

The seminars will be held in Fort Wayne, Indiana, and Omaha, Nebraska, on August 22 and September 28, respectively. According to EBSA, the programs will “increase awareness and understanding about basic fiduciary responsibilities when operating a retirement plan.” 

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Previous EBSA seminars were recently held in Buffalo, New York, and Las Vegas. 

EBSA argued that “getting it right” is especially challenging for small and midsize employers who have limited time, resources and access to professional help with benefit programs.  

Topics covered in both seminars will include understanding plans and responsibilities; carefully selecting and monitoring service providers; making contributions on time; avoiding prohibited transactions and making appropriate disclosures to plan participants; and filing timely annual reports to the government.  

EBSA’s program combines free seminars around the country with educational materials and a dedicated page on EBSA’s website. 

Registration for the free seminars is on a first-come, first-served basis. For the Fort Wayne event, located at the Grand Wayne Convention Center, registration runs through August 18. For the Omaha event, located at the Hilton Omaha, the registration deadline is September 26.  

An agenda for both events can be found on the DOL’s website.  

Seminar partners include the Society for Human Resource Management, the National Federation of Independent Business, the U.S. Small Business Administration and the American Institute of Certified Accountants.  

Data and Research August 8, 2023

Hardship Withdrawals Rose 36% Year-Over-Year in Q2

Bank of America participant analysis shows more employees prioritizing short-term expenses over long-term saving.

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Bank of America retirement plan participants’ hardship withdrawals rose 36% year-over-year in Q2 to 0.52% of participants, according to the bank and recordkeeper’s latest participant analysis.

“This year, more employees are understandably prioritizing short-term expenses over long-term saving,” Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, said in a statement. “However, it’s critical that employees continue to invest in life’s biggest expense – retirement.” 

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In research mining the data of more than 4 million participants and released Tuesday, Bank of America found borrowing from workplace plans and hardship withdrawals were both higher this year.

“Regarding the increase in hardships, the economic environment, which has seen higher rates of inflation and cost of living, could certainly be a contributing factor,” Lisa Margeson, Bank of America’s managing director of external affairs for retirement research and insights, said via email. “That said, although the increase in participants taking a hardship seems large, it is still only 0.5% of the total number of 401(k) plan participants.”

Participants also contributed 23% less to retirement plans on average in the year’s second quarter as compared to Q1, the average contribution rate in Q2 was $1,460, down from $1,880 in Q1. While lower for the year, the contribution rate was in line with the same quarter in 2022, which had an average of $1,440.

“There are several factors driving lower dollar contributions, even as savings rates remained consistent,” Margeson wrote. “The 2023 second quarter contribution amount was in line with the same time period last year, so the drop from first quarter may have been influenced by younger participants—presumably with lower salaries—joining plans, as well as the first quarter often being a time when bonuses are awarded.”

On the plus side, the research found that average 401(k) balances were up 9.6% from the end of 2022 to $7,250. In addition, more participants increased their contribution rate than decreased it (10.2% vs. 2.2%) in Q2, led by Generation Z and Millennial employees (19.3% vs. 2.6% and 11% vs. 2.6%, respectively).

“The data from our report tells two stories—one of balance growth, optimism from younger employees and maintaining contributions, contrasted with a trend of increased plan withdrawals,” said Sabbia in a statement.

The bank also revealed findings about health savings accounts and financial wellness measures, categories it added to the research this quarter to take a more “holistic look at confidence around financial preparedness,” according to the release.

Through the analysis, the bank found that HSA account balances rose 12% in the first six months of 2022 to $4,397 from $3,931.

The researchers also found that 38% of HSA account holders contributed more than they withdrew year-to-date through Q2, consistent with Q4 2022.

Meanwhile, 72% of HSA account holders used those accounts for health care expenses, and 27% plan to save for the future—a slight increase from the end of 2022, when 24% of account holders intended to maintain the account as savings.

Finally, the bank found a decline in feelings of financial wellness among participants. Out of a possible 100 points, the average financial wellness score for employees was 56, down one point from 57 at year-end. Women trailed men in the category, clocking in with an average score of 52, compared to 59 for men.

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