A new beginning and a fresh start is how I typically view the new year. I like the newness and the “re-set mindset” that this time of year allows. It is always good to look back though and review and reflect on the prior year – its successes and setbacks and opportunities.

The same exercise can be done within our retirement industry. The year 2022 ushered in significant events in the industry in many areas. Some were more impactful than others, but a few are worthy of review. First, in the wake of COVID-19 participant and employer contribution rates were at all-time highs beginning in 2021 and into the current year. In light of economic stimulus inflows and a difficult and competitive labor market, participation in and contributions to qualified retirement plans increased. Coinciding with this increase, after a slight uptick during the pandemic, participant hardship distributions and plan loans decreased – which is always a desired outcome. Second, cybersecurity and the need to protect the integrity, security and confidentiality of participant and plan sponsor information was and continues to be a key consideration of any well-administered retirement plan. The sophistication and speed of attacks by hackers is beyond the pale. Greenleaf Trust takes cybersecurity seriously. Third, most retirement plans utilizing a prototype document arrangement required a restatement by 2022 to comply with changes in law generally referred to as the “Cycle 3” restatement. There were interim amendments required as well with this restatement which have subsequently had their deadlines generally extended to 2025. Fourth, the Department of Labor and the Employee Benefits Security Administration (EBSA) continue to review proposed regulations surrounding the use of environmental, social and corporate governance (ESG) factors to permit plan fiduciaries to consider when making decisions about retirement plan investments. While the final rule is pending it is important to note that the operative word for plan fiduciaries surrounding these proposed investment options is may, not must, consider ESG factors.

For 2023 and beyond the most dramatic and anticipated legislation which is now in play is the Setting Every Community Up for Retirement Enhancement Act known as SECURE 2.0. This legislation was passed on December 29, 2022. This act builds on the foundation laid by the SECURE Act passed in late 2019 and contains key provisions that could help close the retirement savings opportunity gap for moderate income Americans. Some of the changes that are in the current SECURE 2.0 Act include extending the required beginning date (RBD) in which to start taking required minimum distributions (RMDs) from age 72 to age 75 (implemented over the next 10 years), reducing the 50% excise tax for the failure to take an RMD to a smaller percent and permitting student debt payments to be matched as employer retirement contributions. The IRS announced the 2023 cost-of-living adjustments to various retirement plan limits in October 2022. The current rate of inflation has served to increase most of the rates substantially and, for the first time in several years, the catch-up contribution limit was increased.

The US retirement landscape in 2023 will be shaped by a number of factors including these three themes or trends I would like to discuss – financial wellness, access and investments. Financial wellness can be defined as a state of financial well-being in which one can manage bills and expenses, weather unexpected financial emergencies and plan for long-term financial goals such as saving for retirement and college funds. Encouraging participation in a retirement plan can be a first step, and an important one, but many people need help whether by education or guidance or advice to navigate the complex challenges of retirement and other financial matters. We continue to evolve and innovate our services to meet this important need.

Access to and the adequacy of a retirement plan for the majority of US workers is critical. The result of non-participation in a retirement plan is impactful because of under-saving and the long-term consequences for the individual who has not had the opportunity to share in significant wealth accumulation. Lack of access to a retirement plan is particularly acute for racial and ethnic minorities according to research. It has been found that overall approximately only 40% of Black workers and 32% of Hispanic workers in the private sector participated in a retirement plan compared with nearly 58% of their white peers. The SECURE 2.0 Act legislation hopes to bridge the gap between those who have access to a qualified retirement plan and those who do not.

The investment landscape theme is important as it highlights how employers and plan providers can help workers weather market challenges to keep portfolios on track in both the saving and the spending phases. The investment landscape looks at the impact of market and economic factors. Inflation, rising interest rates and recession concerns could be immediate issues for investors in 2023 and beyond. The need for diversification and resetting expectations for fixed income is something for plan sponsors, plan providers and participants will want to keep in mind in a complex and potentially volatile market environment.

We in the Retirement Plan Division at Greenleaf Trust enter 2023 with excitement and energy for what the coming year holds. We remain committed to providing excellent and timely service and creative ways to help our plan sponsors with great plan governance and plan participants with great plan outcomes. Happy New Year!