SECURE Distributions

Sponsored by: MFS Investment Management

There are several optional provisions in SECURE 2.0 (and one in SECURE 1.0) which allow participants to take a plan distribution without a penalty under specific circumstances – in the event of a natural disaster, in the event of the birth or adoption of a dependent, for victims of domestic violence, or if the participant is diagnosed with a terminal illness. These provisions, along with the optional emergency savings distributions and existing ability for hardship withdrawals and loans, give plan sponsors a lot of flexibility, and choice, in how their employees can access their retirement savings. With so many options to consider, sixty percent of plans are still determining which provisions best suit their employees and current plan design while 22 percent have adopted the natural disaster provision and 17 percent the domestic violence provision. Comments follow. 

Added at least one provision:

• The money belongs to the participant, and we cannot ignore the realities of life's expenses.  The potential accessibility of the funds is known to participants, it's a selling point, and it can be a collateral effect of participation.
• We suffered greatly from Hurricane Ian – seems like the right thing to do
• Have added natural disasters and domestic violence provisions. These are the options the RK can accommodate at this time.  Will review the others as they become serviceable by the RK.
• We are evaluating whether the terminal illness provision is appropriate for us to add. All others have or will be in place.
• We still have administrative questions/considerations to be worked out regarding the domestic violence and terminal illness provisions. [Have added the others)
• We are working on spousal consent exceptions for the domestic violence distribution. [have added the others]

Not adopting any:

• Prefer to reduce 401(k) leakage before retirement
• We have a program in place to address financial assistance that doesn't interfere with an employee's retirement plan.

Considering:

• Adopting Natural Disasters, considering Terminal Illness but would like more IRS direction.
• Not planning on adding at this time - don't have the standard hardship distributions now we only allow 1 loan.
• We are seeing huge demand for this on top of what we already have for hardships and loan provisions. It appears that you don't need to add a terminal illness withdrawal provision for a participant to be able to take advantage of this since they have to already have a distributable event and they can handle the penalty exemption through there tax return.to take ad
• We have quarterly update meetings with our third-party administrator. We ask for their input on adoption rates of their client portfolio and consider these in our 401k Steering Committee meetings. As of this time, we have not adopted any of these noted provisions but continue to monitor the adoption rates.
• We want to but waiting for our TPA to implement ability to handle.