- Sponsors of defined benefit plans should be aware of new tax laws, rising interest rates and higher Pension Benefit Guaranty Corporation (PBGC) premiums, warns Employee Benefit News. Michael Archer, leader of Willis Towers Watson’s Client Solutions Group, told EBN that these changes could be incentives for employers to phase out defined benefits plans.
- Archer told EBN that President-elect Donald Trump supports lowering the corporate income tax rate, but for retirement plans sponsors, this means a lower deduction on contributions.
- 401k sponsors should stay on top of compliance issues, Archer said, because the IRS, Labor Department and other regulatory bodies will likely increase audits and overall vigilance over retirement plans.
Many employers already have phased out their defined benefit plans and replaced them with 401k plans. Lifetime payouts in benefits can be costly for businesses.
Archer rightfully points out the need for plan sponsors to keep up with changes in the law as they apply to retirement plans, such as the fiduciary rule, and make sure they’re in compliance.
Audits that uncover problems can result in penalties and fines, and lawsuits launched by plan participants can end in costly settlements, especially for small businesses.