Secure 2.0 Equal Parts Exciting and Confusing for Business Owners

Beware Small-Business Plan Pitfalls

“One thing I worry about is small business owners being excited about starting plans but then later being overwhelmed by the compliance burden,” Larsen said. “We know that one of the common features of small businesses is that they don’t have the same degree of human resources staff to rely on compared with bigger organizations.”

Larsen said another legislative change that is getting significant attention from the small-business community pertains to Roth-style accounts offered by employers, such as Roth 401(k)s or Roth 403(b)s. Beginning in 2024, these accounts will no longer be subject to RMDs, and there are new opportunities for matching contributions to be directed toward Roth-style accounts in some cases.

Larsen warned advisory professionals that the mechanics of these Roth changes are complicated, and it will be important to keep on top of any regulations that are issued in this area.

Larsen also noted that the Roth topic seems to have permeated all the way down to the level of individual small-business employees.

“I had a meeting with one business owner recently and he told me his employees are coming to him directly and asking him about the chance to access Roth accounts,” Larsen said. “That’s pretty remarkable if you think about it. I think it shows how important the retirement planning topic has become for so many people.”

A Move Towards Wealth Management

Reflecting on the progress being made within his own firm, Larsen said one of the biggest changes since coming to HUB has been the continued growth and expansion of an individual wealth management practice. The current market environment makes more holistic services more attractive.

Experts say building a firm that does both private wealth and institutional retirement plan business is about creating a holistic service ecosystem that clients want and need, especially as the defined contribution plan system matures and becomes a key component of individuals’ retirement income planning.

“This is an exciting opportunity, but we have to make absolutely sure that we are living up to our regulatory responsibilities,” Larsen said. “For example, you have to have a good process to ensure any rollovers you are recommending are in their client’s best interest.”

Reflecting on the future, Larsen said the discussion about retirement income is really starting to ramp up, with one key question being “in-plan or out-of-plan?”

“Since I grew up as a retirement plan guy, I still think a lot of employees can be better off keeping their money in the plan, especially as better income solutions come to market,” Larsen said. “On the other hand, if more money is going to be staying in plan, we have to make sure the plans can truly deliver the necessary level of service. It’s going to require a balance.”