RECENT developments spring 2017
Posted on: 3/22/2017 1:40 PM
IRS Proposal for Plan Forfeitures
The IRS has proposed new regulations regarding the use of forfeitures by 401(k) plans to fund qualiﬁed non-elective contributions (QNECs) and qualiﬁed matching contributions (QMACs). Plan sponsors typically use QNECs and QMACs to correct testing failures. Under existing rules, the QNECs and QMACs must be nonforfeitable at the time of contribution. This requirement limits their use, because forfeitures are typically subject to a vesting schedule at the time of contribution. Under the proposed regulations, contributions will qualify as QNECs or QMACs if they meet the nonforfeitability and distribution requirements at the time they are allocated to participants’ accounts, rather than when they are ﬁrst contributed to the plan.
Retirement Health Expenses
The latest estimates from the Employee Beneﬁt Research Institute show that a married couple retiring in 2016 needs $165,000 to have a 50% chance of being able to cover health costs in retirement. A 65-year-old man would need $72,000 in savings and a 65-year-old woman would need $93,000 to have a 50% chance of having enough money saved to cover health expenses in retirement. These projections assume median drug expenses throughout retirement. The study excludes long-term care expenses and health care expenses not traditionally covered by Medicare.
Fairly Conﬁdent for Retirement
A recent Ipsos/USA Today survey of Americans between the ages of 45 and 65 found that 77% feel strongly or somewhat agree that they will need to save more to afford the type of retirement they prefer. But 59% feel very or somewhat prepared for retirement and 55% are very or somewhat conﬁdent that they will have enough money to get them through retirement. To help get them to the retirement life-style they want, 65% of those surveyed state they are very or somewhat likely to contribute at least $100 toward their retirement savings in the next six months. To fund their retirement, 42% plan to rely mostly on their savings or beneﬁts.