January 24, 2024 • 8 mins
In today's episode, Todd Zempel will recap 2023 market performance, touch on relevant retirement plan regulatory updates and discuss trends shaping up for plan sponsors in 2024.
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Episode Transcript
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Intro (00:04):
Welcome to the quarterly retirement plan update with
Gordon asset management.
In today's episode, Todd Zempelwill recap 2023 market
performance, touch on relevantretirement plan regulatory
updates and discuss trendsshaping up for plan sponsors in
2024.
Please stay tuned until the endfor important disclosures about
our firm.
Todd Zempel (00:26):
This is Todd Zempel , retirement Plan Services,
director and Partner at Gordonasset management.
Thanks for joining me today.
2023 was yet another veryinteresting year in the markets.
The S&P 500 index, whichrepresents the US's large cap
sector, ended the year up justover 24%.
(00:47):
What's wild, though, is how wegot there.
Through October 27th, themarket was up a respectable
7.24%.
From there, the Santa Clausrally kicked in and sent stocks
up over 16% in the last twomonths of the year.
The S&P 500 equal weightedindex, which weights all 500
(01:09):
stocks equally, was actuallydown over 5% through October
27th, but ended the year up justshy of 12%.
To me, this illustrates justhow tough the year was for the
average stock.
However, if you stayed investedand maintained a diversified
portfolio, you ended up doingpretty well.
(01:29):
The story was the same in bonds.
The Bloomberg US aggregate bondindex was down 2.5% to 3%
through late October, but asinflation began to fade, the
index closed the year up roughly5.5%.
International and emergingmarkets also did well, with most
(01:50):
indexes ending the year up 15%to 20%.
Target data investors also hada great year, with the nearer
term Vintages ending the year up7% to 12%, while the further
out, more aggressive Vintagesended up 15% to 20%.
So, in short, despite all theturmoil in the world, it was a
(02:13):
great year to be invested.
If you stayed the course and orused a managed portfolio like a
target date or balanced fund,you should be extremely pleased
with how your account performedin 2023.
Switching gears, I'd like toremind you of the 2024 401k
contribution limits.
For 2024, the deferral limitwas increased to $23,000, up
(02:37):
from $22,500.
For 2023, the catch-upcontribution limit for those age
50 and older stayed at $7,500.
The total 401k contributionlimit, which includes both
employee and employercontributions, increased from
$66,000 to $69,000 for 2024.
(03:00):
Please don't forget to log intoyour account to update your
contributions to take advantageof these higher limits.
Now let's touch on a criticalaspect of retirement planning
the legal landscape.
During 2023, the number of newclass action lawsuits involving
401k plans dropped, butsettlements in the line of
(03:24):
litigation reached a record high.
Per investment news, there wereat least 48 new cases involving
fees or investment performancein defined contribution plans
last year, down from 89 in 2022,60 in 2021, and 101 in 2020.
(03:45):
There's also been a trendtoward pursuing smaller plans
and focusing more closely onrecord keeping fees versus
investments.
The motivation here is thatplan sponsors may be more
inclined to quickly settle suchcases, as the cost of defending
against the claims is oftenhigher than the settlement Gee.
(04:07):
Thanks, how sweet.
Another thing we've seen is atrend towards cases going to
trial, and the defendants havebeen winning yet again proof
that a sound fiduciarygovernance process can keep you
out of hot water.
Broadly speaking, thelitigation themes haven't
changed much from prior years.
(04:27):
Most cases revolved aroundexcessive fees and fiduciary
breaches.
The takeaway it's crucial toregularly review fund
performance, ensure fee clarityand prioritize participants'
best interests in investmentdecisions.
Let's close out with where thepuck is headed in 2024 and
beyond For those astute plansponsors.
(04:50):
You'll notice that I didn'teven touch on the Secure 2.0 Act
yet.
We and our record keeperpartners have sent volumes of
information on this.
I'm not going to go into thattoday, but there will be more
changes to come as the IRS andservice providers further digest
this comprehensive new law.
(05:11):
More broadly.
In the coming years, I see thecompany sponsored 401k plan
morphing into a morecomprehensive employee financial
management ecosystem.
Not only will the 401k serve asa wealth accumulation vehicle,
it will facilitate the future ofthe company's retirement income
.
It will also integrateseamlessly into your day-to-day
(05:32):
spending.
With technology advancements,in AI, everything will be more
personalized Personalizedinvestments, personalized advice
.
Interactions will be tailoredto your preferences and even
take into consideration yourbehavioral biases.
Lastly, though non 401k related,I'm closely watching health
(05:52):
plan litigation.
The recently signedConsolidated Appropriations Act
of 2021 now requires adetermination of reasonableness
of vendor fees and services forhealth plans.
This is virtually identical tothe reasonableness determination
required by 401k plan sponsorsthat went into effect in 2012,
(06:15):
which subsequently set intomotion massive fee compression
and a deluge of seeminglyendless court cases.
Right now, famed retirementplan litigator, jerry Schlickter
, who is broadly responsible forpioneering 401k excessive fee
litigation, is actively seekingemployees at several large
(06:37):
companies, including Target andState Farm, to serve as
potential plaintiffs for a classaction lawsuit.
I cannot stress how importantthis is.
I could see health plansfollowing a parallel path that
401k plans took a decade ago, asI was coming of age in the
retirement industry, right asfee disclosure took hold.
(06:58):
I can tell you from experiencethis was a total game changer.
In the years following feedisclosure, regs fees compressed
40 to 60% across the board.
Low cost index investing tookoff.
Brokers being paid oncommission essentially went
extinct.
Proposal activity hit a feverpitch as plan sponsors sought
(07:20):
out lower cost providers.
To this day, fees remain thefocus of litigation and are
often a key driver in serviceprovider selection and, frankly,
most benefits brokers have noidea what's coming.
Buckle up With that.
I hope you enjoyed thisquarters update.
Please do not hesitate to reachout if you have questions or
(07:42):
need assistance with your plan.
Intro (07:48):
Thanks for tuning in.
For more information aboutGordon Asset Management, please
visit our website, wealthqbcom.
Gordon Asset Management LLC isa registered investment advisor.
The information presented hereis for educational and
entertainment purposes only andis subject to change without
notice.
Opinions expressed are those ofthe speaker and don't
(08:09):
necessarily reflect those ofGordon Asset Management.
Information presented shouldnot be construed as tax, legal
or investment advice or arecommendation or solicitation
for the sale of any product orstrategy.
Investors are encouraged toseek advice from qualified
professionals to determinewhether any information
presented may be suitable fortheir specific situation.
(08:30):
Investments involve risks.
Gordon Asset Management shallnot be held liable for losses
resulting from decisions basedon information or viewpoints
presented in this material.
Welcome to the quarterly retirement plan update with
Gordon asset management.
In today's episode, Todd Zempelwill recap 2023 market
performance, touch on relevantretirement plan regulatory
updates and discuss trendsshaping up for plan sponsors in
2024.
Please stay tuned until the endfor important disclosures about
our firm.
Todd Zempel (00:26):
This is Todd Zempel , retirement Plan Services,
director and Partner at Gordonasset management.
Thanks for joining me today.
2023 was yet another veryinteresting year in the markets.
The S&P 500 index, whichrepresents the US's large cap
sector, ended the year up justover 24%.
(00:47):
What's wild, though, is how wegot there.
Through October 27th, themarket was up a respectable
7.24%.
From there, the Santa Clausrally kicked in and sent stocks
up over 16% in the last twomonths of the year.
The S&P 500 equal weightedindex, which weights all 500
(01:09):
stocks equally, was actuallydown over 5% through October
27th, but ended the year up justshy of 12%.
To me, this illustrates justhow tough the year was for the
average stock.
However, if you stayed investedand maintained a diversified
portfolio, you ended up doingpretty well.
(01:29):
The story was the same in bonds.
The Bloomberg US aggregate bondindex was down 2.5% to 3%
through late October, but asinflation began to fade, the
index closed the year up roughly5.5%.
International and emergingmarkets also did well, with most
(01:50):
indexes ending the year up 15%to 20%.
Target data investors also hada great year, with the nearer
term Vintages ending the year up7% to 12%, while the further
out, more aggressive Vintagesended up 15% to 20%.
So, in short, despite all theturmoil in the world, it was a
(02:13):
great year to be invested.
If you stayed the course and orused a managed portfolio like a
target date or balanced fund,you should be extremely pleased
with how your account performedin 2023.
Switching gears, I'd like toremind you of the 2024 401k
contribution limits.
For 2024, the deferral limitwas increased to $23,000, up
(02:37):
from $22,500.
For 2023, the catch-upcontribution limit for those age
50 and older stayed at $7,500.
The total 401k contributionlimit, which includes both
employee and employercontributions, increased from
$66,000 to $69,000 for 2024.
(03:00):
Please don't forget to log intoyour account to update your
contributions to take advantageof these higher limits.
Now let's touch on a criticalaspect of retirement planning
the legal landscape.
During 2023, the number of newclass action lawsuits involving
401k plans dropped, butsettlements in the line of
(03:24):
litigation reached a record high.
Per investment news, there wereat least 48 new cases involving
fees or investment performancein defined contribution plans
last year, down from 89 in 2022,60 in 2021, and 101 in 2020.
(03:45):
There's also been a trendtoward pursuing smaller plans
and focusing more closely onrecord keeping fees versus
investments.
The motivation here is thatplan sponsors may be more
inclined to quickly settle suchcases, as the cost of defending
against the claims is oftenhigher than the settlement Gee.
(04:07):
Thanks, how sweet.
Another thing we've seen is atrend towards cases going to
trial, and the defendants havebeen winning yet again proof
that a sound fiduciarygovernance process can keep you
out of hot water.
Broadly speaking, thelitigation themes haven't
changed much from prior years.
(04:27):
Most cases revolved aroundexcessive fees and fiduciary
breaches.
The takeaway it's crucial toregularly review fund
performance, ensure fee clarityand prioritize participants'
best interests in investmentdecisions.
Let's close out with where thepuck is headed in 2024 and
beyond For those astute plansponsors.
(04:50):
You'll notice that I didn'teven touch on the Secure 2.0 Act
yet.
We and our record keeperpartners have sent volumes of
information on this.
I'm not going to go into thattoday, but there will be more
changes to come as the IRS andservice providers further digest
this comprehensive new law.
(05:11):
More broadly.
In the coming years, I see thecompany sponsored 401k plan
morphing into a morecomprehensive employee financial
management ecosystem.
Not only will the 401k serve asa wealth accumulation vehicle,
it will facilitate the future ofthe company's retirement income
.
It will also integrateseamlessly into your day-to-day
(05:32):
spending.
With technology advancements,in AI, everything will be more
personalized Personalizedinvestments, personalized advice
.
Interactions will be tailoredto your preferences and even
take into consideration yourbehavioral biases.
Lastly, though non 401k related,I'm closely watching health
(05:52):
plan litigation.
The recently signedConsolidated Appropriations Act
of 2021 now requires adetermination of reasonableness
of vendor fees and services forhealth plans.
This is virtually identical tothe reasonableness determination
required by 401k plan sponsorsthat went into effect in 2012,
(06:15):
which subsequently set intomotion massive fee compression
and a deluge of seeminglyendless court cases.
Right now, famed retirementplan litigator, jerry Schlickter
, who is broadly responsible forpioneering 401k excessive fee
litigation, is actively seekingemployees at several large
(06:37):
companies, including Target andState Farm, to serve as
potential plaintiffs for a classaction lawsuit.
I cannot stress how importantthis is.
I could see health plansfollowing a parallel path that
401k plans took a decade ago, asI was coming of age in the
retirement industry, right asfee disclosure took hold.
(06:58):
I can tell you from experiencethis was a total game changer.
In the years following feedisclosure, regs fees compressed
40 to 60% across the board.
Low cost index investing tookoff.
Brokers being paid oncommission essentially went
extinct.
Proposal activity hit a feverpitch as plan sponsors sought
(07:20):
out lower cost providers.
To this day, fees remain thefocus of litigation and are
often a key driver in serviceprovider selection and, frankly,
most benefits brokers have noidea what's coming.
Buckle up With that.
I hope you enjoyed thisquarters update.
Please do not hesitate to reachout if you have questions or
(07:42):
need assistance with your plan.
Intro (07:48):
Thanks for tuning in.
For more information aboutGordon Asset Management, please
visit our website, wealthqbcom.
Gordon Asset Management LLC isa registered investment advisor.
The information presented hereis for educational and
entertainment purposes only andis subject to change without
notice.
Opinions expressed are those ofthe speaker and don't
(08:09):
necessarily reflect those ofGordon Asset Management.
Information presented shouldnot be construed as tax, legal
or investment advice or arecommendation or solicitation
for the sale of any product orstrategy.
Investors are encouraged toseek advice from qualified
professionals to determinewhether any information
presented may be suitable fortheir specific situation.
(08:30):
Investments involve risks.
Gordon Asset Management shallnot be held liable for losses
resulting from decisions basedon information or viewpoints
presented in this material.
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