The 2024 NAPA 401(k) Summit in Nashville marked a historic milestone, drawing a record-breaking attendance of over 1400 advisors and 2800 participants. This vibrant gathering delved deep into the intricacies of state and federal policy, offering invaluable insights into “how the sausage is made.” Diverse educational offerings spanned key topics such as the integration of artificial intelligence, the landscape of cash balance plans, Medicare strategies, and “what plan sponsors want”: all while offering ample opportunity for networking. This was complemented by insightful speakers providing a window into the future of wealth management, and the impact of changing demographics. As always, the Exhibitors Floor was populated with many incumbent service providers as well as some newer entrants.
Four key themes emerged from the summit:
The Legislative and Demographic Landscape
On the legislative front, participants engaged in a comprehensive review of the Retirement Savings for America Act, a significant piece of legislation unveiled last autumn, which introduces a Federally Run 401(k) Plan catering to households with incomes up to $150,000. There was also discussion of the SECURE Act 2.0 Technical Corrections Draft (currently available for comment), addressing crucial clarifications such as confusion surrounding the Required Minimum Distributions (“RMDs”) for those born in 1959, Catch-up Contributions and Matching Contributions for Student Loan Payments. Demographically, there was much discussion regarding declining fertility rates, a declining ratio of workers vs. non workers, longer life expectancy, as well as women comprising 50+% of the High Net Worth (HNW) population. These and other issues highlighted the importance of good advice, and served to inform where advisors should focus. There was also an overarching theme regarding the convergence of Wealth Management and Retirement Plan Services, highlighting the need for holistic financial guidance.
The “Coverage Gap”
The emphasis on small plans and the desire to address the "coverage gap" persisted throughout the summit, yet it was acknowledged that the process of narrowing this disparity has become increasingly complex, marked by considerable trial and error. From state-mandated auto-enrollment plans to proposed federal programs that serve as a “backstop” for states lacking such provisions; all aimed at enhancing participant access and enrollment in retirement savings programs. On the tax front, for example, a 3-year credit covering 100% of start-up costs for small businesses with 51-100 employees, alongside start-up credits for small employers to join an existing Multi-Employer Plan (MEP) or Pooled Employer Plan (PEP). While the potential for advisors to specialize in small plans remains significant, achieving success will require scale.
Artificial Intelligence
A notable highlight of the summit was a discussion on the utilization of Artificial Intelligence (AI) in the retirement space. The key determinant of its effectiveness centered on the need for data. Importantly, participants need to be comfortable with sharing data. Not surprisingly, Gen Z is more comfortable with this than Baby Boomers. For example, ChatGPT was viewed as being too general to provide financial advice and the expected advisory model would need to include a combination of Human judgement and AI. Therefore, data will play an important role in enhancing this model.
What Plan Sponsors Care About
Finally, there was an interesting discussion regarding what Plan Participants care about most. Interestingly, there seems to be a disconnect between Plan Sponsors, who may think things are going well, and what Participants think. Participants are notably apprehensive and uneasy, with only 16% feeling adequately prepared for retirement, leading more than a third to contemplate extending their working years, although this can often correlate to the market. Two key concerns of participants revolve around cybersecurity threats and the assurance of reasonable fees. Conversely, Plan Sponsors' primary requests centered on enhancing Financial Planning and Wellness initiatives, as well as providing comprehensive guidance on retirement income management.
We always leave NAPA more informed and enthusiastic about the future of the U.S. Retirement Industry. While the legislative landscape and demographic trends are dynamic, the simple mathematical fact remains that there are many workers who need access to retirement savings vehicles which presents a long-term opportunity for advisors and service providers in the space.
Feel free to reach out if you want to talk about trends in the industry or more insights from the conference.
