Student Loans Are Changing (Again.) Here’s What You Need to Know.
Heads up: big changes are coming to the federal student loan system.
Starting July 1st, there’s a new income-based option called the Repayment Assistance Plan (RAP). The goal is to simplify the menu of repayment plans, but for most borrowers, especially ones with moderate or lower income, this plan will not be as advantageous as the previous SAVE plan or other IDR plans. If you are currently in an IDR plan (especially SAVE), you’ll need to research the best option for you and act quickly.
What’s Changing Under RAP
- • Payment is based off of Adjusted Gross Income: RAP will use AGI (instead of discretionary income), which can result in higher payments
- • Longer loan forgiveness timeframe: Remaining balances can be forgiven after 30 years, which is 5-10 years longer than other plans
- • Fewer Income Driven Repayment (IDR) choices over time: Several IDR plans will be phased out over the next few years as RAP becomes the main choice
- • Lower limits for Parent Plus Loans: The annual and total limits for Parent Plus Loans are decreasing
The names and availability of some federal plans are changing, but the core decision points below are still the foundation.
The Basics
There’s nothing like the feeling of graduating college. You’ve got a degree, a diploma, and… tens of thousands of dollars of debt. Unfortunately, student loan repayment isn’t a Gen-Ed, so let’s go through some tips that can help get your student debt under control.
The first thing to understand is the type of loan you have:
- • Federal Loans: Check them at StudentAid.gov.
- • Private Loans: Log in to your loan servicer’s website (you’ll find it on your statements).
This distinction matters because federal loans come with built-in protections and program pathways, and while the list of specific repayment plans is changing, the core decision points stay the same.
Repayment Options: What Actually Matters
Standard Repayment
The simplest plan. It often results in the least total interest, but payments can be steep if your cash flow is tight.
Income-Driven Repayment (IDR)
If you need flexibility, an IDR plan may help. Your payment adjusts based on your income, giving you breathing room when needed.
The tradeoff? A longer repayment timeline and potentially more total interest.
Public Service Loan Forgiveness (PSLF)
If you work for a qualifying employer, PSLF can erase your remaining balance after you complete the right number of qualifying payments.
But it has hurdles—wrong loan type, wrong repayment plan, missed payments, and missing employer certification can all derail progress. It’s a good idea to check on your PSLF status every six months.
Consolidation vs. Refinancing
Now that you have idea about the types of loans you have and the repayment options available, we can consider consolidation and refinancing. Federal loans can be consolidated into one loan, and this can help you qualify for different repayment options (like IDR). What consolidating doesn’t do is lower your actual interest rate, since it just combines them with a weighted average. Refinancing a federal loan means replacing it with a private loan. This can be a big trade-off. You may get a lower rate in the private market, but you lose out on federal protections and repayment options like IDR and PSLF. If you have private loans, refinancing is usually a simple decision – just lower your rate and lower your cost. What you choose to do depends on your overall strategy. Are you trying to lower your rate, simplify your structure, or preserve flexibility? Once you know what you’d like to accomplish, the reasoning behind the options becomes clearer.
Should You Pay Off Loans Faster or Invest?
Speaking of strategy, one of the biggest and most consistent questions is going to be the balance between paying off your loans and debts vs investing. There’s no silver-bullet answer here, but there are a few things to consider. First, if you’re getting an employer match through your retirement plan, try to max that out, as it’s immediate return on your money. After that, the decision often comes down to how high the interest rate is, how stable your cash flow feels, and how close you are to major life goals. An important thing to remember is that compound interest goes both ways. Just as your loan amount increases each year, the balance of your investments will do the same, so it’s important to have a blended plan. Make sure you have steady retirement contributions and also focused payments on the highest-rate loans.
Need Help?
If you’d like, we can help you turn this into a simple, personalized budget. A quick conversation is usually enough to confirm what you have, what options actually apply, and what a realistic next step looks like. If budgeting for student loans is on your mind this year, give us a call—this is exactly the kind of thing we help participants sort out.
If you need additional assistance navigating the tumultuous world of student loans, we would suggest that you check out Thrive Student Loan Advisors, or another relevant expert. Thrive Student Loan Advisors has monthly webinars you can join that are exclusively about student loans, they offer a free one-time meeting with a student loan advisor, and can even help you manage your student loans ongoing. https://sladvisors.thrivematching.com/
Important Update: DOL Weighs in on Forfeiture Lawsuits
After recent legal challenges around how 401(k) plan forfeitures are used, the Department of Labor (DOL) has offered its opinion, and it’s a positive sign for plan sponsors.
In a well-known case involving HP Inc., the plaintiffs argued that HP misused forfeitures by applying them to reduce employer contributions, instead of reallocating them to participants or covering plan expenses.
Although the court dismissed the case, it acknowledged that the legal theory was new and allowed the plaintiffs a chance to revise and refile their argument. Still, the judge initially found their claims too broad and lacking support from existing law.
What stood out was the DOL’s input in an amicus brief during the appeal:
– The DOL pointed to the IRS’s long-standing approval of using forfeitures to reduce employer contributions.
– It also stated that while deciding how to use forfeitures is a fiduciary responsibility, using them to offset employer contributions does not automatically violate fiduciary duties like loyalty or prudence.
What This Means for Plan Sponsors
– The IRS currently allows forfeitures to be used in several ways: reducing employer contributions, covering plan expenses, or reallocating to participants.
– The DOL’s comments support the legality of using forfeitures to reduce employer contributions, as long as it aligns with the plan document and is appropriately handled.
– Even so, plan sponsors should regularly review their plan documents and carefully document any fiduciary decisions related to forfeiture use.
As legal interpretations continue to evolve, this guidance from the DOL provides valuable clarity and reassurance for plan sponsors. By ensuring forfeiture practices are consistent with plan documents and fiduciary duties are well-documented, sponsors can move forward with greater confidence and compliance.
Are vesting schedules still effective?
Vesting schedules have traditionally been used by employers to manage retirement plan costs while encouraging employee loyalty. But new research shows they may not be as effective at retaining employees as once thought, though they still offer financial advantages to employers.
What is vesting, and how does it work?
“Vesting” means ownership of retirement plan funds. Employee contributions are always 100% vested; however, employees earn the right to employer contributions over time, based on years of service or hours worked. If an employee leaves before fully vesting, the unvested portion goes into the plan’s forfeiture account. Vanguard reports that over half of the plans it administers include a vesting schedule for employer contributions.
Vesting schedules are defined in the plan document and may vary:
- Immediate Vesting: Full ownership from day one.
- Cliff Vesting: 0% vested until a set number of years, then 100%.
- Graded Vesting: Ownership increases gradually each year.
The table below shows the differences between a cliff vesting schedule and a graded vesting schedule. For cliff vesting, the account becomes 100% vested after a set number of years, whereas a graded vesting schedule has gradual increases over a set number of years. This example reflects a three-year cliff vesting schedule and a six-year graded vesting schedule.
| Years of Service | Cliff Vesting | Graded Vesting |
| 1 | 0% | 0% |
| 2 | 0% | 20% |
| 3 | 100% | 40% |
| 4 | 100% | 60% |
| 5 | 100% | 80% |
| 6 | 100% | 100% |
Why do employers use vesting schedules, and what did Vanguard’s research reveal?
Employers who use vesting schedules are generally motivated by two main goals: retaining employees by encouraging them to stay longer in order to earn full benefits and managing costs by recouping unvested contributions when employees leave the company.
Vesting schedules are a common strategy used by about two-thirds of employers to promote retention, but their effectiveness is often limited by a lack of employee understanding. Many workers are unclear on how vesting works, which diminishes its intended impact.
A research report by Vanguard further challenges the idea that vesting schedules significantly influence employee retention. When comparing plans with immediate and three-year cliff vesting, they found no major differences in turnover, and many participants weren’t even aware their plan included a vesting schedule, highlighting a communication gap.
Employers benefit financially by recouping an average of 2.5% of contributions through forfeitures. However, these savings often come at the expense of lower-income employees, whose final retirement balances may be reduced by about 40%. This underscores the need for plan sponsors to balance the cost-saving benefits of vesting schedules with their potential negative impact on lower-paid, high-turnover workers.
What should plan sponsors do?
1. Review Your Plan Documents
Confirm if your plan has a vesting schedule and how it works.
2. Know Who Manages Vesting
Vesting is typically tracked by the plan sponsor, recordkeeper, or third-party administrator (TPA).
3. Communicate Clearly
Help participants understand the vesting schedule because it could influence their decisions and boost retention.
4. Understand Forfeiture Rules
Know how forfeitures can be used (e.g., offsetting employer contributions or plan expenses) and ensure compliance with your plan document.
Want help understanding or reviewing your plan’s vesting structure? Reach out to your Shepherd Financial advisor today.
i Plan Sponsor Council of America, 67th Annual Survey of Profit-Sharing and 401(k) Plans.
ii Internal Revenue Service.
iii How America Saves 2024, Vanguard, available at: institutional.vanguard.com/insights-and-research/report/how-america-saves.html.
iv Plan Sponsor Council of America, 67th Annual Survey of Profit-Sharing and 401(k) Plans.
v Does 401(k) vesting help retain workers?, Vanguard, available at:
It might seem counterintuitive, but plan sponsors are responsible for keeping track of participants, even after they leave the company. Sometimes these former employees become “missing participants,” meaning they’ve left an account balance in the plan but haven’t provided their updated contact information. In other cases, these former employees may simply stop responding to communications from the plan sponsor.
Missing participants can create real headaches for plan administration, especially when you’re trying to terminate a plan or reduce small account balances to lower recordkeeping costs. Still, the law requires plan sponsors to provide plan notifications to all participants, and failure to meet these disclosure obligations can result in penalties.
Steps for Locating Missing Participants
The Department of Labor (DOL) requires plan sponsors to follow a prudent and consistent process to locate missing participants. Here’s a recommended framework:
1. Develop a Consistent Process
Create a documented procedure for locating missing participants that can be applied consistently over time.
2. Audit Plan Data Regularly
Review your census file, which includes participant contact information, to identify any gaps or outdated data. Make auditing a routine part of your administrative process
3. Determine Next Steps
After reviewing your data, assess whether additional measures are needed to locate participants. Remember, it’s the sponsor’s duty—not the participant’s—to maintain contact.
Consider the following tools:
- Free online search engines and public databases (such as those for licenses, mortgages, and real estate taxes)
- Obituaries
- Social media
- Commercial locator services or credit-reporting agencies
- Other reasonable methods, provided privacy rights are respected
4. Document everything
Keep clear records of the process, steps taken, and results for audit and compliance purposes.
5. Revisit the Process Regularly
This isn’t a one-time task. Add this to your fiduciary calendar and reassess periodically, based on your plan’s size and complexity.
Following these steps not only helps you stay compliant but also ensures participants maintain access to their hard-earned retirement savings. Let us know if you need help evaluating your current process or implementing a new one.
As recent market fluctuations unfold, we want to take a moment to update you on how Shepherd Financial is actively monitoring the situation and working to support both you and your retirement plan participants.
What’s Driving the Volatility?
Markets have experienced increased turbulence in recent days, largely due to rising global trade tensions. The U.S. has proposed and implemented new tariffs on imports from several countries, and there is ongoing uncertainty around potential retaliatory measures. These developments have impacted investor sentiment, causing notable swings in both domestic and international equity markets, as well as some disruption in fixed income performance.
Our Response and Ongoing Commitment
As your retirement plan consultant, we are carefully monitoring these developments and their protentional impact on plan investment options. Our investment team is reviewing fund performance, manager commentary, and market outlooks to ensure your plan’s investment menu continues to support long-term outcomes. For participants, we remain focused on reinforcing the value of disciplined, long-term investing. We continue to educate participants on the importance of staying the course during short-term volatility, reminding them that retirement investing is built to weather market cycles.
What You Can Expect from Us
You can expect us to stay closely attuned to market developments and evaluate any potential implications for your plan’s investments. We remain committed to providing you with fiduciary oversight and ensuring your investment menu remains diversified and aligned with long-term goals. If you or your participants have questions, our team is readily available for group sessions or one-on-one support. Please let us know if you would like to schedule time to review your plan’s investment strategy or discuss additional communications for your employees.
We are here to help you. Please don’t hesitate to reach out to us with any questions at shepfinteam@shepherdfin.com.
Understanding Forfeiture Accounts
People are generally most familiar with the plan’s investment options that are part of the plan’s core lineup. However, other plan assets for which plan sponsors have a fiduciary responsibility include the revenue credit account and forfeiture account. The names of these accounts may vary across different recordkeeping platforms.
Forfeiture Basics
Employee contributions are always 100% vested, meaning they belong to the employee when they leave. However, employer contributions may be subject to a specified vesting schedule, which determines when an employee gains ownership of any employer contributions. The forfeiture account is where these employer contributions are held when an employee leaves the company before becoming fully vested in those contributions.
Employers have the choice of how they want to use these funds. It is important to make sure the plan document, as well as any other plan documentation, specifies how the funds can be used. It is also critically important to ensure any plan documents align with what is actually happening. Common uses of the forfeiture funds include:
• Plan Expenses: Covering administrative costs associated with managing the plan.
• Employer Contributions: Reducing future employer contributions that the company needs to make to the plan.
• Reallocation to Participants: In some cases, the forfeited amounts can be reallocated among the remaining plan participants in a nondiscriminatory manner.
Proposed Regulation and Timing
As a practical matter, most plans try to spend the revenue credit account and forfeiture account within the plan year in which the funds were generated or, at the latest, by the end of the following plan year. This was formalized in 2023, when the Internal Revenue Service (IRS) proposed a regulation for defined contribution plans to require that forfeitures must be used no later than 12 months after the close of the plan year in which the forfeiture is incurred. While this remains a proposed rule, the timing guidelines should be followed.
Action Items for Plan Sponsors
• Understand where all the plan assets are even if those funds are not in the core investment lineup; this extends to holding accounts including the revenue credit account and forfeiture account.
• Determine how the forfeiture account can be spent as identified in the plan document or other governing documents and policies for the plan.
• Ensure the plan’s operation aligns with the plan documentation, including as it relates to how to spend forfeiture dollars.
• Determine a procedure to ensure forfeiture dollars are spent within the plan year in which the funds were generated or, at the latest, by the end of the following plan year.
The Department of Labor Reiterates Focus on Cybersecurity
The US Department of Labor (DOL) issued a press release on September 6, 2024, reminding ERISA plan fiduciaries that it considers cybersecurity to be an area of ‘great concern,’ emphasizing the DOL will continue to investigate potential cybersecurity-related ERISA violations. The press release accompanied guidance which updated the DOL’s 2021 cybersecurity guidance; most significantly, it clarified the 2024 updates apply to all types of ERISA plans, including health and welfare plans.
Background
The DOL issued three pieces of guidance in 2021 intended to address the intersection of cybersecurity and ERISA-covered plans. Each piece of guidance was addressed to a different audience:
- Online Security Tips was addressed to ERISA plan participants.
- Tips for Hiring a Service Provider with Strong Cybersecurity Practices (Hiring Tips) was addressed to ERISA plan fiduciaries.
- Cybersecurity Program Best Practices (Best Practices) was addressed to ERISA plan vendors and fiduciaries selecting and monitoring such vendors.
The 2021 guidance was framed only in terms of retirement plans, but it could be read to cover all ERISA plans.
2024 Updates
Outside of clarifying that the DOL’s cybersecurity guidance applies to all ERISA plans – retirement plans and health and welfare plans alike – the 2024 updates were limited:
• In Online Security Tips, the 2024 update tweaked the frequency with which it recommends participants update their passwords (changing it from 120 days to annually), clarified participants should not use common passwords (as opposed to stating they should not use dictionary words), and suggested participants favor longer passwords instead of more frequent resets.
• In Hiring Tips, the 2024 update clarified ERISA plan fiduciaries should ensure their vendors’ insurance coverage covers cybersecurity breaches and incidents involving the plan.
• In Best Practices, the 2024 update indicated ERISA plan vendors who follow these best practices should adopt certain multifactor authentication processes, as well as notify participants of unauthorized acquisition of their personal data without unreasonable delay.
The Bottom Line
Despite the limited scope of the 2024 updates, the takeaway is clear: the DOL continues to see cybersecurity as a top priority, and all ERISA plan fiduciaries (including those overseeing health and welfare plans) should be prepared for the DOL to investigate the steps taken to mitigate their plans’ cybersecurity risks.
In light of this clear message from the DOL, fiduciaries and service providers to ERISA plans (that have access to data and or assets) may want to consider evaluating the plan’s cybersecurity regime, such as through a cybersecurity self-audit, adoption of a cybersecurity policy, or through other improvements to the cybersecurity and or monitoring processes.
For group health plans, this can be done in conjunction with the self-audits that must be conducted to develop those policies and procedures required under the HIPAA Privacy and Security Rules. Final Rules issued under HIPAA earlier this year require group health plans to update their HIPAA privacy policies and procedures and provide associated workforce training by December 22, 2024.
If you need assistance with such process improvements, or have any questions about the impact of this guidance or fiduciary oversight of cybersecurity risk, please contact the Shepherd Financial team.
SECURE 2.0: Catch-Up Contributions
With SECURE 2.0’s increased catch-up contribution limits set to take effect next year, it’s time for 401(k) plan sponsors to brush up on the rules and consider how to administer the changes. Under the current rules, 401(k) plans may allow participants to make catch-up contributions when they are age 50 or older. For 2024, the catch-up contribution limit is $7,500.
SECURE 2.0 creates a window of increased catch-up contribution limits for participants ages 60 – 63. Below are key questions 401(k) plan sponsors are asking about this change:
Are the changes mandatory?
Plan sponsors are not required to offer catch-up contributions. However, if a plan allows for catch-up contributions, it is important to check with the plan’s recordkeeper to determine whether or not opting out of the increased catch-up contribution limit will be permitted.
When do the changes take effect?
The new limits take effect for tax years beginning after December 31, 2024.
Which participants are eligible for the increased limit?
Participants are eligible for the increased limits for the years in which they attain ages 60, 61, 62, and 63.
What is the increased limit?
The increased catch-up contribution limit for eligible participants is the greater of: (a) $10,000, subject to cost-of-living adjustments starting in 2026; or (b) 150% of the limit in effect for 2024 (i.e., $11,250).
While the change seems straightforward, administration may be complex. For example, plan sponsors should consider how to track eligibility for the increased limits, in addition to tracking eligibility for regular catch-up contributions. Plan sponsors should also consider how to re-impose the lower catch-up contribution limits when participants age out of the higher limits. Employers may need to work with their payroll teams and update their existing processes (e.g., payroll codes) to implement these changes.
Finally, keep in mind that the increased catch-up contribution limits are separate from the SECURE 2.0 Roth catch-up rule for certain high-earning individuals, which the IRS delayed to 2026.
SECURE 2.0: RMDs
SECURE 2.0 brought significant changes to retirement planning and distributions, including updating the Required Minimum Distribution (RMD) requirements. As background, RMDs are the minimum amounts that individuals who attain their ‘required beginning date’ must withdraw from their retirement accounts each year.
SECURE 2.0 introduced several changes to the rules on RMDs, including the following:
Delaying the Age for RMDs
The age for starting RMDs has been raised from 72 to 73 years. This increased age provision phases in over time, with the final adjustment taking effect in 2033 to age 75. The change recognizes that many Americans are working and saving for retirement for longer periods, and the later distribution requirement allows for more flexibility in managing retirement assets.
No RMDs from Roth Accounts
Starting with the 2024 calendar year, participants are no longer required to take RMDs from their retirement plan Roth accounts. This change aligns the RMD rules for Roth accounts in retirement plans with the rules applicable to Roth IRAs.
Decreased Penalties for Missed RMDs
The excise taxes for failing to take an RMD have been decreased from 50% to 25% of the RMD amount not taken. The penalty may be further reduced to 10% if the RMD is corrected in a timely manner.
Leah Sylvester Named RIA Intel’s 2024 Retirement Plan Advisor of the Year
[June 5, 2024, Carmel, IN] – Shepherd Financial is proud to announce Leah Sylvester has been honored as the 2024 Retirement Plan Advisor of the year at the RIA Intel Awards. Chosen from nearly 300 nominations, this award highlights Leah’s continued commitment to the retirement plan industry. The RIA Intel Awards are a celebration of excellence in the asset management industry, honoring financial advisors, wealth management firms, and industry leaders.
Having led Shepherd Financial’s retirement plan practice since 2015, Leah provides holistic consulting to help plan sponsors understand best practices, manage the decision-making process, and ensure they are providing real benefits to their employees. Her dedication to delivering exceptional retirement plan advisory services has distinguished her as a leader within the industry. An engaged advocate for plan sponsors, her innovative approach and unwavering commitment to her clients’ success showcase Leah’s standards for excellence.
‘We are extremely proud of Leah’s achievements and this well-deserved recognition,’ said Tom Mayer, CEO of Shepherd Financial. ‘Her passion for her clients and expertise in the field make her an invaluable asset to our team – and the industry as a whole.’
The awards, hosted in partnership with RIA Intel and the RIA Institute, were created to recognize the importance of wealth management and advisory as a growing and influential force within asset management. The awards also honored individuals who have displayed exceptional growth, expertise, and potential.
About Leah Sylvester:
Leah Sylvester, CPC, QKA®, QPA®, is an Executive Partner and the President of Retirement Plans at Shepherd Financial. She oversees both Shepherd Financial’s retirement plan book of business and team members. Leah is an active leader and learner within the retirement plan industry. She is a Member Advisor on the Retirement Advisor Council, an organization committed to advocating for successful qualified plan and participant retirement outcomes. She has co-chaired two Women in Retirement Conferences, an organization dedicated to empowering women in the retirement industry. She was named to the National Association of Plan Advisors Top Retirement Plan Advisors Under 40 list in 2022. Contact her at lsylvester@shepherdfin.com.
About Shepherd Financial:
Headquartered in Carmel, Indiana, Shepherd Financial is an independent firm, utilizing a thorough and highly efficient team approach to retirement plan consulting and wealth management. Our mission is helping people and companies thrive through empowered financial solutions. Our vision is to grow in a meaningful way, becoming a nationally recognized name as a trusted financial partner and industry leader. For further information, please visit www.shepherdfin.com or call 844.975.4015.
June 5, 2024 – The 2024 Annual RIA Intel Retirement Plan Advisor of the Year Award
Recipients are selected through a qualitative assessment of an examination of publicly accessible data and performance indicators, consultation with industry peers and leaders to assess the nominee’s influence and reputation within the sector, evaluation criteria centered on credibility, significance of contributions to the field, and innovation in practice. The process of review and final selection is executed by the Editorial Team of RIA Intel (responsible for conducting research and ensuring nominees meet standards of excellence) and the RIA Institute Advisory Board (offers additional insights and industry expertise to augment the review process). RIA Intel awards are not indicative of an investment adviser’s future performance, and no investment adviser pays, or is paid a fee, to take part in the program.
Top Plan Advisors Under 40 (2022) – National Association of Plan Advisors
Established in 2014, the 2022 Top Retirement Plan Advisors Under 40 were drawn from nominations provided by NAPA Broker-Dealer/RIA Firm Partners, vetted by a blue ribbon panel of senior advisor industry experts based on a combination of quantitative and qualitative data submitted by the nominees, as well as a broker-check review. In 2022: 700 nominations, 100 winners.
Working with an award winner is no guarantee of future financial success. Individuals should conduct their own evaluation.