In November 2023, the IRS proposed regulations regarding long-term part-time employee eligibility for 401k plans, noting that additional guidance was needed for 403b plans. The recent IRS Notice 2024-73 provides important clarifications for 403b plan sponsors, particularly benefiting colleges, universities, and teaching hospitals. This notice addresses various issues related to 403b plans, focusing specifically on the treatment of part-time and student employees.
A data breach this summer exposed the personal information of approximately 77,000 Fidelity clients. From August 17 to August 19, a third party gained unauthorized access to client information using two recently created customer accounts, as reported by Fidelity to the Office of the Maine Attorney General. The breach did not allow access to clients' actual Fidelity accounts.
A $400 million retirement plan has reached a $1.5 million cash settlement in an excessive fee lawsuit. The suit, filed in 2022 against the fiduciaries of the Nova Southeastern University 401k plan, alleged that the plan included underperforming, higher-cost funds, as well as excessive recordkeeping fees, despite the availability of cheaper alternatives. Changes to the plan will also be implemented as part of the settlement.
A recent study by the Wharton Pension Research Council found that retirement plan contributions remain stable even after participants take loans or hardship withdrawals from their 401k accounts. This challenges the belief that allowing loans could negatively impact savings behavior. The research suggests that, when managed properly, loans can help individuals borrow responsibly. With many 401k participants automatically enrolled and sticking to default contribution rates, their saving habits tend to remain consistent over time, as noted by Aaron Goodman, a Vanguard economist and co-author of the study.
Bank of America has been hit with a class action lawsuit claiming it misused forfeited 401k funds, allegedly violating its fiduciary duty under ERISA. Participants in the retirement plan argue that the bank improperly benefited from matching contributions that employees forfeited upon leaving the company. This lawsuit is part of a broader trend, with several major companies facing similar legal challenges across the country.
The IRS has approved a new flexible plan design in a private letter ruling (PLR 202434006) that allows employees to direct employer contributions according to their individual financial needs. This enables employees to allocate contributions for various purposes, including retirement savings, student loan repayment, or healthcare expenses, acknowledging their diverse financial objectives.
On October 3, 2024, the IRS released Notice 2024-73, which offers guidance on Long-Term Part-Time Employees in ERISA 403b plans. The notice clarifies that part-time employees who typically work less than 20 hours per week must be permitted to participate in the plan for elective deferral if they meet certain criteria. The notice also addresses how these rules interact with nondiscrimination standards.
As around 11,200 Americans turn 65 daily, American Century Investment conducted its 11th annual retirement survey, querying 1,500 individuals aged 25-65 about their retirement income strategies. The survey findings highlighted concerns regarding income replacement, showing that the percentage of non-retirees with a defined benefit pension is 30 points lower than that of retirees. This year's survey also incorporated insights from over 500 plan sponsors.
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Collected Wisdom™
Our researchers look for what they think are some of the better resources available to assist you in administering your plan or helping your clients. We group these resources in our COLLECTED WISDOM™ topics to make it easy for you to locate the information you need. Each item in a category contains a summary and date of when it was placed in the group.
We also maintain some older material in these collections for perspective and context.
