A recent paper from the National Bureau of Economic Research proposes a solution to address longevity risk among retirees by defaulting 20% of a retiree's assets above a certain threshold into an immediate annuity. This approach aims to alleviate concerns that financially inexperienced retirees may overlook guaranteed lifetime income options. The research, conducted by professors Vanya Horneff, Raimond Maurer, and Olivia Mitchell, suggests that such automatic allocation could enhance retirement security for many participants, particularly benefiting college graduates if the annuity is deferred until age 80.
The text discusses the challenges and considerations associated with auto-portability in retirement plans, particularly regarding early lump sum distributions and their impact on individuals' financial futures. It suggests there may be better alternatives than auto-portability to achieve the desired benefits. One alternative requires engagement from those involved in the initial stages of auto-portability, while the other calls for a collaborative effort within the community. This article reviews the alternatives.
On June 26, 2025, the U.S. District Court for the District of Massachusetts ruled in favor of Natixis Investment Managers and its fiduciary committee in the case Waldner v. Natixis Investment Managers, L.P., et al. The plaintiffs claimed that the defendants violated their ERISA duties by including underperforming proprietary funds in the 401k plan. However, after a full trial, the court sided with the defendants on all counts, emphasizing the importance of a "prudent process" in managing the fund menu. The ruling focused on the prudence issues raised by the plaintiffs' allegations.
The AICPA has sought further guidance from the Treasury and the IRS concerning catch-up contributions designated as Roth contributions, as outlined in Section 603 of the SECURE 2.0 Act of 2022. In a letter dated July 1, the AICPA addressed proposed regulations issued in January that include updates related to these statutory changes, referred to as the Roth mandate. This mandate requires that catch-up contributions from eligible employees, who meet a certain income threshold, be designated as Roth contributions within employer-sponsored retirement plans.
When sponsoring a retirement plan, engaging outside experts like seasoned fiduciaries is often a wise decision. However, it is crucial to clearly define each party's responsibilities and liabilities. While plan sponsors can never eliminate the risks associated with their role as ERISA fiduciaries, they can mitigate these risks through strategic outsourcing. Read this article for a deeper understanding.
As changes and risks increase for plan sponsors and fiduciaries, they can no longer ignore the specifics of vendor contracts. It is crucial for them to ensure that their expectations align with the contract terms. Additionally, they should have legal counsel review these contracts before signing to identify any limitations on vendor liability or performance obligations. As the landscape evolves and fiduciaries face greater financial exposure, the consequences of not addressing these issues proactively could become significantly detrimental.
A federal judge has formally set aside part of the Department of Labor's investment advice regulation, specifically regarding the interpretation of a rollover recommendation as the beginning of a series of transactions that could be deemed a "regular basis." This ruling marks the second time a federal court has reinstated the traditional understanding of what constitutes "regular basis." While fiduciary responsibilities still apply to advice given to plan participants regarding rollovers, a rollover recommendation made by an advisor without an existing relationship will remain a distinct issue.
A recent Escalent report highlights that fewer defined contribution plan sponsors are prioritizing cost reduction. Only 40% of plan sponsors identified decreasing costs as a key focus for the upcoming year, down from 50% in 2024. Instead, attention is shifting towards cybersecurity and artificial intelligence due to increasing concerns about data breaches and cyberattacks. The report reveals that 70% of plan sponsors and 10% of large-mega plans experienced a 401k-related data breach in the past year. Cybersecurity threats were reported as the primary concern for 52% of surveyed sponsors, surpassing worries about underperforming investment options (45%) and inadequate employee retirement savings (43%).
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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.
