Daily Article Digest - Updated Regularly

This digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403b and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest.

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DOL Supports Participants Against Cornell in Supreme Court Case Over DC Plan Management

The DOL has requested the Supreme Court's support for former participants in two Cornell University 403b plans who claim the plans charged excessive fees and that their contracts with recordkeepers violated federal law. Oral arguments for the case, Cunningham et al. vs. Cornell University et al., are scheduled for January 22. This case, which has been ongoing for eight years, is seen as an opportunity for the Supreme Court to clarify differing interpretations of ERISA's prohibited transactions rules by various appeals courts. The DOL, represented by Solicitor General Elizabeth Prelogar, submitted an amicus brief on December 2, highlighting the central issue of whether plaintiffs need to prove defendants engaged in prohibited transactions, or if fiduciaries must demonstrate they fall under ERISA exemptions.

Source: Pionline.com, December 2024

Kimberly-Clark Will Pay $2.25 Million to Settle a 401k Recordkeeping Fees Lawsuit

Kimberly-Clark Corp. has agreed to pay $2.25 million to settle a class-action lawsuit brought by former employees who accused the company and its 401k plan fiduciaries of imposing high recordkeeping fees and failing to adequately monitor those fees. The settlement, filed on December 2 in a U.S. District Court in Dallas, is pending court approval and was reached through mediation. The lawsuit, initiated in April 2021, claimed that the 401k plan's fees were excessive compared to similar plans, violating ERISA.

Source: Pionline.com, December 2024

What the 2025 Tax Debate Could Mean for 401ks

Key provisions of the Tax Cuts and Jobs Act of 2017 are scheduled to expire at the end of 2025. During that year, it is anticipated that a Republican-controlled government will seek to extend these tax cuts and may consider retirement tax incentives as a way to offset potential revenue losses. Brian Graff, CEO of the American Retirement Association, says that any tax bill could lead to broader changes in the entire tax code.

Source: Napa-net.org, December 2024

When 401k Plan Sponsors Have to Say No

The author reflects on their personal growth from being shy and agreeable in childhood to becoming more assertive in adulthood, particularly in their professional role as a 401k plan sponsor. They emphasize the importance of being able to say no when necessary, despite the desire to maintain positive relationships with participants and providers. The article discusses the necessity of setting boundaries and making tough decisions in the context of managing a 401k plan.

Source: Jdsupra.com, December 2024

Annuities Are the Antithesis of Fiduciary Prudence: Commentary

The author raises concerns about the potential fiduciary risks associated with offering lifetime income annuities in 401k plans. They question why plan sponsors consider such investments when there is no legal requirement under ERISA or other laws to include them. While some plan sponsors feel compelled to provide retirement income options for employees, the author argues that this perspective is legally misguided. They assert that employers can fulfill their fiduciary duties by ensuring that the investment options are prudent and cost-efficient without including annuities in the plan. Employees can seek annuities independently, thus avoiding additional liability for plan sponsors.

Source: Fiduciaryinvestsense.com, December 2024

SECURE 2.0 Permits Employer Roth Contributions

As the January 1 plan year approaches, 401k plan sponsors are considering potential changes to their plans in light of the features introduced by the SECURE 2.0 Act of 2022. One notable feature allows participants to elect Employer Contributions as Roth amounts, instead of the traditional pre-tax contributions. This option applies to various retirement plans, including 401k, 403b, and governmental 457b plans, as outlined in SECURE 2.0 Section 604. This article serves as a reminder for plan sponsors on how to implement this new provision effectively.

Source: Ferenczylaw.com, December 2024

Rebuttal to the American Association for Justice's Supreme Court Amicus Brief Extolling the Virtue of Private ERISA Litigation

The author addresses criticisms presented by the American Association for Justice concerning the Supreme Court's handling of ERISA cases. The article argues that the AAJ's portrayal of ERISA litigation is misleading and does not accurately reflect the realities of the legal landscape surrounding retirement plans. Overall, the article serves as a counter-narrative to the AAJ's position, defending the current legal framework governing ERISA while underscoring the importance of fiduciary duties in safeguarding retirement plan participants.

Source: Encorefiduciary.com, December 2024

What Is a plan document?

The question this short item tackles is about the necessity of a plan document. A plan document is defined as the official and legally binding record of a retirement plan's rules. The discussion emphasizes the importance of having this document, not only for compliance with regulations set by the IRS and DOL but also for clarity and confidence in managing employee benefits.

Source: Employeebenefitslawreport.com, December 2024

DOL Retirement Savings Lost and Found Database Begins Voluntary Data Collection Process

On November 18, 2024, the DOL announced the immediate collection of information from retirement plan administrators to create a new online "Retirement Savings Lost and Found" database. This initiative, established by the SECURE 2.0 Act, aims to reconnect individuals who have lost track of their retirement benefits with the corresponding retirement plans. Currently, participation by plan administrators in populating this database is voluntary. This article reviews specific questions addressed in the DOL announcement.

Source: Compliancedashboard.net, December 2024

How Smart Is Your Retirement Plan Design?

Nearly two decades ago, Congress facilitated the integration of automatic enrollment and automatic increase features in retirement plans by offering safe harbor protections. Since then, these features have gained traction as best practices, supported by Congress, federal regulators, and state legislatures. This evolution provides an ideal moment for employers who have yet to implement these features to reassess their plan design and consider making these beneficial changes. For more insights on this significant shift in defined contribution plans, this paper offers a comprehensive overview.

Source: Bofa.com, December 2024

Staying Off the Fiduciary Naughty List: Nevin and Fred

During the holiday season, employers must navigate the complexities of the SECURE 2.0 Act, which introduces mandatory changes such as automatic enrollment for new retirement plans starting in January 2025. Employers must be mindful of compliance, especially if their status changes regarding plan thresholds. Additionally, the selection of default investment funds is significant, along with fiduciary responsibilities concerning rollovers. While there are also provisions for correcting mistakes, it's essential to stay informed. In this episode, Nevin Adams and Fred Reish provide guidance to ensure that employers are well-prepared and compliant to avoid pitfalls associated with the legislation.

Source: Asppa-net.org, December 2024

Is Matching Student Loan Repayments Worth the Cost for Employers?

The SECURE 2.0 Act allows employers to match student loan repayments with retirement plan contributions, providing support for younger employees facing student debt challenges. This benefit can enhance recruitment and retention efforts, making it appealing to HR teams and talent acquisition professionals. However, implementing this feature can lead to significant costs that employers need to evaluate carefully. While the provision offers valuable advantages, it also presents challenges. This article will help HR professionals and plan sponsors understand the practical implications and key factors involved in implementing student loan repayment matching.

Source: 5500audit.com, December 2024

Year-End Considerations for Employer-Provided Retirement Plans

As 2024 approaches, it's important to assess the impacts of recent changes under the SECURE Acts on qualified retirement plans. Although plan amendments are not due until December 31, 2026, qualified plans must be compliant with the new requirements from the law's effective date. This article provides a review of significant changes that have already taken effect or will soon.

Source: Rrlawpc.com, December 2024*

The Mechanics of Matching

Vanguard's research highlights that employees may risk losing up to $300,000 in retirement savings by 2025 due to "savings frictions" associated with job changes, such as being defaulted into lower contribution rates in new 401(k) plans. Kelly Hahn, head of retirement research at Vanguard, emphasizes the need to address these inefficiencies in plan design for better retirement outcomes. Consequently, employers are reevaluating contribution strategies by adjusting automatic-enrollment practices, reviewing default rates, and enhancing communication with employees to improve retirement planning and readiness.

Source: Plansponsor.com, December 2024

Behind the 401k Match: Why Employers Offer It and How to Best Design It

To implement an effective employer contribution strategy, plan sponsors must focus on timing, costs, and the unique financial needs of their workforce. A matching contribution to retirement savings has become essential for attracting and retaining talent. Key considerations include developing a match formula suited to the specific employee population and determining when to make contributions.

Source: Plansponsor.com, December 2024

401ks and the Courts in 2025

The article discusses potential legal changes and challenges that may impact 401k plans in 2025. It highlights ongoing litigation that could redefine fiduciary responsibilities, affect target-date funds, and influence the way plan sponsors manage fees and expenses. Additionally, it examines the implications of the SECURE Act 2.0 and other regulatory developments, suggesting that plan sponsors must stay vigilant and proactive in adapting their practices to comply with evolving legal standards. Overall, the piece underscores the need for continued diligence in 401k plan management as legal landscapes shift.

Source: Planadviser.com, December 2024

Missing Pension Plan Members in Canada

The National Institute on Ageing has released a significant report titled "Missing Pension Plan Members in Canada," which addresses the issue of individuals who cannot be contacted by pension plan administrators due to outdated contact information or other complications. With Canada's aging population, the issue has become increasingly concerning, particularly in Ontario, where nearly 200,000 pension members are considered missing, totaling $3.6 billion in unclaimed benefits. The report highlights these challenges and explores potential solutions to help reconnect Canadians with their entitled retirement benefits.

Source: Niageing.ca, December 2024

Trump Appoints Proponent of Federally Run Retirement Plan to Key Policy Position

President-elect Donald Trump has appointed Kevin Hassett as the Director of the White House National Economic Council. Hassett previously served as Chair of the Council of Economic Advisers during Trump's first term and was instrumental in creating the Tax Cuts and Jobs Act of 2017. He also advised Trump on economic policy during the campaign. Recently, he gained attention for a 2021 white paper co-written with economist Teresa Ghilarducci, which criticized 401k plans.

Source: Napa-net.org, December 2024

2025 DC Plan Compliance Calendar

The document is a compliance calendar for defined contribution plans for 2025. It outlines important deadlines related to various compliance requirements that plan sponsors must adhere to, including notices, filings, and other obligations. Key dates include deadlines for submitting disclosures to participants, filing reports with regulatory agencies, and ensuring plan amendments are made timely. The calendar serves as a useful tool for employers and plan administrators to help them maintain compliance with legal and regulatory standards in managing their defined contribution plans.

Source: Mercer.com, December 2024

USERRA Case Highlights Employer Defenses to Allegations of Anti-Military Bias

In Porter v. Trans State Holdings, Inc., the federal district court dismissed a Naval Reserve pilot's USERRA lawsuit claiming discrimination and retaliation regarding promotional opportunities and 401k contributions due to anti-military bias. USERRA protects military personnel from such discrimination. The court's decision emphasizes that a company's documented commitment to hiring veterans and supporting current service members can be an effective defense against USERRA claims, providing useful guidance for employers.

Source: Littler.com, December 2024

401k Plans: Industry Data Show Low Participant Use of Crypto Assets Although DOL's Data Limitations Persist

In 2022, U.S. retirement savings in 401k plans exceeded $6.7 trillion, and some investment firms began offering crypto asset options for participants, prompting regulatory and industry discussions. The Government Accountability Office was tasked with reviewing these crypto asset options within 401k plans. This report focuses on four key areas: 1. The availability of crypto asset investment options in 401k plans. 2. The potential impact of these assets on participant savings. 3. How fiduciaries comply with ERISA responsibilities when including crypto assets in plans. 4. The level of federal oversight regarding these investment options.

Source: Gao.gov, December 2024

Fundamental Unfairness: Sixth Circuit Decision Addresses the Premature Dismissal of ERISA Actions

The author comments that the Sixth Circuit's decision in Johnson v. Parker-Hannifin Corp. signals a potential trend towards greater protections for plan participants in fiduciary litigation, particularly by revisiting issues of pleading plausibility and the burden of proof under ERISA. With the Supreme Court set to consider the burden of proof in the Cunningham v. Cornell case, 2025 might be pivotal for fiduciary litigation. The author highlights that the majority opinion in Parker Hannifin could strengthen claims for equitable treatment of plan participants, depending on how effectively the plaintiffs' bar approaches the case.

Source: Fiduciaryinvestsense.com, December 2024

2025 Changes in Catch-Up Contributions Available

The article highlights important updates regarding 401k catch-up contributions set to take effect on January 1, 2025. As part of the SECURE 2.0 Act, participants aged 60 to 63 will be able to contribute larger amounts in catch-up contributions compared to previous years, with new limits established. However, the implementation of this provision is not automatic; plan sponsors must actively decide to adopt it for their employees. Additionally, there is currently a lack of guidance from the IRS on how to manage these new limits, which presents some challenges for plan sponsors as they prepare for these changes.

Source: Ferenczylaw.com, December 2024

The Sixth Circuit Decision Allows a Performance Standard to Judge the Fiduciary Prudence of 401k Plan Investment Decisions

The Sixth Circuit's Parker-Hannifin decision permits claims of fiduciary breach for investment underperformance after just eleven months, even without a meaningful benchmark to assess prudence. Plaintiffs have compared Northern Trust's conservative strategy to higher-risk, top-performing funds. The article notes that if upheld, fiduciaries could be liable for failing to select top performers or exceed the S&P 500, regardless of their actual investment strategy. The dissent argues that ERISA sets "standards of conduct, not standards of performance," indicating that this ruling could lead to speculative class action lawsuits based on unrealistic performance expectations.

Source: Encorefiduciary.com, December 2024

401k Annual Administration: A Checklist for 2025

Effective annual 401k administration shouldn't be overwhelming for employers, as qualified providers handle the technical aspects. To streamline this process, employers are encouraged to use a checklist for the timely completion of annual tasks. Employers can utilize this checklist for the 2025 plan year to ensure compliance and organization.

Source: Employeefiduciary.com, December 2024

How Well Does Automatic Enrollment Work?

This is a review of a study by the National Bureau of Economic Research that highlights the benefits of automatic features in retirement savings plans, particularly automatic enrollment and automatic escalation, which are effective in raising average savings rates. However, the study also identifies factors that can counteract these benefits. Overall, this study underscores both the potential advantages of automatic retirement plan features and the complexities that can arise from individual choices and employment-related factors.

Source: Asppa-net.org, December 2024

Long-Anticipated VFCP Changes May Be Issued Soon

This piece discusses anticipated changes to the Voluntary Fiduciary Correction Program that may be issued by the DOL in early 2025. The VFCP is a program that allows fiduciaries of employee benefit plans to correct certain violations of ERISA without facing enforcement actions. The proposed modifications are expected to streamline the correction process and make it easier for fiduciaries to comply with regulations. The article highlights the importance of these changes for plan sponsors and fiduciaries, as well as the potential impacts on the administration of retirement plans.

Source: Asppa-net.org, December 2024

Debt is Limiting American Retirement Savings

According to the 2024 Annual Retirement Study conducted by Allianz Life Insurance Company, a significant number of Americans are prioritizing debt repayment as they strive to secure their long-term financial goals. Notably, 55% of respondents are actively working to pay off debts, with Generation X leading this effort—64% of Gen Xers are focusing on debt reduction compared to 54% of both millennials and boomers. The article notes further that many Americans acknowledge that their debt is a barrier to retirement savings. Among those who wish they had saved more, 46% cite non-housing debts, such as car loans, credit cards, and student loans, as impediments to saving.

Source: Allianzlife.com, December 2024

MEPs and PEPs in the Pooled Marketplace

The article discusses the differences between Multiple Employer Plans and Pooled Employer Plans in the context of retirement savings options for small businesses. It outlines the benefits and features of each plan type, highlighting how they allow multiple employers to participate in a single retirement plan, which can reduce administrative burdens and costs associated with offering retirement benefits. The article touches on regulatory considerations, potential advantages for small businesses, and the evolving landscape of retirement plan options as they seek to enhance employee benefits and encourage retirement savings.

Source: Planadviser.com, November 2024*

Eleven Republican AGs Sue BlackRock, State Street, Vanguard in ESG Case

Eleven states have filed a complaint against BlackRock Inc., State Street Corp., and Vanguard Group Inc. in the U.S. District Court for the Eastern District of Texas. The states accuse these asset managers of anti-competitive practices aimed at constricting coal markets and misleading investors regarding funds that do not prioritize environmental, social, and governance factors. The complaint alleges that these companies held significant stakes in U.S. coal firms and influenced them to shift towards green energy goals. The plaintiffs argue that the asset managers' involvement in initiatives like Climate Action 100+ and the Net Zero Asset Managers Initiative has manipulated coal output, resulting in higher costs for coal-powered electricity.

Source: Planadviser.com, November 2024

Mapping State Retirement Programs

The article discusses the various state-sponsored retirement savings programs that have been implemented across the United States. Key points include the structure and features of these state programs, including automatic enrollment, payroll deduction, and the availability of individual retirement accounts or similar vehicles. The article also explores the variation among states in terms of program design, regulatory frameworks, and the goals behind these initiatives.

Source: Planadviser.com, November 2024

Sixth Circuit Revives Kellogg 401k Fee Suit After Arbitration Dismissal

The article discusses a ruling by the Sixth Circuit Court that reinstated a lawsuit against the Kellogg Company regarding alleged excessive fees in its 401k plan. Initially, a lower court dismissed the case, suggesting that the plaintiffs were required to resolve their claims through arbitration. However, the Sixth Circuit found that the plaintiffs had sufficiently alleged violations of ERISA concerning excessive fees and deemed the arbitration clause unenforceable in this situation. The article highlights the implications of this ruling for 401k plan participants, emphasizing ongoing issues related to fiduciary responsibilities and the scrutiny of retirement plan fees.

Source: Hallbenefitslaw.com, November 2024

Sixth Circuit Clarifies That Plaintiffs Must Plead, Not Prove, Excessive Fees

The article discusses a ruling from the Sixth Circuit Court of Appeals regarding litigation over excessive fees in retirement plans, specifically focusing on the distinction between pleading standards and the burden of proof for plaintiffs in such cases. The court clarified that plaintiffs in cases alleging excessive fees do not need to definitively prove that fees are excessive at the pleading stage. Instead, they must only sufficiently plead that the fees are excessive based on relevant facts. This ruling has implications for how participants can challenge fee structures in retirement plans, emphasizing the importance of the initial pleading stage in these legal matters. Overall, it contributes to the ongoing dialogue regarding fiduciary responsibilities and transparency in retirement plan management.

Source: Yourerisawatch.com, November 2024

How 401k Recordkeeper Consolidation is Helping RPAs Grow

In a recent RFP for an $80 million defined contribution plan, service issues arose after the acquisition of the previous recordkeeper, leading to the exclusion of the current Retirement Plan Advisor from the final selection. Past experiences with acquisitions have shown mixed outcomes for plan sponsors, with few reporting positive integration experiences or immediate service improvements, even with better technology. The recordkeeping industry features around 40 national firms and many local ones, indicating that smaller companies may face acquisitions. While industry consolidation poses challenges, it also presents opportunities for experienced RPAs, highlighting the importance of being proactive in navigating these changes.

Source: Wealthmanagement.com, November 2024

IRS Issues Guidance on Long-Term, Part-Time Employees in 403b Plans

On October 3, 2024, the IRS issued guidance in Notice 2024-73 regarding the application of Long-Term, Part-Time Employee rules to 403b plans, effective in 2025, as part of the SECURE 2.0 legislation. Previously, these rules applied to 401k plans under the SECURE Act. LTPTs in 403b plans will be eligible to make elective deferrals but do not need to qualify for matching or nonelective contributions, nor need to be included in discrimination testing for matching contributions. Although plan amendments for LTPT rules are not required until the end of the 2026 plan year, 403b plan operations must be compliant by January 1, 2025.

Source: Thebenefitofbenefits.com, November 2024

Forfeiture Funds: Legal Requirements, Permitted Uses, and Litigation Risk Management

Forfeiture funds in 401k plans consist of unvested employer contributions that revert to the plan when participants leave before becoming fully vested. Effective management of these funds is essential for plan sponsors, who must adhere to federal regulations and their plan documents as fiduciaries. Properly utilizing forfeiture funds minimizes litigation risks and ensures compliance with ERISA fiduciary standards. By regularly reviewing and carefully drafting plan documents, plan sponsors can establish clear guidelines for the use of forfeiture funds, protecting both the plan and its fiduciaries from potential legal issues.

Source: Quarles.com, November 2024

Key SECURE 2.0 Act Updates for Defined Contribution Retirement Plans

Beginning in 2025, new regulations will impact 401k and 403b retirement plans concerning long-term part-time employees, automatic enrollment, catch-up contributions, and Roth treatment for high earners. These updates reflect a significant shift in the retirement planning landscape aimed at enhancing access and contribution flexibility for employees while ensuring compliance with new regulations.

Source: Quarles.com, November 2024

Three Data-Driven Trends in Retirement Plan Management

The 2024 Morgan Stanley Retirement Plan Survey indicates that as retirement plans and financial markets evolve, plan sponsors are under increasing pressure to provide comprehensive benefits packages. The survey shows that these sponsors are increasingly seeking professional guidance to better align with company goals and support plan participants. Key findings highlight a shift in focus toward restructuring consultant relationships, expanding investment options, and improving participant education, emphasizing the critical role of professional expertise in enhancing retirement offerings.

Source: Plansponsor.com, November 2024

Great Gray Presses Senators to Allow 403b Plans to Use CITs

Great Gray Trust Co. LLC, along with law firms Covington & Burling LLP and Groom Law Group, has sent letters to all U.S. Senators advocating for a bill that would permit 403b plans to invest in collective investment trusts. This initiative aims to enable nonprofit organizations, including schools and churches, to access CITs before the year's end. Their push is partly in response to a letter from six investor advocacy groups, including Americans for Financial Reform and the Consumer Federation of America, which expressed concerns about the risks associated with CITs, as they are not registered with the SEC.

Source: Planadviser.com, November 2024

The Retirement Plan Advisor Ties That Bind

A potential nationwide ban on non-compete agreements could significantly impact the retirement plan advisory industry, particularly in areas such as recruitment, retention, and mergers and acquisitions. Experts, including Brian Hamburger, emphasize that for financial advisors, switching firms is a critical and often singular career move. The implications of this ban, although currently on hold, may reshape how advisors operate within the industry.

Source: Napa-net.org, November 2024

End of The Year Tips for 401k Plan Sponsors

As we transition from Thanksgiving to the holiday season and prepare for the New Year, retirement plan sponsors must focus on year-end planning for their plans. This article emphasizes the fiduciary responsibility of sponsors to review and enhance their retirement plans in anticipation of the upcoming year. For detailed information and guidance on maintaining and improving retirement plans, please refer to the full publication.

Source: Jdsupra.com, November 2024

The DOL Retirement Accounts Lost and Found Database Should Do Much More to Facilitate Retirement Account Consolidation

The initial version of the DOL's Retirement Accounts Lost and Found database is limited in its effectiveness, as it will only gather information for participants over age 65 due to data privacy and cybersecurity concerns. Participation from plan administrators is voluntary, potentially leading to reduced data availability. The author argues that to improve the database, future administrations should address these privacy and security issues to expand its scope to include all retirement plan participants and data from all administrators. This would create a comprehensive hub for locating and consolidating retirement savings and could facilitate the implementation of the Saver's Match, a federal matching contribution for eligible savers.

Source: Georgetown.edu, November 2024

A Country and Western Retirement

Fred Reish asked ChatGPT to write lyrics for a country and western song about retirement, about the uncertainty of moving into a new phase of life. Here is what he got.

Source: Fredreish.com, November 2024

Brad Campbell Discusses New Department of Labor Leadership

Chavez-DeRemer's nomination as Secretary of Labor is seen as "unusual" due to her pro-union stance and positions on health care benefits, which may not sit well with many Senate Republicans because of her opposition to right-to-work laws. Additionally, she has not publicly addressed the Department of Labor's fiduciary rule, and notably, as a member of the House Committee on Education and the Workforce, she was the only Republican to vote against a resolution to roll back this rule. Brad Campbell suggests that Trump's election does not necessarily imply opposition to the fiduciary rule, with Chavez-DeRemer's nomination serving as a prime example.

Source: Faegredrinker.com, November 2024

How HR Teams Can Help Employees Handle Financial Emergencies

Many employees are facing financial challenges due to high inflation and economic instability, leading them to rely on short-term solutions that jeopardize their long-term financial health, such as early 401k withdrawals or payday loans, which often come with high interest rates and increased default risk. To help employees manage unexpected expenses without compromising their financial futures, HR departments should consider implementing benefits like PTO conversion plans. These plans allow employees to convert their accrued paid time off into funds that can be used for retirement contributions or immediate cash needs.

Source: Blr.com, November 2024

How Canadian Employers Are Supporting Plan Members' Investment Decisions Amid Rising Cost of Living

In 2023, Hofmann-La Roche Ltd. assessed the financial wellness of its multigenerational workforce in light of the rising cost of living following the pandemic. They recognized the need for increased flexibility to help employees better manage and save for retirement. This insight was shared by Rana Kassab, the company's director of rewards and recognition, during a panel discussion at Benefits Canada's 2024 Defined Contribution Investment Forum.

Source: Benefitscanada.com, November 2024

Long-Term, Part-Time (LTPT) Guidance for 403b Plans

On October 2, 2024, the IRS issued Notice 2024-73, providing important guidance on the relationship between permitted exclusions from participation in 403b plans and the LTPT rules set to take effect on January 1, 2025, for ERISA-covered 403b plans. This guidance supports earlier predictions outlined in a previous blog about the LTPT rules and clarifies which exclusions remain allowable despite the upcoming LTPT regulations.

Source: Belfint.com, November 2024

IRS to Issue Opinion Letters for Certain 403b Pre-Approved Plans

The IRS plans to issue opinion letters on November 29, 2024, or shortly after, for certain 403b pre-approved plans. This was announced in IRS Announcement 2024-38. The opinion letters will pertain to plans updated to comply with changes regarding Internal Revenue Code Section 403(b) and were filed during the second remedial amendment cycle for these plans.

Source: Asppa-net.org, November 2024

Rhode Island, Connecticut Partner on Auto IRAs

Rhode Island and Connecticut have formed a partnership to offer retirement savings programs for private sector employees in Rhode Island who lack employer-sponsored plans. The new RISavers Program, established under the Secure Choice Retirement Savings Program Act, will collaborate with an existing program in Connecticut to provide these retirement planning benefits.

Source: 401kspecialistmag.com, November 2024

Agencies Release 2024 Form 5500 Series With Minimal Changes

The agencies have released the 2024 Form 5500 series, including Form 5500, Form 5500-SF, Form 5500-EZ, and their instructions, with minimal changes mostly concerning retirement plans. Key highlights include: 1. Pension-Linked Emergency Savings Accounts: A new plan characteristics code (2Y) has been added for these accounts, which are available for plan years beginning in 2024. Plans offering this feature must include the code on Form 5500 (line 8a) or Form 5500-SF (line 9a). 2. Form 5558 for DCG Filing: Defined contribution group (DCG) plan administrators can file a single Form 5558 to request an extension for Form 5500 without needing to attach a list of participating plans.

Source: 401khelpcenter.com, November 2024

Who Can Make Additional 401k Catch-up Contributions Under the SECURE 2.0 Act?

The SECURE 2.0 Act allows for enhanced catch-up contributions for older participants in 401k plans starting in 2025. Specifically, participants aged 60 to 63 will be able to contribute the greater of $10,000 or 150% of the standard catch-up limit for 2024 ($7,500, indexed for inflation). In 2025, this means the maximum catch-up contribution for older participants will be $11,250.

Source: 401khelpcenter.com, November 2024

Trump, New Congress Will Likely Continue Bipartisan Work to Expand 401k Coverage: Mercer

Policy experts at consultancy Mercer suggest that despite Republican control of the House and Senate under President-elect Donald Trump, bipartisan efforts to expand employer-sponsored retirement plan coverage may continue. Geoff Manville noted during a Washington policy briefing that policymakers are likely to collaborate on further initiatives, often referred to as "SECURE 3.0," while the SECURE 2.0 Act of 2022 is being implemented. He emphasized that retirement issues are expected to remain a largely bipartisan focus in Congress, particularly regarding the guidance from agencies related to SECURE 2.0.

Source: Planadviser.com, November 2024*

DOL Has Been Improperly Sharing Information With Plaintiffs' Bar, House Republicans Allege

Rep. Virginia Foxx, who chairs the House Committee on Education and the Workforce, has accused the DOL of "abusing its authority." She is calling for an investigation by the DOL's Office of the Inspector General into allegations that the DOL and the Employee Benefits Security Administration have been secretly sharing confidential information with a plaintiffs' attorney to target plan fiduciaries. Foxx claims the DOL is collaborating with these attorneys to bypass legal protections by conducting investigations that serve as a pretext for obtaining information used in private lawsuits.

Source: Ntsa-net.org, November 2024

Insecurity for ERISA's Retirement Security Rule After Trump's Election?

The election of Trump is expected to have significant consequences for federal agencies, particularly regarding the Retirement Security Rule under ERISA. There is speculation about whether financial institutions will begin to dismantle their compliance efforts related to rollover solicitations due to the fluctuating regulatory stance of the DOL on the definition of "investment advice" in ERISA's fiduciary rules. This ongoing uncertainty may finally be nearing resolution, suggesting that clarity on the future of ERISA's fiduciary rules could be forthcoming.

Source: Wagnerlawgroup.com, November 2024

Final and Proposed RMD Regulations Provide Much Needed Guidance for SECURE 2.0 and SECURE 1.0 Provisions

On July 18, 2024, the IRS issued final regulations and proposed regulations under Section 401(a)(9) of the Internal Revenue Code concerning required minimum distributions. The final regulations mainly incorporate changes from the proposed regulations issued in February 2022, following the SECURE 1.0 Act of 2019, and offer guidance on RMD provisions from the SECURE 2.0 Act of 2022. The regulations will take effect for distribution calendar years beginning on or after January 1, 2025, while a good faith standard applies for years before that date. Key provisions that clarify or expand on previous regulations are highlighted in the announcement.

Source: Truckerhuss.com, November 2024

Morningstar Takes Sword to Grade Inflation, Likely to Slash 40,000 Funds' "Medalist" Ratings

Morningstar has initiated a significant overhaul of its "medalist rating" system, which is expected to downgrade approximately 20% of current bronze, silver, and gold-rated funds by the end of 2025. The rating system reviews around 200,000 investment products, including ETFs, open-end funds, SMAs, CITs, model portfolios, 529 plans, and insurance products. The first round of downgrades began on October 29, affecting about 41% of bronze-rated funds, 38% of silver-rated funds, and 33% of gold-rated funds globally.

Source: Riabiz.com, November 2024

Spending Retirement Savings is Keeping Americans Up at Night

According to the Alliance for Lifetime Income's 2024 Protected Retirement Income and Planning Study, nearly 46% of American retirees experience anxiety over spending their savings, and 32% are depleting their funds faster than expected. The study, which surveyed 2,516 individuals aged 45-75, identifies inflation (82%) and healthcare costs (70%) as primary concerns affecting retirees' spending and saving. Many retirees lack a clear strategy for withdrawing savings or generating income in retirement, with only 32% having a specific income plan.

Source: Prnewswire.com, November 2024

Capital One Facing 401k Plan Forfeiture Suit

In a recent case, Capital One is facing a lawsuit regarding alleged forfeitures within its 401k plan. The lawsuit, filed by former employees, claims that the company improperly enforced a policy that led to the forfeiture of retirement plan benefits due to insufficient vested service. The plaintiffs argue that they were not adequately informed about the implications of the plan's provisions, which they believe was misleading and harmed their retirement savings. The outcome of this case may have significant implications for how companies manage their 401k plans and communicate with employees about their retirement benefits.

Source: Planadviser.com, November 2024

Correcting 401k Auto-Enrollment Failures

As a registered investment adviser servicing 401k plan committees, you're aware that some of your clients with auto-enrollment features have faced administrative issues, such as missing eligible employee enrollments. To address these problems without jeopardizing the plan's tax-qualified status, the SECURE 2.0 Act of 2022 introduces a special safe harbor correction provision. This provision is akin to the previously existing safe harbor correction method, which has now expired. The SECURE 2.0 safe harbor provides guidelines for correcting operational errors in retirement plans and may necessitate the employer making a qualified nonelective contribution to rectify missed enrollments.

Source: Planadviser.com, November 2024

DOL Initiates Data Collection to Reunite Workers With Lost Retirement Savings

The DOL has begun efforts to create the Retirement Savings Lost and Found database, an online tool to help workers locate lost retirement benefits. Starting Monday, plan administrators, recordkeepers, and service providers are invited to voluntarily submit data to help populate the database, which is expected to launch by December 29. The EBSA has issued a request outlining the necessary data elements and submission methods, highlighting the importance of collaboration between the government and the retirement plan community for the tool's success.

Source: Planadviser.com, November 2024

DC Plan Sponsors and Forfeiture Lawsuits Webinar: What You Need to Know

In a recent webinar hosted by NEPC's Dan Beaton and Groom Law Group's Jennifer Eller, the discussion focused on the surge of lawsuits involving defined contribution plan forfeiture accounts. They explored the allowed uses of forfeitures and offered strategies for plan sponsors to minimize the risk of litigation in this area. The replay of the webinar is available here.

Source: Nepc.com, November 2024

Avoiding 401k Problems With Former Employees

The author reflects on his experience as a former employee to explain why his employer avoided hiring staff for their law firm. Additionally, his employer identified a potential liability risk for 401k plan sponsors involving former employees who still have account balances in the plan. To minimize this risk, the author recommends encouraging these former participants to roll over their balances or cash them out if they qualify under the cash-out provision. For more details, the full publication is available here for review.

Source: Jdsupra.com, November 2024

Form 1099-R Distribution Codes for Defined Contribution Plans

Form 1099-R must be issued by January 31 of the year following the distribution. The accompanying image outlines the most commonly used boxes on the form and provides explanations specifically for distributions from defined contribution plans.

Source: Dwc401k.com, November 2024

IRS Releases Guidance on Overpayments From 401k Plans

On October 15, 2024, the IRS issued Notice 2024-77, which outlines new rules for correcting overpayments from retirement plans, including 401k plans, under the SECURE 2.0 Act. This guidance clarifies situations in which plan sponsors can correct inadvertent benefit overpayments made to participants without needing to recoup those amounts or make corrective payments, a shift from the previous requirement that sponsors attempt recoupment to avoid potential plan disqualification.

Source: Compliancedashboard.net, November 2024

Developing an Investment Policy Statement for Retirement Plan Sponsors: Video

An investment policy statement is a formal document that explains the guidelines and procedures for how to manage an organization's investment portfolio. For retirement plan sponsors, this important plan document is part of creating a sound investment policy. In this video, learn about IPS development and the role an IPS can play in your risk management process.

Source: Captrust.com, November 2024

IRS Regulations Clarify 403b Plans' Obligations to Part-Time Employees

On October 3, 2024, the IRS issued guidance regarding the obligations of 403b plan sponsors to part-time employees, in light of new legislation effective January 1, 2025. This legislation mandates that long-term, part-time employees -- defined as those who work 500 or more hours in two consecutive years -- must be allowed to participate in 403b plans, regardless of previous exclusions. The IRS guidance, titled Notice 2024-73, clarifies which employees are eligible for participation, the extent of their required participation, and addresses several key questions about the rights of LTPT employees under 403b plans.

Source: Bsk.com, November 2024

Adding Private Equity Investment Options to 401k Plans May Be a Good Idea, for Everyone Who Is Not a Plan Participant or a Plan Fiduciary

The author argues that while pension plan sponsors who engage alternative asset managers bear both the risks and costs associated with their investment decisions, 401k plans present a different situation. Several reasons contribute to this distinction, but the author only briefly notes them here, suggesting that further discussion or deep dives into these reasons will occur later by themselves or by others.

Source: Bostonerisalaw.com, November 2024

Advisor Insights: Navigating Retirement Income

In recent discussions, industry stakeholders have reached a consensus on the critical need to empower retirees with the ability to spend confidently. The focus has now shifted from merely identifying the challenges to actively exploring and implementing effective solutions. To gain insights into this topic, the author engaged with experts Jennifer Doss (National Practice Leader at Captrust), Kathleen Kelly (Managing Partner at Compass Financial Partners, a Marsh & McLennan Agency LLC Company), and Michael Kozemchack (Managing Director, Institutional Investment Consulting). They shared their perspectives on retirement income and the ongoing conversations they are having with plan sponsors to enhance the financial security of retirees.

Source: Blackrock.com, November 2024

The Basics of New Comparability Plans

New comparability plans are qualified defined contribution plans that allow employers to allocate varying profit-sharing contribution percentages to different employee groups. These plans enable higher contributions for owners and highly compensated employees while minimizing contributions for other staff. However, they must pass discrimination tests that assess the retirement benefits equivalent to the contributions made. These plans are particularly effective when there is a significant disparity in compensation or age between favored employees and the rest of the workforce.

Source: Belfint.com, November 2024

The Challenges of Census Data in Non-Discrimination Testing: Why Uniformity Remains Elusive

Each year, 401k Plan Sponsors must compile a detailed employee census for non-discrimination testing, a process that can be frustrating and prone to errors related to data consistency and accuracy. Auditors often find discrepancies between census data and payroll records, highlighting the need for careful data management. Despite the requirement for NDT across all plans, there is no standard format for census reports, primarily due to various challenges that prevent uniformity in payroll systems.

Source: 5500audit.com, November 2024

Securing Retirement: 2025 Trends in DC Retirement Income Solutions

The executive director of the IRIC outlines expectations for defined contribution plans in 2025, emphasizing their evolution due to demographic changes, technological progress, and regulatory adjustments. With uncertainties surrounding Social Security, longer life expectancies, and the decline of traditional defined benefit plans, generating retirement income from DC plans is increasingly important for policymakers, employers, and participants. Key trends anticipated for 2025 will significantly influence retirement income strategies for millions of Americans.

Source: Plansponsor.com, November 2024*

Principal's Houston Says Recordkeepers Must Go Beyond Scale, Innovate to Expand Service

At the PLANADVISER 360 conference in Scottsdale, Arizona, Dan Houston, chairman and CEO of Principal Financial Group, highlighted the significance of scale in the ongoing consolidation of recordkeeping companies. He emphasized that innovation and enhanced participant services will be crucial for sustained growth, as advisers leverage these advancements. Houston anticipates further acquisitions and consolidation among recordkeepers but believes that future success will demand greater customization for advisers and plan sponsors to better address participants' needs.

Source: Planadviser.com, November 2024

How to Establish Better Decumulation Options for Future DC Plans

During a session at PLANADVISER 360 in Scottsdale, Arizona, leaders from TIAA discussed the growing demand for lifetime income solutions in retirement plans and the shifting attitudes of plan sponsors. Tim Pitney, TIAA's head of lifetime income default sales, emphasized that the retirement industry should prepare for innovation even without immediate regulatory changes. He highlighted that, historically, government support like the Pension Protection Act has driven advancements such as the rise of target-date funds, but many current challenges can be addressed without new regulations.

Source: Planadviser.com, November 2024

Consumer Advocacy Groups Push Back On CIT Use by 403bs

Six investor advocacy groups have expressed their opposition to the Empowering Main Street in America Act of 2024 (S.5139), which allows 403b plans to invest in collective investment trusts. The bill, introduced by Senator Tim Scott, would amend the Securities Act of 1933 and remove regulatory oversight by the SEC. The groups argue that this change could lead to the sale of unregistered financial products with hidden risks and costs, potentially harming vulnerable retirement savers.

Source: Planadviser.com, November 2024

Understanding When a Retirement Plan Audit Is Required

To demonstrate fiduciary responsibility and avoid fines, it's crucial for retirement plans to understand when audited financial statements are required with Form 5500. Starting from plan years beginning on or after January 1, 2023, a plan is considered a "large plan" and requires an audit if it has 100 or more participants with account balances at the beginning of the plan year. For plans initiated during the year, the audit requirement is based on the number of participants with account balances, triggering the audit if that number exceeds 100. This article provides a quick overview of the requirements.

Source: Withum.com, November 2024

Prepare for Upcoming Changes to Retirement Plans for 2025

The SECURE 2.0 Act of 2022 introduced major changes to retirement plans, with some already implemented by service providers and others set to take effect in 2025. Employers must comply with these changes as they come into effect, but the IRS has allowed an extended deadline for adopting amendments to reflect the changes until the end of the 2026 plan year for many employers. This article outlines some of those changes.

Source: Wagnerlawgroup.com, November 2024

Five Ways Trump's Election Could Change Employee Benefits

Attorneys are preparing for potential changes to tax, investment, and health policies that could arise from Donald Trump's second term as president, particularly regarding employee benefit plans. Trump's administration is expected to roll back regulations established under President Biden related to retirement advice, investment selection, and healthcare protections. Brigen Winters from Groom Law Group emphasizes that the expiration of tax provisions in 2025 will be a critical issue impacting employee benefits and retirement health benefits.

Source: Wagnerlawgroup.com, November 2024

2024 Defined Contribution Consultant Study

T. Rowe Price's fourth annual Defined Contribution Consultant Study gathered insights from the defined contribution consultant and advisor community regarding current retirement perspectives. The study, conducted from January 12 to March 4, 2024, involved 35 leading consultant and advisor firms, which together manage over $7.5 trillion in assets. Key findings continued to highlight areas such as target date solutions, retirement income, investment trends, and financial wellness programs. New topics introduced this year included managed accounts, alternative investments, and comparisons of active versus passive management strategies.

Source: Troweprice.com, November 2024

Lisa Gomez Expects Fiduciary and ESG Rules to Face Reversals Under New Administration

Assistant Secretary of Labor Lisa Gomez indicated that the incoming Trump administration may implement changes to retirement security regulations and financial fiduciary standards. Speaking at the PLANADVISER 360 conference, she noted that the Department of Labor's existing retirement security rule, which defines when financial professionals become fiduciaries for retirement plan participants, might not align with the new administration's priorities. These changes are expected to significantly impact retirement plan investing and ESG guidelines.

Source: Planadviser.com, November 2024

SECURE 2.0 in 2025: Here Comes a Big Plan Design Change

As we approach 2025, new provisions of the SECURE 2.0 Act are set to impact retirement plan design and administration. Key changes include: mandatory automatic enrollment, long-term, part-time employee provisions, and increased contribution opportunities. Advisors should use this information to guide clients on how these regulations may affect their plans, allowing for strategic adjustments in administration and participant communications.

Source: Penchecks.com, November 2024

What Are the Most Popular SECURE 2.0 Provisions?

A survey by Willis Towers Watson found that student loan matching and pension-linked emergency savings accounts are among the most sought-after features of the SECURE 2.0 Act. Specifically, 42% of 483 surveyed sponsors plan to implement a student loan matching feature, while 35% aim to add a PLESA. The survey also noted a reduction in the disparity between the highest and lowest employer contributions to defined contribution plans.

Source: Napa-net.org, November 2024

Will It Be Feast or Famine for Retirement Policy in the Lame Duck?

As President-elect Trump prepares to return to the White House and Republicans gain control of Congress, the upcoming lame-duck session will involve finalizing unfinished legislative business. The outcomes of the recent election are expected to influence proceedings, as outgoing members may seek to leave a legacy. However, the potential for passing retirement policy legislation will largely depend on lawmakers' willingness to discuss issues beyond essential bills.

Source: Napa-net.org, November 2024

Do You Need to Send an Annual Notice to Plan Participants?

Plan sponsors of defined contribution-qualified plans are required to issue various annual notices to participants before the end of each plan year. Neglecting to issue these notices can lead to serious consequences, such as losing safe harbor status for 401k plans, which may result in restrictions or refunds of contributions for highly compensated employees. This article serves as a reminder of the multiple year-end notices that defined contribution plans must be issued to participants.

Source: Alston.com, November 2024

Services "Standard" Sinks Another 401k Excessive Fee Suit

A lawsuit alleging excessive fees in the Mitsubishi Chemical America Employees' Savings Plan has been dismissed. The participant-plaintiff, Robert Humphries, claimed fiduciary breaches, but the court found that he failed to conduct a proper comparison of services relative to the fees charged. The judgment favors the plan's fiduciaries, as the judge emphasized that evaluating fee reasonableness requires more than just a size comparison, establishing a high bar for such lawsuits to succeed.

Source: Napa-net.org, November 2024

US Supreme Court Agrees to Hear Recordkeeping Fees Case Against Cornell University

In 2017, several private universities, including Cornell University, were sued in ERISA class action lawsuits for alleged fiduciary duty breaches related to high recordkeeping fees in their defined contribution plans. In the case Cunningham v. Cornell University, the district court dismissed claims about prohibited transactions tied to these fees, a decision upheld by the Second Circuit Court of Appeals in November 2023. This ruling contributes to an existing circuit split regarding the standards for plausibly alleging prohibited transaction claims under ERISA. Subsequently, the US Supreme Court granted the plaintiffs' petition for writ of certiorari in Cunningham on October 4, 2024, marking this as the second university case to reach the Supreme Court, following Hughes v. Northwestern, decided in early 2022.

Source: Morganlewis.com, November 2024

Fred Reish on Things I Worry About: Automatic Enrollment - Part 2

The SECURE Act 2.0, enacted on December 29, 2022, mandates that new 401k and private sector 403b plans automatically enroll eligible employees starting in the plan year after December 31, 2024. This article focuses on the effective date as pertaining to the 2025 calendar year, which is approaching. It highlights two specific issues related to automatic enrollment: the determination of "which" eligible employees will be automatically enrolled and the inclusion of long-term, part-time employees in this requirement.

Source: Fredreish.com, November 2024

How to Improve 401k Plan Fee Disclosures

Congress sought the Government Accountability Office's evaluation of 401k plan fee disclosures, which found that participants largely do not read or understand these disclosures. The Department of Labor's 2010 initiative to mandate quarterly fee disclosures has been ineffective, as many participants remain unaware of their fees. The GAO report suggests there may not have been a need for these separate disclosures, given the availability of account information online. Instead, the DOL could enhance regular account statements with clear, concise, standardized fee information, removing complex language to improve participant understanding. The article provides three suggestions to improve fee disclosures.

Source: Encorefiduciary.com, November 2024

IRS Guidance: How Reliable Is It?

Federal agencies translate legislation affecting defined contribution plans into guidance, with the IRS focusing on tax laws and the DOL on labor laws. The IRS provides crucial guidance that helps plan sponsors, fiduciaries, and participants to effectively implement tax-preferred savings options. This framework is essential, as it reduces uncertainty surrounding new laws such as the SECURE Act of 2019, the CARES Act of 2020, and SECURE 2.0 from 2022, ensuring these legislative changes are practical and beneficial.

Source: Callan.com, November 2024

New Permissible Minimum Service Requirements for 401k and 403b Plans

The SECURE Act, signed into law on December 20, 2019, followed by SECURE Act 2.0 on December 23, 2022, introduced several changes to 401k and 403b plan requirements. One significant change pertains to minimum service requirements for participation in 401k plans, allowing sponsors to set criteria that help streamline administration by excluding part-time employees with minimal participation history. This is aimed at reducing the administrative burden associated with managing small accounts. Meanwhile, 403b plans must provide universal eligibility but can exclude employees working less than 20 hours per week for similar administrative efficiency reasons.

Source: Berrydunn.com, November 2024

The DOL Expanded Cybersecurity Guidance: What ERISA Plan Sponsors and Fiduciaries Need to Know

On September 6, 2024, the U.S. Department of Labor released Compliance Assistance Release No. 2024-01, titled "Cybersecurity Guidance Update." This updated guidance clarifies that DOL's cybersecurity protocols apply to all ERISA-covered plans, including health and welfare plans, not just retirement plans. In response to service provider concerns, the DOL emphasized the need for plan sponsors, fiduciaries, recordkeepers, and participants to implement strong cybersecurity practices across all employee benefit plans. The update underscores the importance of robust security measures to safeguard participant information and plan assets amid evolving cyber risks.

Source: Beneficiallyyours.com, November 2024

One in Three Guilty of Overspending in Retirement: EBRI

A recent study by the Employee Benefits Research Institute reveals that 31% of retirees in 2024 are spending more than they can afford, a significant increase from 17% in 2020. The survey, conducted in the summer of 2024 and involving around 3,600 retirees aged 62 to 75, indicates a rising trend in unaffordable spending among retirees: 27% reported the same in 2022. Additionally, the study found that half of the respondents saved less than necessary for retirement, while one-third felt they saved the right amount, and 17% believed they saved more than needed.

Source: 401kspecialistmag.com, November 2024

Plan Design, Flexibility Outpace Employer Contributions Among Plan Sponsors' Priorities

A new survey by Willis Towers Watson reveals that plan sponsors are increasingly focused on improving the overall financial well-being of employees beyond just enhancing retirement benefits and 401k matching contributions. The 2024 WTW U.S. DC Survey, which involved 483 U.S.-defined contribution plan sponsors, found that only 12% plan to increase their contributions over the next two years. The median employer contribution currently stands at approximately 7.1% of pay, reflecting a decline from 11.4% in 2000, 9.5% in 2010, and 7.4% in 2020.

Source: Plansponsor.com, November 2024

Latest 401k Plan Forfeiture Complaint Filed Against BMO Financial

BMO Financial Corp. has been sued in federal court for allegedly misusing forfeitures from its 401k plan, with the lawsuit seeking class-action status. Filed in the U.S. District Court for the Central District of California, the complaint claims that BMO's retirement plan committee did not adhere to ERISA regarding forfeited funds. BMO, part of the Bank of Montreal, stated it believes the allegations have no merit and will defend itself vigorously.

Source: Plansponsor.com, November 2024

Another Trump Term May Change Tax Treatment of Retirement Plans

With President-elect Donald Trump securing another term as president, retirement industry experts believe there will be various implications on retirement plans and policy in the coming four years, including the risk of changes to the deferred-income-tax treatment of most retirement plan contributions, sources said.

Source: Plansponsor.com, November 2024*

ERISA Experts See Regulation Pullback as Key Theme of Trump Rule

The return of President-elect Donald Trump and a potential Republican majority in Congress is expected to significantly impact the employer-sponsored retirement plan industry. Experts anticipate several changes, including the likely repeal of the fiduciary rule, a shift in how environmental, social, and governance factors are considered in investments, continued tax cuts, and more relaxed regulations on alternative investments in defined contribution plans. While some changes may enhance services, there are concerns about potential obstacles, such as efforts to find revenue from tax-advantaged savings and the dropping of a proposed national individual retirement account mandate.

Source: Planadviser.com, November 2024

How Plan Advisers Are Reacting to Trump Election Win

In the wake of the recent U.S. presidential election, retirement plan advisers are focusing on helping plan sponsors and participants navigate its potential effects on markets and economic policies. Phil Sherman, a senior consultant at Deschutes Investment Consulting, noted the strong emotional reactions among participants, ranging from excitement to distress. He highlighted the responsibility of advisers to help manage these emotions and emphasize the importance of maintaining a steady, long-term investment approach. Advisers are encouraged to continue educational efforts in 2025 and beyond, reinforcing that political shifts typically do not have a lasting impact on market returns.

Source: Planadviser.com, November 2024

Election 2024: What Could the Results Mean for Retirement Policy?

The Republican control of the Executive Branch and the Senate could significantly impact retirement and tax policies, although the House of Representatives control is still uncertain due to outstanding races. Former President Donald Trump has regained the presidency but has not proposed substantial policies on retirement security, aside from eliminating taxes on Social Security benefits. His administration is expected to aim at reversing various Labor Department initiatives that were established under Biden.

Source: Asppa-net.org, November 2024

John Hancock, Not 401k Plan, Receives Fruit of Foreign Tax Credits in Pooled Investments

In a certified class action lawsuit, 401k plan trustees accused John Hancock Life Insurance Company of breaching fiduciary duties under ERISA. They claimed that John Hancock did not pass on foreign tax credits to the plans, resulting in a decrease in the plans' asset value, and argued that the company profited from these credits without disclosing this in contract terms. The plaintiffs asserted that this behavior constituted a prohibited transaction since the plans were burdened with double taxation. However, the court ruled that John Hancock was not acting as a fiduciary in managing the separate accounts for the retirement investments or when obtaining the foreign tax credits.

Source: Yourerisawatch.com, November 2024

Clorox Wins First Round in 401k Plan Forfeiture Lawsuit

A class action lawsuit by former Clorox employee James McManus regarding the company's handling of forfeited 401k funds was mostly dismissed by U.S. District Judge Yvonne Gonzalez Rogers. The judge ruled that McManus's breach of fiduciary duty claim under ERISA was too broad and required more specific details. McManus was given until November 12 to revise his complaint, emphasizing the need to demonstrate "special circumstances" affecting fund management, referencing a U.S. Supreme Court standard. McManus argued that Clorox improperly used forfeited contributions to offset the company's expenses, while Clorox maintained that reallocating forfeitures within the plan is permissible under ERISA.

Source: Planadviser.com, November 2024

Industry Watchers Point to Fiduciary Rule, ESG, Markets After Trump Win

As of Wednesday morning, the U.S. financial services industry is bracing for potential changes under a Donald Trump-led Republican administration. This could impact various aspects of employer-sponsored retirement plans, particularly fiduciary standards and Department of Labor priorities. Matthew Eickman, chief legal officer for the Fiduciary Law Center, predicts that a Republican-controlled administration and Congress will likely reverse many of the Department of Labor's regulations established in the past four years, including the recent fiduciary rule abandoned during Trump's first term.

Source: Planadviser.com, November 2024

Retirement Plan Disaster Relief

Recent news highlights the increasing frequency of natural disasters across the United States, affecting many people. Although these catastrophes cannot be prevented, the SECURE 2.0 Act has made it easier for retirement plan participants to access their savings after such events. This federal legislation allows retirement plan sponsors to provide greater access to funds following a federally recognized disaster, streamlining the previous process which required individual congressional measures for each disaster. Once a major disaster is declared by the President, relief options become available for approximately six months, allowing individuals in the affected areas who have suffered economic losses to access their retirement savings.

Source: Legacyrsllc.com, November 2024

SECURE 2.0 2025 Catch-Up Contribution Increase

The SECURE 2.0 Act of 2022 introduced changes to catch-up contributions under the Internal Revenue Code that have delayed effective dates. Notably, Section 109 increases the limit on catch-up contributions, effective for tax years beginning January 1, 2025. A second provision requires that catch-up contributions for employees earning over $145,000 in FICA wages be made as Roth contributions. Initially set to begin on January 1, 2024, this requirement has now been postponed to January 1, 2026, pending IRS guidance. Currently, catch-up contributions from higher-paid employees do not need to be made as Roth contributions.

Source: Ferenczylaw.com, November 2024

Retirement Plan Amendments and 2024 Year-End Action Items

The notice advises plan sponsors to prepare for 2024 IRS year-end amendments and outlines key action items. This includes amendments related to qualified plans, catch-up contributions under the SECURE Act 2.0, and the IRS final rule regarding required minimum distributions after death. The advisory emphasizes upcoming deadlines for amending qualified retirement plans and encourages plan sponsors to review other important considerations.

Source: Alston.com, November 2024

Advisors Significantly Boost the Financial Knowledge and Confidence of America's Retirement Savers: Survey

The Pontera 401k survey reveals that financial advisors play a vital role in enhancing the financial knowledge and confidence of retirement savers in the U.S. Key findings indicate that individuals working with advisors feel significantly more prepared for retirement, with higher levels of understanding about 401k plans and investment strategies. Advisors help clarify complex financial concepts, leading to more informed decision-making among clients. The survey underscores the importance of professional guidance in effective retirement planning.

Source: Prnewswire.com, November 2024

Plan Sponsors Cannot Have Roth-Only Catch Ups for All Employees

The IRS will not allow retirement plan sponsors to mandate that all participants make catch-up contributions on a Roth basis for easier plan administration. According to Kelsey Mayo of the American Retirement Association, individuals earning $145,000 or less must still have the option for traditional catch-up contributions. This aligns with the SECURE 2.0 Act, which requires those earning over $145,000 to make catch-up contributions on a Roth basis to generate additional revenue by reducing pre-tax contributions. Previously, catch-up contributions could be made on either a pre-tax or Roth basis, depending on the plan sponsor's terms.

Source: Napa-net.org, November 2024

What a Possible GOP Election Trifecta Means for Retirement Policy Issues

The potential for a Republican trifecta -- control of the Executive Branch and both chambers of Congress -- could dramatically reshape retirement and tax policies in the United States. While Trump's campaign has not introduced comprehensive policy initiatives to bolster retirement security, he has suggested eliminating taxes on Social Security benefits. His anticipated administration is expected to reverse various Labor Department measures implemented under President Biden. The evolving political landscape raises critical questions about the future of retirement and tax policies, with implications for American workers and retirees.

Source: Napa-net.org, November 2024

Stripping 401k Tax Breaks Won't Fix Social Security

A controversial proposal aimed at improving Social Security finances suggests eliminating tax deferral for defined contribution plans. The author argues that this approach could harm the voluntary retirement plan system and ultimately weaken the overall US retirement framework. The article emphasizes that Social Security and retirement plans should complement each other instead of being viewed as competing systems, highlighting the importance of both in providing retirement security to Americans.

Source: Ici.org, November 2024

Are Plan Forfeitures Being Properly Utilized in Qualified Retirement Plans?

In February 2023, the Internal Revenue Service issued proposed regulations to update the rules regarding the use of forfeitures by qualified retirement plans. Plan sponsors must ensure that plan forfeitures are used appropriately to avoid any operational failures and to comply with their fiduciary duties. The proposed regulations apply for plan years beginning on or after January 1, 2024, and provide a compliance transition period.

Source: Icemiller.com, November 2024

Understanding Your Role as an ERISA Plan Administrator

ERISA Plan administrators and sponsors serve as fiduciaries, carrying a legal obligation to uphold the highest standards of care and service for plan participants. Due to the critical nature of the retirement assets they manage, the Department of Labor demands exceptional standards and accountability from these fiduciaries. To assist in adhering to these complex regulations, a set of best practices has been outlined here to ensure that plans meet these high expectations.

Source: Cshco.com, November 2024

Difficult Work Pushes More Blacks Into Early Retirement

The article explores the factors leading to early retirement among Black workers. It highlights how challenging working conditions, including physically demanding jobs, workplace discrimination, and health disparities, contribute to a higher propensity for early retirement in this demographic. Overall, the article underscores the need to understand the specific challenges faced by Black workers in the retirement landscape.

Source: Bc.edu, November 2024

Common Practices to Question in the Retirement Industry: Part One

The article discusses various deeply ingrained practices within the retirement industry that may warrant reexamination. The piece emphasizes that while certain methods have been standard for years, they may not be serving participants' best interests or the broader goals of retirement security. Five examples are provided. Overall, the article urges industry stakeholders to critically assess established practices to ensure they align with the evolving needs of retirement plan participants and promote better financial wellness.

Source: Asppa-net.org, November 2024

New Research on 401k Loans and Leakage Unveils a Big Surprise

A recent paper from researchers at Harvard, Yale, and Vanguard presents a new perspective on retirement plan leakage, particularly regarding 401k loans and withdrawals. Titled "Does 401k Loan Repayment Crowd Out Retirement Saving? Implications for Plan Design," the study examines the impact of legislative changes under SECURE 2.0, especially the provision allowing penalty-free emergency withdrawals of up to $1,000. The authors argue that these changes may increase early withdrawals, highlighting the balance between immediate liquidity needs and long-term wealth accumulation.

Source: Asppa-net.org, November 2024

What Are the Consequences of Excess Deferrals? IRS Offers a Look

When a participant makes excess deferrals to a 401k plan, there are significant implications, as detailed by the IRS in their Issue Snapshot. The IRS outlines the limitations on elective deferrals, their treatment under tax law, and the implications related to catch-up contributions under IRC Section 414(v). Excess deferrals can lead to increased income tax liability for participants, and if mismanaged, could jeopardize a plan's qualified status. The IRS also provides guidance for employers and plan sponsors on how to audit elective deferrals effectively.

Source: Asppa-net.org, November 2024

CIP Rules Hindering State-Run Auto-IRA Program Enrollment

The Customer Identification Program (CIP) rules, established by the USA PATRIOT Act of 2001 to combat financial crime, are obstructing the enrollment of millions of Americans in state-run auto-IRA programs. A brief from the Bipartisan Policy Center highlights that 17 states have enacted auto-IRA legislation to help workers without employer-sponsored retirement plans, with nearly 1 million workers already saving over $1.7 billion across eight states. However, the lack of a common exemption for low-risk accounts under CIP rules is limiting access to these beneficial programs for many potential participants.

Source: 401kspecialistmag.com, November 2024

Top 10 Lead Producing Campaigns for 401k Advisors in 2025

The article discusses innovative strategies for 401k advisors to generate leads and succeed in a competitive and evolving landscape. It reviews ten lead campaigns to elevate your practice. Additionally, the article emphasizes understanding the needs of plan sponsors and employees, suggesting topics to address in content creation that resonate with diverse financial challenges.

Source: 401k-Marketing.com, November 2024

IRS Announces 2025 Retirement Plan Limits

On November 1, 2024, the IRS announced that the contribution limit for 401k plans will increase to $23,500 for 2025, up from $23,000 in 2024. Additionally, the IRS provided technical guidance on cost-of-living adjustments impacting pension plans and other retirement-related items for tax year 2025 in Notice 2024-80.

Source: 401khelpcenter.com, November 2024*

Understanding the New Super Catch-Up 401k Rule

The Super Catch-Up 401k rule is a new legislative provision designed to help individuals aged 60 to 63 significantly boost their retirement savings by allowing them to contribute more to their 401k plans beyond the standard limits. This rule expands on the existing catch-up contributions available for those 50 and over. This is an overview of the new rule.

Source: 401khelpcenter.com, November 2024

Timelines for Retirement Plans

Are you considering switching to a new plan advisor, third-party administrator, or recordkeeper for the new year? Is there enough time to do it by January 1? Well, it depends on which role you're looking to replace. This article explores the timelines and issues involved.

Source: Retirementplanology.com, November 2024

Coca-Cola Southwest Faces Lawsuit Over Forfeitures, Target-Date Funds

Former participants of the Coca-Cola Southwest Beverages LLC 401k plan have filed a lawsuit alleging that the company breached its fiduciary duties under ERISA. The complaint, known as Ware et al. v. Coca-Cola Southwest Beverages LLC, claims that the company offered "underperforming" target-date funds and mismanaged forfeited 401k funds. Specifically, the plaintiffs allege that the J.P. Morgan TDFs provided by Coca-Cola SW were expensive and underperformed compared to similar funds and benchmarks. The case is being heard in the U.S. District Court for the Northern District of Texas.

Source: Plansponsor.com, November 2024

Most Hybrid RIAs Favor Retirement Fiduciary Standard

The article discusses a survey of hybrid registered investment advisors, which are firms that offer both investment advisory and brokerage services. The survey revealed that a significant majority of these hybrid RIAs (68%) prefer a fiduciary standard for retirement advice. The fiduciary standard requires advisors to act in the best interests of their clients, ensuring that the advice given is not only suitable but also beneficial for the client's financial well-being. The findings highlight a growing consensus among RIAs regarding the importance of transparency and ethical standards in retirement planning.

Source: Planadviser.com, November 2024

IRS Announces 2025 Cost of Living Adjustments to Various Retirement Plan Limits

The IRS has announced cost-of-living adjustments for retirement plan limitations effective January 1, 2025. While inflation rates have stabilized, resulting in modest increases, these adjustments are still welcomed. The updated limits include slight increases in the 415 and 402(g) limits, as well as new limits for additional catch-up contributions for participants aged 60-63 and deferral limits for Starter 401k Plans.

Source: Ferenczylaw.com, November 2024

DOL Fiduciary Rule Update -- Where Are We Now and Best Practices for Retirement Investors: Podcast

This podcast features a "Lessons From The Front Lines" discussion focusing on the DOL Fiduciary Rule. The panel of experts, including Jason Berkowitz from the Insured Retirement Institute, David Kaleda from the Groom Law Group, and Jason Roberts from the Pension Resource Institute, will share insights on the current status of the rule, future developments, and best practices for firms regarding investment recommendations and services for retirement investors.

Source: Complianceincontextpodcast.com, November 2024

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