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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IRS Issues Proposed Regulations on SECURE 2.0 Catch-up Provisions

On January 10, 2025, the IRS issued proposed regulations outlining guidance on age-based catch-up contributions under Internal Revenue Code Section 414(v). These regulations allow participants aged 50 or older in 401k, 403b, and governmental 457b plans to make additional "catch-up" contributions beyond regular deferrals. This provision is not subject to the usual limits on elective deferrals. The proposed regulations implement statutory changes from the SECURE 2.0 Act of 2022 and provide important guidance for retirement plan participants, beneficiaries, employers, and administrators regarding compliance with the new catch-up contribution rules.

Source: Icemiller.com, January 2025

Issues to Watch in 2025's ERISA Litigation Landscape

In 2024, there was a notable increase in class action filings under ERISA, with 136 new cases, which is higher than in 2023 but still below the 2020 record of over 200. The continuation of this trend into 2025 will likely hinge on the resolution of key legal issues. This Law360 article by Groom principals discusses what to expect for ERISA litigation in 2025, highlighting potential increases in health plan litigation, developments in excessive fee and forfeiture cases, as well as pension plan litigation.

Source: Groom.com, January 2025

Cornell Retirement Plan Dispute Tees Up Circuit Split at SCOTUS

The US Supreme Court will hear arguments regarding Cornell University's retirement plan, which may clarify the requirements for employees challenging 401k service provider fees under ERISA. The case addresses whether plaintiffs must include exemptions for prohibited transactions in their complaints or if these are defenses the plan fiduciary must prove. The outcome could significantly impact workers' ability to pursue claims against retirement plan service providers, with a ruling against Cornell potentially opening the door for more claims and settlements, while a ruling in favor could hinder efforts to address management issues.

Source: Groom.com, January 2025

The Latest and Greatest on Catch-Up Contributions

Under SECURE 2.0 Section 603, catch-up contributions for individuals earning more than $145,000 (adjusted for inflation starting in 2025) in FICA wages must be designated as Roth contributions. These individuals are referred to as "higher-paid individuals." The IRS has delayed the implementation of this requirement until January 1, 2026, during which time they will develop the necessary regulations. As a result, not all plans with catch-up contributions are required to offer Roth contributions immediately; however, they will need to comply with this requirement by the effective date.

Source: Ferenczylaw.com, January 2025

401k Plan Fiduciaries Breached ERISA's Duty of Loyalty by Allowing ESG Interests to Influence Management of the Plan

Last week, Judge Reed O'Connor of the U.S. District Court for the Northern District of Texas issued a significant ruling regarding environmental, social, and corporate governance investing in ERISA-covered retirement plans. In his 70-page opinion in the case of Spence v. American Airlines, Inc., he found that American Airlines' 401k plan fiduciaries breached their duty of loyalty by allowing ESG interests to influence plan management, but did not breach their duty of prudence. The ruling has generated considerable media attention and varying opinions on its implications for ESG investing in retirement plans.

Source: Erisapracticecenter.com, January 2025

The Cornell Prohibited Transaction Case is ERISA's Most Absurd Case: Opinion

The Encore Fiduciary Guide discusses the Schlichter firm's appeal to the Supreme Court after losing an excessive fee case against Cornell University. They aim to reframe their claim from fiduciary imprudence to a prohibited transaction, avoiding the need to prove that fees are excessive. If successful, this could lead to an increase in ERISA class action abuses, granting plaintiff law firms the ability to conduct audits on any plan sponsor. This marks a significant shift in ERISA litigation, with plaintiff firms moving away from claims of participant advocacy and focusing on litigation tactics.

Source: Encorefiduciary.com, January 2025

Electronic Delivery of Participant Notices

Plan participants must receive notices and disclosures about their 401k plans securely and promptly. Traditional paper delivery is costly and not preferred by many, with most people rarely reading such notices in paper form. While paper notices can still be distributed at meetings or mailed, placing them in common areas isn't sufficient. The e-Disclosure Safe Harbor Rule allows for electronic delivery as the default method, provided that participants can be reached electronically and receive proper initial notifications. This offers a more efficient and less expensive alternative for communicating important plan information.

Source: Consultrms.com, January 2025

A Deficient Form 5500 Filing is Preferable to a Delinquent Filing

At the AICPA National Conference, Marcus Aron, the Chief of the Division of Accounting Services at the DOL's Employee Benefit Security Administration, provided an update, joined by Scott Albert from the Division of Reporting and Compliance. Marcus discussed the complex issue of filing Form 5500 in situations where the audit cannot be completed by the deadline, addressing the challenges and considerations involved in such scenarios. They clarified the distinction between delinquent filings, which are late, and deficient filings, which are timely but inaccurate or incomplete. Aron emphasized the importance of understanding these differences in the context of compliance.

Source: Belfint.com, January 2025

IRS Announces New Rules for Catch-Up Contributions: A Timeline of Changes and Where We Stand Today

On January 13, 2025, the IRS proposed regulations (REG-101268-24) to help plan administrators and participants better understand and implement new rules related to retirement plans. These updates build on the SECURE 2.0 Act of 2022 and address the administrative challenges faced by employers, plan administrators, payroll providers, and financial professionals. This document outlines key provisions of the regulations, their evolution, and their current implications.

Source: 5500audit.com, January 2025

A Glimpse at Personal Finance in Australia, The United States, and The United Kingdom

The report analyzes financial behavior in Australia, the United States, and the United Kingdom, focusing on aspects such as spending, saving, retirement planning, and investment trends. It also assesses basic financial literacy by gauging respondents' understanding of essential financial concepts, aiming to reveal the relationship between financial knowledge and practical behavior. Through this analysis, the report aims to enhance the understanding of global financial habits and the confidence gaps that impact these behaviors.

Source: Checkbox.com, January 2025*

IRS Proposes Regulations on SECURE 2.0 Act Catch-Up Provisions

The IRS has proposed regulations regarding catch-up contributions under the SECURE 2.0 Act. Key changes include: Increased catch-up contribution limits for participants aged 60 to 63, starting in 2025. Mandatory Roth tax treatment for catch-up contributions by 401k participants earning over $145,000 from the previous calendar year, effective from 2024. Transition relief allows plans to let all participants, including those above the income threshold, make pre-tax catch-up contributions until 2026. These plans will still meet the new requirements even if they do not offer designated Roth contributions. These highlights summarize the main aspects of the proposed regulations.

Source: 401khelpcenter.com, January 2025

IRS Issues Proposed Regulations on Automatic Enrollment Requirements

The IRS has issued proposed regulations stemming from the SECURE 2.0 Act, which mandates that certain retirement plans established after December 29, 2022, must operate as automatic enrollment plans for plan years beginning after December 31, 2024. These regulations outline requirements for qualified cash or deferred arrangements, including initial contribution percentages, automatic increase provisions, permissible withdrawals, and investment requirements. Additionally, they specify exemptions for certain plans and clarify that most employees must be included in automatic enrollment programs. The regulations also include modifications to previous IRS guidance on automatic enrollment.

Source: 401khelpcenter.com, January 2025

IRS Issues Proposed Regulations Regarding Mandatory Automatic Enrollment in Qualified Retirement Plans

On January 10, 2025, the IRS released proposed regulations concerning the mandatory automatic enrollment provisions of the SECURE 2.0 Act of 2022. These new regulations under Code section 414A replace the initial guidance provided in Notice 2024-2 and address comments received from stakeholders. The proposed regulations offer clarifications and examples to help implement the new requirements. This 4-page summary highlights some key aspects of the proposed regulations.

Source: Voya.com, January 2025

Second Circuit Adopts "Meaningful Benchmark" Pleading Standard in ERISA Cases

This article examines the Singh case and its implications for excessive fee claims in retirement plans. It highlights the "meaningful benchmark" standard, which requires plaintiffs to demonstrate sufficient similarity between their plan and other comparable plans with lower fees -- a standard upheld by the Eighth and Tenth Circuits and adopted by the Second Circuit with additional specific requirements. In the Singh case, former employees alleged that the fiduciaries of their 401k plan failed to act prudently by allowing participants to incur high recordkeeping fees, suggesting that the fiduciaries could have secured better pricing by examining comparable plans. Ultimately, the case challenges the fiduciary process tied to evaluating and approving recordkeeping fees.

Source: Spotlightonbenefits.com, January 2025

Understanding and Enhancing the Workforce Impact of Retirement Plans

This report emphasizes the importance of assessing retirement plans not only in terms of their costs and risks but also in their contributions to organizational success. To evaluate the impact of retirement plans, the report presents a comprehensive framework consisting of 10 key considerations framed as context-specific questions. The framework is intended to be action-oriented, helping organizations identify necessary changes, particularly for critical employee segments. The report includes case studies demonstrating successful implementations of the framework, highlighting potential risks associated with not adequately considering the impacts of retirement strategy changes.

Source: Soa.org, January 2025

Bechtel Managed Account QDIA Lawsuit Dismissed

A federal judge in Virginia dismissed a lawsuit against Bechtel Global Corporation and its board regarding defaulting plan participants into a high-fee managed account, which allegedly provided no benefits compared to low-cost target-date funds. U.S. District Judge Anthony Trenga ruled on January 10 that the plaintiff, Debra Hanigan, did not provide a sufficient benchmark to support her claim of excessive fees. Hanigan had originally filed the complaint in May 2024, arguing that the managed account's performance did not justify its higher fees without participant engagement.

Source: Planadviser.com, January 2025

2025 Compliance Calendar for 401k Plans

Stay on track with this 4-page annual Compliance Calendar, designed to assist plan sponsors. This resource serves as a general guide for educational purposes only and is not intended as authoritative legal or tax advice. Since each retirement plan has unique requirements, it is recommended to consult with your attorney or tax advisor for tailored guidance.

Source: Pensionplanspecialists.com, January 2025

Retirement Retirement Plans Offer Financial Relief for Wildfire-Affected Participants

The SECURE Act 2.0 allows retirement plan sponsors to offer qualified disaster relief distributions to participants affected by federally declared disasters, such as the recent wildfires in Southern California. These distributions come with specific eligibility, timing, and repayment criteria. Plan sponsors are encouraged to work with recordkeepers and legal counsel to ensure proper administration of these relief options. This initiative underscores the important role that plan sponsors can play in providing financial support to employees during crises.

Source: Nixonpeabody.com, January 2025

IRS Confirms SECURE 2.0 Age 60-63 "Super Catch-Ups" are Optional

Recently proposed IRS regulations clarify the increased catch-up contribution limit for defined contribution plan participants aged 60-63 under the SECURE 2.0 Act of 2022. Employers will be relieved to learn that they are not mandated to offer the higher "super catch-up" limit; they can continue to provide the regular limit to all eligible participants. Since the law's enactment, there has been uncertainty among employers and administrators regarding how the "universal availability requirement" impacts the new higher catch-up contributions.

Source: Mercer.com, January 2025

GAO Reports Limited Federal Control Over Crypto Assets in 401k Plans

The U.S. Government Accountability Office recently reported on the status of crypto assets in 401k plans, highlighting a lack of federal oversight and limited data from the DOL regarding these assets. The GAO noted that crypto investments exhibit "uniquely high volatility," and there is no standard method for predicting their future returns. Additionally, the DOL does not mandate that fiduciaries adhere to established fiduciary standards of ERISA when selecting and monitoring crypto assets. Consequently, workers investing in crypto assets bear the responsibility for managing their investments without sufficient guidance or oversight.

Source: Hallbenefitslaw.com, January 2025

IRS Issues Guidance on Mandatory Automatic Enrollment

On January 10, 2025, the IRS released Proposed Regulations concerning the automatic enrollment requirement for newly established 401k and 403b plans under SECURE 2.0. These regulations build on previous interim guidance from late 2023 and include clarifications on participant notice requirements. While the regulations will take effect six months after finalization, the automatic enrollment mandate itself is applicable for plan years starting January 1, 2025. For plans before the final rules are effective, compliance will be assessed based on a good faith interpretation of the law.

Source: Groom.com, January 2025

IRS Issues Much Anticipated Guidance on Catch-Up Contributions

On January 10, 2025, the IRS proposed regulations regarding the SECURE 2.0 Act's catch-up contributions, providing much-anticipated guidance but highlighting the complexities involved in implementation. The regulations indicate that the mandatory Roth catch-up provision will create significant administrative challenges for employers and plan administrators, regardless of whether a qualified Roth contribution program is offered. Although the increased catch-up contribution is optional, plan sponsors must consider various implementation factors, requiring coordination with payroll, third-party administrators, and legal counsel to ensure compliance with legal requirements specific to their situations.

Source: Groom.com, January 2025

RIA Acquisition Opportunities Remain Fertile as Succession Looms Large

Over one-third of financial advisors are expected to retire within the next 10 years, bringing significant importance to succession and transition planning for both advisors and wealth management firms. According to The Cerulli Report—U.S. Advisor Metrics 2024, 105,887 advisors, representing 37.4% of the industry and 41.4% of total assets, plan to retire. However, 26% of these advisors are uncertain about their retirement plans, with uncertainty highest among those affiliated with independent RIA firms at 30%. The increasing trend of independent affiliations complicates retirements but also fosters growth through the acquisition of independent practices.

Source: Cerulli.com, January 2025

Self-Correction of Late Deferrals Will Soon be Permissible

The DOL has issued a revised Voluntary Fiduciary Compliance Program, introducing a self-correction component for certain delinquent participant contributions, a significant update welcomed by the industry. Late participant deferrals constitute about 95% of corrections handled through the VFCP, often identified by plan auditors or prompted by DOL letters encouraging voluntary participation. This new self-correction option aims to simplify addressing this common issue. However, it won't be available until March 17, 2025.

Source: Brickergraydon.com, January 2025

Missing Participant Enforcement Relief Available for Fiduciaries

On January 14, the Department of Labor announced a new enforcement relief policy aimed at retirement plan fiduciaries. This policy, outlined in Field Assistance Bulletin No. 2025-01, allows fiduciaries to transfer benefit payments of $1,000 or less owed to missing participants to state unclaimed property funds without facing action under ERISA Section 404(a), provided certain conditions are met. Assistant Secretary Lisa Gomez stated that the policy offers fiduciaries an additional way to manage small outstanding retirement benefits while supporting efforts to reconnect participants with their benefits.

Source: Asppa-net.org, January 2025

Key DC Trends Shaping the Retirement Industry in 2025

The T. Rowe Price annual U.S. Retirement Market Outlook webinar for 2025 discussed key themes including retirement income in defined contribution plans, fiduciary responsibilities, and ESG investing. Michael Davis, head of global retirement strategy, emphasized the need for industry leaders to adapt to the evolving retirement landscape. Panelists, including Kathryn Farrell, Jessica Sclafani, Rachel Weker, and Aliya Robinson, highlighted important topics such as the advancement of qualified default investment alternatives, retirement income solutions, emergency savings accounts, and potential policy changes under a new Trump administration.

Source: 401kspecialistmag.com, January 2025

401k Excessive Fee Litigation Spiked to "Near Record Pace" in 2024

In 2024, there was a significant 35% increase in ERISA excessive fee class action litigation, with a notable surge in filings during the latter half of the year, approaching record levels. This uptick followed a quieter 18-month period starting in January 2023, during which plaintiff firms managed a backlog of cases. Many older cases have been settled after three years of record settlements, leading to the emergence of new legal theories. These include innovative claims such as forfeiture issues in defined contribution plans and new challenges related to wellness programs, excessive fees, and Affordable Care Act fraud involving defined benefit plans. This summary highlights the key developments in ERISA litigation for 2024.

Source: Planadviser.com, January 2025

New Year = New Proposed Rules Impacting Retirement Plans

On January 10, 2025, the IRS issued proposed rules affecting qualified retirement plans. One set of rules requires new defined contribution plans to incorporate an automatic enrollment feature, following the SECURE 2.0 mandate. Another set provides guidance for plans allowing participants aged 50 and older to make catch-up contributions. Here is a recap.

Source: Mcafeetaft.com, January 2025

Don't Fall for These 401k Plan Provider Gimmicks

A "sales gimmick" is a strategy used by businesses to quickly boost demand for their products or services. An example is purchasing Fan Fest tickets six months in advance to receive a $30 merchandise credit. While using gimmicks in personal spending is acceptable, it's crucial to avoid such tactics when it comes to your 401k plan and third-party administration services, as fiduciary responsibilities require a more careful and prudent approach. When selecting a plan provider, prioritize their competency, the quality of services they offer, and the overall value they bring. Focusing solely on cost or gimmicks can lead to higher long-term expenses if the provider offers subpar services.

Source: Jdsupra.com, January 2025

401k ESG Lawsuit Order Cites 'Cartel-Like Behavior,' Could Prompt More Litigation

Plaintiffs have successfully sued American Airlines for breaching its fiduciary duties related to ESG considerations in the proxy-voting process of its $25 billion 401k plan, particularly for selecting BlackRock as an asset manager. A US District Court Judge found that the airline allowed corporate and BlackRock's ESG interests to influence plan management. This decision could prompt more lawsuits against 401k sponsors regarding ESG practices. However, it's uncertain if the plaintiffs can demonstrate financial harm to plan participants from BlackRock's involvement. While there was a ruling on breach of duty of loyalty, the judge did not find evidence of breach of prudence.

Source: Investmentnews.com, January 2025

PE Industry Hopeful About 401ks in Second Trump Administration

Private equity, known for its illiquidity, valuation challenges, and high costs, is being eyed for inclusion in target-date funds, particularly as the industry seeks to make significant inroads into the 401k market during the upcoming Trump administration. With 401k plans largely lacking private equity allocations -- less than 1% of the largest plans incorporate it into custom target-date strategies -- executives and lobbyists are preparing to advocate for these investments. While the DOL acknowledged the potential use of private equity in asset-allocation strategies under certain conditions in 2020, the Biden administration has since indicated a lack of endorsement for private equity in 401k plans, particularly as a standalone option for employees.

Source: Investmentnews.com, January 2025

IRS Answers Calls for Additional SECURE 2.0 Guidance

On January 10, the IRS and Treasury issued additional guidance on SECURE 2.0 Act provisions related to automatic enrollment and catch-up contributions, as part of the Consolidated Appropriations Act of 2023. The proposed regulations clarify that high-income earners must designate their catch-up contributions as after-tax Roth contributions; employers cannot bypass this requirement. However, plans can still offer catch-up contributions to eligible employees without a Roth option. The guidance is seen as beneficial for employers, although it introduces complexity for plans that undergo nondiscrimination testing and may lead to participant requests for Roth features.

Source: Groom.com, January 2025

And Not a Moment Too Soon: Mandatory Automatic Enrollment Guidance

This week at the Treasury was eventful, as two significant pieces of guidance were released. This summary focuses on the proposed Mandatory Automatic Enrollment (MAE) regulations. The proposed regulations were issued on January 9, 2025, addressing outstanding questions as the mandatory automatic enrollment took effect at the start of the year. Previous communications outlined anticipated issues, and this will assess how those expectations align with the newly issued regulations.

Source: Ferenczylaw.com, January 2025

How to Improve Women's Retirement Security in 2025

Saving for retirement poses significant challenges for many, and recent data indicates that women are particularly concerned about their retirement savings. Nearly half of women find the decision-making process for retirement savings complicated and confusing, while about 60% feel they lack sufficient income to save adequately. Contributing to these concerns are factors such as women's roles in caregiving, lower average earnings compared to men, and a longer average lifespan. Statistics show that women aged 50 and older hold only 77 cents in wealth for every dollar held by men, highlighting the disparity in financial security. As such, women must plan for their financial future and for policymakers and employers to aid in these efforts. The article suggests three steps to enhance retirement security for women.

Source: Dol.gov, January 2025

Field Assistance Bulletin No. 2025-01: Missing Participants and Beneficiaries

This Field Assistance Bulletin outlines a temporary enforcement policy under ERISA regarding small retirement benefit payments owed to missing participants or beneficiaries. It allows responsible plan fiduciaries to voluntarily transfer payments, including uncashed checks, to a state unclaimed property fund without facing violations under ERISA section 404(a). This is applicable when the present value of the owed benefits is $1,000 or less, and the plan fiduciary meets specific conditions outlined in the memorandum. Further guidance from the Department will be provided in the future.

Source: Dol.gov, January 2025

IRS Releases Guidance on Mandatory Roth Catch-ups, Autoenrollment

On January 10, 2025, the IRS issued proposed regulations regarding the planned restriction of catch-up contributions to Roth accounts beginning in 2026 for certain individuals. It also released notice of proposed auto-enrollment requirements under the SECURE 2.0 Act. Here are the key provisions of this guidance.

Source: Captrust.com, January 2025

Act 3: To Roth or Not to Roth: That Is No Longer the Question for Some Catch-Up Eligible Individuals

The IRS recently released proposed regulations concerning mandatory Roth catch-up contributions, following amendments made by SECURE 2.0. Starting in 2024, individuals earning over $145,000 from the previous year will need to designate their catch-up contributions as Roth contributions, eliminating the option for pre-tax contributions. The IRS had previously postponed the implementation of this requirement from 2024 to 2026. The new proposed regulations address several key questions from the benefits community regarding this mandatory Roth provision.

Source: Brickergraydon.com, January 2025

ERISA 2025 Requirements Calendar

Plan sponsors of defined benefit and defined contribution retirement plans should be mindful of key deadlines and dates for ensuring compliance in 2025, assuming a calendar year plan. The dates on this chart may vary based on the plan sponsor's fiscal year, and not all deadlines may apply. Alongside these important dates, sponsors should also familiarize themselves with the 2025 contribution plan limits and any relevant rolling notices. It's critical to track these elements to maintain compliance and effectively manage retirement plans.

Source: Bdo.com, January 2025

How Much Does 401k Auto-Enrollment Help Workers Save for Retirement?

Recent research revisits the impact of automatic provisions like auto-enrollment and auto-escalation in 401k plans, initially finding these mechanisms beneficial but now suggesting their positive effects on savings may be less significant than previously believed. While auto-enrollment effectively boosts participation, it appears to have a mixed effect on contribution rates. Specifically, it tends to increase contributions from individuals who would not have participated at all or who would have contributed less, while potentially decreasing contributions from those who would have contributed more than the default rate. Overall, the studies confirm that auto-enrollment raises average contributions, but the source of these additional contributions remains unclear.

Source: Bc.edu, January 2025

IRS Updates Procedures for Retirement Plans Requesting IRS Advice

The IRS has released Revenue Procedures 2025-1 and 2025-4, which update the guidance and procedures related to determination letters and letter rulings for retirement plans. Revenue Procedure 2025-1 outlines the types of advice the IRS offers to taxpayers, such as letter rulings, closing agreements, determination letters, information letters, and oral advice. Revenue Procedure 2025-4 details the procedures for obtaining specific letter rulings, closing agreements, determination letters, information letters, and oral advice for qualified retirement plans.

Source: Asppa-net.org, January 2025

Voluntary Fiduciary Correction Program Final Rule Issued by the DOL

On January 14, the Department of Labor released its final rule regarding updates to the Voluntary Fiduciary Correction Program. The most notable changes include the introduction of two new self-correction features. Proposed in November 2022, the VFCP permits fiduciaries to report specific administrative errors to the DOL and receive a no-action letter. This includes issues like prohibited transactions, improper loans, and late contributions, with a particular emphasis on addressing year-end remittance of delinquent contributions.

Source: Asppa-net.org, January 2025

Loper Bright: Reshaping the ERISA Regulatory Landscape

Under the Loper Bright decision, federal courts are now required to apply independent judgment regarding whether federal agencies have acted within their statutory authority, moving away from the previous Chevron deference standard that allowed agencies more interpretative leeway. This change, exemplified in the Corner Post case, facilitates challenges to longstanding regulations and agency decisions, even when statute of limitation issues arise. As a result, the DOL may face increased scrutiny over its interpretations of ERISA, leading to potential challenges to DOL regulations in the ERISA space starting in 2025 and beyond.

Source: Reedsmith.com, January 2025*

American Airlines Violated Federal Law By Using 401k Plan to Promote ESG Funds, Judge Rules

A Texas federal judge, Reed O'Connor, ruled that American Airlines violated federal law by directing its employee retirement plans toward investment firms focused on environmental, social, and governance products. This decision marks a significant victory for opponents of progressive investing. The judge found that the airline breached its fiduciary duty of loyalty under ERISA by hiring BlackRock to manage its $26 billion 401k plan. However, he did not find that American Airlines violated its duty of prudence, noting that the airline acted in line with industry practices. The ruling followed a four-day trial initiated by a lawsuit led by pilot Bryan Spence, who contended that American Airlines' choice of BlackRock, which emphasizes political agendas alongside financial returns, was inappropriate.

Source: Nationalreview.com, January 2025

IRS Issue Proposed Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions

The IRS has released proposed regulations concerning the SECURE 2.0 Act, specifically focusing on catch-up contributions available to employees aged 50 and older in 401k plans. The regulations detail a requirement that catch-up contributions from certain higher-income participants be designated as after-tax Roth contributions. They also offer guidance for plan administrators on implementing this new Roth catch-up rule, incorporating feedback from comments on a previous notice issued in August 2023. Additionally, the proposed regulations address an increased catch-up contribution limit for specific participants, including those aged 60-63 and employees enrolled in newly established SIMPLE plans.

Source: Irs.gov, January 2025

IRS Issue Proposed Regulations on New Automatic Enrollment Requirement for 401k and 403b Plans

The IRS has released proposed regulations related to the SECURE 2.0 Act, which includes a mandate for newly established 401k and 403b plans to automatically enroll eligible employees starting in the 2025 plan year. The proposed regulations offer guidance for plan administrators on implementation and will apply to plan years starting more than six months after the final regulations are released. In the interim, administrators must follow a reasonable, good faith interpretation of the statute.

Source: Irs.gov, January 2025

Kimberly-Clark Settles 401k Excessive Fee Case for $2.25M

Kimberly-Clark has agreed to a $2.25 million settlement in an ERISA lawsuit concerning excessive fees in the company's 401k plan. The case, Seidner et al. v. Kimberly-Clark Corp. et al., has been ongoing for three years, and the settlement was reached through mediation. The plaintiffs, two former employees, are seeking preliminary court approval for the settlement in the U.S. District Court for the Northern District of Texas. They chose to settle to avoid the prolonged uncertainty of litigation and potential appeals, acknowledging that the settlement represents only about 15% of the estimated overall losses suffered by plan participants due to mismanagement of the retirement plan.

Source: Hallbenefitslaw.com, January 2025

IRS Posts FAQs for SECURE 2.0 Disaster Relief Guidance

Congress has historically provided optional disaster relief for retirement plan sponsors to assist participants in accessing funds during natural disasters, but this assistance often arrived too late. The SECURE 2.0 Act of 2022 addresses this issue by establishing automatic and permanent disaster relief that becomes effective immediately upon the declaration of a "major disaster" by FEMA. This relief is retroactive to January 26, 2021, aiming to streamline the previous ad hoc assistance. In May 2024, the IRS released a FAQ page to offer additional guidance to plan sponsors regarding this provision. This article in the Journal of Pension Benefits discusses the SECURE 2.0 disaster relief and the IRS's related guidance.

Source: Groom.com, January 2025

Groups Call On Supreme Court to Uphold Cornell University Decision to Stem Frivolous Lawsuits

The U.S. Supreme Court is set to hear the case Cunningham v. Cornell University, which addresses a disagreement among circuit courts regarding whether a plaintiff must demonstrate more than just the occurrence of a "prohibited transaction" to survive a motion to dismiss. Several retirement industry groups, including the ERISA Industry Committee, the American Benefits Council, and the SPARK Institute, have filed an amicus brief supporting the U.S. 2nd Circuit Court of Appeals' ruling. This ruling asserts that simply identifying a "prohibited transaction" is not enough for a lawsuit to proceed; plaintiffs must also claim that applicable statutory exemptions do not apply.

Source: Planadviser.com, January 2025

Pru's Prudent Process Prevails in Proprietary 401k Fund Suit

A lawsuit against Prudential regarding its GoalMaker-managed account platform has been dismissed. The suit, initiated in September 2022, alleged that Prudential's fiduciaries improperly filled the 401k plan with proprietary mutual funds, neglected to monitor their performance, and failed to disclose recordkeeping fees. This allegedly led to excessive fees being paid to Prudential and significant losses for the plan and its approximately 45,000 participants.

Source: Napa-net.org, January 2025

$6.9 Million Settlement Struck in Northern Trust Excessive Fee Suit

The parties in an excessive fee lawsuit regarding Northern Trust's Focus Funds in its 401k plan have reached a settlement agreement, pending court approval. The proposed settlement amount is $6.9 million, which will be used to cover recoveries for plan participants, attorneys' fees and costs for class counsel, administrative expenses, and service awards for the plaintiffs.

Source: Napa-net.org, January 2025

Defined Contribution Plan Profile: A Close Look at ERISA 403b Plans, 2021

The BrightScope/ICI Defined Contribution Plan Profile is a research initiative by BrightScope and the Investment Company Institute that analyzes audited Form 5500 data from private-sector DC plans. It provides insights into DC plan design, including investment options, employer contributions, automatic enrollment features, and recordkeeping practices. The research draws from the BrightScope Defined Contribution Plan Database and includes analysis of employer contribution structures and associated fees, enhancing understanding of retirement savings. The current report focuses on ERISA 403b plans in 2021, examining data from the Department of Labor's 2021 Form 5500 Research File and nearly 6,300 audited plans in the BrightScope database.

Source: Ici.org, January 2025

The Simplified Employee Pension (SEP) - 2025

A Simplified Employee Pension is a retirement plan that any employer, including self-employed individuals, can adopt. Employers can set up a SEP as late as their tax return due date (including extensions) and make contributions retroactive to the start of the tax year. SEPs offer business owners a straightforward way to contribute to their employees' retirement savings. This is a detailed overview of the SEP plan.

Source: Consultrms.com, January 2025

Advisor-Sold Defined Contribution Market Set to Flourish

The Cerulli Report: U.S. Retirement Markets 2024 highlights significant growth in the advisor-sold defined contribution market, particularly within the micro 401k segment, which includes plans with under $5 million in assets. In 2023, 57% of DC recordkeepers reported that a majority of their plans were sold via advisors. Wealth advisors are expected to leverage their relationships with small business owners to offer retirement plans. A survey of non-specialist retirement plan advisors revealed that 46% seek support in fostering wealth management clients from their DC business, while 43% want assistance in acquiring plan sponsor clients.

Source: Cerulli.com, January 2025

Rollover Recommendations: The DOL Fiduciary Rule Stay and What Remains

The implementation of the Department of Labor's new fiduciary rule and amendments to Prohibited Transaction Exemption 2020-02 has been halted due to a stay issued by two Texas federal district courts, pending ongoing lawsuits challenging these regulations. This litigation process could extend for years, meaning the new rules may never take effect. As a result, the current DOL fiduciary rule remains in place, which offers a more limited scope of recommendations that can trigger fiduciary status for advisors. The article notes at least three situations where the existing rule applies to rollover recommendations, suggesting that firms and advisors may need to rely on the relief offered by the unaffected PTE 2020-02.

Source: Benefitslink.com, January 2025

Defined Contribution Retirement Plan: 2025 Compliance Calendar

This 4-page Retirement Plan Compliance Calendar outlines the essential reporting, disclosure, and notice requirements for Defined Contribution plans for the year 2025. It specifies due dates for these compliance obligations, which are based on a calendar plan year and applicable to plans governed by ERISA. The calendar serves as a helpful reference for retirement plan sponsors to ensure they meet their regulatory responsibilities throughout the year.

Source: Usicg.com, January 2025

2025 Guide to Retirement Plans

This annual guide provides a detailed comparison of the different types of retirement plans and their key features, eligibility requirements, contribution limits and more.

Source: Standard.com, January 2025

Is the DOL's New Lost and Found Database Worth It or Just a New 401k Plan Sponsor Chore?

The SECURE 2.0 Act, enacted on December 29, 2022, as part of the Consolidated Appropriations Act of 2023, aims to create a Retirement Savings Lost and Found Database. This centralized resource will help American workers locate lost or forgotten retirement benefits from private sector plans governed by ERISA. Michelle Capezza of Mintz Levin emphasizes the importance of this database, while Lawrence Starr from Cornerstone Retirement suggests that it is intended to supplement the existing database maintained by the Social Security Administration, which is based on employer filings of Form 8955-SSA. However, a concern is raised about the actual value added by this new database, given that the SSA already collects relevant information, even if not in a searchable format.

Source: Fiduciarynews.com, January 2025

2025 Newfront ERISA for Employers Guide: An Overview of EB's Overarching Legal Framework

The 49-page document addresses several key topics related to ERISA compliance, including: Plan Document and SPD: It explains how wrap documents can be used to meet ERISA requirements. Form 5500: This section outlines when reporting is necessary, potential penalties for non-compliance, and the obligation to distribute the Summary Annual Report to employees. Fiduciary Duties: It provides a practical overview of the core four fiduciary duties under ERISA that employers must adhere to. Eligibility: The document emphasizes the importance of clearly defining eligibility classes and consistently applying conditions to prevent issues. Special Issues: It touches on topics such as ERISA preemption, annual notice requirements, and the classification of benefits subject to ERISA. Overall, the document serves as a comprehensive guide to understanding and navigating ERISA compliance for employers.

Source: Ctfassets.net, January 2025

Why Your Employee Benefit Plan Needs a Cybersecurity Policy

Participant data and plan assets are vulnerable to cyberattacks, prompting the Department of Labor to emphasize the obligation of plan fiduciaries to address cybersecurity risks. However, fiduciaries may lack clarity on fulfilling these responsibilities or be unaware of existing guidelines for securing data and assets. Acknowledging that breaches can still occur, it is crucial to establish procedures for responding to such incidents, including ransomware attacks. Educating fiduciaries is best achieved through their involvement in creating a comprehensive written policy outlining specific procedures. Adhering to this policy will demonstrate their fulfillment of fiduciary responsibilities. A list of factors to consider when developing this policy is provided in this article, though it's not exhaustive.

Source: Cohenbuckmann.com, January 2025

Automatic Plan Features for Employees

Retirement savings are essential for financial security, but many employees do not save enough. Research indicates that younger employees (38%) are more likely than older employees (25%) to contribute less than 5% of their income to retirement. This savings gap is also evident across different genders, ethnicities, and income levels. To address this, implementing automatic 401k programs can simplify enrollment and encourage higher contributions over time. Understanding demographic differences in saving behaviors can help optimize plan designs to boost employee engagement and financial wellness. This 3-page paper discusses automatic 401k programs, strategies to close the retirement savings gap, supportive legislation, and employer benefits.

Source: Bofa.com, January 2025

New Year Brings New Automatic Enrollment and Escalation Requirements for Some Recently Adopted 401k and 403b Plans

The SECURE 2.0 Act of 2022 mandates that starting January 1, 2025, newly adopted 401k and 403b plans must implement automatic enrollment and escalation features. Participants will be automatically enrolled to make pre-tax contributions between 3% and 10% of their eligible pay, with an annual increase of one percentage point until contributions reach at least 10%, but no more than 15%. Employers should also consider IRS guidance issued in December 2023 regarding how these requirements apply to plan mergers. The guidance indicates that depending on the circumstances, a merger could result in the newly merged plan being subject to or exempt from the automatic enrollment requirements.

Source: Benefitsnotes.com, January 2025

Required Minimum Distributions for 401k and 403b Plans

The first Required Minimum Distribution must be taken by April 1 of the year following the latter of when a participant turns 73 or retires (if allowed by the plan). For 5%-or-more owners, RMDs must begin by April 1 following their 73rd birthday, regardless of employment status. The minimum distribution rules must be explicitly included in the plan to maintain its tax-qualified status. Recordkeepers typically notify participants about RMDs and assist with calculations, but failure to comply with RMD rules can result in qualification errors for the plan, with excise taxes imposed on individuals. This scenario creates confusion over accountability, as plan sponsors, recordkeepers, and participants often blame each other for RMD violations, leaving everyone with a problem.

Source: Belfint.com, January 2025

Generation Beta: Redefining Life, Longevity, and Retirement

This 34-page white paper introduces a new generation starting on January 1, 2025, known as Generation Beta, comprising individuals born between 2025 and 2039. This generation is expected to experience significant technological advancements, changing societal norms, and economic transformations, leading to potentially the longest lifespans in history. The study highlights the challenges and opportunities that will shape Generation Beta's lives, emphasizing flexibility in work and family structures as key characteristics of their experience. Overall, Generation Beta is positioned to redefine concepts of life, longevity, and retirement in unprecedented ways.

Source: Prudential.com, January 2025*

Adoption of Optional SECURE 2.0 Provisions Still Slow Going Into 2025

An Alight survey reveals that employers are cautiously implementing optional provisions from the SECURE 2.0 Act of 2022 as 2025 approaches. Although there is interest in features like hardship self-certification, adoption of emergency sidecar accounts and student loan matching remains low. For example, only about 30% of employers have adopted hardship self-certification, with 15% planning to add it soon; over half of those intend to implement it in 2025.

Source: Plansponsor.com, January 2025

The Why, What and How of Plan Benchmarking

A review of methods for assessing retirement plan costs reveals their importance, as highlighted by Callan's 2024 DC Trends Survey. Approximately two-thirds of plan sponsors plan to conduct a fee study in 2024, with many likely to evaluate various fee types, including managed account service fees and indirect revenue. There is also a significant trend towards adopting lower-cost investment options, with half of the respondents indicating they may switch to cheaper vehicles, an increase from 42% in 2023. Many sponsors have successfully reduced fees after benchmarking their plans.

Source: Plansponsor.com, January 2025

Retirement Plan Benchmarking: "More Art Than Science"

Experts emphasize that evaluating retirement plans requires a more nuanced approach than just assessing costs and investment performance. Jamie Curcio points out that assessing a company's retirement plan against its peers should be tailored to the specific company. The fiduciary obligation for plan sponsors to benchmark their plans should involve a deeper analysis to ensure they meet their goals effectively. With the prevalence of automatic features in retirement plans, measuring success should extend beyond just participation rates to include engagement and effectiveness in meeting participant needs.

Source: Plansponsor.com, January 2025

Amazon Employees File 401k Plan Forfeiture Complaint in Federal Court

Amazon.com Inc. and its 401k savings plan administrative committee are facing a lawsuit regarding the management of employee forfeiture funds, the largest such case against a company. In the case of Curtis v. Amazon.com, filed in the U.S. District Court for the Western District of Washington, plaintiff Cory Curtis claims that Amazon's fiduciaries improperly used millions in forfeited plan assets to cover the company's contributions instead of reducing administrative fees for over 20,000 participants from 2018 to 2023. The lawsuit, represented by Terrell Marshall Law Group PLC, argues that this practice allowed Amazon to save millions in contribution costs.

Source: Planadviser.com, January 2025

Auto-Enrollment, Escalation No Longer Optional

Starting January 1, 2025, plans initiated after December 29, 2022, are required to implement automatic enrollment and escalation as part of the SECURE 2.0 Act. Participants must be automatically enrolled at a contribution rate of 3% to 10%, with a mandatory annual increase of at least 1% until the contribution reaches between 10% and 15%. Participants will have the option to opt-out or choose different contribution levels.

Source: Ntsa-net.org, January 2025

DC Senior Was Tricked Into Draining Her 401k

Judith Boivin, an 80-year-old retired therapist, fell victim to a scam after receiving calls from someone posing as the "Rockville Police Department." She was informed that her Social Security number was implicated in a crime involving a drug cartel, and she agreed to assist an alleged FBI agent named Wayne A. Jacobs in the investigation. However, she was manipulated by scammers into cashing out over $595,000 from her 401k over several months in 2023. As a result, Boivin not only lost her life savings to this government imposter scam but also faced a significant tax bill for the withdrawn funds.

Source: Moneywise.com, January 2025

Don't Let Your 401k Plan Turn Into a Natural Disaster

The author, having experienced severe flooding during Hurricane Sandy, expresses concern over the increasing frequency and severity of natural disasters, influenced by unstable weather patterns, regardless of the cause. For 401k plan sponsors, the author suggests that, unlike natural disasters, they can take proactive measures to prevent their plans from becoming problematic by addressing key aspects of plan management.

Source: Jdsupra.com, January 2025

IRS Adds New Category to the 2024 Required Amendments List

The IRS has expanded its "Required Amendments" List by adding a new Part C that focuses on "optional amendments" that may have been influenced by recent law changes or IRS guidance. An example provided is section 604 of the SECURE 2.0 Act, which allows plans to offer Roth treatment for employer or nonelective contributions starting in 2023. The IRS issued guidance on this in Notice 2024-2, and plans may need to be amended to comply with this guidance by December 31, 2026.

Source: Groom.com, January 2025

Vermont Saves, a New Auto-IRA Program, Requires Employers Without a 401k to Enroll Employees

Vermont has become the 17th state to mandate that employers either enroll their employees in the state-run retirement program or offer their own 401k plans. The new program, called Vermont Saves, is an automated savings initiative administered by the Treasurer's Office, allowing participants to contribute up to $7,000 a year through automatic paycheck deductions. It aims to provide a retirement plan for employees without existing employer-sponsored plans, building on a successful pilot program that was recently launched.

Source: Benefitspro.com, January 2025

The 2024 Retirement Security Rule: What is Old is New Again

The DOL 2024 Fiduciary Rule, intended to replace the longstanding 1975 Regulation defining investment advice fiduciaries, has faced significant legal challenges. Now the political landscape following the recent election raises uncertainty about the DOL's commitment to continue with the appeal or withdraw it altogether. Depending on the new administration's approach, the 2024 Fiduciary Rule may face a fate similar to the 2016 rule, potentially reinforcing the precedent established by the Chamber case and complicating future efforts to redefine "investment advice fiduciary."

Source: Truckerhuss.com, January 2025

Beyond TDFs

Target-date funds have become the leading option for retirement savings, particularly as the default investment choice for employees in defined contribution plans. David Blanchett from PGIM DC Solutions points out that TDFs effectively provide professionally managed portfolios based on age. However, he notes that optimal portfolios may differ even among individuals in the same age group. As the retirement landscape evolves, various professionally managed solutions will emerge, ranging from established options like stable value funds to newer alternatives like adviser-managed accounts. The success of these solutions will hinge on their adoption by plan advisers and sponsors.

Source: Planadviser.com, January 2025

How TDFs Are Evolving

Target-date funds have become the preferred retirement savings option for many Americans, particularly since the Pension Protection Act of 2006 designated them as a qualified default investment option. Their popularity has surged, reaching a record $3.47 trillion in 2023, thanks to their straightforward "set it and forget it" strategy that adjusts risk based on an individual's targeted retirement date. Recently, fund providers have begun introducing personalized versions of TDFs to better cater to participants' specific retirement needs.

Source: Planadviser.com, January 2025

DOL's Retirement Savings Lost and Found Database Goes Live

On December 27, the DOL launched the Retirement Savings Lost and Found Database, which helps workers and beneficiaries search for retirement plans owed to them. Created under the SECURE 2.0 Act of 2022, this centralized tool allows users to input personal information, such as their name and Social Security number, to locate lost or forgotten retirement accounts from previous employers. The DOL aims to enhance data quality in the future, facilitating the return of retirement savings to workers and retirees.

Source: Planadviser.com, January 2025

Five Fiduciary Resolutions for 2025

This is the time of year when resolutions for the cessation of bad behaviors and the beginning of better ones are in vogue. Here are five for plan fiduciaries for 2025.

Source: Napa-net.org, January 2025

It's Here: Mandatory Auto-Enrollment Starts This Week

A key update from the SECURE 2.0 provisions is the requirement for automatic enrollment in retirement plans, effective January 1st for plans established after December 29, 2022. These plans must automatically enroll participants at a contribution rate between 3% and 10%, with annual auto-escalation of at least 1% until reaching a contribution rate of 10% to 15%. While older, grandfathered plans can opt-out, the new mandate will apply starting in the 2025 plan year. Participants will still have the option to opt-out or choose different contribution levels. If recordkeepers or fiduciaries are unable to implement these automatic features, it may be categorized as an operational error that can be rectified through the Employee Plans Compliance Resolution System.

Source: Napa-net.org, January 2025

Considering Auto-Portability for Your Retirement Plan?

Employers are increasingly inquiring about joining the auto-portability network for their defined contribution plans. Many major recordkeepers are adopting this feature, which aims to assist retirement plan participants in managing their savings as they change jobs. The auto-portability system allows small account balances to be automatically rolled over from an Individual Retirement Account into a new employer's plan when a former employee joins a participating company. This simplifies tracking and consolidating retirement savings, which is beneficial given that individuals change jobs an average of over ten times during their careers. However, employers must consider the additional liabilities associated with joining the network alongside its advantages.

Source: Brickergraydon.com, January 2025

Federal District Court Dismisses Another 401k Forfeitures Suit

Since September 2023, at least 25 lawsuits have been filed arguing that the decision to use 401k forfeitures to offset plan expenses instead of reducing plan sponsor contributions is a fiduciary choice under ERISA. In the most recent case, Barragan v. Honeywell Int'l, Inc., the U.S. District Court for New Jersey dismissed the plaintiff's complaint without prejudice, allowing for the possibility of an amended complaint. This decision marks the seventh ruling on a motion to dismiss a 401k plan forfeiture lawsuit, with only two cases successfully surviving such motions. This article is a review of the ruling.

Source: Beneficiallyyours.com, January 2025

Digital Age Communication: Mix of New, Tried & True

The Digital Age has transformed communication for plan sponsors, third-party administrators, and retirement plan professionals, emphasizing the importance of both modern and traditional practices. Industry experts Sarah Simoneaux and James Passarelli shared insights on this topic during a T. Rowe Price webinar. Simoneaux, a founding partner at SCS Consultants and former ASPPA President, noted that artificial intelligence significantly enhances data gathering and analysis, and its use in marketing operations is widespread. Overall, the webinar emphasized the evolving nature of communication in the retirement planning sector amid technological advancements.

Source: Asppa-net.org, January 2025

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