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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Mandatory Catch-Up Contribution "Rothification" Is Coming to U.S. Savings Plans

The SECURE 2.0 Act mandates that participants aged 50 or older in 401k retirement plans, who are classified as highly compensated (earning at least $145,000, indexed), must make catch-up contributions as Roth contributions rather than pretax contributions. Roth contributions are taxable in the contribution year but allow for tax-free distributions, including earnings. Initially set to take effect in 2024, the implementation has been delayed to 2026 due to administrative readiness concerns. The IRS has introduced proposed regulations to provide guidance on the Roth catch-up contribution requirement for highly compensated participants.

Source: Sidley.com, March 2025

Key Types of Investment Fiduciaries

A clear list exists detailing the essential responsibilities of a good plan advisor, which can vary in service types and quality. At a minimum, a plan advisor should offer investment advice, taking on fiduciary responsibility for the selection and monitoring of plan funds. This discussion explores the key types of investment fiduciaries.

Source: Retirementplanology.com, March 2025

Fiduciary Duty Meets Stewardship: Aligning Compliance With Care

In this podcast, Todd Solomon, an attorney with McDermott Will & Emery, delves into the changing fiduciary landscape, recent trends in ERISA litigation, and how the current administration is influencing the Department of Labor. He also highlighted the shifting expectations surrounding fiduciary responsibilities. Key discussions revolved around finding the right balance between the duty of loyalty and prudence, the influence of participant demographics on plan decisions, and the challenges that plan sponsors encounter when balancing cost versus value, particularly in the selection of investments such as target date funds.

Source: Mwe.com, March 2025

Retirement Plan Balances Are Flourishing. Why Are So Many Advisors Missing Out on a $3 Trillion Opportunity?

The number of 401k millionaires is increasing, with Fidelity reporting 537,000 participant accounts exceeding $1 million in 2024, a 27% rise from the previous year. The median balance for this group is around $1.4 million. As employees increasingly depend on their 401k for retirement income, many are defaulting to standard investment options instead of customized strategies due to a lack of time, investment knowledge, and support. A Schwab survey found that only 35% of 401k participants received professional financial advice, despite 73% wanting personalized guidance. So why aren't more plan participants getting help, and why aren't more advisors offering it?

Source: Investmentnews.com, March 2025

IRAs Play an Increasingly Important Role in Saving for Retirement

The Investment Company Institute's latest research indicates that individual retirement accounts are increasingly important for retirement planning in the U.S. By mid-2024, 44 percent of U.S. households owned IRAs, a rise from 34 percent a decade earlier. The study, titled "The Role of IRAs in US Households' Saving for Retirement, 2024," provides insights into the characteristics and activities of households that own IRAs.

Source: Ici.org, March 2025

New Research Study Finds Auto-Enrollment, Auto-Escalation, Auto-Portability Can Substantially Reduce Likelihood That Today's Workers Will Run Short of Money in Retirement

The Employee Benefit Research Institute recently released a research study titled "ERISA and Auto Features: An RSPM Analysis of the Impact of Automatic Features on Retirement Security." The study reveals that the combined implementation of automatic enrollment, automatic escalation, and automatic portability significantly decreases the chances that today's workers will face financial shortfalls in retirement. This effect is especially pronounced for younger workers, who have several years of opportunity to participate in a defined contribution plan before reaching retirement age.

Source: Ebri.org, March 2025

DC Plan Annual Review: Key Steps for Plan Administrators

Regular plan reviews are essential for ensuring compliance and improving performance in Defined Contribution Plans, ultimately helping participants meet their retirement goals. As a plan administrator, you play a key role in managing these plans by overseeing compliance, financial management, and participant engagement. This includes verifying accurate contribution processing, maintaining fee transparency, and providing educational resources to participants, all of which contribute to the efficient operation of the plan. This is a list of items that must be reviewed.

Source: Watkinsross.com, March 2025

DOL Expands Voluntary Fiduciary Compliance Program

Earlier this year, the DOL unveiled updated regulations for its Voluntary Fiduciary Compliance Program. Notably, these new rules introduce a long-anticipated self-correction option for plan sponsors.

Source: Spconsultants.com, March 2025

Do ETFs Have a Place in 401k Plans?

Defined contribution plans are viewed as a potential growth area for ETFs, but certain structural challenges hinder their inclusion in 401k offerings. While the ETF industry celebrates its 35th anniversary and continues to attract investors due to low costs, it remains uncertain whether ETFs will gain a significant foothold in retirement plans. Concerns about the intraday trading nature of ETFs lead some to believe they are not suitable for 401k plans. Nevertheless, some retirement plan service providers are exploring ways to integrate ETFs into their offerings.

Source: Plansponsor.com, March 2025

Beyond Target-Date Funds: How Tailored 401k Plan Design Strategies Keep Near-Retirees on the Right Path

Near-retirees face a dilemma with target-date funds, which may not adequately protect their investments when the market drops as they approach retirement. While these funds offer convenience, their one-size-fits-all glide paths could leave participants vulnerable. As retirement approaches, balancing risk with the need for cash becomes crucial. Plan sponsors and ERISA fiduciaries are encouraged to adopt tailored strategies in 401k plans to better support near-retirees, prompting a discussion on when to transition from generic glide paths to more personalized options.

Source: Fiduciarynews.com, March 2025

Asset Managers Reevaluate Guaranteed Income Components in DC Plans

Despite the advantages of annuities, retirement plan participants still hold significant negative sentiment toward them. According to the latest Cerulli Edge -- U.S. Retirement Edition, 91% of asset managers believe annuity products have a negative stigma, up from 79% in 2019. While the proportion of those who "strongly agree" has decreased slightly, overall agreement has increased, highlighting a growing recognition among asset managers of the enduring stigma surrounding annuities. Asset managers and recordkeepers are advised to market guaranteed income products as part of a diversified retirement income strategy instead of presenting them as a complete solution.

Source: Cerulli.com, March 2025

What Patent Trolls Can Teach Us About Tackling Problems in the ERISA Class Action Industry: Opinion

The "America Invents Act" aimed to resolve issues in patent prosecution and litigation, effectively addressing the patent troll problem while balancing the interests of various stakeholders, including industries reliant on patents and patent holders. A similar approach could be taken to tackle excessive class action litigation related to ERISA plans, seeking to balance participants' access to the courts with the risks faced by plan sponsors. The key challenge remains finding the right balance in managing the issues caused by such litigation.

Source: Bostonerisalaw.com, March 2025

Latest Bill to Waive Early Withdrawal Fee for Fraud Victims

Rep. Haley Stevens has introduced the "No Penalties for Victims of Fraud Act," which aims to ease the financial strain on individuals who have experienced fraud involving their retirement accounts. The legislation proposes to waive the 10% early withdrawal penalty for those withdrawing funds from their 401k or retirement plans before age 59 1/2, provided they can document their fraud losses through law enforcement or court verification. Although victims would be exempt from penalties, they would still be required to repay the amounts withdrawn.

Source: 401kspecialistmag.com, March 2025

DOL Publishes New VFCP Model Participant Notice

On March 18, the DOL released a model notice for applicants to the Voluntary Fiduciary Correction Program to inform plan participants about their application to the program. This model notice is specifically for applicants and is not meant for those using self-correction to address errors. The DOL’s Employee Benefits Security Administration anticipates that completing the notice will take plan administrators about one hour on average.

Source: Napa-net.org, March 2025*

State Republican Finance Officials Urge SEC and DOL to Adopt Regulations Prohibiting Use of ESG or DEI Factors

Republican state finance officials from 18 states have called on the acting leaders of the SEC and the DOL to establish regulations preventing asset managers and retirement plan sponsors from incorporating environmental, social, and governance or diversity, equity, and inclusion factors in their decision-making. They cited a recent legal setback for American Airlines as evidence that considering these factors may violate the fiduciary duty of loyalty mandated by ERISA.

Source: Hallbenefitslaw.com, March 2025

Walberg Calls for DOL to "Rescind or Withdraw" Fiduciary Rule

This week saw another request for the rescission of the Department of Labor's contentious final fiduciary rule. Chairman of the House Committee on Education and Workforce, Rep. Tim Walberg, sent a letter to newly confirmed DOL Secretary Lori Chavez-DeRemer on March 19, urging her to "rescind or withdraw" the fiduciary rule established by the Biden-Harris administration's prior DOL leadership.

Source: 401kspecialistmag.com, March 2025

To Reduce Retirement Plan Risk, Balance Stability & Security

Retirement programs, whether in the public or private sector, single-employer or multiemployer, and whether defined benefit or defined contribution, represent a long-term commitment by plan sponsors to serve the interests of both recipients and the sponsors themselves. Two key components of successful retirement programs are stability and security. This article explores the significance of stability and security in retirement plans and their role in meeting these objectives.

Source: Segalco.com, March 2025

Simple IRA Catch-Up Contribution Limits

If a SIMPLE IRA plan has the special small employer increased deferral/catch-up limit of 110% of the standard amounts, and someone is also age 60-63 catch-up eligible, does the participant get both the 110% and age 60-63 increases in catch-up contributions? This article highlights the discussion on Simple IRA catch-up contribution limits.

Source: Retirementlc.com, March 2025

Johns Hopkins Study: Private Equity, 401ks Do Not Mix

Recent research from Johns Hopkins Carey Business School raises concerns about the push for defined contribution plans to invest in private equity, particularly leveraged buyout funds. The study suggests that private equity may be riskier than the traditionally used publicly traded funds in 401k plans. Given that private equity funds involve pooling money from a limited number of investors to buy privately held companies with minimal public reporting, the report questions whether these investments align with the safety and transparency that workers typically expect from their retirement plans.

Source: Plansponsor.com, March 2025

Lawsuit Against Lockheed Martin Criticizes Firm for Using In-House TDFs

Lockheed Martin Corporation and its subsidiary investment management company are facing a lawsuit from current and former participants in their 401k plans. The plaintiffs allege that the company breached its fiduciary duties of prudence and loyalty by utilizing an in-house service provider and affiliated target-date funds. The lawsuit criticizes Lockheed Martin for adopting a "DIY" approach to investments, resulting in the creation of ineffective private funds that charged excessive fees. It claims that the company prioritized its own benefit by using underperforming target-date funds with high fees in the retirement plans.

Source: Plansponsor.com, March 2025

Is Investment Performance a Fiduciary Duty?

ERISA attorneys analyze the legal obligations of plan sponsors, particularly regarding their fiduciary duties. Marcia Wagner, founder of the Wagner Law Group, asserts that ERISA does not mandate plan sponsors to maximize investment returns for participants. Instead, Rick Pearl from the Faegre Drinker law firm notes that ERISA's general standard of fiduciary prudence is intentionally vague and not intended for micromanagement. Wagner emphasizes that fulfilling the duty of prudence involves a proper process for selecting and managing plan investments, but she points out that investment outcomes do not always correlate with the quality of the process followed.

Source: Plansponsor.com, March 2025

Access Gaps Remain as State-Facilitated Retirement Plans Near $2B

State-facilitated retirement programs, particularly automatic individual retirement accounts, are expanding access to retirement savings and are approaching $2 billion in total assets. However, a study by the Georgetown University Center for Retirement Initiatives reveals that 47% of U.S. private sector workers over 18 -- amounting to 59 million individuals -- still lack access to employer-sponsored retirement plans. The study, conducted with Econsult Solutions Inc., found that access varies significantly by employer size, with smaller firms being the least likely to provide retirement coverage for their employees.

Source: Planadviser.com, March 2025

Written Requests for ERISA Documents

Employers are required to respond to written requests for certain ERISA documents within 30 days to avoid penalties of up to $110 per day. However, there is often ambiguity regarding which documents fall under this mandatory disclosure requirement and what specific plan materials should be provided. This can create challenges for employers in determining their obligations in response to these requests.

Source: Newfront.com, March 2025

Should Managed Accounts Be Used as a Plan's Default?

The use of professionally managed accounts in employer-sponsored retirement plans has been steadily increasing over the past decade, with improvements in technology and customization making these accounts more personal. While engaged participants can benefit from actively choosing this service, automatically enrolling unengaged participants raises fiduciary concerns. It's essential to critically evaluate defaulting unengaged participants into managed accounts.

Source: Multnomahgroup.com, March 2025

How 401k Plans Benefit From Auto Portability

Angela Capek, a product area leader for defined contribution platforms at Fidelity Investments, has spent 28 years at the company in various roles related to product development for retirement plans. In a recent discussion with Russ Alan Prince, she highlighted the benefits of the auto portability solution, which assists participants in employer-sponsored DC plans in consolidating their 401k savings and maintaining their investments in the U.S. retirement system as they transition between jobs.

Source: Fa-mag.com, March 2025

ERISA and Auto Features: An Analysis of the Impact of Automatic Features on Retirement Security

The study highlights the positive impact of automatic features, such as automatic enrollment, in defined contribution plans, which increases participant participation rates by enrolling them by default. It emphasizes the significance of effective plan design in enhancing retirement outcomes. Utilizing the Retirement Security Projection Model®, the study assesses the benefits of various automatic features, both individually and collectively, in reducing the risk of individuals running out of money during retirement. The RSPM has been a tool for evaluating retirement policies since 2003.

Source: Ebri.org, March 2025

Insurance Company Providing 401k Retirement Plans Not an ERISA Fiduciary With Respect to Foreign Tax Credits

In Romano v. John Hancock Life Insurance, the Eleventh Circuit ruled that John Hancock, which provided investment and recordkeeping services for 401k plans, does not qualify as an ERISA fiduciary regarding its handling of foreign tax credits. The Romano Law Plan, established by the Romanos, made contributions to a separate account distinct from John Hancock's general funds, rather than making direct investments. The Romanos filed claims asserting that John Hancock's management of the foreign tax credits constituted a breach of fiduciary duty under ERISA and violated prohibited transaction provisions. The court, however, determined that John Hancock was not acting as a fiduciary in this context.

Source: 11thcircuitbusinessblog.com, March 2025

Monitoring the Activities of a Plan Fiduciary Committee: Recommendations to a Board of Directors

It is a fundamental principle that anyone with fiduciary responsibility for an ERISA benefit plan must continually monitor the performance of any service providers or individuals to whom they have delegated fiduciary duties. This ongoing obligation is rooted in the core "duty of prudence" outlined in ERISA, as established by both judicial interpretation and regulatory guidance. This requirement has been recognized in various forms even before the Supreme Court's explicit confirmation of it a decade ago in the well-known Tibble case. Given this context, what actions should a board of directors (or an equivalent governing body) take to effectively oversee the activities of a plan fiduciary committee to which it has delegated some or all of its fiduciary responsibilities regarding an ERISA benefit plan?

Source: Verrill-law.com, March 2025

SPARK Institute Comment Letter on the Proposal for Roth Catch-Up Contributions

The SPARK Institute has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. They say that administering the Roth catch-up mandate will be difficult, particularly in the initial years, and further simplification and clarification would be greatly beneficial. As mentioned towards the end of this letter, SPARK is also requesting that the IRS consider a postponement or offer additional good faith relief, as the final regulations will not be ready in time for implementation in 2026.

Source: Sparkinstitute.org, March 2025

A State-Level Analysis and an Examination of the Potential Benefits of State-Facilitated Retirement Savings Programs

Access to employer-sponsored retirement savings plans is crucial for private sector workers to save for retirement, yet nearly 47% of U.S. private sector workers over 18 lack such access. To address this, 20 states have implemented state-facilitated retirement savings programs, which aim to enhance workplace savings opportunities for approximately 20.6 million workers without access. This study aims to analyze the retirement savings landscape across all states, evaluating access to employer-sponsored retirement plans, demographic trends related to aging populations, and the potential for supplemental retirement income from modest contributions. It will also examine initial outcomes from early adopting states -- California, Illinois, and Oregon -- in increasing access and savings through both state programs and incentivizing private plan adoption.

Source: Georgetown.edu, March 2025

Don't Forget the Disclosures: What's Required to Keep Plan Participants and Beneficiaries Informed

This educational fiduciary training webinar emphasizes the responsibilities needed to keep participants and beneficiaries well-informed. Tailored for committee members and fiduciaries engaged in retirement plan management, the session explores crucial elements of employee engagement, necessary disclosures, and effective fiduciary governance practices. Key topics covered include: Understanding Fiduciary Responsibilities, Required Disclosures, Optional Engagement Strategies, Digital and Paper Notices, and Selecting Service Providers.

Source: Multnomahgroup.com, March 2025

The Thing You Have to Fear as a 401k Plan Sponsor

In his inauguration speech, Franklin Delano Roosevelt famously stated, "the only thing we have to fear is fear itself." However, 401k plan sponsors face numerous risks beyond just fear, often without even realizing it. The article highlights the potential issues and challenges that plan sponsors must be aware of to avoid trouble.

Source: Jdsupra.com, March 2025

ICI Comment Letter on the Proposal for Roth Catch-Up Contributions

The Investment Company Institute has sent this comment letter to the Treasury Department and the Internal Revenue Service regarding the proposed regulations on catch-up contributions. This proposal aims to amend the regulations under section 414(v) of the Internal Revenue Code to incorporate several changes to catch-up contributions introduced by sections 109, 117, and 603 of the SECURE 2.0 Act.

Source: Ici.org, March 2025

New Self-Correction Option for Voluntary Fiduciary Correction Started March 17, 2025

On March 17, 2025, the DOL introduced a "self-correction" option within its Voluntary Fiduciary Correction Program. This new option allows fiduciaries to correct certain violations without waiting for formal approval of their correction submissions. However, participating fiduciaries are still required to fulfill a notice obligation and provide information to the DOL. The self-correction option applies to two specific types of transactions that would usually be considered prohibited: late contributions for participants and loan repayments, as well as eligible inadvertent failures relating to participant loans.

Source: Erisapracticecenter.com, March 2025

ERIC Comment Letter on the Proposal for Roth Catch-Up Contributions

The ERISA Industry Committee has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. In this letter, ERIC supports SECURE 2.0 but acknowledges the challenges in implementing certain provisions, particularly Section 603, which mandates that catch-up retirement plan contributions be made on a Roth basis. While the guidance in Notice 2023-62 and the Proposal are generally helpful, ERIC has suggested improvements as the Treasury and IRS work on finalizing the rules.

Source: Eric.org, March 2025

Why America Needs a Specialized ERISA Court: Opinion

The differing rulings in the HP and Clorox forfeiture cases highlight the need for a specialized court dedicated to ERISA litigation. ERISA was intended to create a uniform framework for plan sponsors to offer voluntary benefits and to ensure predictable fiduciary responsibilities across the country. However, this predictability and consistency have not been achieved, as more than forty judges are making determinations on fiduciary duty breaches related to unvested plan contributions, and twelve judges are reviewing decisions regarding independent fiduciaries selecting private-equity backed life insurance for pension risk transfers. This situation calls for reform to standardize rulings under ERISA.

Source: Encorefiduciary.com, March 2025

A Review of Existing Measures of Retirement Well-being

Research indicates that many U.S. households are unprepared for retirement, potentially falling short of maintaining their standard of living. However, despite concerns about financial readiness, most retirees express satisfaction with their lives. An analysis of various datasets reveals that objective measures like health and income are not strong predictors of personal satisfaction. This disconnect implies that traditional satisfaction surveys may not effectively inform policymakers about financial security. To better assess retirees' well-being, new metrics could focus on spending habits, responses to emergencies, and expense shocks.

Source: Bc.edu, March 2025

BlackRock Lifepath TDF Suit Dismissed, Again

A federal judge has dismissed a lawsuit involving BlackRock Lifepath target date funds on behalf of participants in multiple 401k plans, including those from Citigroup Inc. and Genworth, among others. After allowing the plaintiffs three opportunities to strengthen their case, the judge dismissed the suit with prejudice, meaning it cannot be refiled. The plaintiffs were represented by Miller Shah LLP, while the defendants were the fiduciaries of the Cisco Systems Inc. 401k plan, who had previously responded to similar allegations in August 2023.

Source: Planadviser.com, March 2025*

Georgia Bill Aims to Create State-Run Retirement Plan

Georgia lawmakers have introduced a bill to create Peach State Saves, a defined contribution retirement program designed for private sector employees who lack access to employer-sponsored retirement plans. According to the proposed legislation, employers that do not provide a retirement plan will be mandated to automatically enroll their employees in a state-managed payroll deduction individual retirement account. Employees will have the option to opt out of the program if they choose.

Source: Planadviser.com, March 2025

The 401k Has Become America's Rainy-Day Fund

Financial emergencies are prompting an increasing number of Americans to tap into their 401k accounts. Last year, approximately 4.8% of account holders made early withdrawals to address issues such as avoiding foreclosure and covering medical expenses. This figure marks a record high, up from a previous peak of 3.6% in 2023 and significantly higher than the pre-pandemic average of around 2%, according to Vanguard Group, which manages 401k-style accounts for nearly five million individuals. As more employers automatically enroll their employees in these plans, the 401k has essentially become a fallback fund for those with limited non-retirement savings.

Source: Msn.com, March 2025

Catch-Up Contributions Get Anticipated Proposed Regulations

SECURE 2.0 introduced significant updates to catch-up contributions for participants aged 50 and older. Recent IRS proposed regulations clarify these changes. The first adjustment requires certain higher-paid employees to make catch-up contributions as Roth contributions, which are taxable in the deferral year. This rule will take effect on January 1, 2024, but plan sponsors can delay it until January 1, 2026, due to transition relief. The second change allows participants aged 60-63 to contribute 50% more in catch-up contributions starting January 1, 2025. The proposed regulations also address various operational issues related to these updates, set to take effect in the first plan year that begins at least six months after the final regulations are issued. A summary of the key issues addressed in the proposed regulations is outlined in this article.

Source: Groom.com, March 2025

Spousal Consent Proposal Re-Introduced in Senate

U.S. Senators Tammy Baldwin and Patty Murray spearheaded a coalition of their fellow lawmakers to reintroduce a bill aimed at safeguarding women's retirement security. The Women's Retirement Protection Act of 2025 seeks to tackle the systemic obstacles women encounter in achieving a secure retirement by enhancing protections and offering improved resources to help women better prepare for their financial futures.

Source: Ascensus.com, March 2025

7 in 10 Retirees Over 70 Receive Income From 401ks or IRAs

According to recent research from the Investment Company Institute, 71% of Americans over age 70 receive income from retirement plans like 401ks or IRAs, with this figure rising to nearly 90% for those above the bottom income quartile. In their ICI Viewpoints blog, economists Peter Brady and Steven Bass argue that these findings, along with other tax data analyses, counter claims that the voluntary U.S. retirement system is inadequate and that retirees are overly dependent on Social Security.

Source: 401kspecialistmag.com, March 2025

The Impact Anti-DEI/ESG May Have on Fiduciary Responsibility

The pursuit of effective leadership and decision-making has ancient roots. As fiduciaries, it's essential to acknowledge that managing client investments cannot occur in isolation. Instead, one must consider all relevant factors, including the client's core values, priorities, and sense of purpose. Various ethical frameworks can guide fiduciaries in meeting their crucial responsibility to act in the best interests of their clients.

Source: 401kspecialistmag.com, March 2025

State of Retirement Planning: Fidelity Study

As more Americans approach retirement age in 2025, the latest Fidelity Investments State of Retirement Planning study reveals a growing sense of concern. While 67% of Americans in their planning years feel confident about their retirement, this is a decline of seven percentage points from the previous year, primarily due to ongoing inflation and rising living costs. Despite over 70% of recent retirees reporting that their retirement is proceeding as planned, many are surprised by increased expenses, especially in healthcare. The study, which has been conducted since 2019, compares the expectations and realities of individuals nearing retirement and those recently retired, highlighting the challenges faced during this critical period as a record number of Americans approach the traditional retirement age of 65.

Source: Thenewsmarket.com, March 2025

What Does the Next EBSA Head Think of ESG?

Daniel Aronowitz, President Trump's nominee to lead the Employee Benefits Security Administration, has expressed nuanced views on ESG (Environmental, Social, and Governance) issues through his Fid Guru blog. He argues that while ESG investments are generally poor choices, they are not inherently imprudent. Furthermore, he believes that the ongoing cultural debate over ESG distracts from more pressing fiduciary responsibilities. As the president of Euclid Fiduciary, a fiduciary liability insurance firm, Aronowitz has consistently opposed lawsuits against plan sponsors, which may influence his perspective on ESG-related cases. He is expected to receive Senate approval, although no votes have occurred yet.

Source: Psca.org, March 2025

Frequency of Formal Retirement Plan Committee Meetings

A PSCA member inquired about the frequency of meetings between company retirement plan committees and their plan recordkeepers and advisors. Currently, their committee meets formally every quarter, but they learned that some committees meet semi-annually. A 2021 PSCA survey found that quarterly meetings were the most common practice. Recently, PSCA asked plan sponsors in a QOTW about their current meeting frequencies to assess any changes. The inquiry also raised the question of whether there is a best practice or standard for how often retirement plan committees should meet with their recordkeepers and advisors.

Source: Psca.org, March 2025

Adoption of SECURE 2.0 Optional Provisions

The SECURE 2.0 Act of 2022 was significant retirement plan legislation that introduced various required and optional provisions for retirement accounts and employer-sponsored plans. However, plan sponsors have been slow to upgrade their programs due to the complexity of the legislation. Many have chosen to implement only those provisions that require minor adjustments, such as expanded catch-up contributions for participants aged 60-63. While some features have been adopted, there is hesitation around others, primarily due to a lack of available technology for implementation and uncertainty regarding the administration of the various provisions.

Source: Planpilot.com, March 2025

Many Plan Sponsors Don't Feel Responsibility for Participant Retirement Goals

A recent survey by MFS Investment Management revealed that plan sponsors received a C+ grade regarding their confidence in participants' ability to retire when they want, while participants themselves expressed higher confidence. The survey found that plan sponsors who feel accountable for helping participants achieve their retirement goals are more optimistic about their chances of success. However, 66% of plan sponsors believe that it is the participant's responsibility to ensure they are invested appropriately to meet their retirement needs. Notably, 87% of participants regarded setting savings goals for retirement as their responsibility rather than that of the plan sponsor.

Source: Planadviser.com, March 2025

403b Plans Have Special Considerations When Complying With SECURE 2.0

During the PLANSPONSOR Roadmap Livestream session titled "Special Considerations for 403b Plans," speakers addressed new rules affecting long-term, part-time employees and the potential for creating multiple and pooled employer plans. They also highlighted the possible future option for 403b plan sponsors to utilize collective investment trusts. As provisions from SECURE 2.0 are implemented, 403b plan sponsors are encountering new challenges related to plan design and administration.

Source: Planadviser.com, March 2025

2025 Study on Advisor Attitudes Toward 3(16) Fiduciary Outsourcing

The "Advisor Attitudes Toward 3(16) Fiduciary Outsourcing" survey, conducted by Pentegra in January 2025, explored how over 50 advisors utilize fiduciary outsourcing to enhance retirement plan management for clients. It highlighted the benefits of outsourcing these responsibilities, such as improved compliance and risk mitigation for clients, while allowing advisors to concentrate on their core business operations. Carlo Guerrera, Vice President of Sales and Key Accounts, emphasized that outsourcing 3(16) fiduciary duties to professionals is considered a best practice that provides significant advantages to both advisors and their clients.

Source: Pentegra.com, March 2025

Swiss Re Group, Empower Targeted in Sweeping Fiduciary Breach Suit

A recent lawsuit brings forth extensive allegations of fiduciary breaches related to excessive fees, inappropriate share classes, poor selections of target-date funds, and the improper use of plan forfeitures and participant data. The suit accuses the Swiss Re Defendants of "failing to comply with ERISA’s fundamental principles," claiming they employed flawed methodologies that resulted in suboptimal outcomes. Furthermore, the allegations assert that they opted for costly, underperforming investment options rather than more affordable and superior alternatives, while also imposing exorbitant recordkeeping fees on the Plaintiffs.

Source: Napa-net.org, March 2025

2024 Defined Contribution Survey

The 2024 Defined Contribution Survey indicates a slight decrease in capital flows to real estate funds, with a drop of $700 million in 2023. Despite this decline, two-thirds of real estate investment managers reported net increases in flows from defined contribution plan investors. The overall net decline in capital flows was attributed to just one-third of firms. The survey, produced by NAREIM in collaboration with the DC Real Estate Council, NCREIF, and PREA, assesses inflows and redemptions related to private real estate vehicles, open-ended funds, and targeted strategies. By the end of 2023, over $36 billion of DC capital was invested in real estate strategies, as detailed in the 2024 survey.

Source: Nareim.org, March 2025

Get 401k Plan Providers That Will "Hold" Your Hand

As children, we relied on trusted figures like parents or older siblings to guide us through life and teach us right from wrong. Similarly, as a 401k plan sponsor, it's essential to seek support from a 401k plan provider. This partnership can help navigate potential pitfalls and avoid costly liabilities, providing the necessary guidance to manage retirement plans effectively. For more details, read this article.

Source: Jdsupra.com, March 2025

Preventive Measure: Self-Audits Help Your Plan Stay in Compliance

Morgan Lewis partners Amy Pocino Kelly and Dan Salemi and associate Rachel Mann wrote an article for Benefits Magazine about internal compliance self-audits of employee benefit plans. The article discusses the self-audit process, highlights common areas of compliance that plans should target, and notes changes affecting self-audits included in the SECURE 2.0 Act.

Source: Ifebp.org, March 2025

The Multiemployer Retirement Plan Landscape Report: DC Key Findings

The health of multiemployer-defined contribution retirement plans improved from 2020 to 2021. The average account balance for participants increased from $46,100 in 2019 to $52,800 by the end of 2021, as reported by the International Foundation of Employee Benefit Plans. The report analyzed Form 5500 data from 1,049 multiemployer DC plans with total assets of approximately $227 billion, covering about 4.6 million participants and their beneficiaries. This reflects an increase in the number of plans and participants from 2019 when there were 1,008 plans covering roughly 4.5 million participants.

Source: Ifebp.org, March 2025

How Efficiency Shapes 401k Plan Administration

Professional fiduciaries managing 401k plans face the challenge of streamlining administration while ensuring compliance with complex ERISA regulations. Industry calls for efficiency clash with the need for precision, as missteps can lead to serious consequences, including costly corrections or plan disqualification. While enhancing efficiency is crucial, it should not involve cutting corners; instead, it involves creating smarter systems. Fiduciaries are increasingly adopting technology and outsourcing solutions to manage administrative tasks, raising the question of whether these tools can be effective without compromising their responsibility to plan participants.

Source: Fiduciarynews.com, March 2025

How the Tie-Breaker Rule Applies to Restrict ESG and Economically Targeted Investments in Retirement Plans After the State of Utah Decision

On February 14, 2025, the District Court in State of Utah v. Micone upheld the 2022 Biden-era fiduciary investment regulation, including the tiebreaker rule allowing fiduciaries to consider collateral benefits for investments that have equal financial benefits for participants. However, the ruling does not signal a shift toward widespread ESG investments in ERISA-sponsored plans. Despite Republican Attorneys General losing this case, the court's decision emphasizes that social investing will likely not meet ERISA's strict fiduciary duties to prioritize the financial interests of plan participants.

Source: Encorefiduciary.com, March 2025

401k Safe Harbor Rules - 2025

The 401k Safe Harbor Rules provide plan sponsors with a way to satisfy the nondiscrimination requirements of the Internal Revenue Code, ensuring that their retirement plans are fair and beneficial for all employees, particularly for non-highly compensated workers. As of 2025, the Safe Harbor provisions have been refined and updated, offering several key features. This chart reviews the 2025 401k safe harbor rules.

Source: Consultrms.com, March 2025

55 Things You Should Know About Designated Roth Accounts

The SECURE 2.0 Act, enacted on December 29, 2022, expands Roth options in workplace retirement plans by allowing employer matching or non-elective contributions to be designated as Roth contributions, in addition to the existing employee deferrals. This change necessitates substantial updates to systems for employers, recordkeepers, and payroll providers. In December 2023, the IRS issued Notice 2024-02, providing guidance for the retirement industry on implementing these new provisions effectively.

Source: Belfint.com, March 2025

Have State Auto-IRAs and Fintech Shifted Who Contributes to IRAs?

Individual Retirement Accounts were designed to help workers without employer-sponsored plans save for retirement through tax-advantaged accounts, but have mostly served as rollover vehicles for funds from employer plans, with direct contributions being relatively low. Recently, two factors may influence IRA contributions: the implementation of state auto-IRA programs that automatically enroll uncovered workers into Roth IRAs, and the rise of fintech platforms that promote and incentivize IRA contributions. An increase in contributions could indicate that IRAs are finally meeting their original goal of supporting retirement savings for the uncovered population, or it may suggest that they primarily benefit those who are already financially secure, particularly among younger and tech-savvy individuals. This is a critical moment to evaluate the trends in IRA contributions.

Source: Bc.edu, March 2025

New 401k Plan Requirements End Pre-Tax Catch-Up Contributions for High Earners

On January 10, 2025, the IRS issued proposed regulations regarding age-based catch-up contributions for retirement plans. These contributions, which are available to participants aged 50 or older in 401k plans, allow for additional contributions beyond regular deferrals, regardless of other limits on elective deferrals. The proposed regulations are based on changes made by the SECURE 2.0 Act of 2022 and affect retirement plan participants, beneficiaries, employers, and administrators. Plan sponsors need to consider necessary design or operational changes, consult with plan administrators and recordkeepers for administrative updates, and seek advice from benefits counsel regarding implementation and required amendments to their plans.

Source: Quadecircle.com, March 2025*

Fiduciary Risk Continues to Pose Barrier to Mass Adoption of Alts in DC Plans

The U.S. District Court for the Northern District of California has decided not to dismiss a class action complaint against The Clorox Company and its employee benefits committee concerning the 401k Plan. The plaintiff accuses Clorox of violating ERISA fiduciary duties by using plan forfeitures to offset non-elective contributions instead of lowering administrative costs for participants. The court previously dismissed the initial complaint but found the amended complaint adequately alleged breaches of loyalty and prudence under ERISA. The court noted that the plaintiff's claims of self-interest and lack of a reasoned decision-making process were plausible, allowing for an inference of liability based on motivations for loyalty and the thoroughness of decision-making for prudence claims.

Source: Plansponsor.com, March 2025

Court Greenlights ERISA Forfeiture Case Against Clorox

The U.S. District Court for the Northern District of California has decided not to dismiss a class action complaint against The Clorox Company and its employee benefits committee concerning the 401k Plan. The plaintiff accuses Clorox of violating ERISA fiduciary duties by using plan forfeitures to offset non-elective contributions instead of lowering administrative costs for participants. The court previously dismissed the initial complaint but found the amended complaint adequately alleged breaches of loyalty and prudence under ERISA. The court noted that the plaintiff's claims of self-interest and lack of a reasoned decision-making process were plausible, allowing for an inference of liability based on motivations for loyalty and the thoroughness of decision-making for prudence claims.

Source: Millerchevalier.com, March 2025

401k ADP Test Basics

The tax code for 401k plans includes non-discrimination tests to ensure that retirement plans do not disproportionately benefit Highly Compensated Employees over Non-Highly Compensated Employees. The testing process begins with the coverage test, as outlined in IRS Code section 410(b). If the coverage test is passed, or if adjustments are made to pass it, the Average Deferral Percentage test follows. The ADP test uses mathematical comparisons of participation and contribution rates between HCEs and NHCEs to assess potential discrimination in favor of HCEs. This article provides a basic review of the test.

Source: Legacyrsllc.com, March 2025

Teachers and Nurses Deserve Access to the Same Investment Options as 401k Savers

Public education and nonprofit workers, such as teachers and nurses, are facing limitations in retirement investment options compared to the private sector, potentially leading to higher fees and reduced retirement savings. Currently, 403b plans, designed for tax-exempt organizations, are not allowed to hold collective investment trusts, which can offer cost savings and efficiency. In contrast, CITs are commonly available in 401k plans and the Thrift Savings Plan for federal employees. There is bipartisan support in Congress to eliminate this disparity for 403b plans.

Source: Ici.org, March 2025

Study Reveals 401k Plans Boost Employee Retirement Engagement and Contributions

The BrightScope/ICI Defined Contribution Plan Profile (2022) highlights the importance of automatic enrollment and employer contributions in 401k plans for encouraging retirement savings. Over one-third of large 401k plans utilize automatic enrollment, while nearly 90% provide employer contributions, which collectively help employees save more effectively. Sarah Holden, ICI Senior Director, notes that these features help overcome barriers to saving and support workers in building their retirement funds. The report also indicates that employers typically offer a diverse range of investment options in their 401k plans, with the average plan providing 29 investment choices, including domestic and international equity, as well as domestic bond funds.

Source: Ici.org, March 2025

Cybersecurity and Your Retirement Plan

The DOL has provided guidance on best practices for cybersecurity in retirement plans. While this guidance is not legally binding, it is essential for plan sponsors and fiduciaries to take it seriously. By implementing a robust data security and privacy protection policy, plan sponsors can significantly enhance the safeguarding of plan assets and create a strong defense against claims of negligence in protecting the plan and its participants. This article reviews a few key considerations to keep in mind.

Source: Gct.law, March 2025

Early Preparation Tips to Streamline Your Employee Benefit Plan Audit

Plan sponsors should consider their organization's employee benefit plan audit well in advance. Typically, audits cannot commence until spring, when recordkeepers supply the necessary audit package containing detailed reports on the plan's operations for the year. Here is a list of items auditors will require over the coming months, along with steps plan sponsors can take to prepare.

Source: Withum.com, March 2025

What Self-Correction Options Are Available for 401k Plan Fiduciary Mistakes?

The DOL introduced a self-correction component to the Voluntary Fiduciary Correction Program, effective March 17, 2025. This allows retirement plans to self-correct specific failures, such as the late transmission of participant contributions or loan repayments, and certain inadvertent loan failures. To self-correct, a plan official or authorized representative must notify the EBSA by submitting a notice through an online tool, which includes essential information about the plan and the correction made. Unlike regular VFC submissions, self-correctors will receive an automatic acknowledgment email but will not get a "no action" letter.

Source: Thomsonreuters.com, March 2025

Vanguard Sees All-Time High Deferral Rates, Plan Design Improvements in 2024

Vanguard's preview of the "How America Saves 2025" report reveals that participant outcomes for defined contribution retirement plans remained strong in 2024. Key findings include a 10% increase in average account balances, largely due to positive market performance, and a record high of 45% of participants raising their deferral rates, either voluntarily or through automatic increases. Jeff Clark, head of defined contribution research at Vanguard, highlighted that plan designs are at their strongest, noting a consistent annual rise in the adoption of automatic enrollment over the past 20 years.

Source: Plansponsor.com, March 2025

Document Retention is an Employer's Duty, Not the TPA's

It's crucial to clarify your third-party administrator's document retention practices, as they may not keep signed copies of plan documents, older versions, or those prepared by previous TPAs. Understand the scope of retention covered in your contract with the TPA and your ultimate responsibilities under ERISA. TPAs are responsible for document compliance from their engagement until they disengage, which includes drafting required restatements every six years, handling interim amendments, and any discretionary amendments the Plan Sponsor chooses to implement.

Source: Klblawgroup.com, March 2025

IRS Issues Regulations on SECURE 2.0 Act Retirement Plan Catch-Up Provisions

The Internal Revenue Service has introduced proposed regulations related to the changes in catch-up contributions under SECURE Act 2.0 for retirement plans. These changes feature enhanced catch-up contributions for participants aged 60 to 63, as well as a requirement for certain 401k plan participants to utilize Roth tax treatment for their catch-up contributions.

Source: Hallbenefitslaw.com, March 2025

Eleventh Circuit Confirms Foreign Tax Credits Owned by Insurance Company Not Plan Assets of 401k Plan

In late October 2024, the Eleventh Circuit Court of Appeals ruled in Romano v. Hancock Life Insurance Company that foreign tax credits generated from 401k plan investments in accounts owned by John Hancock Life Insurance Company are not considered "plan assets" under ERISA. Consequently, the Court determined that JHLIC was not a fiduciary under ERISA and did not violate any fiduciary duties or prohibited transaction rules by failing to pass these foreign tax credits on to its 401k plan clients.

Source: Erisapracticecenter.com, March 2025

Employee Benefit Question: Are Summary Plan Descriptions Supposed to Be Easy to Read?

Navigating the intricacies of employee benefit plans can lead to questions that you may be reluctant to ask -- perhaps they seem too fundamental, or you're unsure how to start. This series addresses some of the most frequently encountered inquiries regarding employee benefits, empowering you to tackle the details with assurance. This article answers the question, "Are summary plan descriptions supposed to be easy to read?"

Source: Employeebenefitslawreport.com, March 2025

How America Saves 2025 Preview: Five Key Takeaways

Today, Vanguard offered a preview of its highly anticipated "How America Saves" research for 2025, with the full report set to be released this June. In 2024, participant outcomes showed impressive resilience, largely due to plan sponsors adopting automatic solutions and capitalizing on human inertia to guide decision-making. This is just one of several trends highlighted in the upcoming 24th edition of this annual analysis of retirement saving behaviors. This article reviews some key insights from the early release of the study.

Source: 401kspecialistmag.com, March 2025

IRI Reveals Top Retirement Legislation Priorities for 2025

The Insured Retirement Institute introduced its 2025 Federal Retirement Security Blueprint, emphasizing the importance of maintaining current tax treatment for retirement savings and promoting the use of protected, guaranteed lifetime income solutions. Unveiled during a press conference, the Blueprint includes 33 proposals aimed at enhancing retirement security for American workers and retirees. IRI President and CEO Wayne Chopus expressed hope for collaboration with Congress and the administration to implement these policies and help more Americans achieve financial security in retirement.

Source: 401kspecialistmag.com, March 2025

Schwab Self-Directed 401ks Finish 2024 With 13.6% Gain

As of the end of the fourth quarter of 2024, the average self-directed 401k balance at Charles Schwab reached $352,605, reflecting a 13.6% increase from the previous year. This data comes from Schwab's SDBA Indicators Report, which tracks investment activity in self-directed brokerage accounts. There was also a 1.5% rise from the third quarter of 2024, when the average balance was $347,437. SDBAs allow participants in workplace retirement plans, including 401ks, to invest their retirement savings in a variety of individual securities beyond the plan's standard offerings.

Source: 401kspecialistmag.com, March 2025

Plan Sponsors Driving 401k Industry Consolidation

The Harvard Business Review article "The Consolidation Curve" highlights the trend of consolidation in fragmented industries, which is becoming evident in the defined contribution industry. As plan sponsors become more proactive, they are increasingly focusing on advisor due diligence and the request for proposals, leading to further consolidation among advisors, similar to the earlier trend with recordkeepers. Advisors that have been vetted and possess scale, technology, marketing, and branding capabilities will gain more influence as they are better positioned to compete for participant services against recordkeepers.

Source: Wealthmanagement.com, March 2025

An ERISA Journey for ESG Via American Airlines by Way of Utah?

In 2025, U.S. district court decisions highlighted the ongoing debate over the permissibility of integrating environmental, social, and governance goals into ERISA-governed investing. Supporters of ESG investing can reference "State of Utah v. Micone," which upheld the Department of Labor's 2022 "tiebreaker" approach favoring ESG considerations. Conversely, opponents might cite "Spence v. American Airlines," which determined that the defendants violated their duty of loyalty by allowing proxy votes that supported ESG initiatives not focused on the financial interests of plan participants. Although both cases involve similar legal principles, they emerged in distinct contexts, with private litigation likely having a more significant influence on future fiduciary practices than the litigation surrounding the DOL's regulatory stance.

Source: Wagnerlawgroup.com, March 2025

Sham Employment Terminations and Plan Distributions

To receive a distribution from a qualified retirement plan due to severance of employment, a participant must have a genuine termination of their employment. Sham terminations can create compliance issues for the plan. Usually, qualified retirement plan assets can't be distributed until a specific distribution triggering event occurs, as defined in the plan document. Severance of employment is a common triggering event. However, processing a distribution based on a sham termination can lead to operational failures, risking the plan's qualification and potentially resulting in negative tax consequences for both the participant and the employer.

Source: Retirementlc.com, March 2025

"America First Investment Policy" Calls for Updated Fiduciary Standards

The Trump administration issued a policy memo on February 21 directing the Secretary of Labor to establish updated fiduciary standards regarding investments in companies deemed as "foreign adversaries," particularly highlighting concerns about Chinese firms potentially using U.S. investments to develop technologies that could threaten national security. The memo instructs the DOL to revise fiduciary standards under ERISA concerning investment in public market securities of these foreign adversary companies, to safeguard U.S. investors' savings and promote American economic growth.

Source: Napa-net.org, March 2025

IRS Issues Proposed Regulations Regarding Mandatory Auto-Enrollment Under SECURE 2.0

The IRS has issued proposed regulations regarding the mandatory automatic enrollment requirements under the SECURE 2.0 Act of 2022, which builds on previous interim guidance from IRS Notice 2024-02. Starting with plan years after December 31, 2024, new 401k and 403b plans established after December 29, 2022, must include an eligible automatic enrollment arrangement. The recently proposed regulations clarify that a plan is considered established on the adoption date, irrespective of its effective date, and also provide guidance on how these automatic enrollment requirements will affect plan mergers and spin-offs.

Source: Ktslaw.com, March 2025

Mandatory Automatic Enrollment Is Here

Employers have long had the option to automatically enroll employees in their 401k or 403b plans to boost participation and encourage retirement savings. Due to the success of these automatic enrollment strategies, Congress has decided to make them mandatory. Starting in 2025, many plans that allow participants to make deferral elections will be required to automatically enroll their participants. This article reviews the key points regarding the new requirements.

Source: Ferenczylaw.com, March 2025

Recent Developments in Forfeiture Cases

This article examines recent developments in "forfeiture" litigation, focusing on claims made by plaintiffs, defenses raised by defendants, and court decisions on these matters. So far, five motions to dismiss have been ruled upon: two in favor of plaintiffs and three in favor of defendants, including a notable decision in the Thermo Fisher case. The article also reviews a new complaint against Knight Smith and a similar 2017 forfeiture complaint by the Department of Labor. Unlike other complaints, these recent pleadings assert that plan documents necessitate that forfeitures be used for plan expenses first before reducing employer contributions. The article raises the possibility that this new angle on forfeiture allegations could signal a trend in upcoming lawsuits.

Source: Wagnerlawgroup.com, March 2025*

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