February 2025 Digest

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, 403(b) 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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401k Loans: Debunking the Myths

The retirement industry has had ongoing discussions regarding the necessity and implications of 401k loans, with many believing that borrowing from retirement accounts jeopardizes long-term financial security for immediate needs. However, recent research suggests that retirement loans may be misunderstood. Insights from the Principal Retirement Security Survey—Loans and Withdrawals 2023, along with Principal Proprietary 2022 data, have uncovered misconceptions surrounding retirement plan loans, indicating a potential shift in perspective and approach to their use.

Source: Principal.com, February 2025

Why Are Employees Not Participating in Their 401k's?

Workplace retirement plans aim to ensure employees' financial security in retirement, but their effectiveness hinges on enrollment rates. Principal conducted a survey of eligible individuals who aren't currently contributing to their retirement plans to identify the barriers to participation. The survey revealed three key obstacles that hinder employees from enrolling in retirement plans.

Source: Principal.com, February 2025

ERISA Advisory Council Currently "On Ice"

The ERISA Advisory Council is currently inactive amid efforts by President Trump to reduce federal bureaucracy, including staff cuts in the Department of Labor's Employee Benefits Security Administration. Ali Khawar, the deputy assistant secretary of labor for EBSA under President Biden, notes that the council is a statutory body established by ERISA, meaning the administration cannot abolish it without legislative action. Khawar expresses concern over the potential for future recommendations to repeal the council, indicating it would be a lengthy and unfortunate process.

Source: Plansponsor.com, February 2025

2025 DC Survey: Plan Provider Service Ratings

Recordkeeper satisfaction among defined contribution plan sponsors is generally high, with an average Net Recommendation/Promoter Score exceeding 8 on a scale of 1 to 10, according to PLANSPONSOR's DC Survey. Jeff Cullen, CEO of Strategic Retirement Partners, notes that most of his clients are satisfied with their current providers and few are seeking alternatives. He emphasizes that "quality of service" and a "true partnership philosophy" are critical factors when choosing a recordkeeper. Cullen points out that variations in client experiences often stem from the quality of personnel assigned to their accounts, highlighting an area for potential improvement.

Source: Plansponsor.com, February 2025

SECURE 2.0 Provisions Should Boost Adviser Revenue in 2025

Most retirement plan advisers anticipate revenue growth this year due to the SECURE 2.0 Act of 2022, according to a survey by Fuse Research Network. About two-thirds expect revenue increases of at least 1%, with 59% anticipating a growth of 1% to 10% and 9% expecting over 10%. However, one-third of advisers do not foresee any revenue increase from the new provisions. The survey covered advisers with at least 10 DC plan clients, 79% of whom manage at least 25 plans.

Source: Planadviser.com, February 2025

Money Market Funds Damaged by "Flawed" SEC Amendments

A report from the Investment Company Institute has criticized recent amendments by the SEC aimed at improving redemption costs and liquidity in prime money market funds. The report argues that these amendments have harmed prime money market funds by causing "significant consolidation and reduced competition" within the institutional segment of the industry. While the ICI acknowledges the goal of enhancing fund resilience as a "worthy objective," it highlights the imposition of mandatory liquidity fees on prime institutional funds as the "most consequential change," made without public consultation.

Source: Planadviser.com, February 2025

Lawsuit Alleges Empower Misused Participant Data for Cross-Selling

Former employees of Swiss Re American Holding Corp. have filed a lawsuit against the company, its board of directors, the employee pension plan committee, and the recordkeeper Empower for alleged breaches of fiduciary duties under ERISA. Specifically, Empower is accused of providing improper rollover recommendations and using participant data for cross-selling. The lawsuit seeks class-action status and covers the period since January 2019.

Source: Planadviser.com, February 2025

How to Avoid Submitting Any Information to the DOL Lost and Found Database

The DOL's Lost and Found Database was established last year as part of SECURE 2.0, but its implementation faced several challenges, including decisions about the required information, the submission process, and whether participation would be voluntary. Despite these difficulties, plan sponsors can minimize their need to submit participant information to the database by using force-out distributions and automatic rollover IRAs, effectively reducing potential risks associated with the database.

Source: Penchecks.com, February 2025

Some New Twists on Forfeiture Reallocation Litigation: Podcast

Yet another 401k forfeiture fiduciary breach suit has been filed, but there are some key differences. And then there is a case that has been through several rounds of adjudication and though winning, has had to keep going back to court. In this podcast, Nevin Adams and Fred Reish examine the issues and potential implications, as well as a quick review of some recent updates.

Source: Napa-net.org, February 2025

Key Concerns for Navigating 2025 SECURE 2.0 Changes: Devil in the Details

A recent report indicates that SECURE 2.0 remains a top priority for plan sponsors over two years after its enactment, with 82% prioritizing the review and adoption of relevant updates. With over 90 changes introduced by the law, many plan sponsors feel overwhelmed and confused about maintaining employee retirement plans, especially with new provisions set to take effect in 2025. Staying informed and proactive on these updates is crucial, as it will enable plan sponsors to better support employees' financial well-being while ensuring compliance.

Source: Napa-net.org, February 2025

State Legislatures Continue Auto-IRA Push

State-level activity to expand retirement plan coverage marches on, as four state legislatures are considering bills to create state programs for private-sector employees whose employers do not offer a plan.

Source: Napa-net.org, February 2025

Do 401k Vesting Schedules Help With Worker Retention?

According to IRS rules, defined contribution plans must either immediately vest employer contributions or implement a cliff or graded vesting schedule. A cliff vesting schedule provides complete vesting at a specific point within three years, while a graded schedule allows for gradual vesting over six years. New research from Vanguard suggests that vesting schedules, traditionally used to encourage employee retention, may not be as effective as previously thought.

Source: Napa-net.org, February 2025

Judge Grants DOL Motion to Pause Fiduciary Rule Litigation

A federal circuit court judge has granted the DOL a 60-day pause on two cases challenging the fiduciary rule. This decision allows new DOL officials time to familiarize themselves with the issues before determining their course of action. The DOL requested this pause after the recent change in administration on January 20, 2025, as the new leadership is still onboarding and assessing the pending litigation.

Source: Napa-net.org, February 2025

The Most 401k Plan Errors

401k plans are complex systems involving various stakeholders, which can lead to frequent errors. As an ERISA attorney, Ary Rosenbaum frequently encounters specific recurring mistakes in these plans which he reviews here.

Source: Jdsupra.com, February 2025

401k Excessive Fee Class Action Lawsuits Proliferate in 2024

In 2024, excessive fee class action litigation under ERISA has increased by 35%, continuing a trend seen in other ERISA class action cases. The rise has been notable in the past six months, influenced by record-high settlements for plaintiffs over the previous three years. While some major cases have settled, plaintiff law firms are employing innovative legal strategies to initiate new lawsuits, including an uptick in forfeiture claims against defined contribution plans, excessive fee cases, and fraud claims under the Affordable Care Act. Additionally, the year has seen more claims against defined benefit plans, particularly around pension risk transfers, and an increase in fiduciary breach claims against health plans, including those related to tobacco and vaccine wellness programs.

Source: Hallbenefitslaw.com, February 2025

Supreme Court Declines to Address Circuit Split Over Arbitration Provisions in ERISA-Covered Plans

The U.S. Supreme Court has denied Tenneco's request to enforce an arbitration clause in its ERISA-governed retirement plan, leaving an ongoing circuit court split unresolved regarding the enforceability of such provisions. Tenneco and its subsidiary, Driv Automotive, faced a lawsuit from current and former employees who accused the company of mismanaging the retirement plan and violating fiduciary duties under ERISA. The employees alleged that the company's selection of poorly performing investment options resulted in significant financial losses in their retirement savings.

Source: Hallbenefitslaw.com, February 2025

How SECURE 3.0 Could Reshape the 401k Fiduciary Regulatory Landscape and Why That's a Good Thing

401k plan sponsors and fiduciaries are facing a potential significant regulatory change with the forthcoming SECURE 3.0 legislation, designed to modernize retirement plans, boost participation, and improve financial security. This law is expected to build on prior SECURE Acts, which expanded access to employer-sponsored plans and introduced lifetime income options. Experts believe SECURE 3.0 could fill gaps in the current retirement system, ensuring greater long-term financial stability for retirees. Future changes might also involve alterations to the tax treatment of ERISA plans to incentivize saving while easing regulatory burdens on businesses, influenced by shifting political dynamics.

Source: Fiduciarynews.com, February 2025

DOL Updated Voluntary Fiduciary Correction Program: Self-Correction or Self-Incrimination?

In January 2025, the DOL released an updated version of the Voluntary Fiduciary Correction Program, which includes the formal establishment of a self-correction component. This update, influenced by feedback on a November 2022 proposal, becomes effective on March 17, 2025. While VFCP does not charge a user fee, potential costs and the risk of DOL rejection for technical reasons may deter some from using it, especially for minor issues like late deposits. Additionally, plan sponsors risk investigation if they attempt to use the SCC multiple times for repeated violations. It is suggested that they improve their internal procedures instead.

Source: Ferenczylaw.com, February 2025

New Self-Correction Component under the DOL's Voluntary Fiduciary Correction Program

The Voluntary Fiduciary Correction Program provides a way for plan sponsors and fiduciaries to address and correct violations of ERISA before facing enforcement actions from the DOL. On January 15, 2025, the DOL updated the VFCP, making it more accessible and user-friendly. The amendments aim to encourage plan sponsors and fiduciaries to voluntarily correct issues by simplifying the process and broadening the scope of the program for addressing prohibited transaction errors.

Source: Faegredrinker.com, February 2025

Retirement Plan Participation, by Race/Ethnicity, 2023

This 6-page paper analyzes employment-based retirement plan participation data from the Current Population Survey, which started incorporating new retirement account variables in 2019. This data is beneficial because it focuses on individual workers rather than employers, allowing for a nuanced understanding of retirement participation based on worker characteristics. The study specifically explores variations in retirement plan participation among different racial and ethnic groups, while also considering how factors such as income, age, education, gender, and employer size influence these differences.

Source: Ebri.org, February 2025

How to Know if You Have Enough Saved for Retirement?

Retirement planning is crucial yet uncertain, with a common concern being whether individuals have saved enough. There isn't a universal answer, as the required savings depend on factors like lifestyle, expenses, and additional income sources such as Social Security. Instead of focusing on a single "magic number," individuals can use three different strategies to assess their retirement readiness.

Source: Conradsiegel.com, February 2025

President Issues Regulatory Freeze: Will the DOL Fiduciary Rule Saga Continue?

Since Donald Trump's inauguration on January 20, 2025, there has been a movement toward deregulation. On his first day, he issued a presidential memorandum called "Regulatory Freeze Pending Review," which functions similarly to an executive order. This freeze memo is particularly important as it could jeopardize the 2024 Retirement Security Rule, known as the fiduciary rule, which outlines the definition of investment advice fiduciary under ERISA. Since the fiduciary rule had not yet been implemented, the article reviews how the freeze memo will affect its progress.

Source: Carltonfields.com, February 2025

DESTINATION 2030: A Roadmap for the Future of Employer-Provided Benefits

Katy Johnson, President of the American Benefits Council, emphasized the importance of employer-provided health, retirement, and paid leave benefits for the well-being of many Americans. The Council introduced "DESTINATION 2030," a strategic plan aimed at protecting and enhancing these workplace benefits over the next five years, particularly in the context of upcoming tax and budget discussions. The plan is built on core values, including the preservation of ERISA and tax incentives for employer-sponsored plans. DESTINATION 2030 outlines the Council's approach to shaping future policy debates regarding employee benefits.

Source: Americanbenefitscouncil.org, February 2025

Lower Fees Could Drive Greater Managed Account Adoption Among Plan Sponsors

Defined contribution retirement plan sponsors are increasingly interested in providing personalized investment options for participants; however, access to managed accounts remains limited. A survey by PGIM DC Solutions reveals that 88% of plan sponsors believe personalized advice would enhance retirement outcomes. Despite this, only 60% of sponsors with assets over $100 million offer managed accounts, compared to just 35% of those with assets between $10 million and $99 million, indicating a significant gap in the availability of these solutions across different plan sizes.

Source: Planadviser.com, February 2025*

Generative AI, Email Scams Lead Cyber Fraud in 2024

According to research from Trustpair, a significant challenge in fraud prevention is that employees often do not adhere to established fraud prevention policies. Cybersecurity is anticipated to be a major business risk in 2025, with 90% of companies reporting cyber-fraud attempts in the past year, an increase from 79% in 2023. Cyber-fraud incidents, which encompass hacking, deepfakes, voice cloning, and sophisticated phishing schemes, rose by 14% year-over-year.

Source: Planadviser.com, February 2025

DC Retirement Plan Balances and Contributions Rising, Fidelity Reports

Fidelity Investments reported that retirement account balances reached record highs in the latter half of 2024, with an average of $132,300 in 401ks and $119,300 in 403bs. Contribution rates are also rising, approaching Fidelity's 15% savings guideline. More than two-thirds of employees (69%) and employers (67%) view retirement plans as essential benefits. In 401k plans, the average total contribution is 14.1%, with employers contributing 4.7% and employees 9.4%. For 403b plans, the average total contribution is 11.8%, comprising 3.3% from employers and 8.5% from employees.

Source: Planadviser.com, February 2025

The Pension Specialists Breach Exposes Data of 71,000 Participants

The Pension Specialists Ltd., a retirement plan third-party administrator, reported a data breach compromising the personal information of at least 71,443 individuals. Affected participants were notified recently about the breach, which occurred during a network disruption on February 24, 2024. An investigation revealed unauthorized access to certain files between February 18 and February 20, 2024. The company engaged cybersecurity experts and conducted a thorough review, ultimately determining on December 16, 2024, that personal information may have been exposed.

Source: Planadviser.com, February 2025

KISS Advice to 401k Plan Sponsors

Attorney Ary Rosenbaum shares a connection between his admiration for the rock band KISS and the K.I.S.S. principle, which stands for "Keep It Simple, Stupid." They emphasize the importance of simplicity for 401k plan sponsors, suggesting that avoiding overcomplication can help protect both the plan and the sponsor from potential issues and liabilities. The article aims to highlight straightforward concepts that can assist in maintaining compliance and ease in managing retirement plans.

Source: Jdsupra.com, February 2025

An Emerging Trend in ERISA Class Action Litigation: 401k Forfeiture Suits

Litigation attorneys Monica Perkowski, Kayla Pragid, Lindsey Camp, and Todd Wozniak co-authored this article in the Employee Benefit Plan Review discussing the rise of ERISA class actions challenging the use of 401k plan forfeitures. Plaintiffs argue that offsetting future employer contributions with these forfeitures may violate fiduciary duties under ERISA. Although longstanding regulatory guidance permits this practice, the lawsuits present a new liability theory. The authors suggest that plan sponsors should reevaluate their forfeiture terms to ensure compliance and reduce litigation risks.

Source: Hklaw.com, February 2025

ERISA "Stock Drop" Cases: Should Plan Fiduciaries Rest Easy?

Prior to 2014, many federal courts utilized a "presumption of prudence" when assessing a fiduciary's decision to include employer stock in retirement plans. However, the U.S. Supreme Court's ruling in Fifth Third Bancorp v. Dudenhoeffer eliminated this presumption and revised the pleading standards for plaintiffs claiming breach of fiduciary duty when stock prices decline. Consequently, plaintiffs now face greater challenges in successfully pursuing such claims, although the risk of litigation remains. The 10-page column discusses the legal landscape before and after Dudenhoeffer and offers guidance for plan fiduciaries on minimizing their fiduciary risk.

Source: Dglaw.com, February 2025

IRS Proposes Regulations for the Roth Catch-Up Rule

On January 13, 2025, the IRS proposed new regulations providing guidance on the SECURE 2.0 Act's requirement for certain participants to make catch-up contributions exclusively on a Roth basis. These proposed rules come after IRS Notice 2023-62, which offered limited guidance and allowed a two-year administrative transition period, delaying the compliance date. With the 2026 deadline approaching, concerns within the retirement plan industry arise regarding plan sponsors' ability to implement the rule effectively and address various related issues. The IRS's proposed regulations aim to clarify many of these concerns and responsibilities surrounding the rule's implementation.

Source: Ajg.com, February 2025

Missing Participants and Fiduciary Responsibility

Missing participants pose significant challenges for plan sponsors, leading to long-term liabilities, increased costs, and fiduciary risks. The DOL is actively scrutinizing how plan sponsors locate and distribute benefits to these participants, even asserting fiduciary duty breaches in cases of inadequate searches. In January 2021, the DOL provided best practices for finding missing participants and documenting efforts. In January 2025, the DOL introduced a temporary enforcement policy allowing plans to send small account balances of missing participants to a state's unclaimed property program. This 6-page white paper reviews the issue in some detail.

Source: Ajg.com, February 2025

DOL Adds Self-Correction Component to Voluntary Fiduciary Correction Program Update

On January 15, 2025, the DOL finalized updates to its Voluntary Fiduciary Correction Program, with the new rules set to take effect on March 17, 2025. The most notable update includes the introduction of two new self-correction features for common plan failures. Additional changes involve alternative correction methods for prohibited transactions related to certain below-market interest rate plan loans, as well as corrections for transactions involving the plan and interested parties. This article emphasizes the newly established self-correction opportunities.

Source: Truckerhuss.com, February 2025

Expansion of Roth Contributions in Workplace Retirement Plans

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: Spconsultants.com, February 2025

Three Key SECURE 2.0 Provisions Effective in 2025

The SECURE 2.0 Act of 2022 expands on the original SECURE Act of 2019 and includes over 90 provisions aimed at improving retirement savings. Key objectives of the act include helping individuals save more effectively, enhancing access to retirement plans, and increasing the flexibility of savings options. While most provisions are already in effect, some important changes aimed at boosting retirement savings will take effect in 2025. They are reviewed here.

Source: Spconsultants.com, February 2025

How Do Middle Class Americans Feel About Retirement?

Most middle-class Americans aspire to a long, fulfilling life and a comfortable retirement, which is integral to the American Dream. Representing about half of the U.S. population, the middle class is crucial for the economy, as consumer spending accounts for two-thirds of the U.S. GDP and drives growth. Insights into middle-class Americans' perceptions of retirement are highlighted in the 24th Annual Transamerica Retirement Survey, which explores their health, employment, finances, and outlook on retirement. This article reviews a few key findings from the survey.

Source: Spconsultants.com, February 2025

DC Retirement Plan Balances and Contributions Rising, Fidelity Reports

Fidelity Investments has reported record-high retirement account balances in the latter half of 2024, with the average 401k balance reaching $132,300 and the average 403b balance at $119,300. Contribution rates are also increasing, getting closer to Fidelity's recommended 15% savings rate (including both employer and employee contributions). According to Fidelity's 2025 workplace outlook report, 69% of employees and 67% of employers view retirement plans as essential benefits. In 401k plans, employers contribute an average of 4.7% of pay, while employees contribute 9.4%, totaling 14.1%. In 403b plans, employer contributions average 3.3%, and employee contributions average 8.5%, resulting in a total of 11.8%.

Source: Planadviser.com, February 2025

Federal Judge Reaffirms Biden Era ESG Rule

A federal judge in Amarillo, Texas, has once again dismissed the arguments from 26 Republican-led state attorneys general questioning the validity of the Biden Administration's ESG rule. This coalition had requested the court to rethink its previous decision upholding the rule following the U.S. Supreme Court's overturning of the Chevron doctrine in June. The Labor Department's rule permits sustainable investment options in 401k plans, using ESG factors as a "tiebreaker" when other investment considerations are equal.

Source: Napa-net.org, February 2025

Cybersecurity: Understanding the Threats That Cyberattacks Pose

Joshua Cook, an attorney specializing in cybersecurity, emphasized the importance of trust between service providers and their employees or clients during a webinar on February 5. He highlighted that acquiring and managing private information and operating systems involves significant commitments, with maintaining security being crucial. Cook pointed out the pervasive threat of cybercrime, citing that nearly 900,000 complaints were filed with the FBI in 2024. He warned that "the threat is ubiquitous," indicating that everyone is at risk of cyber threats.

Source: Napa-net.org, February 2025

How to Open a 401k for Your Small Business: A Step-by-Step Guide

401k plans are essential for small businesses as they help attract and retain talent, provide tax advantages, and support employees' financial futures. Offering these plans enhances a company's competitive edge in the job market and promotes employee satisfaction and loyalty. Modern providers have simplified the setup process, making it easier for small businesses to implement 401k plans. This article explores the benefits of providing a 401k, outlines different plan types, and offers a step-by-step guide to establishing a plan. It also addresses costs and financial considerations associated with 401k plans, as well as common challenges that businesses may face and strategies to overcome them.

Source: Myubiquity.com, February 2025

Understanding the Risks and Conflicts in the "Retailification" of Retirement Plans

This whitepaper examines the changing dynamics of retirement plans, focusing on the trend of "retailification," where institutions use their relationships to market retail products and services to plan participants. It discusses the associated risks and conflicts, explores ways to generate extra compensation, provides historical context, and offers future predictions. Additionally, the paper outlines strategies for effectively managing and mitigating these conflicts. Registration required.

Source: Multnomahgroup.com, February 2025

Is the Cybersecurity of Employee Benefit Plans the Employer's Problem?

U.S. employee benefit plans are increasingly targeted by criminals, with hackers stealing sensitive data and funds from retirement accounts, sometimes resulting in participants losing their life savings. Employers may assume that cybersecurity is the responsibility of financial institutions or service providers, like banks and health insurance companies, which are subject to strict regulations. However, employers also have a critical role to play in ensuring the cybersecurity of their benefit plans.

Source: Littler.com, February 2025

Do We Need a New Word for Retirement as Fewer People Give Up Work?

Traditionally, 'retirement' is defined as the time when individuals stop working. However, recent trends indicate that this definition is becoming less applicable. A report from Indeed Flex reveals that 88% of Baby Boomers are still in the workforce, including those aged 59-65, who traditionally might still be employed. For those aged 66-77, however, the expectation of retirement is shifting, as many find themselves working longer than previous generations. This suggests a change in the concept of retirement in modern society.

Source: Investmentnews.com, February 2025

DOL Issues Missing Participant and Lost and Found Guidance

The DOL has issued guidance on two topics: Missing Participants and Beneficiaries, along with the Retirement Lost and Found Program outlined in the SECURE 2.0 Act of 2022. The practical impact of these guidelines for plan sponsors is still uncertain. Some of the nine criteria for acceptable Supplementary Determination of Uniformity and Propriety outlined in the guidance may be challenging for plan fiduciaries to verify. As a result, fiduciaries can rely on the State Treasurer's assertions that these requirements are met, unless they have contrary knowledge.

Source: Ferenczylaw.com, February 2025

Comparing Seven Defined Contribution Plan Designs - 2025

Companies often seek assistance in designing their retirement programs to meet specific goals and objectives. Typically, employers are willing to allocate a certain budget for staff retirement benefits, depending on company profits. A common inquiry revolves around the maximum pre-tax deferral amounts for owners and highly compensated employees. When crafting a plan, factors such as the company's objectives, flexibility needs, ages and salaries of key personnel, and total budget considerations are examined. The article presents an analysis conducted for a company interested in establishing a defined contribution plan, which included 10 eligible participants, one of whom was the owner.

Source: Consultrms.com, February 2025

DOL Finally Allows Self-Correction of Late Contributions under VFCP-But With Catches

Effective March 17, 2025, the DOL has amended the Voluntary Fiduciary Correction Program to permit employers and plan fiduciaries to self-correct certain fiduciary breaches, including the common violation of late deposits of employee contributions. Previously, fiduciaries needed to file a VFCP application with the DOL to avoid excise taxes for prohibited transactions and to prevent further scrutiny. The updated VFCP introduces the Self-Correction Component, allowing self-correction without filing an application. While DOL will not issue a "No Action" letter in this process, excise tax relief remains available.

Source: Cohenbuckmann.com, February 2025

Missing Participants: New State Unclaimed Property Fund Option for Small Balances

On January 14, 2025, the DOL issued Field Assistance Bulletin 2025-01, allowing sponsors and administrators of defined contribution plans to transfer missing participant balances of $1,000 or less to the state unclaimed property fund linked to the participant's last known address. This option aims to help reunite individuals with lost assets, reflecting the success of state unclaimed property funds in returning billions in unclaimed property to owners. The DOL's temporary enforcement policy will remain in effect until formal guidance is provided.

Source: Benefitslawadvisor.com, February 2025

Avoiding the Snags of Long-Term, Part-Time Rules

The Long-Term, Part-Time rules, introduced in the SECURE Act of 2019, require retirement plan eligibility for employees aged 21 who have completed three consecutive years of service with at least 500 hours. Starting January 1, 2024, these rules will take effect, with modifications under SECURE 2.0, which allows eligibility after two consecutive years of service with at least 500 hours, effective January 1, 2025. The updated rules enable part-time employees to participate in retirement plans and address retirement savings disparities. Advisors should clarify that these rules pertain only to employee deferral contributions and do not mandate changes to employer contributions, though employers may choose to contribute to LTPT employees.

Source: 401kspecialistmag.com, February 2025

Student Loan Retirement Match Program Making a Big Impact at Candidly

The 2024 Candidly Impact Report highlights the significant benefits of the Student Loan Retirement Match program, which allows employers to match employee student loan payments with retirement contributions. Key findings include a 13.5% increase in first-time retirement plan participation and a 27% increase in employees maximizing their employer's match. Participants in the program contributed an average of $3,300 annually to retirement, leading to projected additional savings of $48,800 by retirement. Furthermore, the program correlated with a 58% reduction in employee turnover among participants.

Source: 401kspecialistmag.com, February 2025

Solo 401k Plans: A Quick Fix-It Guide

Operating a solo 401k can present compliance challenges similar to those in any 401k plan. Key considerations include keeping the plan updated with legal changes and adhering to its terms. However, solo 401k plans can also face specific issues. Here are three notable compliance challenges that may arise in managing a solo 401k.

Source: Verrill-law.com, February 2025*

Top Retirement Plan Trends to Watch in 2025

In 2024, the evolution of retirement plans has highlighted the shared responsibility of employees and employers in retirement planning, a trend set to continue into 2025. To retain top talent and aid employee future planning, plan sponsors are increasingly eager to adopt innovative strategies. This has led companies to seek assistance from advisory firms for tailored retirement plan design, implementation, and governance. Several key retirement plan trends are expected to emerge throughout the year.

Source: Planpilot.com, February 2025

401k Auto Feature in Works Despite Other Trump Priorities

The next generation of automatic features in 401k plans will allow employees changing jobs to choose between the default savings rate of their new employer or the higher rate from their previous employer. Mark Iwry, a senior fellow at the Brookings Institution, anticipates this innovation will be implemented within the next 24 months. He emphasized that the technology is available, and the focus is now on industry implementation and troubleshooting.

Source: Pionline.com, February 2025

Investment Menu Influences in Defined Contribution Plans: Considerations for Plan Sponsors

Designing an optimal investment menu for a defined contribution plan is challenging for fiduciaries due to the diverse demographics of participants. Decisions made at the plan level affect the investment experience for individuals. Best practices recommend that committees follow a thorough process for creating the menu and selecting managers, including maintaining a documented rationale for the choices made and ensuring diversification options. Ongoing monitoring of the investment lineup is essential, as well as consideration of external factors that may influence the DC investment menu. This paper discusses five of these influences.

Source: Dciia.org, February 2025

Avoiding the Snags of Long-Term, Part-Time Rules

The Long-Term, Part-Time status was established to address the needs of part-time employees who may not qualify for retirement plans and thus lack retirement savings. Advisors and consultants should inform their sponsor clients that this rule impacts only employee deferral contributions and does not mandate changes to employer contributions, such as safe harbor, matching, or profit sharing. Nonetheless, employers have the option to offer employer contributions to LTPT-eligible employees. This article reviews the new rule including potential pitfalls.

Source: 401kspecialistmag.com, February 2025

The Accelerating Adoption of Auto Portability: A Market Adoption Theory Perspective

Auto portability is an innovative solution aimed at reducing cashout leakage in retirement savings, a problem that occurs when employees withdraw their savings upon changing jobs instead of transferring them to their new employer's plan. As defined contribution recordkeepers and plan sponsors recognize its advantages, the adoption of auto portability is accelerating. This technology automates the transfer of retirement savings between plans during job transitions, helping to prevent significant losses -- estimated at $92 billion annually in the U.S. -- due to cashout leakage. By facilitating seamless transfers, auto portability preserves retirement savings and simplifies administration for both employees and plan sponsors.

Source: 401kspecialistmag.com, February 2025

2025 Outlook for Pension Legislation, Rules and Litigation

The new administration has quickly issued several executive orders and memoranda to reverse previous orders and initiate new agency actions, including a standard directive for agencies to withdraw unpublished materials as of Inauguration Day. Meanwhile, there are expectations for a bipartisan SECURE 3.0 bill, following the SECURE Act of 2019 and SECURE 2.0 Act of 2022, although it is unlikely to be finalized before 2026. This year will focus on gathering input through hearings and discussions. While agency rules are currently frozen, litigation against government rules continues, including participant lawsuits where the previous administration supported these cases. It is anticipated that the new administration may drop appeals against rulings that overturn previous rules and may take opposing stances in future legal matters.

Source: Segalco.com, February 2025

Common Examples of Breach of Fiduciary Duty That Result in Litigation

Fiduciary relationships in the business world include those between trustees and beneficiaries, investment advisors and clients, principals and agents, corporate directors and shareholders, and attorneys and clients. Understanding fiduciary duties -- along with how to uphold them and the consequences of breaches -- is essential for fostering productive relationships and avoiding costly litigation related to breach of fiduciary duty.

Source: Scarincihollenbeck.com, February 2025

Most Advisers Say Bitcoin and Digital Assets Misaligned With Fiduciary Duty

A survey by CoinShares International Ltd. reveals that financial advisers are cautious about recommending digital assets to clients due to concerns about their fiduciary duty. About 62% of advisers feel that suggesting speculative assets, such as bitcoin, conflicts with their obligation to act in clients' best interests, while 79% believe their role is shifting towards risk management as clients explore cryptocurrency independently. Over half of the 250 advisers surveyed are worried that promoting digital assets might harm their relationships with colleagues. While there is a growing willingness among advisers to consider digital assets, they seek independent education on the topic.

Source: Planadviser.com, February 2025

DOL Files to Pause Appeal of Fiduciary Rule

The DOL has filed a motion in the U.S. 5th Circuit Court of Appeals to pause its appeals in two cases regarding the DOL's fiduciary rule. The DOL stated that the new administration and agency officials need time to understand the cases. The opposing parties, including the American Council of Life Insurers and the Federation of Americans for Consumer Choice, are not opposed to this motion. The DOL requested to put the appeals on hold and provide status updates every 60 days.

Source: Planadviser.com, February 2025

What to Know About Part-Time Employee Eligibility for Retirement Plans

The SECURE 2.0 Act of 2022 introduces significant changes to the eligibility criteria for long-term, part-time employees in employer-sponsored 401k and 403b retirement plans. Laurie Lombardo from Voya Financial explains that employees aged 21 and older can now participate if they have either one year of service with at least 1,000 hours or two consecutive years with at least 500 hours. Employers must evaluate their part-time workforce to determine eligibility, and they face new administrative requirements. While some may choose the minimum compliance route, others might make part-time employees immediately eligible, potentially reducing administrative burdens.

Source: Planadviser.com, February 2025

Catch-Up Contribution Regulations Answer Many Questions

On January 10, 2025, the Internal Revenue Service proposed regulations aimed at clarifying ambiguities surrounding Super Catch-Up and Mandatory Roth Catch-Up contributions. This summary outlines key questions addressed by the Proposed Regulations. The regulations for Mandatory Roth Catch-Up contributions will take effect for taxable years beginning six months after the final rule is published, though plans may implement the rules for contributions made after December 31, 2023. Similarly, the regulations for Super Catch-Up contributions will become effective six months after the final rule, with plans able to apply them starting after December 31, 2024.

Source: Pbwt.com, February 2025

Judge Denies Request to Block DOGE From Accessing DOL Data

A federal judge has ruled that the plaintiffs, including the AFL-CIO, challenging the Department of Government Efficiency's access to data at the DOL do not have standing to sue. This decision allows DOGE to continue its operations for now. The plaintiffs had filed a complaint seeking to block the DOL from sharing sensitive information with DOGE, claiming violations of the Privacy Act and potential harm to employees. Judge John D. Bates acknowledged concerns about the defendants' conduct but ultimately dismissed the case due to a lack of alleged injury by the plaintiffs.

Source: Napa-net.org, February 2025

Schlichter Targets Massive 401k Plan With Forfeiture Suit

A new fiduciary breach lawsuit has been filed against Charter Communications, Inc. regarding its 401k Savings Plan. The law firm Schlichter Bogard, LLC is representing participant-plaintiffs Patrick O'Donnell, Wayne Saffold, and Mark Papenfuss, who claim to represent a class of participants and beneficiaries. As of December 31, 2023, the plan had over 102,000 active participants and nearly $7.87 billion in total assets. The case, titled O'Donnell et al. v. Charter Communications Inc., is similar to numerous previous lawsuits on the same issue, but it includes unique elements or claims.

Source: Napa-net.org, February 2025

IRS Issues Proposed Regulations Related to Mandatory Automatic Enrollment

On January 10, 2025, the IRS issued proposed regulations concerning mandatory automatic enrollment in certain 401k and 403b plans. These regulations reflect updates under Section 101 of the SECURE 2.0 Act of 2022, including adjustments to participant notice requirements established in sections 320 and 341 of SECURE 2.0. The proposed regulations also integrate earlier guidance on these automatic enrollment requirements from IRS Notice 2024-2. This article outlines the key provisions of these proposed regulations.

Source: Milliman.com, February 2025

Labor Department Updates the Voluntary Fiduciary Correction Program

On January 14, 2025, the DOL updated its Voluntary Fiduciary Correction Program for the first time since 2006. This program aims to encourage the voluntary correction of certain fiduciary violations in eligible transactions, helping to prevent potential enforcement actions and penalties from the DOL. The updated program has been simplified and expanded to facilitate less costly corrections, promoting more plans to address breaches of fiduciary duty under ERISA. A key addition is a self-correction feature, which was not available in the previous version.

Source: Milliman.com, February 2025

Puerto Rico Announces 2025 Limits on Qualified Retirement Plans

On January 23, 2025, the Puerto Rico Department of the Treasury released Internal Revenue Circular Letter No. 25-01, which details the limits for Puerto Rico qualified retirement plans for 2025. These limits are based on Section 401(a) of the U.S. Internal Revenue Code, as required by the PR Code. The announcement includes updated figures for annual compensation, benefits, and contribution limits, which align with the IRS's published retirement plan limits.

Source: Littler.com, February 2025

When Your 401k Financial Advisor May Have to be Fired

401k financial advisors often struggle because they lack the necessary ERISA background required for their roles, which leads to significant mistakes in managing their 401k clients. This article discusses the common errors these advisors may make and the potential consequences, including the possibility of losing their positions.

Source: Jdsupra.com, February 2025

Northern District of California Dismisses 401k Forfeiture Suit

In Hutchins v. HP Inc., the U.S. District Court for the Northern District of California dismissed the plaintiff's claims regarding the use of forfeited employer 401k contributions, ruling with prejudice. This case is part of a growing trend of class action lawsuits questioning whether using 401k forfeitures to offset future employer contributions violates ERISA. The court's decision underscores the need for carefully drafted plan provisions that specify the allowed uses of forfeitures and reinforces the importance for employers and plan fiduciaries to regularly review their plan documents to ensure compliance with legal standards.

Source: Hklaw.com, February 2025

Amazon Faces Class Action Lawsuit for Mismanagement of $350M in Forfeited 401k Plan Contributions

Amazon is facing a class action lawsuit from its retirement plan participants regarding the handling of forfeited 401k contributions. The plaintiffs claim that Amazon misused these forfeited funds to offset the company's contributions instead of using them to benefit participants by lowering plan fees. This lawsuit alleges a violation of fiduciary duty under ERISA. Similar actions have been taken against other companies like Bank of America and Wells Fargo for comparable issues.

Source: Hallbenefitslaw.com, February 2025

DOL Finalizes Update to Voluntary Fiduciary Correction Program

On January 15, 2025, the DOL announced updates to its Voluntary Fiduciary Correction Program and made final amendments to Prohibited Transaction Exemption 2002-51. The key change allows plan fiduciaries to self-correct late deposits of participant contributions and loan repayments, as well as certain loan errors, by simply filing a notice of correction with the DOL instead of a full VFCP application. These amendments will take effect on March 17, 2025.

Source: Groom.com, February 2025

SIMPLE IRAs vs 401k Safe Harbor Plans: What are the differences? - 2025

SIMPLE IRAs are often viewed as a cost-effective alternative to 401k Safe Harbor Plans for small businesses wanting to offer retirement savings options to employees. They feature lower administrative responsibilities due to simplified documentation and the absence of annual compliance testing or government reporting (Form 5500). This raises the question of whether small businesses should consider qualified plans like 401ks. This chart aims to compare SIMPLE IRAs and Safe Harbor 401k plans, particularly focusing on employers required to extend coverage beyond just the owners.

Source: Consultrms.com, February 2025

Presumed Guilty? The Cornell Decision Could Help Rein in Questionable ERISA Litigation

The U.S. Supreme Court recently heard a case involving Cunningham v. Cornell University, which addresses when a plan service agreement can be challenged. The decision could significantly influence ERISA litigation and attempts to curb speculative lawsuits. Fundamental legal concepts like standing -- requiring plaintiffs to demonstrate actual harm -0- and the need for reasonable suspicion of wrongdoing are essential to prevent frivolous lawsuits from overwhelming the courts.

Source: Cohenbuckmann.com, February 2025

2025 Benefit Limits and Annual Amounts all in One Place

The author describes themselves as a "benefit nerd," relying on printed charts of annual benefit plan limits for quick reference. Frustrated by the lack of a comprehensive online chart that includes both retirement and health plan limits, they decided to create their own. The goal is to provide a useful resource for others.

Source: Brickergraydon.com, February 2025

Cybersecurity: Form a Foundation of Trust

Joshua Cook, a cybersecurity attorney at the Wagner Law Group, emphasized the importance of trust in the relationship between service providers and their clients when handling sensitive information. In a February 5 webinar, he discussed how to establish and maintain this trust through effective cybersecurity measures. Cook highlighted the prevalent nature of cybercrime, noting that nearly 900,000 complaints were filed with the FBI in 2024, and warned that the threat of cybercrime is universal, affecting everyone.

Source: Asppa-net.org, February 2025

PEPs: A solution for non-integrated 401k plans

Pooled Employer Plans present significant benefits for companies managing multiple non-integrated 401k plans, particularly as businesses expand through mergers or acquisitions. While consolidating these plans is often a goal, challenges such as costs and timing can hinder the process. This multi-part series investigates how PEPs provide a streamlined and cost-effective solution for fragmented 401k structures. This first installment covers PEPs' support during mergers and acquisitions.

Source: Wtwco.com, February 2025

The DOL Adopts Self-Correction for Common Retirement Plan Fiduciary Breaches

For the first time since its inception in 2002, the DOL has updated its Voluntary Fiduciary Correction Program to include a Self-Correction Component. This new feature allows retirement plan sponsors to efficiently self-correct common compliance issues, such as late contributions and loan repayments. Additionally, an amendment to an existing prohibited transaction exemption has been finalized, offering excise tax relief for transactions that have been self-corrected. Both the SCC and excise tax relief will take effect on March 17, 2025.

Source: Pensionsandbenefits.blog, February 2025*

SECURE Act 2.0 Mandatory Automatic Enrollment Requirements for New Retirement Plans Guidance Released

The SECURE 2.0 Act of 2022 aims to boost participation in retirement plans, and on January 10, 2025, the IRS proposed regulations mandating automatic enrollment for new 401k and 403b plans. This follows the addition of Code Section 414A, which states that plans must meet specific automatic enrollment criteria to be considered qualified. The proposed regulations will take effect six months after the final regulations are issued. However, with potential changes in presidential administration and agency policies, there is uncertainty about whether these regulations will be finalized or altered. Plan sponsors are advised to continue complying with the proposed rules in good faith until they are finalized.

Source: Pensionsandbenefits.blog, February 2025

DOL Muddies the Water With Escheatment Guidance for Retirement Plans

The DOL has issued Field Assistance Bulletin 2025-01, which outlines a temporary non-enforcement policy allowing plan fiduciaries to escheat small retirement benefit payments to state unclaimed property funds for missing participants. The bulletin offers insight into the DOL's perspective on the fiduciary decision to voluntarily escheat benefits. However, the relief provided is limited and the DOL indicates that this non-enforcement policy is temporary, as it plans to consider issuing more formal guidance on escheatment in the future.

Source: Groom.com, February 2025

Allstate's 401k Turns Back Focus Fund Fiduciary Suit

The fiduciaries of the Allstate 401k plan have successfully defended against a lawsuit alleging a breach of fiduciary duty regarding their selection of target date funds and advisory services. The lawsuit, originally filed by plaintiff Cutrone with the help of Scott+Scott Attorneys and Michael M. Mulder, argued that the plan's fiduciaries failed to effectively leverage their large plan size to choose appropriate target date options, specifically criticizing the selection of Northern Trust Focus Funds, which the plaintiff claims have significantly underperformed compared to benchmarks and similar funds since their launch in 2010.

Source: Asppa-net.org, February 2025

Auto Enrollment Boost on the Menu in Two States

Legislation in two states aims to enhance retirement plan coverage by expanding automatic enrollment. This approach intends to increase participation in retirement savings plans by making enrollment automatic for employees, thereby broadening the impact and reach of these programs.

Source: Asppa-net.org, February 2025

DOGE Puts DOL in its Sights; Labor Groups Push Back

Labor groups, including the American Federation of Government Employees and the AFL-CIO, filed a lawsuit on February 5 challenging the Department of Government Efficiency and its authority over the Department of Labor. DOGE, created by an executive order from President Donald Trump and led by Elon Musk, has faced criticism for demanding access to sensitive government systems. The lawsuit claims that DOGE's authority over DOL violates the Privacy Act and the Administrative Procedures Act, and it was filed in the U.S. District Court for the District of Columbia.

Source: Asppa-net.org, February 2025

Got COLA? The IRS Does

The IRS has released a detailed chart outlining over 20 rates and thresholds for retirement plans applicable for the current year, alongside the rates from 1989 to 2024. This chart provides essential information on compensation and contribution limits, particularly influenced by annual cost-of-living adjustments. It includes key limits related to defined benefit and contribution plans per the Internal Revenue Code Section 415, as well as specifics on SEP, SIMPLE, and IRA limits. The chart highlights changes in rates over the current decade and offers insights into longer-term trends from 1989 to 2019.

Source: Asppa-net.org, February 2025

House and Senate Reintroduce CITs in 403b Plans Legislation

Legislators have reintroduced two bills aimed at allowing the use of collective investment trusts in 403b plans. Named the Retirement Fairness for Charities and Education Institutions Act of 2025, the bills were presented in the House as H.R. 1013 and in the Senate as S. 424.

Source: 401kspecialistmag.com, February 2025

How ERISA Litigators Strengthen Plan Compliance and Risk Management: Video

In a one-on-one interview, Epstein Becker Green attorney Jeb Gerth discusses the importance of strategic ERISA plan design and administration, emphasizing that compliance alone is insufficient. He highlights how incorporating a litigation perspective can serve as a "stress test" to reveal potential legal vulnerabilities, such as discretionary decision-making and insufficient documentation. By proactively addressing these issues, plan administrators can reduce the risk of legal disputes and enhance the integrity of ERISA plans.

Source: Workforcebulletin.com, February 2025

Court's ESG Ruling Puts Pressure on Managers of 401k Plans

A recent ruling court found that American Airlines violated its fiduciary duty by allowing BlackRock, its 401k manager, to consider ESG factors in proxy voting for employees. O'Connor criticized BlackRock for its significant influence over the industry, claiming that ESG investments often underperform traditional ones. Although BlackRock is not a defendant in the case, the ruling could lead to similar lawsuits in the future, according to legal experts, as the judge seeks further information before determining damages. This decision may reshape the approach to ESG investing within retirement plans.

Source: Wagnerlawgroup.com, February 2025

ESG Court Ruling Could Prompt 401k Upheaval

A recent ruling by U.S. District Judge Reed O'Connor found that American Airlines violated its fiduciary duty by allowing its 401k manager, BlackRock, to consider environmental, social, and governance factors in investment decisions. This decision could potentially lead to "copycat" lawsuits in the 401k plan industry, prompting significant changes in how such plans are managed. Bloomberg reported that the case may influence the future approach to ESG investing in retirement plans.

Source: Wagnerlawgroup.com, February 2025

IRS Proposed Regulations on Catch-Up-As-Roth Contributions Effective January 1, 2026

On January 10, 2025, the IRS released proposed regulations regarding several provisions of the SECURE 2.0 Act. One key provision focuses on catch-up contributions for employees aged 50 and older in 401k, 403b, and governmental 457b plans. The IRS is open to public commentary on these regulations until March 14, 2025. Starting January 2026, employees who earned over $145,000 in FICA wages in the prior year will be required to direct their catch-up contributions to Roth accounts (after-tax contributions) for the following year. This changes the previous timeline established in Notice 2023-62, extending the implementation to taxable years beginning January 1, 2026.

Source: Tri-ad.com, February 2025

Is SECURE 3.0 on the Horizon?

SECURE 2.0, introduced over two years ago, significantly enhanced opportunities for Americans to save for retirement. As advisers, plan sponsors, and recordkeepers navigate the new provisions, legislators and policymakers are already considering potential developments for a SECURE 3.0. Observers and lobbyists are discussing possible advancements in retirement policy, as well as the challenges that may arise in future policymaking efforts.

Source: Planadviser.com, February 2025

Study Finds Most Corporate Retirement Plans Have Regulatory or Fiduciary Violations

A study by Abernathy Daley 401k Consultants found that 84% of retirement plans exhibit at least one potential violation of ERISA that may expose them to regulatory risks or indicate fiduciary failure. Examining over 764,000 Form 5500 filings, the analysis identified "red flag violations" in two categories: regulatory infractions, which were present in 43% of companies, and egregious plan mismanagement, found in 76% of American companies. As a result, Abernathy Daley estimates that over 600,000 U.S. companies could face potential fines, legal penalties, and fiduciary issues.

Source: Planadviser.com, February 2025

Trader Joe's 401k Plan Accused of Overinvesting in Balanced Fund

Six former Trader Joe's employees have filed a lawsuit against the grocery chain, its board of directors, and its investment committee, alleging mismanagement of the company's 401k plan. The lawsuit, filed in the U.S. District Court for the District of Massachusetts, claims that approximately 70% of the plan's assets -- nearly $2 billion -- were overconcentrated in the American Funds American Balanced Fund R4 in 2019 and 2020. The suit argues that the company continued to use the higher-fee R4 share class despite the availability of a more suitable version through a collective investment trust beginning in 2021.

Source: Planadviser.com, February 2025

You Can Transfer Balances of $1,000 or Less to State Unclaimed Property Funds, But Should You?

The DOL's Field Assistance Bulletin 2025-01 has raised concerns due to its timing and content. The bulletin references older reports from 2019 and 2014, making its relevance unclear, and complicating an already straightforward process. It provides temporary relief for fiduciaries transferring retirement plan benefits of $1,000 or less owed to missing participants to a state unclaimed property fund, but this comes with complex conditions. Critics argue that a simpler solution exists: transferring balances of $1,000 or less to an automatic rollover IRA.

Source: Penchecks.com, February 2025

The Trump Administration's Priorities for Retirement Plans: D.C. Pension Geek Podcast With Brad Campbell

In this recent episode of D.C. Pension Geeks, American Retirement Association CEO Brian Graff and former Assistant Labor Secretary Brad Campbell discussed the future of retirement plans under a potential second Trump Administration. They covered key topics such as the fiduciary rule, environmental, social, and governance considerations, litigation reform, and alternative investments, providing insights into the current landscape and upcoming changes in retirement policy.

Source: Napa-net.org, February 2025

2025 Puerto Rico Retirement Plan Limits

On January 22, 2025, the Puerto Rico Treasury Department issued Internal Revenue Circular Letter No. 25-01, which specifies the limits for retirement plans under Section 1081.01(a) of the Puerto Rico Internal Revenue Code for the year 2025. This includes cost-of-living adjustments published by the U.S. IRS in Notice 2024-80 and IR-2024-285 on November 1, 2024. These limits apply to taxable years beginning on or after January 1, 2025.

Source: Mcvpr.com, February 2025

The Do's and Don'ts of 401k Plan Provider Networking

The author reflects on his legal education, emphasizing that while academic performance was crucial for securing their first job, networking has proven to be more important for success in the retirement plan business. He highlights the significance of developing and maintaining relationships in their field, noting that there are both recommended practices and pitfalls to avoid. The article aims to provide insights into effective networking strategies.

Source: Jdsupra.com, February 2025

Things I Worry About: DOL Investigations and Unsuspecting Plan Sponsors

The DOL has released a fact sheet highlighting its recovery of nearly $1.4 billion for employee benefit plans, participants, and beneficiaries. A significant focus of their efforts has been on identifying "missing participants," particularly through their "Terminated Vested Participant Benefits Payments" program, which recovered approximately $429.2 million in the 2023-2024 fiscal year. Plan sponsors, fiduciaries, and their advisors are encouraged to assess and address the issue of missing participants following DOL guidelines.

Source: Fredreish.com, February 2025

CAPTRUST Fiduciary Update: January 2025

Every quarter, CAPTRUST Financial Advisor Drew McCorkle reviews the latest fiduciary lawsuits. In this quarter's recap, explore topics such as potential ERISA violations, conflicts of interest, proxy voting, and more.

Source: Captrust.com, February 2025

The DOL May Not Actually Want to Hear From You: New Guidance Streamlining the Voluntary Fiduciary Correction Program

The DOL has updated its Voluntary Fiduciary Correction Program, which has been in place for over 20 years, to facilitate plan sponsors in correcting specific fiduciary breaches. The revised VFCP now allows for self-correction of failures to timely remit contributions and loan repayments that were withheld from participants' salaries. Previously, administrators had to formally submit a request to the DOL, including full correction of the delinquency, to obtain a "no action letter" and avoid being accused of a fiduciary breach. The updated process, if other conditions are met, also prevents the DOL from claiming a prohibited transaction and provides an exemption from any excise tax related to such transactions.

Source: Beneficiallyyours.com, February 2025

The New Super Catch-up for 401k and 403b Plans

Effective January 1, 2025, plan sponsors may choose to implement a "super catch-up" provision for participants aged 60 to 63 at the end of 2025 and in subsequent years. This allows eligible participants in 401k and 403b plans to contribute an additional amount that is 150% of the regular annual catch-up limit. For the year 2025, this means the super catch-up contribution would be $11,250 (150% of the $7,500 catch-up limit). While the addition of this provision is optional, it must be made universally available to all participants across related plans.

Source: Belfint.com, February 2025

The Limits of Behavioral Finance

A new study titled "Smaller than We Thought? The Effect of Automatic Savings Policies" examines the limitations of inertia in behavioral finance and automatic enrollment in retirement savings. It highlights that job changes can disrupt retirement savings due to vesting issues and the resetting of automatic enrollment and auto-escalation mechanisms. While the report acknowledges that these automatic systems yield positive outcomes, it suggests that their effectiveness may be overstated. The authors propose reducing access to retirement funds before retirement and implementing mandatory savings instead of allowing an opt-out option to enhance savings outcomes.

Source: Asppa-net.org, February 2025

Recordkeepers Slowly Integrating AI in DC Plans

As consumers increasingly adopt artificial intelligence tools like ChatGPT, the retirement planning industry is exploring their impact. Research from Cerulli Associates indicates that a few defined contribution plans are already integrating AI into their management and back-office operations. A survey of defined contribution investment-only asset managers revealed that 16% expect AI to have a "significantly positive" impact on legal document summaries, while 23% anticipate a "moderately positive" effect and another 23% foresee "slightly positive" outcomes.

Source: 401kspecialistmag.com, February 2025

Trump Executive Order Means Any New DOL Regulation Requires Elimination of 10 Existing Ones

President Trump's "Unleashing Prosperity through Deregulation" executive order mandates that any federal agency, including the DOL, must identify at least 10 existing regulations to repeal for every new rule or guidance it proposes. This approach is expected to limit the introduction of new regulations by the DOL and its Employee Benefits Security Administration over the next four years. Rather than seeing an influx of new regulations, it's likely that existing ones will be vacated in line with this policy.

Source: 401kspecialistmag.com, February 2025

Breaking Through the Noise: Creative Strategies for 401k Advisors

Getting noticed online can be daunting due to the overwhelming noise of memes, viral videos, and breaking news. However, breaking through this chaos doesn't have to be complex; it requires creativity, relatability, and authenticity. Instead of trying to outshout the noise, focusing on meaningful messaging at the right time can be more effective. Simple ideas can have a significant impact. Here are five strategies to capture attention, along with essential follow-up steps to convert that attention into meaningful engagement.

Source: 401k-marketing.com, February 2025

The Year in ERISA Litigation: 2024 Trends and What We're Watching in 2025

ERISA litigation has significantly increased in recent years, with 2024 seeing a notable rise in lawsuits related to defined contribution and defined benefit plans, as well as health plan fiduciary breaches. The trend indicates that 2025 will likely be even busier. The document provides a comprehensive seven-page analysis of the 2024 litigation landscape and offers insights into expected developments in 2025.

Source: Willkie.com, February 2025

DOL Will Permit Self-Correction of Delinquent Contributions and Loan Payments Under Qualified Retirement Plans

On January 14, 2025, the DOL announced final updates to the Voluntary Fiduciary Correction Program, marking the first changes in nearly 20 years. The key improvement is the introduction of a self-correction process for small-dollar delinquent participant contributions and loan repayments, effective March 17, 2025. This change allows plan sponsors to correct certain prohibited transactions without needing prior approval from EBSA, thus avoiding civil penalties under ERISA. The streamlined procedure aims to assist with the correction of the most common issues within the VFCP, specifically targeting minor delinquencies.

Source: Sidley.com, February 2025*

Hands Off My 401k: American Retirement Savers Appreciate Their Plans Just the Way They Are

New research from the Investment Company Institute reveals that nearly 75% of Americans hold favorable views of 401k and similar defined contribution plans. The report, "American Views on Defined Contribution Plan Saving, 2024," emphasizes the benefits of employer-sponsored DC plans, such as employer contributions, diverse investment options, and tax-deferred growth. Sarah Holden, ICI Senior Director of Retirement and Investor Research, notes that 85% of participants find the tax benefits a significant motivator to save. The research indicates that most Americans, regardless of their retirement account status, trust the current system and do not favor changes.

Source: Prnewswire.com, February 2025

AI-Enhanced Fraud: A Growing Threat to Retirement Plans

Artificial intelligence is advancing rapidly, contributing to an increase in fraud and cyberattacks, particularly in phishing. Jeffrey Wu from DOL Cybersecurity LLC suggests that AI enhances the effectiveness of cybercrime by generating error-free messages, realistic images, and personalized emails using stolen information. This allows for more convincing and targeted phishing attacks, which can be automated. Wu notes that retirement plans are working to improve their defenses against the rise of AI-driven fraud, although the level of preparation varies among companies based on their size and available resources.

Source: Planadviser.com, February 2025

Virginia District Court Dismisses Suit Challenging Use of Managed Account as a Default Investment

On January 10, 2025, the U.S. District Court for the Eastern District of Virginia dismissed the claim in Hanigan v. Bechtel, where the plaintiff argued that the plan sponsor violated ERISA's fiduciary prudence standard by using a managed account as the plan's qualified default investment alternative. The plaintiff contended that for 65% of participants who did not provide personalized information, the managed account's approach was similar to that of a target-date fund but incurred higher fees ($458 more annually) and yielded poorer returns. The dismissal of the case raises important implications for the fiduciary responsibilities of plan sponsors.

Source: Octoberthree.com, February 2025

Retirement Plan Sponsors and Participants Get LA Wildfire Relief

The IRS has extended tax filing and payment deadlines for retirement plan sponsors and participants affected by the Los Angeles wildfires, with the new deadlines set until October 15, 2025. This extension will automatically apply to certain filings with the Pension Benefit Guaranty Corporation. The SECURE 2.0 Act of 2022 also permits plan sponsors to provide affected participants with access to their retirement savings and other assistance.

Source: Mercer.com, February 2025

DOL Issues Guidance on Retirement Plan Treatment of Missing Participants With Small Balances

The DOL has issued Field Assistance Bulletin 2025-01, offering new guidance for fiduciaries of ERISA-covered retirement plans. This Bulletin allows fiduciaries to transfer retirement benefits of less than $1,000 to a state unclaimed property fund temporarily. This update is notable given that the previous guidance from DOL Field Assistance Bulletin 2014-01 recommended rolling over benefits for missing participants to an individual retirement account. However, many employers have faced challenges in finding IRA providers that will accept small accounts and have been concerned about potential fees that could deplete these accounts.

Source: Mccarter.com, February 2025

SECURE 2.0 Administrative Pandemonium: Are You Keeping Up?

In recent months, there has been significant activity surrounding the implementation of SECURE 2.0 provisions, a set of laws enacted at the end of 2022 that impact retirement plans. Employer plan sponsors must make informed decisions regarding SECURE 2.0, carefully track these decisions, and ensure compliance with legal requirements. They should avoid impulsive reactions and seek guidance from benefits counsel and advisors to strengthen their processes and prevent future issues. There are still unresolved questions and considerations regarding these decisions that warrant careful thought.

Source: Hawleytroxell.com, February 2025

Anticipated Retirement Policies Under the Second Trump Administration

Lawmakers are considering the SECURE 3.0 Act to enhance retirement savings access for Americans. Proposed measures may involve simplifying the rollover process, establishing default investments in retirement plans, and increasing coverage for more workers. Additionally, President-elect Trump is anticipated to extend the 2017 Tax Cuts and Jobs Act, set to expire at the end of 2025, which could boost retirement savings through increased disposable income. Conversely, if Congress lets the legislation lapse, taxes on withdrawals from retirement accounts may increase.

Source: Hallbenefitslaw.com, February 2025

Southwest 401k Hit With Lawsuit for Underperforming Fund

A class action lawsuit was filed on Tuesday in the U.S. District Court for the Northern District of Texas by Sanford Heisler Sharp McKnight against Southwest Airlines Co., accusing the airline of breaching fiduciary duties under ERISA by mismanaging its Retirement Savings Plan. The complaint, representing over 60,000 plan beneficiaries, alleges that Southwest failed to remove the Harbor Capital Appreciation Fund, which holds over $2 billion in assets but has underperformed its benchmarks and similar funds for more than 15 years. The Harbor Capital Fund was selected as an investment option before 2010, and by December 2018, its performance lagged behind the Russell 1000 Growth Index and other alternatives, yet Southwest did not take action to replace it.

Source: 401kspecialistmag.com, February 2025

Vast Majority of 401ks Have a "Red Flag" Fiduciary or Regulatory Violation: Study

A recent analysis by Abernathy Daley 401k Consultants revealed that 84% of U.S.-based retirement plans show at least one potential ERISA red flag, indicating possible regulatory or fiduciary violations. The consultancy examined Form 5500 filings for 764,729 plans and identified over 600,000 companies at risk of fines, legal penalties, and fiduciary failures. Red flag violations are categorized into Regulatory Infraction Red Flags and Egregious Plan Mismanagement Red Flags, representing issues including infractions, fineable offenses, fiduciary failures, or plan malpractice.

Source: 401kspecialistmag.com, February 2025

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