December 2024 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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2025 Reporting and Disclosure Requirements for Calendar-Year Qualified Plans

This article outlines the reporting and disclosure requirements for calendar-year qualified plans in the United States. It includes a summary chart of the most common requirements and is intended solely for informational purposes, not as a replacement for professional legal, accounting, or actuarial advice.

Source: Wtwco.com, December 2024*

Higher Education and 403b Plan Litigation

Since 2015, universities have faced over 20 lawsuits related to DC plan fees, a shift from prior litigation focusing on for-profit 401k plans. The lawsuits typically accuse universities of offering excessive investment options, failing to replace costly underperforming investments, and imposing above-market fees for investment and recordkeeping services. Some claims also focus on issues like duplicative fees from multiple recordkeepers and misuse of forfeiture assets, as well as concerns regarding target-date fund selections. This article identifies four common claims in university lawsuits that higher education plan sponsors should pay close attention to. It then suggests actions that go beyond the basic fiduciary and governance best practices.

Source: Wtwco.com, December 2024

SECURE 2.0, Retirement Income, and Litigation Risk Lead the DC Menu for 2025

As 2025 approaches with significant political and regulatory uncertainty, defined contribution plan executives are urged to focus on proactive measures rather than reactive responses. Mikaylee O’Connor from NEPC highlights that uncertainty can lead to inaction, emphasizing the importance of implementing mandatory SECURE 2.0 requirements, evaluating appropriate retirement income products for employees, and reviewing plan documents to mitigate litigation risks. Michael Volo of CAPTRUST Financial Advisers notes the lack of clarity regarding retirement plan policies due to potential shifts in leadership and regulatory bodies in the coming year.

Source: Pionline.com, December 2024

IRS Provides Guidance on Application of SECURE 2.0 Act's Coverage of Long-Term, Part-Time Employees

The IRS issued Notice 2024-73, guiding the application of non-discrimination rules for long-term, part-time employees in 403b plans under the Internal Revenue Code. This follows modifications made by the SECURE Act and SECURE 2.0 Act, which changed eligibility criteria for these employees, now allowing them to make elective deferrals once they meet specific service requirements. Specifically, ERISA LTPT employees aged 21 or older can begin deferring contributions either after completing a year of service with at least 1,000 hours or after 24 months with at least 500 hours each year, with this counting only for periods starting from January 1, 2023.

Source: Jdsupra.com, December 2024

Hardship Distributions: Five Questions for Plan Sponsors

This article discusses key considerations for plan sponsors regarding hardship distributions from retirement plans. It presents five essential questions that sponsors should address. Overall, the article serves as a guide for plan sponsors to ensure their hardship distribution procedures are clear, compliant, and effectively communicated to participants.

Source: Ifebp.org, December 2024

Here Are the Biggest 401k Mistakes Each Generation Is Making

The 401k retirement plan, established 46 years ago, remains the most prevalent savings vehicle for employees. However, many individuals fail to fully understand their plans or optimize their savings effectively. Each generation has made notable mistakes with their 401k accounts. For Baby Boomers, a common issue is the low utilization of Roth 401k accounts, which offer tax-free withdrawals in retirement. Gen Xers often carry outstanding 401k loans, impacting their savings. Millennials and Gen Zers are encouraged to increase their savings rates and assess their investment choices to enhance their financial growth. Fortunately, there are still opportunities for individuals from all generations to rectify these issues.

Source: Fool.com, December 2024

How Johnson v. Parker-Hannifin Impacts Professional Fiduciaries and 401k Plan Sponsors

This article examines the implications of the Johnson v. Parker-Hannifin case, which involves allegations of the company's failure to adequately monitor investments, resulting in the use of high-cost share classes. This case has significant relevance for professional fiduciaries and 401k plan sponsors. Initially dismissed by a lower court, the plaintiffs appealed, and the U.S. Court of Appeals for the Sixth Circuit found merit in their claims, subsequently remanding the case for further proceedings. The article also notes a few steps 401k plan sponsors can take to better protect themselves.

Source: Fiduciarynews.com, December 2024

SECURE 2.0 Compliance in 2025: Key Guidance for 401k Plan Sponsors

Many 401k plan sponsors are feeling overwhelmed by recent legislative changes and the obligation to implement new options. Mercer recommends some degree of outsourcing to help manage these responsibilities. With the population aged 65 and older reaching a historical peak in the U.S., there is increasing pressure on plan sponsors to expand coverage and enhance financial flexibility, especially with SECURE 2.0 encouraging the inclusion of retirement income in plans. As SECURE 3.0 legislation is anticipated in 2025, Mercer suggests that plan sponsors focus on three key areas to optimize their limited resources in the upcoming year.

Source: Benefitspro.com, December 2024

DOL to Use SSA Data for Lost and Found Database

The DOL will enhance its Lost and Found database using information from Form 8955-SSA, which reports separated participants with vested benefits from ERISA-governed plans. This announcement was made by Lisa Gomez, head of the Employee Benefits Security Administration, during a December 13 hearing. Previously, the IRS restricted DOL's access to this information for privacy reasons, prompting DOL to seek voluntary data from the industry. Form 8955-SSA is submitted to the IRS and subsequently shared with the Social Security Administration to notify participants about their benefits when they apply for Social Security.

Source: Asppa-net.org, December 2024

Retirement Plan Forfeitures: A New Wave of Class Action ERISA Litigation

In the past year, numerous class action lawsuits have been filed against major U.S. companies regarding the alleged misuse of retirement plan forfeitures. The trend started in September 2023 with a lawsuit against Thermo Fisher Scientific, which claimed that the company's fiduciaries violated ERISA by using plan forfeitures to offset employer-matching contributions instead of covering administrative costs. While U.S. Treasury rules have allowed this practice for years, the plaintiffs argued it breached ERISA's fiduciary duties of loyalty and prudence. This article provides an overview of plan forfeitures and their regulation, analyzes the claims and defenses presented in these lawsuits, and summarizes initial court rulings. It concludes by offering recommendations for plan fiduciaries to reduce the risk of future legal challenges.

Source: Truckerhuss.com, December 2024

Safeguarding Retirement in the Age of Scams

Every year, millions of older Americans face scams and fraud that threaten their retirement security. Common scams include impersonations of government agencies, banks, investment schemes, fake sweepstakes, tech support fraud, and romance scams, with new variants continually emerging. The financial services industry, retirement plan sponsors, and participants can take proactive steps to reduce scam risks. This includes utilizing technology for account verification and monitoring, educating employees on identifying scams, and encouraging participants to recognize fraud indicators and add trusted contacts to help oversee their financial accounts as they age. This is a 22-page paper on the issue.

Source: Ssrn.com, December 2024

Honeywell 401k Case Dismissed

A federal court has ruled in favor of Honeywell, dismissing a lawsuit that accused the company of breaching fiduciary duties related to its 401k plan by using forfeitures to offset employer contributions. The plaintiff, Luciano Barragan, alleged that Honeywell violated ERISA by breaching fiduciary duties, abusing its authority, and engaging in prohibited transactions. However, the court agreed with Honeywell that it followed the plan guidelines and Treasury regulations, leading to the dismissal of the case without prejudice. Barragan has 30 days to amend the complaint to address the identified deficiencies.

Source: Psca.org, December 2024

Extension of Certain Proposed RMD Regulations

The IRS announced the extension of the effective date for certain provisions in the proposed required minimum distribution regulations, which were originally issued on July 19, 2024. The new effective date will apply no earlier than the 2026 distribution calendar year. The regulations include updates reflecting recent IRS guidance and changes from the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022. These updates affect various retirement plans, including defined benefit and defined contribution plans.

Source: Principal.com, December 2024

Key Terms and What They Mean

Retirement plans are subject to various legal requirements and terminology, making it essential for sponsors to grasp key terms and their implications for participants. To aid in this understanding, online definitions from the IRS are a useful resource, as well as definitions provided by the Department of Labor related to plans and compliance with the Employee Retirement Income Security Act.

Source: Plansponsor.com, December 2024

PSCA Survey Finds Good News on 401k Savings and Participation Rates

In 2023, contribution rates for 401k plans saw modest increases as both employers and participants contributed more after a decrease the previous year. This information comes from the Plan Sponsor Council of America's 67th Annual Survey of Profit Sharing and 401k Plans, which analyzed the plan-year experience of 709 401k plans. While contributions are not yet back to the record highs of 2021, the uptick indicates a positive shift in participation and funding.

Source: Napa-net.org, December 2024

How Does a Retirement Plan Provide Disaster Relief? (Part 1)

The term "disaster relief" invokes the image of the Red Cross and other care organizations rushing in with food, blankets, medical care and temporary housing to those impacted by an earthquake, flood, hurricane, or fire. But when it comes to a retirement plan, what is relief for a disaster?

Source: Klblawgroup.com, December 2024

Things That Shouldn't Impress You From 401k Plan Providers

The author reflects on a childhood experience in Brooklyn where a classmate falsely claimed to be wealthy, highlighting his insecurities despite his modest background. This anecdote serves as a metaphor for 401k plan providers who may boast about their offerings to attract plan sponsors, often emphasizing features that may not be truly valuable. The article aims to guide readers in discerning the genuine merits of 401k providers versus mere flashy claims.

Source: Jdsupra.com, December 2024

The Rise of Target-Date Funds: Closer Look at 403b Plan Investments

The Investment Company Institute and ISS Market Intelligence released a report titled "The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403b Plans, 2021." The report emphasizes the increasing adoption of target-date funds in large ERISA 403b plans. Since 2009, the percentage of these plans offering target-date funds has risen from approximately 50% to around 90% by 2021. Sarah Holden, ICI Senior Director of Retirement and Investor Research, noted that target-date funds provide a diversified investment solution that shifts from growth to income-focused strategies as the target-date approaches, making them a valuable option for retirement plan participants.

Source: Ici.org, December 2024

Pooled Employer Plans Top $10B in Assets

The article discusses the growth of the pooled employer plan market, which has exceeded $10 billion in assets and includes over 24,000 participating employers, according to Cerulli Associates. PEPs were established through the Setting Every Community Up for Retirement Enhancement Act of 2019, aimed at simplifying retirement plan management and reducing costs for employers. The market has shown steady adoption as businesses recognize the benefits of PEPs. Key factors motivating participation differ by employer size. Interestingly, the appeal of PEPs has also reached midsize businesses, indicating their advantages in alleviating administrative and fiduciary responsibilities. Overall, the article highlights the increasing acceptance and utility of PEPs in the retirement plan landscape.

Source: Planadviser.com, December 2024*

Top 10 Highlights from PSCA's Newest Survey of 401k Plans

In 2023, 401k plan contribution rates saw a modest increase as both employers and participants contributed slightly more than the previous year, although they have not yet returned to the record highs of 2021. This information is derived from the 67th Annual Survey of 401k Plans by The Plan Sponsor Council of America (PSCA). The survey indicates a rise in contributions, coinciding with plan sponsors focusing on the implementation of mandatory provisions from SECURE 2.0, along with decisions on optional provisions. Hattie Greenan, PSCA's director of research and communications, noted the dual focus of maintaining contributions while incorporating design features to support participant financial needs. This outlines the top 10 highlights from the survey.

Source: 401kspecialistmag.com, December 2024

What Is the Real Revenue Cost of Retirement Tax Incentives?

The Joint Committee on Taxation has projected that defined contribution plans will lead to a $1.4 trillion loss in federal tax revenue over the next decade, a figure that is expected to be central in upcoming tax policy discussions. However, industry advocates, including the American Retirement Association, argue that this analysis is misleading. They contend that the cash flow approach used by the JCT overstates the long-term revenue impact of tax benefits like retirement plan tax deferrals. Proponents favor a net present value model, asserting that it better reflects the true costs of these tax expenditures, as retirement plans are designed for long-term savings and tax recoupment occurs over many years. They criticize the JCT's methodology as failing to accurately assess the value of tax benefits over the necessary time frame for retirement savings.

Source: Psca.org, December 2024

What the Crystal Ball Says for 2025 Retirement Industry Trends

As the new year begins, industry experts are sharing predictions for the retirement sector, with a key trend being the rise of in-plan retirement income solutions. The Institutional Retirement Income Council expects a significant wave of innovation and adoption of these solutions by 2025, driven by growing interest from plan sponsors, providers, and participants. Additionally, a report from Mercer highlights that retirees face challenges in managing their savings throughout retirement, particularly in dealing with unexpected financial issues and sustainable spending. The IRIC also identified a few additional trends it believes will have a significant impact on retirement plans and participants in 2025.

Source: Napa-net.org, December 2024

A Deeper Dive Into the DOL's "CIA" Activities

Rep. Virginia Foxx has called for an investigation into the DOL's use of common interest agreements (CIAs) to share information from its investigations with plaintiffs in ERISA-related litigation. However, many ERISA attorneys, including those from both sides of the legal spectrum, expressed unfamiliarity with this practice and the associated statute. Alex Ryan, a partner at Willkie Farr & Gallagher, stated he learned about CIAs only through recent reports and noted that speculation existed about their use. Jerry Schlichter, a prominent attorney, confirmed that his firm has never utilized CIAs with the DOL and generated information independently. Similarly, Nate Ingraham from Thompson Hine also reported a lack of awareness regarding the DOL's use of these agreements. Overall, the responses suggest that CIAs may not be a widespread practice within the DOL.

Source: Napa-net.org, December 2024

Leave My 401k Alone! Looking for Tax Revenue in All the Wrong Places

In this opinion piece, the author discusses the significant tax deferral associated with 401k plans and other defined contribution plans, likening the pursuit of tax advantages to Willie Sutton's rationale for robbing banks. It highlights that this tax deferral is estimated to cost the U.S. Treasury between $185 billion to $200 billion annually. Critics argue this subsidy mainly benefits the wealthy and does not effectively increase overall retirement savings, suggesting that the lost revenue could be better utilized, particularly to bolster the Social Security trust fund, which is projected to face shortfalls by 2034. However, the author contends that taxing 401k plans to support Social Security would severely undermine workers' retirement savings and asserts that the tax deferral likely does not result in significant revenue losses for the federal government.

Source: Klgates.com, December 2024

GAO Analysis Misrepresents Case for DOL Fiduciary Rule

The Government Accountability Office released a report supporting the DOL's Fiduciary rule, claiming that investors could lose significant sums by buying mutual funds through brokers, particularly highlighting that bundled funds (those compensating brokers) yield lower gross returns compared to unbundled funds. The Investment Company Institute expressed doubt about the GAO's findings, suggesting that performance differences are negligible and unrelated to the compensation structure. Further investigation using standard financial models confirmed this, indicating no significant difference in gross risk-adjusted returns between bundled and unbundled funds, thus disputing the claim that investors face substantial financial risks when purchasing mutual funds through brokers.

Source: Ici.org, December 2024

CAPTRUST's 2025 Retirement Plan Industry Predictions

The retirement plan landscape is expected to undergo significant changes due to legislative shifts, economic conditions, and trends in plan design and participant engagement. In 2024, with stabilized economic conditions and the Federal Reserve cutting interest rates, retirement plan sponsors are focused on enhancing participant experiences and outcomes. Existing trends are accelerating while new ones are emerging. As 2025 approaches, employers will need to remain adaptable to navigate changes in investment options, regulatory adjustments, and evolving employee needs. CAPTRUST leaders provide insights and predictions for these upcoming developments.

Source: Captrust.com, December 2024

A Modest Proposal for Solving (At Least Part of) the ERISA Class Action Litigation Crisis

The article discusses the ongoing tension between legitimate excessive fee class actions against plan sponsors and fiduciaries and the high costs associated with defending such claims, particularly when they are deemed to have little merit. The author proposes a balanced approach: while encouraging plan sponsors and fiduciary liability insurers to take cases to trial, there is an alternative strategy that could be less costly in the short term. This strategy involves implementing a thoughtful litigation campaign that raises barriers to lawsuits and reduces costs for those that proceed. Additionally, the author suggests treating class action ERISA litigation as a commoditized type of litigation, allowing for more efficient and cost-effective handling of these cases.

Source: Bostonerisalaw.com, December 2024

IRS Delays Application of Certain RMD Final Regs to 2026 Distribution Calendar Year

The IRS announced in Announcement 2025-02 that certain future regulations regarding required minimum distributions will take effect in the 2026 distribution calendar year. This follows concerns raised by commenters about the proposed regulations amending specific Treasury regulations. Until these amendments are applicable, the IRS advises that taxpayers should apply a reasonable, good-faith interpretation of the existing statutory provisions.

Source: Asppa-net.org, December 2024

IRS Extends Deadline for Certain RMDs

The Internal Revenue Service and the Department of the Treasury on Wednesday issued an announcement stating that several aspects of required minimum distribution rules will not apply until 2026. The decision was made after commenters expressed concerns about challenges in implementing the final regulations.

Source: 401kspecialistmag.com, December 2024

Bipartisan Bill Introduced to Simplify Retirement Savings Distribution Options

The "Retirement Simplification and Clarity Act," a bipartisan bill introduced by Reps. Jimmy Panetta and Darin LaHood, aims to enhance flexibility and provide clearer guidance for Americans on retirement savings. The legislation addresses existing barriers and complexities, empowering individuals with better options and straightforward information for securing their financial futures. It specifically aims to reform the complicated 402(f) Notice process, which is issued to individuals leaving their employers and seeking distributions from their 401k plans, based on recommendations from the Government Accountability Office.

Source: 401kspecialistmag.com, December 2024

DOL Launches Retirement Savings Lost and Found

The SECURE 2.0 Act of 2022 introduced a new Section 523 to ERISA, mandating the creation of an online database called the Retirement Savings Lost and Found. This database aims to assist individuals in locating unclaimed retirement benefits by identifying the current plan administrators of employer-sponsored plans. On November 18, 2024, the DOL launched a Voluntary Information Collection Request to retirement plan administrators and recordkeepers to start populating the RSLF. The current RSLF is narrower in scope compared to earlier proposals and serves as a starting point for the database, while also addressing key concerns regarding data security and fiduciary responsibilities that were not fully resolved in previous proposals.

Source: Verrill-law.com, December 2024

Plan Sponsors Face Legal Challenges Over 401k Plan Forfeiture Use

ERISA was established to protect plan assets and impose legal responsibilities on fiduciaries. Typically, employers and their delegates are considered fiduciaries and must act in the best interests of the plans and their participants. Recently, several lawsuits have emerged against plan sponsors concerning the use of a plan's forfeiture account to lower future employer contributions in 401k plans, with around two dozen such cases currently pending. Although the future of these lawsuits is uncertain, employers may want to consider protecting themselves by amending their plan document to provide a predetermined, specific order in which forfeiture funds shall be used.

Source: Phelps.com, December 2024

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

As we approach 2025, new provisions from SECURE 2.0 will be implemented, impacting plan design, administration, and costs. Understanding these provisions will enable you to better advise your clients on how they may affect their plans. This knowledge will help you strategize necessary administrative changes and effectively communicate with participants. This article provides a detailed review of these provisions.

Source: Penchecks.com, December 2024

401k Plans, 2025, and the 401k Plan Sponsor

The article reflects on the changes in the 401k plan business since the author started in 1998, noting how different it is today compared to the past. It emphasizes the importance for plan sponsors to stay ahead of potential changes in 401k plans. This publication provides detailed insights.

Source: Jdsupra.com, December 2024

Half of Women Retirees Say Retirement Is Pricier Than They Expected

A recent survey by Morning Consult for Corebridge Financial reveals that only 20% of retired women feel their retirement matches their expectations, while 25% find it completely different from what they anticipated. The primary surprise for these women is the cost of retirement, with 50% stating it has been more expensive than expected. Despite 51% reporting their financial health as good or very good, 63% wish they had started saving earlier. Corebridge Financial's retirement services president, Terri Fiedler, noted the disconnect between expectations and reality in retirement experiences.

Source: Hrdive.com, December 2024

Crypto Investments and Your 401k: What's Being Done to Protect Your Retirement Savings?

This article by the U.S. Government Accountability Office discusses the introduction of cryptocurrency investments in 401k plans and the associated risks and regulatory concerns. It makes six key points. The article advises that while crypto might offer potential high returns, the volatility and regulatory environment pose significant risks to retirement security. The GAO recommends better data collection and regulatory oversight to protect investors.

Source: Gao.gov, December 2024

2025 Is Right Around the Corner: What's Lurking There for You?

In the past five years, retirement plans have faced numerous legal and regulatory changes, and more are expected in 2025. The upcoming year will bring obligations due to new laws and government guidance that may impact existing options. This summary aims to highlight key issues that plan sponsors should prepare for in 2025.

Source: Ferenczylaw.com, December 2024

Cryptocurrency in Retirement Plans

Bitcoin surpassed $100,000 in early December 2024, prompting a renewed discussion on the inclusion of cryptocurrency in retirement plans. Despite the appeal of adding crypto to such plans, concerns regarding its speculative nature and associated risks persist. In 2022, the DOL warned against including cryptocurrencies in 401k plans. The Employee Benefits Security Administration also advised plan fiduciaries to exercise caution when considering cryptocurrency options for investment menus. The article aims to detail these concerns, along with insights from industry experts.

Source: Conradsiegel.com, December 2024

34% of Gen Z Canadians Relying on Inheritance to Meet Retirement Goals: Survey

A recent survey by Vanguard Group Inc. reveals differing perspectives on inheritance among Canadians. While 34% of Canadians aged 18 to 34 view an inheritance as crucial for retirement, only 31% of baby boomers expect to leave money for their children. Over half of Gen Z respondents anticipate receiving an inheritance, but 39% don't see asset transfer as important. Additionally, 35% of those 55 and older are worried about needing their assets for health care, extended retirement, or living costs.

Source: Benefitscanada.com, December 2024

Planning for 2025: Employee Benefit Plan Changes Taking Effect

As the new year approaches and a new administration begins, changes to employee benefit plans will be implemented in 2025 due to existing laws like ERISA and the Setting Every Community Up for Retirement Enhancement Act of 2022. This summary highlights these upcoming changes and provides insights to help plan sponsors stay informed. It's important for plan sponsors to proactively review and adjust their plans to remain compliant with the new mandates.

Source: Bdo.com, December 2024

Retirement Industry Trends to Look Out for in 2025

A recent report from the Institutional Retirement Income Council suggests that as we approach 2025, there will be a significant increase in the adoption and innovation of retirement income solutions. This trend stems from both employers and participants seeking guaranteed income options in response to rising costs and lower savings. According to a 2024 Invesco report, 54% of participants would prefer to remain in their employer's plan post-retirement if it included a monthly payout feature. However, a separate Allianz Life study reveals that only 44% of Americans currently have a strategy for generating retirement income, even as plan sponsors are beginning to incorporate guaranteed income options. With the decline of traditional pensions, there is an anticipated growth in the demand for these retirement income features.

Source: 401kspecialistmag.com, December 2024

DOL Program to Reunite $1.65 Trillion of 401k Assets With Plan Participants Is Long Overdue; It's Also Little Threat to VC-Backed Startup

The article highlights the negligence in the management of retirement funds, particularly the issue of lost 401k assets, which has short-changed retirees by trillions of dollars. A staggering 25% of 401k assets are reportedly unaccounted for, highlighting a systemic failure that requires significant attention and resources to resolve. In response, a startup in New York City and a Washington D.C. agency are initiating efforts to address this issue. Federal regulators, particularly the DOL, are now taking steps to combat this fiduciary breach by launching a database that will help employees locate and reclaim their old 401k plans, a provision made possible by the 2022 SECURE 2.0 Act. The article includes insights from Gaurav Sharma, the CEO of the startup, in a Q&A format.

Source: Riabiz.com, December 2024

TIAA Survey Sees Growing Demand for Lifetime Income in Retirement Plans

A recent survey by TIAA reveals that while there is a growing interest in lifetime income offerings like annuities among employers, a significant 63% of respondents struggle to understand their value and importance. The survey, titled "Building a Better Retirement 2024," highlights the potential for increased adoption of these products following the SECURE Act, which aimed to simplify retirement savings through annuities. However, the lack of "annuity fluency" among decision-makers may impede their broader implementation in defined contribution plans.

Source: Prnewswire.com, December 2024*

The Role of Behavioral Finance in Retirement Plan Participation

Behavioral finance studies how human psychology affects financial decision-making and market movements. It posits that individuals often act irrationally, influenced by biases, cognitive shortcuts, and emotional behaviors, which can hinder their enrollment and success in retirement plans. By understanding these behavioral tendencies, plan sponsors can design retirement plans that better encourage employee participation and contributions, ultimately helping them achieve their savings goals.

Source: Planpilot.com, December 2024

Five Marketing Tips for 401k Advisers in 2025

As plan advisers aim to expand their client base in the new year, standing out in a cluttered information landscape is crucial. Rebecca Hourihan, founder and chief marketing officer of 401k Marketing LLC, shared her insights on effective lead-generating campaigns for 2025 during a conversation with PLANADVISER. In this article, she highlighted five key areas that advisers should focus on to enhance their marketing efforts and attract new clients.

Source: Planadviser.com, December 2024

IRS Issues 2024 Required Amendments List for Qualified Plans and 403b Plans

The IRS issued Notice 2024-82, which outlines the 2024 Required Amendments List for qualified plans under IRC sections 401(a) and 403(b). This RA List indicates the deadline for plan amendments necessary to comply with recent legislative and regulatory changes that affect these plans, applicable to both individually designed and pre-approved plans. Each year's RA List includes changes for which the IRS has provided guidance or determined that no guidance is needed. The 2024 RA List includes amendments related to the SECURE Act, the Bipartisan American Miners Act, the CARES Act, the Relief Act, and the SECURE 2.0 Act.

Source: Milliman.com, December 2024

QPAM Amendments Impact on CITs: What Banks and Their Advisers Need to Know

Effective June 17, 2024, the DOL has adopted significant amendments to Prohibited Transaction Exemption 84-14, known as the "QPAM exemption." This exemption allows investment funds, including collective investment trusts for employee benefit plans under ERISA, to conduct transactions with parties in the interest of those plans, provided the fund's asset management is under the discretionary control of a qualified professional asset manager. This article discusses the origins and objectives of the Sole Responsibility Requirement within this framework and its implications for arrangements between banks and investment advisors concerning CITs. It posits that if banks and advisors follow specific guidelines, they can ensure compliance with the exemption, thereby enabling them to engage in transactions with parties in interest associated with their CITs.

Source: Klgates.com, December 2024

Reform QDIAs, ERISA Advisory Council Urges DOL

The ERISA Advisory Council has made significant recommendations to the DOL concerning qualified default investment alternatives. These recommendations include the creation of a "tips document" to assist fiduciaries in selecting QDIAs that incorporate lifetime income options, enhancements in QDIA disclosure, and the inclusion of QDIAs in individual retirement accounts. QDIAs serve as the default investment choice in defined contribution plans, which is increasingly relevant due to the rise of automatic enrollment practices that place participants into QDIAs without their active involvement.

Source: Asppa-net.org, December 2024

Keeping Participant Data Safe: Duty Bound

Cybersecurity is essential for protecting retirement plans and participant data, as emphasized by industry experts Bonnie Treichel from Empower Retirement and Matt Johnson from Alpha Guard during a webinar hosted by Broadridge titled "Retirement Plan Cybersecurity: Keeping Your Participant Data Safe." They highlighted that prioritizing cybersecurity is not only wise and prudent but also a critical duty for organizations.

Source: Asppa-net.org, December 2024

UnitedHealth Group Agrees to Historic $69 Million 401k ERISA Settlement

UnitedHealth Group has agreed to pay $69 million to settle the Snyder v. UnitedHealth Group ERISA class action lawsuit concerning underperforming investment options in its 401k plan. This settlement is reportedly the largest in an ERISA case of its kind. The settlement is pending review and approval by Judge John R. Tunheim of the District Court for the District of Minnesota, with a hearing date yet to be determined.

Source: 401kspecialistmag.com, December 2024

Take the 'Hard' Out of Hardship Distributions With a Substantiation Policy

The article discusses the evolving substantiation requirements for hardship distributions from defined contribution DC retirement plans, highlighting the challenges faced by plan sponsors. As Congress and the IRS modify these requirements, sponsors must balance the need to prevent excessive withdrawals (leakage) from retirement plans with the need to support participants in financial distress. Although recent legislation has eased the criteria for hardship distributions, some sponsors remain cautious about making changes. The article suggests that establishing a clear substantiation policy for hardship distributions could help mitigate risks for the plans while still providing needed support to participants.

Source: Reinhartlaw.com, December 2024

Most SECURE 2.0 Plan Design Options Fully Available for 2025

The SECURE 2.0 Act, passed in December 2022, introduced over 90 provisions aimed at enhancing defined contribution plans, building on the earlier SECURE Act from December 2019. These provisions have staggered effective dates to allow the Treasury Department and the IRS to provide necessary guidance and for recordkeepers to update their systems. Although final guidance is still pending in some areas, the Treasury and IRS have provided enough information for recordkeepers to implement the new plan design options available under SECURE 2.0. This article discusses some of the more relevant provisions for plans in 2025.

Source: Segalco.com, December 2024

Rothification, AI Advancements Among Expected Retirement Plan Trends for 2025

Looking ahead to 2025, Amber Brestowski from Vanguard discusses anticipated trends in retirement plans that plan sponsors should consider. Key predictions include a focus on tax efficiencies, the rise of Roth contributions -- expected to be included in nearly all plans by 2026 -- and the integration of artificial intelligence in retirement services. Brestowski highlights that AI will enhance the efficiency of call centers by providing service associates with valuable data insights into participants' financial needs, ultimately improving support for retirement savers.

Source: Plansponsor.com, December 2024

Annual Outlook Projects Compliance, Due Diligence, Well-Being Will Be Essential to Plan Success in 2025

In 2025, employers are expected to prioritize basic retirement plan administration and management, as highlighted in Hub International Ltd.'s "2025 Retirement & Private Wealth Outlook." The report emphasizes the importance of compliance and due diligence to mitigate risks of litigation, regulatory issues, and cybercrime, which are crucial for the long-term viability of retirement plans. Additionally, plan sponsors are shifting their focus not only on current employees but also on managing the trend of former employees remaining in the plan after leaving or retiring.

Source: Planadviser.com, December 2024

DC Advisers Interested in Retirement Income Solutions, but Still Hesitant

A recent report by Escalent Inc. highlights the growing trend among retirement plan advisers to recommend retirement income solutions. As of September, 30% of defined contribution plan advisers surveyed indicated they are currently recommending such solutions, a rise from 26% in 2023 and 21% in 2022. This percentage is expected to increase, with 40% planning to suggest these solutions in the future. Among the various options, systematic withdrawals are the most popular, with 40% of advisers endorsing them for providing a regular paycheck in retirement. Other recommended solutions include income-producing bond funds (33%), target-date funds that incorporate guaranteed income (33%), managed accounts with annuities (24%), out-of-plan annuities (22%), and in-plan immediate annuities (20%).

Source: Planadviser.com, December 2024

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

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

Source: Pionline.com, December 2024

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

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

Source: Pionline.com, December 2024

"Astronomical" Claims Crash Again in Excessive Fee Suit

This article discusses a ruling in a legal case involving excessive fee claims against a retirement plan. A federal court dismissed the lawsuit, which had made "astronomical" allegations about the fees charged to participants, stating that the claims were not substantiated. The decision highlights the challenges plaintiffs face in proving excessive fee claims and reinforces the need for credible evidence. The article emphasizes the importance of this ruling in shaping future litigation related to retirement plan fees.

Source: Napa-net.org, December 2024

What the 2025 Tax Debate Could Mean for 401ks

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

Source: Napa-net.org, December 2024

Employee Benefit Plans: Important Considerations for Year-End and 2025

As the 2025 plan year approaches, plan sponsors should take the opportunity to review their plan documents and policies, consider potential design changes, and ensure compliance with new legislative and regulatory requirements. While this overview focuses on key updates affecting retirement and health plans, it's essential to note that for 2024, no amendments are required unless discretionary changes have been made. The SECURE 2.0 Act of 2022 introduces several mandatory and optional provisions that are already in effect, making this an important time for plan sponsors to assess their plans.

Source: Mwe.com, December 2024

When 401k Plan Sponsors Have to Say No

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

Source: Jdsupra.com, December 2024

RMD Comparison Chart (IRAs vs. Defined Contribution Plans)

This article from the IRS provides a comparison of the Required Minimum Distributions for Individual Retirement Accounts and defined contribution plans. It outlines key differences and similarities in how RMDs are calculated and when they must begin for both types of accounts. The article emphasizes the importance of understanding the rules to avoid penalties for missed RMDs.

Source: Irs.gov, December 2024

17 Tips for 401k Loan Program Design

The article outlines strategies for 401k plan sponsors to manage participant loans effectively while promoting retirement security. To help plan sponsors implement loan options while mitigating potential drawbacks, 17 ideas are suggested here. These aim to educate participants, minimize the perception that loans are endorsed for nonretirement purposes (the endorsement effect), reduce outstanding loan balances, and prevent defaults, regardless of employees' job stability.

Source: Ifebp.org, December 2024

Annuities Are the Antithesis of Fiduciary Prudence: Commentary

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

Source: Fiduciaryinvestsense.com, December 2024

SECURE 2.0 Permits Employer Roth Contributions

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

Source: Ferenczylaw.com, December 2024

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

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

Source: Encorefiduciary.com, December 2024

What Is a plan document?

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

Source: Employeebenefitslawreport.com, December 2024

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

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

Source: Compliancedashboard.net, December 2024

How Smart Is Your Retirement Plan Design?

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

Source: Bofa.com, December 2024

Staying Off the Fiduciary Naughty List: Nevin and Fred

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

Source: Asppa-net.org, December 2024

Is Matching Student Loan Repayments Worth the Cost for Employers?

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

Source: 5500audit.com, December 2024

Dressing Up Traditional Automatic Rollovers

Tom Hawkins discusses the shortcomings of traditional automatic rollover IRAs, which often lead to high-fee options that fail to serve the best interests of participants. He critiques the marketing of "world-class" services that simply repackage these ineffective IRAs with superficial enhancements. Instead of these gimmicks, Hawkins advocates for a low-fee transitional safe harbor IRA that effectively maintains small-balance retirement savings until they can be rolled into a current employer's plan or another IRA, ensuring better financial management for former participants.

Source: 401kspecialistmag.com, December 2024

Year-End Considerations for Employer-Provided Retirement Plans

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

Source: Rrlawpc.com, December 2024*

The Mechanics of Matching

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

Source: Plansponsor.com, December 2024

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

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

Source: Plansponsor.com, December 2024

401ks and the Courts in 2025

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

Source: Planadviser.com, December 2024

Missing Pension Plan Members in Canada

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

Source: Niageing.ca, December 2024

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

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

Source: Napa-net.org, December 2024

2025 DC Plan Compliance Calendar

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

Source: Mercer.com, December 2024

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

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

Source: Littler.com, December 2024

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

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

Source: Gao.gov, December 2024

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

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

Source: Fiduciaryinvestsense.com, December 2024

2025 Changes in Catch-Up Contributions Available

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

Source: Ferenczylaw.com, December 2024

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

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

Source: Encorefiduciary.com, December 2024

401k Annual Administration: A Checklist for 2025

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

Source: Employeefiduciary.com, December 2024

How Well Does Automatic Enrollment Work?

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

Source: Asppa-net.org, December 2024

Long-Anticipated VFCP Changes May Be Issued Soon

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

Source: Asppa-net.org, December 2024

Debt is Limiting American Retirement Savings

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

Source: Allianzlife.com, December 2024

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