Insight: Studies, Research, Analysis, or Papers

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

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

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

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Fiduciary and Plan Governance

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

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

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

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Items of Special Interest to Advisers or Other Service Providers

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

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

Automatic 401k Plan Features

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

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Court and Legal

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

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

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Compliance and Regulatory

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

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

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

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

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

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Marketplace News

Morningstar Drops Recommended Safe Withdrawal Rate to 3.7%

KWP Growth Partners Highlights Retirement Plan Industry Innovators

This eNewsletter is a digest of information published by a variety of web-based sources on 401k and related issues and is published as a service to our users. 401khelpcenter.com, LLC is not the author of the material unless specifically noted.