Five Fiduciary Resolutions for 2025
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In This Issue
Fiduciary and Plan Governance Five Fiduciary Resolutions for 2025 This is the time of year when resolutions for the cessation of bad behaviors and the beginning of better ones are in vogue. Here are five for plan fiduciaries for 2025. Source: Napa-net.org The Why, What and How of Plan Benchmarking A review of methods for assessing retirement plan costs reveals their importance, as highlighted by Callan's 2024 DC Trends Survey. Approximately two-thirds of plan sponsors plan to conduct a fee study in 2024, with many likely to evaluate various fee types, including managed account service fees and indirect revenue. There is also a significant trend towards adopting lower-cost investment options, with half of the respondents indicating they may switch to cheaper vehicles, an increase from 42% in 2023. Many sponsors have successfully reduced fees after benchmarking their plans. Source: Plansponsor.com Retirement Plan Benchmarking: "More Art Than Science" Experts emphasize that evaluating retirement plans requires a more nuanced approach than just assessing costs and investment performance. Jamie Curcio points out that assessing a company's retirement plan against its peers should be tailored to the specific company. The fiduciary obligation for plan sponsors to benchmark their plans should involve a deeper analysis to ensure they meet their goals effectively. With the prevalence of automatic features in retirement plans, measuring success should extend beyond just participation rates to include engagement and effectiveness in meeting participant needs. Source: Plansponsor.com Don't Let Your 401k Plan Turn Into a Natural Disaster The author, having experienced severe flooding during Hurricane Sandy, expresses concern over the increasing frequency and severity of natural disasters, influenced by unstable weather patterns, regardless of the cause. For 401k plan sponsors, the author suggests that, unlike natural disasters, they can take proactive measures to prevent their plans from becoming problematic by addressing key aspects of plan management. Source: Jdsupra.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, or Papers Generation Beta: Redefining Life, Longevity, and Retirement This 34-page white paper introduces a new generation starting on January 1, 2025, known as Generation Beta, comprising individuals born between 2025 and 2039. This generation is expected to experience significant technological advancements, changing societal norms, and economic transformations, leading to potentially the longest lifespans in history. The study highlights the challenges and opportunities that will shape Generation Beta's lives, emphasizing flexibility in work and family structures as key characteristics of their experience. Overall, Generation Beta is positioned to redefine concepts of life, longevity, and retirement in unprecedented ways. Source: Prudential.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers or Other Service Providers The 2024 Retirement Security Rule: What is Old is New Again The DOL 2024 Fiduciary Rule, intended to replace the longstanding 1975 Regulation defining investment advice fiduciaries, has faced significant legal challenges. Now the political landscape following the recent election raises uncertainty about the DOL's commitment to continue with the appeal or withdraw it altogether. Depending on the new administration's approach, the 2024 Fiduciary Rule may face a fate similar to the 2016 rule, potentially reinforcing the precedent established by the Chamber case and complicating future efforts to redefine "investment advice fiduciary." Source: Truckerhuss.com Employee Education and Communications Digital Age Communication: Mix of New, Tried & True The Digital Age has transformed communication for plan sponsors, third-party administrators, and retirement plan professionals, emphasizing the importance of both modern and traditional practices. Industry experts Sarah Simoneaux and James Passarelli shared insights on this topic during a T. Rowe Price webinar. Simoneaux, a founding partner at SCS Consultants and former ASPPA President, noted that artificial intelligence significantly enhances data gathering and analysis, and its use in marketing operations is widespread. Overall, the webinar emphasized the evolving nature of communication in the retirement planning sector amid technological advancements. Source: Asppa-net.org »» Click here for more Education and Communications Material Automatic 401k Plan Features Considering Auto-Portability for Your Retirement Plan? Employers are increasingly inquiring about joining the auto-portability network for their defined contribution plans. Many major recordkeepers are adopting this feature, which aims to assist retirement plan participants in managing their savings as they change jobs. The auto-portability system allows small account balances to be automatically rolled over from an Individual Retirement Account into a new employer's plan when a former employee joins a participating company. This simplifies tracking and consolidating retirement savings, which is beneficial given that individuals change jobs an average of over ten times during their careers. However, employers must consider the additional liabilities associated with joining the network alongside its advantages. Source: Brickergraydon.com It's Here: Mandatory Auto-Enrollment Starts This Week A key update from the SECURE 2.0 provisions is the requirement for automatic enrollment in retirement plans, effective January 1st for plans established after December 29, 2022. These plans must automatically enroll participants at a contribution rate between 3% and 10%, with annual auto-escalation of at least 1% until reaching a contribution rate of 10% to 15%. While older, grandfathered plans can opt-out, the new mandate will apply starting in the 2025 plan year. Participants will still have the option to opt-out or choose different contribution levels. If recordkeepers or fiduciaries are unable to implement these automatic features, it may be categorized as an operational error that can be rectified through the Employee Plans Compliance Resolution System. Source: Napa-net.org Auto-Enrollment, Escalation No Longer Optional Starting January 1, 2025, plans initiated after December 29, 2022, are required to implement automatic enrollment and escalation as part of the SECURE 2.0 Act. Participants must be automatically enrolled at a contribution rate of 3% to 10%, with a mandatory annual increase of at least 1% until the contribution reaches between 10% and 15%. Participants will have the option to opt-out or choose different contribution levels. Source: Ntsa-net.org »» Click here for more on Automatic 401k Plan Features Court and Legal Federal District Court Dismisses Another 401k Forfeitures Suit Since September 2023, at least 25 lawsuits have been filed arguing that the decision to use 401k forfeitures to offset plan expenses instead of reducing plan sponsor contributions is a fiduciary choice under ERISA. In the most recent case, Barragan v. Honeywell Int'l, Inc., the U.S. District Court for New Jersey dismissed the plaintiff's complaint without prejudice, allowing for the possibility of an amended complaint. This decision marks the seventh ruling on a motion to dismiss a 401k plan forfeiture lawsuit, with only two cases successfully surviving such motions. This article is a review of the ruling. Source: Beneficiallyyours.com Amazon Employees File 401k Plan Forfeiture Complaint in Federal Court Amazon.com Inc. and its 401k savings plan administrative committee are facing a lawsuit regarding the management of employee forfeiture funds, the largest such case against a company. In the case of Curtis v. Amazon.com, filed in the U.S. District Court for the Western District of Washington, plaintiff Cory Curtis claims that Amazon's fiduciaries improperly used millions in forfeited plan assets to cover the company's contributions instead of reducing administrative fees for over 20,000 participants from 2018 to 2023. The lawsuit, represented by Terrell Marshall Law Group PLC, argues that this practice allowed Amazon to save millions in contribution costs. Source: Planadviser.com »» Click here for more Court and Other Legal Issues State-Based Private-Sector Retirement Programs Vermont Saves, a New Auto-IRA Program, Requires Employers Without a 401k to Enroll Employees Vermont has become the 17th state to mandate that employers either enroll their employees in the state-run retirement program or offer their own 401k plans. The new program, called Vermont Saves, is an automated savings initiative administered by the Treasurer's Office, allowing participants to contribute up to $7,000 a year through automatic paycheck deductions. It aims to provide a retirement plan for employees without existing employer-sponsored plans, building on a successful pilot program that was recently launched. Source: Benefitspro.com »» Click here for more on Legislative and Washington Actions Compliance and Regulatory IRS Adds New Category to the 2024 Required Amendments List The IRS has expanded its "Required Amendments" List by adding a new Part C that focuses on "optional amendments" that may have been influenced by recent law changes or IRS guidance. An example provided is section 604 of the SECURE 2.0 Act, which allows plans to offer Roth treatment for employer or nonelective contributions starting in 2023. The IRS issued guidance on this in Notice 2024-2, and plans may need to be amended to comply with this guidance by December 31, 2026. Source: Groom.com Adoption of Optional SECURE 2.0 Provisions Still Slow Going Into 2025 An Alight survey reveals that employers are cautiously implementing optional provisions from the SECURE 2.0 Act of 2022 as 2025 approaches. Although there is interest in features like hardship self-certification, adoption of emergency sidecar accounts and student loan matching remains low. For example, only about 30% of employers have adopted hardship self-certification, with 15% planning to add it soon; over half of those intend to implement it in 2025. Source: Plansponsor.com »» Click here for more Compliance and Regulatory Material Marketplace News Voya Financial Completes Acquisition of OneAmerica Financial's Retirement Plan Business MAP Retirement Merging with Pension Plan Specialists CAPTRUST Brings in $2B in Twin Deal
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