Article Summaries

Fiduciary and Plan Governance

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

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

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Insight: Studies, Research, Analysis, or Papers

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

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

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

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

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Items of Special Interest to Advisers or Other Service Providers

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

Court and Legal

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

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

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Cyber and Plan Security

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

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

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

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Compliance and Regulatory

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

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

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

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

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Marketplace News

Daniel Aronowitz Nominated to Head EBSA

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.