COLLECTED WISDOM™ on Compliance and Regulatory Related Issues

This page gathers relevant information for 401k plan managers, sponsors, administrators, recordkeepers and others with plan fiduciary and administrative responsibilities. It covers many aspects of compliance and regulatory related issues.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.

DC Retirement Plan Default Beneficiary Hierarchy

Many participants in defined contribution retirement plans often neglect to designate a beneficiary to receive their remaining account balance after their death, despite efforts by plan sponsors and administrators to emphasize its importance. When a valid beneficiary designation is not in place, the plan's default beneficiary hierarchy is utilized. This also applies if designated beneficiaries do not survive the participant or if they refuse their interest in the account. This article discusses key considerations for plan sponsors concerning their plan's default beneficiary hierarchy.

Source: Verrill-law.com, June 2025

Avoiding Litigation in the Aftermath of Cunningham v. Cornell University: Procedural Protections for Plan Sponsors

Following the Supreme Court's ruling related to fiduciary duties in Cunningham v. Cornell University, there's speculation about a surge in litigation, but a significant increase in meritless claims is unlikely. Instead, fiduciary lawsuits are expected to commonly include prohibited transaction claims along with other allegations such as excessive fees or breaches of duty. The lower threshold set by the ruling may enable these prohibited transaction claims to move past the initial pleading stage, extending litigation into discovery and further proceedings. However, plan sponsors can reduce litigation risk and associated costs by consistently following specific procedural practices, regardless of the ruling's overall impact on litigation rates.

Source: Reinhartlaw.com, June 2025

En Garde! The Challenge With Forfeitures

Recent news has highlighted an increase in ERISA class action lawsuits concerning the use of forfeitures in retirement plans. This issue impacts plans with employer contributions that have a vesting schedule. To mitigate the risk of being targeted by these lawsuits, many employers are amending their plans or establishing clear written administrative policies outlining the handling of forfeitures. The goal is to eliminate discretion in managing forfeitures, thereby reducing the potential for claims of fiduciary breach.

Source: Ferenczylaw.com, June 2025

DOL Rolls Out Updates to Opinion Letter Program

The DOL's Employee Benefits Security Administration has modernized its opinion letter program to improve compliance support. Announced on June 2, these changes aim to enhance the assistance provided to the public in understanding their rights and responsibilities under the law. Opinion letters offer official interpretations from the DOL on how laws apply to specific situations, providing clarity on regulations. Deputy Secretary of Labor Keith Sonderling emphasized the importance of these letters in offering clear and practical guidance for both workers and businesses.

Source: Napa-net.org, June 2025

New Voluntary Fiduciary Correction Program

The new Voluntary Fiduciary Correction Program introduces a Self-Correction Component that allows practitioners to use the DOL Calculator for self-correction of errors. In return for the self-correction, plan sponsors will receive an email acknowledgment of receipt rather than a "no-action" letter. The key difference between self-correction submissions and traditional VFCP filings is that self-correction only requires the retention of supporting documents, while filings necessitate the submission of those documents. Despite the difference, self-correctors must still prepare and keep all documentation as if filing a regular VFCP application.

Source: Belfint.com, May 2025

How Much Do Companies Typically Match on 401k

Employee matching contributions are a prevalent feature in employer-sponsored retirement plans, with 98% of employers offering some form of match to enhance employee savings. Beyond being a benefit, matching contributions serve as a strategic tool for employers to attract and retain top talent, boost productivity, and increase engagement. By linking matches to vesting schedules, employers can incentivize employees to remain with the company longer, resulting in increased savings for employees and better utilization rates for employers.

Source: Myubiquity.com, May 2025

Timely Use of Forfeitures

The IRS mandates that forfeitures in defined contribution plans must be utilized within 12 months after the end of the plan year in which they occur. Failure to comply with this timeline is deemed a compliance issue. Many plan sponsors unknowingly violate this requirement, leading to potential problems. However, the IRS is currently providing a temporary reprieve for affected plan sponsors, allowing them to resolve these compliance failures if they take action promptly.

Source: Legacyrsllc.com, May 2025

Mandatory Automatic Enrollment for New 401k/403b Plans Gets Much Needed Guidance

SECURE 2.0 mandated, for the very first time, a special automatic enrollment arrangement be added to all new 401k and 403b plans. In this comprehensive article, Groom principals Elizabeth Thomas Dold and David Levine explore essential facets of the IRS proposed regulations covering this new mandate. They discuss which plans fall under the regulations, the functioning of automatic enrollment features, and any applicable exceptions. Additionally, the article details the necessary compliance steps and highlights specific considerations regarding mergers, acquisitions, and multiple employer plans.

Source: Groom.com, May 2025

DOL Issues Temporary Enforcement Policy for Small Amount Transfers to State Unclaimed Property Funds

The DOL recently released Field Assistance Bulletin 2025-01, which offers a temporary enforcement policy concerning the transfer of small retirement plan benefits to state unclaimed property funds. This guidance aims to assist fiduciaries in meeting their ERISA obligations to locate participants and ensure they receive their retirement benefits, especially regarding uncashed checks and amounts that have been involuntarily distributed. However, plan fiduciaries are advised to carefully consider and consult legal counsel on the appropriateness of escheatment in different situations.

Source: Morganlewis.com, May 2025

Controlled Group or Affiliated Service Group? What That Means for Your 401k Plan Compliance

If your business is part of a Controlled Group or an Affiliated Service Group, it may face compliance issues concerning its 401k plan. Misunderstandings about these affiliations can lead to severe consequences, including plan disqualification, costly corrections, IRS penalties, and employee dissatisfaction. The positive aspect is that many of these issues can be resolved if addressed promptly. The article outlines the potential consequences, corrective actions, and strategies to safeguard your plan against audit risks.

Source: Employeebenefitslawgroup.com, May 2025

New VFCP on Late Deposits

The issue of timely deferral deposits remains a contentious topic in the industry, largely due to the vague language used in regulations that leaves room for interpretation. According to DOL Regulation, deferral deposits should be made at the "earliest" reasonable time but must be completed by the fifteenth business day following the month of withholding. This regulation also applies to loan repayments withheld from employee pay. After discussions with regulators, it appears that most pension professionals avoid delaying deposits until the mandated deadline. However, the debate continues regarding whether there can be some flexibility for late deposits.

Source: Belfint.com, May 2025

DOL Updates Voluntary Fiduciary Correction Program to Add a New Self-Correction Option

The DOL has updated its Voluntary Fiduciary Correction Program to introduce a new Self-Correction Component. This allows plan sponsors and fiduciaries to self-correct certain prohibited transactions, such as delinquent contributions and loan repayments, without submitting a full VFCP application, under specific circumstances. They can do this by providing a notice and required information to the DOL. Additionally, the DOL has amended the related Prohibited Transaction Exemption to broaden the excise tax relief available for transactions corrected under the SCC.

Source: Robertsandholland.com, May 2025

Missing Participants

When a company sponsors a 401k plan, it can help attract top talent, retain employees, and improve morale. However, after an employee leaves, the plan administrator is still responsible for delivering plan notices and communications until the participant's account is fully paid out. This ongoing obligation can be frustrating when participants become unresponsive or difficult to locate, as fiduciary duties require continued efforts to find and engage them. This article reviews some effective best practices to minimize and address the challenges posed by missing or nonresponsive participants.

Source: Consultrms.com, April 2025

Uncashed Distribution Checks

Uncashed distribution checks pose a growing fiduciary risk and administrative burden for qualified plan sponsors, especially as small-balance and separated participant accounts increase. These uncashed checks remain plan assets until cashed or resolved, with balances returning to participant accounts after 180 days, potentially triggering additional plan audits. Plan administrators should proactively minimize uncashed checks and address unresolved cases to reduce costs and compliance risks. This article reviews the issue and offers suggestions to minimize it.

Source: Consultrms.com, April 2025

Two Approaches to the Roth Catch-Up Mandate: Implications for Plan Sponsors

The SECURE 2.0 Act's Section 603, effective January 1, 2026, requires employees earning above a certain threshold (originally $145,000) to make catch-up contributions only as Roth (after-tax) contributions rather than pre-tax. This new "Roth catch-up mandate" is prompting DC plan sponsors to reconsider their current catch-up contribution methods, typically either a separate election or single election approach, as each has advantages and disadvantages affected by this change. Both methods are reviewed here.

Source: Alight.com, April 2025

More Discretion, More Documentation: Recovering Overpayments Under Secure 2.0

Under SECURE 2.0, plan sponsors can decide whether to recoup inadvertent benefit overpayments but are no longer required to do so. However, they must document and monitor their decision-making process to fulfill fiduciary duties. Maintaining a consistent process for handling and recording all overpayment decisions helps ensure proper oversight and simplifies audits.

Source: Brickergraydon.com, April 2025

2026 401k Contribution Limit on Track for $1,000 Increase: Milliman

The maximum 401k contribution limit, currently $23,500 for 2025, is projected to increase by $1,000 to $24,500 in 2026, according to Milliman's latest IRS limits forecast. This forecast, based on Consumer Price Index data, predicts the annual adjustment that the IRS typically announces in late fall.

Source: 401kspecialistmag.com, April 2025

Report Raises Eyebrows About Claims of Rampant "Red Flags" in Retirement Plans

An expert criticized a recent analysis highlighting extensive ERISA noncompliance as "scaremongering." In January, the New York-based consulting firm Abernathy Daley released a report claiming that approximately 84% of U.S. retirement plans exhibited at least one "red flag" indicative of a potential violation of ERISA. However, some industry professionals have disputed the firm's assertions regarding the prevalence of compliance risks.

Source: Hrdive.com, April 2025

The DOL's Lost and Found Database Is Live

The DOL has developed a database as part of SECURE 2.0 to assist in locating missing retirement plan participants and beneficiaries. This initiative aims to address the ongoing issue of missing participants, which is a key focus for both the DOL and the IRS. While participation in the database is voluntary for plan sponsors, it can serve as additional evidence that they are fulfilling their fiduciary duty to locate eligible participants for benefits.

Source: Brickergraydon.com, April 2025

IRA Bankruptcy Exemption Increases

Effective April 1, 2025, the maximum bankruptcy exemption for IRAs will increase from $1,512,350 to $1,711,975. This amount will be adjusted for cost-of-living increases and reflects an increase from the original limit of $1,000,000 set by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Source: Ascensus.com, April 2025

User's Guide to SECURE 2.0

Navigating SECURE 2.0 is challenging due to its complexity and lack of a table of contents. To help employers and plan sponsors understand its implications, this guide provides a summary of SECURE 2.0 provisions organized thematically, including distinctions between changes for defined contribution and defined benefit plans. The six accompanying tables outline statutory changes, their effective dates, and whether changes are mandatory or optional for employers. The guide also includes observations from Mercer regarding potential implementation challenges and notes drafting errors that Congress plans to correct.

Source: Mercer.com, April 2025

What Documents Do I Need for a 401k Audit?

Preparing for a 401k audit can raise questions about required documentation. A sample checklist can help guide you, but note that your auditor will tailor requests based on your specific retirement plan. While the checklist might appear extensive, many items will likely be supplied by your plan's third-party administrator or recordkeeper. To facilitate the audit, it's recommended to provide your auditor with online view-only access to the plan. Here is a sample checklist.

Source: Belfint.com, April 2025

Time Is Running Out to Utilize Forfeiture Relief (And How to Avoid Lawsuits)

Lawsuits regarding the misuse of forfeitures in retirement plans are ongoing, with outcomes varying. However, individuals and advisors can proactively implement strategies to avoid these lawsuits. Additionally, there is a limited opportunity to benefit from IRS relief related to built-up forfeitures that haven't been utilized in prior years, with a deadline set for the end of 2025. This article outlines ways to take advantage of this IRS forfeiture relief while also providing guidance on preventing potential lawsuits. By helping clients stay compliant and avoid legal issues, advisors can position themselves as valuable resources.

Source: Penchecks.com, April 2025

Cheats Sheets and Hacks for 401k Plan Sponsors

The author reflects on the significant impact of the Internet in their life, noting its ability to provide vast information and time-saving hacks, particularly in fixing things. They share some lesser-known tips and tricks for 401k plan sponsors to simplify their tasks and enhance efficiency.

Source: Jdsupra.com, April 2025

Roth Treatment of Employer Contributions

SECURE 2.0 includes an optional provision allowing Roth treatment for employer contributions in addition to participant deferrals. In a recent survey, nearly half of plan sponsors indicated they are open to adding this provision, a significant increase from the previous year. Currently, about 20% have already adopted it, while over 25% are considering doing so.

Source: Psca.org, April 2025

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

As we enter 2025, the implementation of new SECURE 2.0 provisions is imminent. Understanding how these provisions will impact plan design, administration, and costs is essential for effectively advising clients. This knowledge allows you to inform clients about upcoming changes, strategize any necessary administrative adjustments, and coordinate communications with participants.

Source: Penchecks.com, April 2025

What Plan Administrators Need to Know About the 2025 RMD Age Increase

Plan administrators are increasingly focusing on the accuracy of participant birthdates due to upcoming changes in Required Minimum Distributions (RMDs) effective April 1, 2025. Participants who turn 73 in 2024 will need to start taking RMDs from their employer-sponsored retirement plans by this date unless still employed and allowed to defer. Failure to meet this deadline can result in steep penalties: 25% of the missed distribution, or 10% if corrected within two years. Consequently, plan administrators are essential in ensuring compliance and helping participants avoid these penalties. This article reviews several steps towards RMD compliance.

Source: Berwyngroup.com, April 2025

Mandatory Catch-Up Contribution "Rothification" Is Coming to U.S. Savings Plans

The SECURE 2.0 Act mandates that participants aged 50 or older in 401k retirement plans, who are classified as highly compensated (earning at least $145,000, indexed), must make catch-up contributions as Roth contributions rather than pretax contributions. Roth contributions are taxable in the contribution year but allow for tax-free distributions, including earnings. Initially set to take effect in 2024, the implementation has been delayed to 2026 due to administrative readiness concerns. The IRS has introduced proposed regulations to provide guidance on the Roth catch-up contribution requirement for highly compensated participants.

Source: Sidley.com, March 2025

DC Plan Annual Review: Key Steps for Plan Administrators

Regular plan reviews are essential for ensuring compliance and improving performance in Defined Contribution Plans, ultimately helping participants meet their retirement goals. As a plan administrator, you play a key role in managing these plans by overseeing compliance, financial management, and participant engagement. This includes verifying accurate contribution processing, maintaining fee transparency, and providing educational resources to participants, all of which contribute to the efficient operation of the plan. This is a list of items that must be reviewed.

Source: Watkinsross.com, March 2025

DOL Expands Voluntary Fiduciary Compliance Program

Earlier this year, the DOL unveiled updated regulations for its Voluntary Fiduciary Compliance Program. Notably, these new rules introduce a long-anticipated self-correction option for plan sponsors.

Source: Spconsultants.com, March 2025

DOL Publishes New VFCP Model Participant Notice

On March 18, the DOL released a model notice for applicants to the Voluntary Fiduciary Correction Program to inform plan participants about their application to the program. This model notice is specifically for applicants and is not meant for those using self-correction to address errors. The DOL’s Employee Benefits Security Administration anticipates that completing the notice will take plan administrators about one hour on average.

Source: Napa-net.org, March 2025

Written Requests for ERISA Documents

Employers are required to respond to written requests for certain ERISA documents within 30 days to avoid penalties of up to $110 per day. However, there is often ambiguity regarding which documents fall under this mandatory disclosure requirement and what specific plan materials should be provided. This can create challenges for employers in determining their obligations in response to these requests.

Source: Newfront.com, March 2025

SPARK Institute Comment Letter on the Proposal for Roth Catch-Up Contributions

The SPARK Institute has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. They say that administering the Roth catch-up mandate will be difficult, particularly in the initial years, and further simplification and clarification would be greatly beneficial. As mentioned towards the end of this letter, SPARK is also requesting that the IRS consider a postponement or offer additional good faith relief, as the final regulations will not be ready in time for implementation in 2026.

Source: Sparkinstitute.org, March 2025

Don't Forget the Disclosures: What's Required to Keep Plan Participants and Beneficiaries Informed

This educational fiduciary training webinar emphasizes the responsibilities needed to keep participants and beneficiaries well-informed. Tailored for committee members and fiduciaries engaged in retirement plan management, the session explores crucial elements of employee engagement, necessary disclosures, and effective fiduciary governance practices. Key topics covered include: Understanding Fiduciary Responsibilities, Required Disclosures, Optional Engagement Strategies, Digital and Paper Notices, and Selecting Service Providers.

Source: Multnomahgroup.com, March 2025

ICI Comment Letter on the Proposal for Roth Catch-Up Contributions

The Investment Company Institute has sent this comment letter to the Treasury Department and the Internal Revenue Service regarding the proposed regulations on catch-up contributions. This proposal aims to amend the regulations under section 414(v) of the Internal Revenue Code to incorporate several changes to catch-up contributions introduced by sections 109, 117, and 603 of the SECURE 2.0 Act.

Source: Ici.org, March 2025

New Self-Correction Option for Voluntary Fiduciary Correction Started March 17, 2025

On March 17, 2025, the DOL introduced a "self-correction" option within its Voluntary Fiduciary Correction Program. This new option allows fiduciaries to correct certain violations without waiting for formal approval of their correction submissions. However, participating fiduciaries are still required to fulfill a notice obligation and provide information to the DOL. The self-correction option applies to two specific types of transactions that would usually be considered prohibited: late contributions for participants and loan repayments, as well as eligible inadvertent failures relating to participant loans.

Source: Erisapracticecenter.com, March 2025

ERIC Comment Letter on the Proposal for Roth Catch-Up Contributions

The ERISA Industry Committee has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. In this letter, ERIC supports SECURE 2.0 but acknowledges the challenges in implementing certain provisions, particularly Section 603, which mandates that catch-up retirement plan contributions be made on a Roth basis. While the guidance in Notice 2023-62 and the Proposal are generally helpful, ERIC has suggested improvements as the Treasury and IRS work on finalizing the rules.

Source: Eric.org, March 2025

Adoption of SECURE 2.0 Optional Provisions

The SECURE 2.0 Act of 2022 was significant retirement plan legislation that introduced various required and optional provisions for retirement accounts and employer-sponsored plans. However, plan sponsors have been slow to upgrade their programs due to the complexity of the legislation. Many have chosen to implement only those provisions that require minor adjustments, such as expanded catch-up contributions for participants aged 60-63. While some features have been adopted, there is hesitation around others, primarily due to a lack of available technology for implementation and uncertainty regarding the administration of the various provisions.

Source: Planpilot.com, March 2025

Preventive Measure: Self-Audits Help Your Plan Stay in Compliance

Morgan Lewis partners Amy Pocino Kelly and Dan Salemi and associate Rachel Mann wrote an article for Benefits Magazine about internal compliance self-audits of employee benefit plans. The article discusses the self-audit process, highlights common areas of compliance that plans should target, and notes changes affecting self-audits included in the SECURE 2.0 Act.

Source: Ifebp.org, March 2025

New 401k Plan Requirements End Pre-Tax Catch-Up Contributions for High Earners

On January 10, 2025, the IRS issued proposed regulations regarding age-based catch-up contributions for retirement plans. These contributions, which are available to participants aged 50 or older in 401k plans, allow for additional contributions beyond regular deferrals, regardless of other limits on elective deferrals. The proposed regulations are based on changes made by the SECURE 2.0 Act of 2022 and affect retirement plan participants, beneficiaries, employers, and administrators. Plan sponsors need to consider necessary design or operational changes, consult with plan administrators and recordkeepers for administrative updates, and seek advice from benefits counsel regarding implementation and required amendments to their plans.

Source: Quadecircle.com, March 2025

401k ADP Test Basics

The tax code for 401k plans includes non-discrimination tests to ensure that retirement plans do not disproportionately benefit Highly Compensated Employees over Non-Highly Compensated Employees. The testing process begins with the coverage test, as outlined in IRS Code section 410(b). If the coverage test is passed, or if adjustments are made to pass it, the Average Deferral Percentage test follows. The ADP test uses mathematical comparisons of participation and contribution rates between HCEs and NHCEs to assess potential discrimination in favor of HCEs. This article provides a basic review of the test.

Source: Legacyrsllc.com, March 2025

Early Preparation Tips to Streamline Your Employee Benefit Plan Audit

Plan sponsors should consider their organization's employee benefit plan audit well in advance. Typically, audits cannot commence until spring, when recordkeepers supply the necessary audit package containing detailed reports on the plan's operations for the year. Here is a list of items auditors will require over the coming months, along with steps plan sponsors can take to prepare.

Source: Withum.com, March 2025

What Self-Correction Options Are Available for 401k Plan Fiduciary Mistakes?

The DOL introduced a self-correction component to the Voluntary Fiduciary Correction Program, effective March 17, 2025. This allows retirement plans to self-correct specific failures, such as the late transmission of participant contributions or loan repayments, and certain inadvertent loan failures. To self-correct, a plan official or authorized representative must notify the EBSA by submitting a notice through an online tool, which includes essential information about the plan and the correction made. Unlike regular VFC submissions, self-correctors will receive an automatic acknowledgment email but will not get a "no action" letter.

Source: Thomsonreuters.com, March 2025

Document Retention is an Employer's Duty, Not the TPA's

It's crucial to clarify your third-party administrator's document retention practices, as they may not keep signed copies of plan documents, older versions, or those prepared by previous TPAs. Understand the scope of retention covered in your contract with the TPA and your ultimate responsibilities under ERISA. TPAs are responsible for document compliance from their engagement until they disengage, which includes drafting required restatements every six years, handling interim amendments, and any discretionary amendments the Plan Sponsor chooses to implement.

Source: Klblawgroup.com, March 2025

Sham Employment Terminations and Plan Distributions

To receive a distribution from a qualified retirement plan due to severance of employment, a participant must have a genuine termination of their employment. Sham terminations can create compliance issues for the plan. Usually, qualified retirement plan assets can't be distributed until a specific distribution triggering event occurs, as defined in the plan document. Severance of employment is a common triggering event. However, processing a distribution based on a sham termination can lead to operational failures, risking the plan's qualification and potentially resulting in negative tax consequences for both the participant and the employer.

Source: Retirementlc.com, March 2025

IRS Issues Proposed Regulations Regarding Mandatory Auto-Enrollment Under SECURE 2.0

The IRS has issued proposed regulations regarding the mandatory automatic enrollment requirements under the SECURE 2.0 Act of 2022, which builds on previous interim guidance from IRS Notice 2024-02. Starting with plan years after December 31, 2024, new 401k and 403b plans established after December 29, 2022, must include an eligible automatic enrollment arrangement. The recently proposed regulations clarify that a plan is considered established on the adoption date, irrespective of its effective date, and also provide guidance on how these automatic enrollment requirements will affect plan mergers and spin-offs.

Source: Ktslaw.com, March 2025

Mandatory Automatic Enrollment Is Here

Employers have long had the option to automatically enroll employees in their 401k or 403b plans to boost participation and encourage retirement savings. Due to the success of these automatic enrollment strategies, Congress has decided to make them mandatory. Starting in 2025, many plans that allow participants to make deferral elections will be required to automatically enroll their participants. This article reviews the key points regarding the new requirements.

Source: Ferenczylaw.com, March 2025

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

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

Source: Penchecks.com, February 2025

Do 401k Vesting Schedules Help With Worker Retention?

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

Source: Napa-net.org, February 2025

The Most 401k Plan Errors

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

Source: Jdsupra.com, February 2025

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

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

Source: Ferenczylaw.com, February 2025

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

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

Source: Faegredrinker.com, February 2025

IRS Proposes Regulations for the Roth Catch-Up Rule

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

Source: Ajg.com, February 2025

Missing Participants and Fiduciary Responsibility

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

Source: Ajg.com, February 2025

Three Key SECURE 2.0 Provisions Effective in 2025

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

Source: Spconsultants.com, February 2025

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

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

Source: Planadviser.com, February 2025

Labor Department Updates the Voluntary Fiduciary Correction Program

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

Source: Milliman.com, February 2025

Puerto Rico Announces 2025 Limits on Qualified Retirement Plans

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

Source: Littler.com, February 2025

DOL Finalizes Update to Voluntary Fiduciary Correction Program

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

Source: Groom.com, February 2025

2025 Benefit Limits and Annual Amounts all in One Place

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

Source: Brickergraydon.com, February 2025

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

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

Source: Pensionsandbenefits.blog, February 2025

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

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

Source: Pensionsandbenefits.blog, February 2025

DOL Muddies the Water With Escheatment Guidance for Retirement Plans

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

Source: Groom.com, February 2025

Got COLA? The IRS Does

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

Source: Asppa-net.org, February 2025

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

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

Source: Tri-ad.com, February 2025

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

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

Source: Penchecks.com, February 2025

2025 Puerto Rico Retirement Plan Limits

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

Source: Mcvpr.com, February 2025

Things I Worry About: DOL Investigations and Unsuspecting Plan Sponsors

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

Source: Fredreish.com, February 2025

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

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

Source: Beneficiallyyours.com, February 2025

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

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

Source: Sidley.com, February 2025

Retirement Plan Sponsors and Participants Get LA Wildfire Relief

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

Source: Mercer.com, February 2025

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

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

Source: Mccarter.com, February 2025

SECURE 2.0 Administrative Pandemonium: Are You Keeping Up?

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

Source: Hawleytroxell.com, February 2025

DOL Updates Voluntary Fiduciary Correction Program

In 2002, the DOL established the Voluntary Fiduciary Correction Program to encourage voluntary compliance with ERISA. VFCP allows employers and plan fiduciaries facing potential liability for fiduciary duty breaches to seek relief from enforcement actions and civil penalties, provided they adhere to specific criteria and procedures. The program is linked to prohibited transaction class exemption 2002-51, which offers relief from excise tax for certain prohibited transactions. The DOL recently announced modifications to VFCP, effective March 17, 2025, notably introducing two new self-correction features.

Source: Wagnerlawgroup.com, January 2025

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

On January 10, 2025, the IRS released proposed regulations concerning several provisions of the SECURE 2.0 Act, particularly regarding catch-up contributions for employees aged 50 and older in 401k, 403b, and governmental 457b plans. The IRS is open to comments on these regulations until March 14, 2025. Starting January 2026, employees who earned over $145,000 in FICA wages the previous year must make their catch-up contributions to Roth accounts (after-tax contributions) for the following calendar year. For instance, employees meeting this income threshold in 2025 will be required to use Roth accounts for their catch-up contributions in 2026.

Source: Tri-ad.com, January 2025

ERISA Moments: DOL Investigations - Priorities for 2025

Faegre Drinker attorneys Fred Reish and Brad Campbell provide concise updates on current trends and developments in ERISA in their quick-hit series. This latest episode focuses on the Department of Labor's priorities for investigations in 2025. This series offers a high-level overview of important topics within the ERISA realm.

Source: Spotlightonbenefits.com, January 2025

Missing Participants: What to do With Abandoned Accounts

Plan sponsors and administrators have long faced challenges in managing accounts belonging to participants who left employment years ago and are now unlocatable, often referred to as "missing participants." Despite their efforts, many plans still hold accounts for these individuals. On January 14, 2025, the DOL released Field Assistance Bulletin 2025-01, which permits sponsors and administrators of ongoing defined contribution plans to transfer unclaimed small accounts to the state unclaimed property fund corresponding to the participant's last known address, as long as certain conditions are met.

Source: Beneficiallyyours.com, January 2025

Form 5500: The Role of the Accountant and the Audit Report

An accountant's role in the annual Form 5500 for employee benefit plans is significant but often misunderstood. While accountants and auditors play a crucial part in preparing the report from financial and regulatory perspectives, their responsibilities are limited. They are responsible for detecting material fraud in financial statements but do not guarantee a plan's qualified status or the conduct of fiduciaries. The specific scope of an accountant's responsibility is shaped by the interplay between DOL regulations and the standards of the accounting profession.

Source: Employeebenefitslawgroup.com, January 2025

Electronic Delivery of Participant Notices

Plan participants must receive notices and disclosures about their 401k plans securely and promptly. Traditional paper delivery is costly and not preferred by many, with most people rarely reading such notices in paper form. While paper notices can still be distributed at meetings or mailed, placing them in common areas isn't sufficient. The e-Disclosure Safe Harbor Rule allows for electronic delivery as the default method, provided that participants can be reached electronically and receive proper initial notifications. This offers a more efficient and less expensive alternative for communicating important plan information.

Source: Consultrms.com, January 2025

A Deficient Form 5500 Filing is Preferable to a Delinquent Filing

At the AICPA National Conference, Marcus Aron, the Chief of the Division of Accounting Services at the DOL's Employee Benefit Security Administration, provided an update, joined by Scott Albert from the Division of Reporting and Compliance. Marcus discussed the complex issue of filing Form 5500 in situations where the audit cannot be completed by the deadline, addressing the challenges and considerations involved in such scenarios. They clarified the distinction between delinquent filings, which are late, and deficient filings, which are timely but inaccurate or incomplete. Aron emphasized the importance of understanding these differences in the context of compliance.

Source: Belfint.com, January 2025

IRS Announces New Rules for Catch-Up Contributions: A Timeline of Changes and Where We Stand Today

On January 13, 2025, the IRS proposed regulations (REG-101268-24) to help plan administrators and participants better understand and implement new rules related to retirement plans. These updates build on the SECURE 2.0 Act of 2022 and address the administrative challenges faced by employers, plan administrators, payroll providers, and financial professionals. This document outlines key provisions of the regulations, their evolution, and their current implications.

Source: 5500audit.com, January 2025

IRS Proposes Regulations on SECURE 2.0 Act Catch-Up Provisions

The IRS has proposed regulations regarding catch-up contributions under the SECURE 2.0 Act. Key changes include: Increased catch-up contribution limits for participants aged 60 to 63, starting in 2025. Mandatory Roth tax treatment for catch-up contributions by 401k participants earning over $145,000 from the previous calendar year, effective from 2024. Transition relief allows plans to let all participants, including those above the income threshold, make pre-tax catch-up contributions until 2026. These plans will still meet the new requirements even if they do not offer designated Roth contributions. These highlights summarize the main aspects of the proposed regulations.

Source: 401khelpcenter.com, January 2025

IRS Issues Proposed Regulations on Automatic Enrollment Requirements

The IRS has issued proposed regulations stemming from the SECURE 2.0 Act, which mandates that certain retirement plans established after December 29, 2022, must operate as automatic enrollment plans for plan years beginning after December 31, 2024. These regulations outline requirements for qualified cash or deferred arrangements, including initial contribution percentages, automatic increase provisions, permissible withdrawals, and investment requirements. Additionally, they specify exemptions for certain plans and clarify that most employees must be included in automatic enrollment programs. The regulations also include modifications to previous IRS guidance on automatic enrollment.

Source: 401khelpcenter.com, January 2025

IRS Issues Guidance on Mandatory Automatic Enrollment

On January 10, 2025, the IRS released Proposed Regulations concerning the automatic enrollment requirement for newly established 401k and 403b plans under SECURE 2.0. These regulations build on previous interim guidance from late 2023 and include clarifications on participant notice requirements. While the regulations will take effect six months after finalization, the automatic enrollment mandate itself is applicable for plan years starting January 1, 2025. For plans before the final rules are effective, compliance will be assessed based on a good faith interpretation of the law.

Source: Groom.com, January 2025

IRS Issues Much Anticipated Guidance on Catch-Up Contributions

On January 10, 2025, the IRS proposed regulations regarding the SECURE 2.0 Act's catch-up contributions, providing much-anticipated guidance but highlighting the complexities involved in implementation. The regulations indicate that the mandatory Roth catch-up provision will create significant administrative challenges for employers and plan administrators, regardless of whether a qualified Roth contribution program is offered. Although the increased catch-up contribution is optional, plan sponsors must consider various implementation factors, requiring coordination with payroll, third-party administrators, and legal counsel to ensure compliance with legal requirements specific to their situations.

Source: Groom.com, January 2025

Self-Correction of Late Deferrals Will Soon be Permissible

The DOL has issued a revised Voluntary Fiduciary Compliance Program, introducing a self-correction component for certain delinquent participant contributions, a significant update welcomed by the industry. Late participant deferrals constitute about 95% of corrections handled through the VFCP, often identified by plan auditors or prompted by DOL letters encouraging voluntary participation. This new self-correction option aims to simplify addressing this common issue. However, it won't be available until March 17, 2025.

Source: Brickergraydon.com, January 2025

Missing Participant Enforcement Relief Available for Fiduciaries

On January 14, the Department of Labor announced a new enforcement relief policy aimed at retirement plan fiduciaries. This policy, outlined in Field Assistance Bulletin No. 2025-01, allows fiduciaries to transfer benefit payments of $1,000 or less owed to missing participants to state unclaimed property funds without facing action under ERISA Section 404(a), provided certain conditions are met. Assistant Secretary Lisa Gomez stated that the policy offers fiduciaries an additional way to manage small outstanding retirement benefits while supporting efforts to reconnect participants with their benefits.

Source: Asppa-net.org, January 2025

IRS Answers Calls for Additional SECURE 2.0 Guidance

On January 10, the IRS and Treasury issued additional guidance on SECURE 2.0 Act provisions related to automatic enrollment and catch-up contributions, as part of the Consolidated Appropriations Act of 2023. The proposed regulations clarify that high-income earners must designate their catch-up contributions as after-tax Roth contributions; employers cannot bypass this requirement. However, plans can still offer catch-up contributions to eligible employees without a Roth option. The guidance is seen as beneficial for employers, although it introduces complexity for plans that undergo nondiscrimination testing and may lead to participant requests for Roth features.

Source: Groom.com, January 2025

And Not a Moment Too Soon: Mandatory Automatic Enrollment Guidance

This week at the Treasury was eventful, as two significant pieces of guidance were released. This summary focuses on the proposed Mandatory Automatic Enrollment (MAE) regulations. The proposed regulations were issued on January 9, 2025, addressing outstanding questions as the mandatory automatic enrollment took effect at the start of the year. Previous communications outlined anticipated issues, and this will assess how those expectations align with the newly issued regulations.

Source: Ferenczylaw.com, January 2025

Field Assistance Bulletin No. 2025-01: Missing Participants and Beneficiaries

This Field Assistance Bulletin outlines a temporary enforcement policy under ERISA regarding small retirement benefit payments owed to missing participants or beneficiaries. It allows responsible plan fiduciaries to voluntarily transfer payments, including uncashed checks, to a state unclaimed property fund without facing violations under ERISA section 404(a). This is applicable when the present value of the owed benefits is $1,000 or less, and the plan fiduciary meets specific conditions outlined in the memorandum. Further guidance from the Department will be provided in the future.

Source: Dol.gov, January 2025

IRS Releases Guidance on Mandatory Roth Catch-ups, Autoenrollment

On January 10, 2025, the IRS issued proposed regulations regarding the planned restriction of catch-up contributions to Roth accounts beginning in 2026 for certain individuals. It also released notice of proposed auto-enrollment requirements under the SECURE 2.0 Act. Here are the key provisions of this guidance.

Source: Captrust.com, January 2025

Act 3: To Roth or Not to Roth: That Is No Longer the Question for Some Catch-Up Eligible Individuals

The IRS recently released proposed regulations concerning mandatory Roth catch-up contributions, following amendments made by SECURE 2.0. Starting in 2024, individuals earning over $145,000 from the previous year will need to designate their catch-up contributions as Roth contributions, eliminating the option for pre-tax contributions. The IRS had previously postponed the implementation of this requirement from 2024 to 2026. The new proposed regulations address several key questions from the benefits community regarding this mandatory Roth provision.

Source: Brickergraydon.com, January 2025

ERISA 2025 Requirements Calendar

Plan sponsors of defined benefit and defined contribution retirement plans should be mindful of key deadlines and dates for ensuring compliance in 2025, assuming a calendar year plan. The dates on this chart may vary based on the plan sponsor's fiscal year, and not all deadlines may apply. Alongside these important dates, sponsors should also familiarize themselves with the 2025 contribution plan limits and any relevant rolling notices. It's critical to track these elements to maintain compliance and effectively manage retirement plans.

Source: Bdo.com, January 2025

IRS Updates Procedures for Retirement Plans Requesting IRS Advice

The IRS has released Revenue Procedures 2025-1 and 2025-4, which update the guidance and procedures related to determination letters and letter rulings for retirement plans. Revenue Procedure 2025-1 outlines the types of advice the IRS offers to taxpayers, such as letter rulings, closing agreements, determination letters, information letters, and oral advice. Revenue Procedure 2025-4 details the procedures for obtaining specific letter rulings, closing agreements, determination letters, information letters, and oral advice for qualified retirement plans.

Source: Asppa-net.org, January 2025

Voluntary Fiduciary Correction Program Final Rule Issued by the DOL

On January 14, the Department of Labor released its final rule regarding updates to the Voluntary Fiduciary Correction Program. The most notable changes include the introduction of two new self-correction features. Proposed in November 2022, the VFCP permits fiduciaries to report specific administrative errors to the DOL and receive a no-action letter. This includes issues like prohibited transactions, improper loans, and late contributions, with a particular emphasis on addressing year-end remittance of delinquent contributions.

Source: Asppa-net.org, January 2025

IRS Issue Proposed Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions

The IRS has released proposed regulations concerning the SECURE 2.0 Act, specifically focusing on catch-up contributions available to employees aged 50 and older in 401k plans. The regulations detail a requirement that catch-up contributions from certain higher-income participants be designated as after-tax Roth contributions. They also offer guidance for plan administrators on implementing this new Roth catch-up rule, incorporating feedback from comments on a previous notice issued in August 2023. Additionally, the proposed regulations address an increased catch-up contribution limit for specific participants, including those aged 60-63 and employees enrolled in newly established SIMPLE plans.

Source: Irs.gov, January 2025

IRS Issue Proposed Regulations on New Automatic Enrollment Requirement for 401k and 403b Plans

The IRS has released proposed regulations related to the SECURE 2.0 Act, which includes a mandate for newly established 401k and 403b plans to automatically enroll eligible employees starting in the 2025 plan year. The proposed regulations offer guidance for plan administrators on implementation and will apply to plan years starting more than six months after the final regulations are released. In the interim, administrators must follow a reasonable, good faith interpretation of the statute.

Source: Irs.gov, January 2025

IRS Posts FAQs for SECURE 2.0 Disaster Relief Guidance

Congress has historically provided optional disaster relief for retirement plan sponsors to assist participants in accessing funds during natural disasters, but this assistance often arrived too late. The SECURE 2.0 Act of 2022 addresses this issue by establishing automatic and permanent disaster relief that becomes effective immediately upon the declaration of a "major disaster" by FEMA. This relief is retroactive to January 26, 2021, aiming to streamline the previous ad hoc assistance. In May 2024, the IRS released a FAQ page to offer additional guidance to plan sponsors regarding this provision. This article in the Journal of Pension Benefits discusses the SECURE 2.0 disaster relief and the IRS's related guidance.

Source: Groom.com, January 2025

Defined Contribution Retirement Plan: 2025 Compliance Calendar

This 4-page Retirement Plan Compliance Calendar outlines the essential reporting, disclosure, and notice requirements for Defined Contribution plans for the year 2025. It specifies due dates for these compliance obligations, which are based on a calendar plan year and applicable to plans governed by ERISA. The calendar serves as a helpful reference for retirement plan sponsors to ensure they meet their regulatory responsibilities throughout the year.

Source: Usicg.com, January 2025

2025 Newfront ERISA for Employers Guide: An Overview of EB's Overarching Legal Framework

The 49-page document addresses several key topics related to ERISA compliance, including: Plan Document and SPD: It explains how wrap documents can be used to meet ERISA requirements. Form 5500: This section outlines when reporting is necessary, potential penalties for non-compliance, and the obligation to distribute the Summary Annual Report to employees. Fiduciary Duties: It provides a practical overview of the core four fiduciary duties under ERISA that employers must adhere to. Eligibility: The document emphasizes the importance of clearly defining eligibility classes and consistently applying conditions to prevent issues. Special Issues: It touches on topics such as ERISA preemption, annual notice requirements, and the classification of benefits subject to ERISA. Overall, the document serves as a comprehensive guide to understanding and navigating ERISA compliance for employers.

Source: Ctfassets.net, January 2025

New Year Brings New Automatic Enrollment and Escalation Requirements for Some Recently Adopted 401k and 403b Plans

The SECURE 2.0 Act of 2022 mandates that starting January 1, 2025, newly adopted 401k and 403b plans must implement automatic enrollment and escalation features. Participants will be automatically enrolled to make pre-tax contributions between 3% and 10% of their eligible pay, with an annual increase of one percentage point until contributions reach at least 10%, but no more than 15%. Employers should also consider IRS guidance issued in December 2023 regarding how these requirements apply to plan mergers. The guidance indicates that depending on the circumstances, a merger could result in the newly merged plan being subject to or exempt from the automatic enrollment requirements.

Source: Benefitsnotes.com, January 2025

Required Minimum Distributions for 401k and 403b Plans

The first Required Minimum Distribution must be taken by April 1 of the year following the latter of when a participant turns 73 or retires (if allowed by the plan). For 5%-or-more owners, RMDs must begin by April 1 following their 73rd birthday, regardless of employment status. The minimum distribution rules must be explicitly included in the plan to maintain its tax-qualified status. Recordkeepers typically notify participants about RMDs and assist with calculations, but failure to comply with RMD rules can result in qualification errors for the plan, with excise taxes imposed on individuals. This scenario creates confusion over accountability, as plan sponsors, recordkeepers, and participants often blame each other for RMD violations, leaving everyone with a problem.

Source: Belfint.com, January 2025

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, January 2025

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

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

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

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

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

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

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

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

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

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