DC Insights, Winter 2025

INSIGHTS AN OFFICIAL PUBLICATION OF PLAN SPONSOR COUNCIL OF AMERICA

Winter 2025

For Defined Contribution Plan Sponsors

PLAN DESIGN

Deep Dive PSCA’s annual research reveals emerging trends in DC plan design and plan sponsor perspectives on hot topics.

ALSO

SECURE 2.0 HAS NONQUALIFIED PLAN SPONSORS PLAYING “CATCH-UP” PARTICIPANT COMMUNICATION & EDUCATION AS RETIREMENT NEARS OUTSOURCING YOUR INVESTMENT MANAGEMENT: PROS AND CONS FOR PLAN SPONSORS

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CONTENTS

WINTER 2025

Muhammad imam hakiki / Shutterstock.com

COVER STORY

16 16 Plan Design Deep Dive What design trends are we seeing in PSCA’s annual research – and what trends are we watching for 2026?

by Hattie Greenan

PSCA National Conference May 4-6, 2026 Saint Louis, MO Upcoming Webcasts:

FEATURE Geoffrey Prior / Shutterstock.com

UPCOMING DATES & EVENTS

22 The DOL’s Lifetime Income Advisory Opinion The advisory opinion is a major development in the field of defined contribution plan design and retirement income planning. Here are the six key reasons why it matters.

by Fred Reish and Tamiko Toland

PSCA.ORG

Impacting Retirement Outcomes: Lifetime Income and Beyond October 7, 2025 Retirement Readiness: Key Trends and Insights for Plan Sponsors October 21, 2025

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CONTENTS

WINTER 2025

IN EVERY ISSUE

6 Editor’s Note Making a List

by Hattie Greenan

7 New Members

10 President’s Page Turning Change into Opportunity: Preparing for 2026 with Confidence

by Brandon Diersch

Cagkan Sayinr / Shutterstock.com

14 Leadership Letter PSCA Launches Knowa Powered by PSCA

by Will Hansen

40

38 Retirement Read(y) ‘Inside’ Straits

ARTICLES

by Nevin E. Adams, JD

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30

34

NQDC SECURE 2.0 Has Nonqualified Plan Sponsors Playing “Catch-up”

Compliance Corner Outsourcing Your Investment Management: Pros and Cons for Plan Sponsors

Plan Design Rule of 55: A Lifeline

by Jason Stephens and David Bleiler

by Adam Greetis

by Scott Greenman

40 Education Participant Communication & Education as Retirement Nears

by Jennifer Rayner

PSCA.ORG

44 Washington Watch Closing Out 2025 with Bipartisan Retirement Policy Wins

by Josh Oppenheimer

Key strategies to improve retirement plans Managing and administering retirement plans requires staying current on industry regulations and trends and addressing issues that affect plan participants’ financial future. The following strategies can help accomplish this.

Strategy 1: Establish an emergency savings option for employees Every year, the cost of living goes up, but wages and annual raises don’t keep pace. As a result, most American workers are living paycheck to paycheck, unable to afford unexpected emergency expenses. For those who do have money set aside for emergencies, 80% of them use that money to pay for emergency expenses as well as essentials such as groceries, rent, and utilities. So when an urgent financial need arises, many Americans use their retirement savings to cover the expense.

Employers have two options to help employees avoid tapping into their retirement funds: hardship withdrawals and emergency savings accounts. Certain retirement plans — 401(k)s, 403(b)s, and 457(b)s — permit participants to make a hardship withdrawal up to $1,000 because of an immediate and heavy financial need. In addition, in-plan and out-of-plan emergency savings accounts can help employees save money for unexpected expenses. To determine which option is best for their organization, employers should consult with plan administrators and plan advisors to determine whether they should offer hardship withdrawals, an emergency savings account, or both.

Strategy 2: Avoid the challenges associated with automatic enrollment Even though the SECURE 2.0 Act’s automatic enrollment requirement applies to only 401(k) or 403(b) plans established on or after Dec. 29, 2022, many employers are automatically enrolling employees in their defined contribution retirement plans regardless of when their plans were initiated. However, because nearly 40% of individuals quit their jobs within a year of being hired, an increasing number of individuals are leaving small balances in their former employers’ retirement plans. Retirement plans with small-balance accounts of former employees often generate higher administrative fees. And since employers continue being fiduciarily responsible for ex-employees’ small-balance accounts, they face elevated liability risks.

Now more than ever, it’s important for employers to establish an automatic rollover IRA program for all former employees’ accounts of $7,000 or less. This will allow employers to roll over ex-employees’ retirement savings into safe harbor IRAs if those individuals don’t specify what they want to do with their money. It will also help employers avoid distributing checks that could go uncashed and reduce their fiduciary liability.

Strategy 3: Get up to speed on retirement plan termination Whether because of a merger, acquisition, bankruptcy, or voluntary termination, terminating a 401(k), 403(b), or other defined contribution plan is a complex process requiring several administrative steps. And if the plan has missing or non-responsive plan participants, that further complicates the matter. An employer terminating a retirement plan cannot simply ignore missing or non-responsive plan participants because termination of a retirement plan cannot be finalized until all of the assets are distributed to plan participants, including former employees. To simplify plan terminations, employers can work with plan advisors that are familiar with plan terminations and with service providers that can take on some of the administrative tasks involved.

Inspira Financial Trust, LLC performs the duties of a directed custodian and, as such, does not provide due diligence to third parties on prospective investments, platforms, sponsors, or service providers and does not offer or sell investments or provide investment, tax, or legal advice. © 2025 Inspira Financial. All rights reserved.

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ADVOCACY, EDUCATION, AND INSIGHT FOR AMERICA’S RETIREMENT

WINTER 2025 Insights is Published by

PSCA MEMBER BENEFITS AND RESOURCES Conferences and Training National and regional conferences designed for defined contribution plan administrators and sponsors.

Our must-attend events provide education from industry leaders and peer networking.

Signature Awards Peer and industry recognition for employee communication and education.

Recognizing outstanding defined contribution programs implemented by plan sponsors, administrators, and service providers.

Research and Benchmarking PSCA surveys: Most comprehensive and unbiased source of plan benchmarking data in the industry.

Annual surveys of profit sharing, 401(k), 403(b), and NQDC plans, as well as HSAs, created by and for members. Current trend and other surveys available throughout the year. Free to members that participate. Surveys currently available include: • 67th Annual Survey of Profit Sharing and 401(k) Plans • 2024 403(b) Plan Survey • 2024 NQDC Plan Survey • 2025 HSA Survey Executive Report A monthly electronic legislative newsletter.

Providing concise, current information on Washington’s most recent events and developments.

Media Outreach PSCA works to ensure fair coverage of the DC system in the media.

PSCA continually speaks to reporters to provide and promote accurate, concise, and balanced coverage DC plans and responds to negative press with editorials and letters to the editors. PSCA is also active on social media — follow us on twitter at @psca401k and on LinkedIn. Washington Representation Your direct connection to Washington DC events and developments affecting DC plans.

PSCA works in Washington to advocate in the best interests of our members and bring you the latest developments that will impact your plan. PSCA is a founding board member of the Save Our Savings Coalition that is currently working in Washington to preserve plan limits amongst tax reform.

Quarterly Magazine, Insights An award-winning and essential 401(k) and profit sharing plan resource.

Featuring nationally-respected columnists, case studies, the latest research, and more. Providing practical and constructive solutions for sponsors.

Professional Growth — Join a Committee!

For plan sponsors, administrators, and service providers.

Editor, Director of Research & Communications Hattie Greenan hgreenan@usaretirement.org Advertising Sales Thomas Connolly TConnolly@usaretirement.org PSCA STAFF Executive Director Will Hansen whansen@usaretirement.org Senior Manager, PSCA Membership & Operations LaToya Millet lmillet@usaretirement.org PSCA Leadership Council OFFICERS President Brandon Diersch, Global Financial Benefits Manager, Microsoft Immediate Past President Diane Garwood, Horizon Bank Directors Joyce Anderson, GE; Davis Blier, United Health Group; Ann Brisk, HSA Bank; Dena Brockhouse, Kent Corporation; Chris Dall, PNC; Yvette George, Henrico County Government; Scott Greenman, The Principia; Teresa Hassara, Principal Financial Group; Sheri Melvin, Union of Concerned Scientists; Michelle McGovern, American College of Surgeons; Tom Moore, Thryv; Rose Murtaugh, International Motors LLC; Cynthia Oberland, Precision Medicine Group; Maria Quintiguia, Public Employee Retirement System of Idaho; Alexandra Richardson, Mercer; Laura Stamps, Financial Finesse; Malika Terry, NCR Atleos; Tracy Tillery, GM

Many opportunities for PSCA members to serve on committees, speak at regional and national conferences, and write articles for Defined Contribution Insights.

PSCA Mission Statement The Plan Sponsor Council of America (PSCA) is a broadly based association of diverse businesses which believe that profit sharing, 401(k), and related savings and incentive programs strengthen the free-enterprise system, empower and motivate the workforce, improve domestic and international competitiveness, and provide a vital source of retirement income.

PSCA Competition Law Statement The Plan Sponsor Council of America (PSCA) is committed to fostering a best practices environment for profit sharing, 401(k), and other employer-sponsored defined contribution retirement programs. PSCA adheres to all applicable laws which regulate its activities. These laws include the anti-trust/competition laws which the United States has adopted to preserve the free enterprise system, promote competition, and protect the public from monopolistic and other restrictive trade practices.

PSCA.ORG

Insights is published by the Plan Sponsor Council of America, 4401 N. Fairfax Drive, Suite 600, Arlington, VA 22203. Subscriptions are part of PSCA membership. Opinions expressed are those of the authors. Nothing may be reprinted without the publisher’s permission. Information contained in Defined Contribution Insights is for general education purposes only and should not be relied upon as legal advice. Contact your legal advisor for advice specific to your plan.

Copyright ©2025 by the Plan Sponsor Council of America.

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2026

MAY

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P R O F M , S I S T. L O U

WORKSHOPS • NETWORKING • SESSIONS • AFTER PARTY

6

EDITOR’S NOTE

WINTER 2025

by Hattie Greenan

Making a List

antoniodiaz / Shutterstock.com

What’s on your retirement plan list for 2026?

THE END OF THE YEAR COMES WITH LISTS – TOP TEN BOOKS OF THE YEAR, TOP TEN MOVIES, TOP TEN SILLY PREDICTIONS, FUNNIEST MEMES OF THE YEAR... it also comes with expanded to-do lists, compliances lists, wish lists, never ending lists. As we reflect on the year that was and the year to come, what are your thoughts on your retirement plan goals and where the industry is going? What’s on your top five list of things your plan accomplished in 2025, and top five things you would like to tackle next year? Have you crossed Roth catch-ups off the list yet or is it still hanging on there like Rudolph’s red nose?

The industry made a lot of changes this year as it continues to evolve and morph from a purely savings model to a savings and income model to meet the financial needs and goals of workers. The SECURE Acts and other legislation are working as intended to expand access to retirement plans at work – the single best way to help workers save for the future.

The cover story this issue highlights the trends PSCA is seeing in its annual research on retirement plans through its four annual surveys and its weekly polling of members on hot topics (QOTW). The data this year shows that in an uncertain economic and political environment, workers and employers continued to contribute to plans, with slight increases in rates, even as we did see a small uptick in hardship withdrawals. What are the top trends we are seeing in the data? I break the mold of top five or top ten lists and give you four trends I am seeing in the data that I think will continue into the new year that will continue to shape the future of plans. I also hit the highlights of what we are not seeing in the data, despite a lot of industry talk.

Follow the Discussion:

@PSCA401k

Plan Sponsor Council of America PSCA.ORG

In the president’s letter and leadership letter, Brandon and Will give you great overviews of the driving forces in the industry in the last year and the ways in which PSCA helped you navigate it with resources, research, and education, and they ways in which PSCA will continue to do so in 2026.

The committee-provided articles in this issue dive into some technical details with yes, more lists – lists of helpful and practical strategies to help you evaluate advisor services, provide pre-retiree resources, and educate key employees on participating in NQDC plans in light of their requirement to make catchup contributions on a Roth basis. We hope these lists can help cut down on your to-do list and provide a quick overview of some key considerations.

Happy list making, and happy holidays!

Hattie Greenan is the Director of Research and Communications for PSCA.

Editor

Plan Sponsor Council of America

WELCOME NEW & RECENTLY CREDENTIALED MEMBERS!

Corporate Members Applied Pension Professionals Fort Wayne, IN

Industry: Pension Consulting Contact: Conni Toth

Certified Plan Sponsor Professionals Elise Alchevsky

Melissa Brown

Regina Clouse

Yun Day

Monica Anderson

Melanie Burrell

Colleena Coleman

Monica De Agostino

Jennifer Collins

Jennifer Demerle

Crystal Collins

Olger Diaz

ADVICS North America, Inc First Bank and Trust Company - Abingdon, VA

Jill Argueta

Prince William County Schools

Dorothy Baker

Capital Integration Systems LLC The Michaels Organization

Benjamin Butron Sanchez

Mark Anthony Group

Stefon Bynes

Retail Concepts, Inc

Rare Collectibles TV, LLC

Amanda Baker

Michael Byrd

Southwest Health System, Inc.

Alyssa Ballantyne Leidos

Marlee Barnes

Applied Systems Inc.

Leah Bedrich

PBK Architects, Inc.

Aria Behfar Real Thread

Jennifer Beishke Kratos Defense

Victoria Benson MedCost LLC

Albero Booto G&A partners

Ashley Brooks

Tutera Senior Living

Debbie Brown PK USA, Inc.

Kratos

Joyce Calderwood NiproPharma

Heather Cannon

Furniture Services, Inc.

John CarlsonBrancher

Treaty Oak Clean Energy

Kelly Carpenter Novonesis

Kristy Carter

Coblentz Patch Duffy & Bass, LLP

Christopher Causey Binny’s

Katelin Charpentier Corvias Corporate Services, LLC

Stephanie ChilesBeauvais The Kolter Group

Heritage Provider Network Tubman PwC

Cardiovascular Logistics

Piper Connors

Del Amo Construction. com MRIGlobal Allego

Intel Corporation

Christina Diller

Kelly IP

Southwest Research Institute

Jason Cooper

Jordan Douglas

Regina Cornejo

Cecily Driver

Coen Oil

Beachbody LLC

Hector Cotto

Williams Mullen

The Country Club of Mobile

Cornerstone OnDemand

Jessica Dubrule

Danae Cummins

Jeanne Edler

FireKeepers Casino Hotel

Adam Dailey

The E.W. Scripps Company

Anna Dane AMB Group

Karen Davis

The Harford Mutual Insurance Group

Yvonne Davis

Luxa Enterprises

Jennifer Davis

Magnolia Oil & Gas Operating LLC

Seattle Credit Union

Lena Finch Allego

Sally Finger

Relevant Solutions

Jason Fredrick Autotality

Jeni Gafkjen

Northern Radiator

William Garcia

HUB International

Craig Gaume

Whiting Door Manufacturing Corp.

Katie Girardi

San Luis Obispo County Pension Trust

Marie Gladue

Dorcas International

Joyce Bridget Gleason

Envoy Air Inc.

MarinHealth Medical Center

Ian Ellis

Adam Gonzales

Julia Emeltchenko

Jenfier Granade

G&A Partners The Appointment Group LLC

Kimberley Ephraim

Case Paper Company

Rexel USA, Inc. MCBS, LLC.

Nina Guerrero Virta Health

Ashlee Hager

Wanship Enterprises, LLC

Central Oklahoma Transportation and Parking Authority

Derek Felderhoff

Theodore Hahn

Leslie Faulkner

512Financial, LLC

Kimberly Ferrebee KTA-Tator, Inc.

The Freedom Center

WELCOME NEW & RECENTLY CREDENTIALED MEMBERS!

Karen Hall

Heritage Provider Network

Alex Harmann

Jeffrey Jablonski

Chenega Corporation

Karen Janson

Alicia Leija

HealthTexas Medical Group

Navitus

Heritage Provider Network

Weronika Leja

Jordan Hawker

Tris Jefferson

Katelyn LeJeune

Susan Heberling

Kim Johnson

King Lewis

S&B USA Construction Eclipse Technology Solutions, Inc.

Stefanie Hedden Avaya LLC

Zoe Helie-Koza

ADUSA Services, LLC

Sue Henige

Child Guidance & Family Solutions

Veronica Heredia Satanta District Hospital

Dichele Hernandez Modern HR, Inc.

Nicole Hernandez

Rohrer Corporation

Michael Hersh

Great Lakes Credit Union

Erin Hieronimus

PwC

Bakerfield Family Medical Group

Mark Johnson

Comer Construction Inc

Samarah Johnson

Pappas Restaurants, Inc.

Connor Keating The Revolution Companies

Peninsula Orthopaedic Associates

American Cancer Society

Tina Holt

CommerceOne Bank

D’Anna Hood Serapid, Inc.

Tyler Horner Schultz Ind.

Steve Huffman

Damar Services

Kimberly Moir Entrata

Yvonne Monea

Buehler’s Fresh Foods

Anthony Monjure Jennifer Monks

Melissa Lisher

Cynthia Morel

Amy Lyn Logan

Matthew Morrin

G&A Partners

American Gas Association

MANCON, LLC

Axiom Bank NA

Triangle Sign & Service

Pathward, NA

Bose McKinney & Evans LLP Northern Maine Medical Center

Leah Muhich

Empire Today, L.L.C.

Elaine Muirhead

Susan Lowmiller

Rollins College

Linda Martin

Advanced Technology Services

Mandy King

Shipley Energy

Penn State Health

Energy Vault, Inc.

Lathon Lewis

Tijwanna Ketter PEACE, Inc.

Christine Mithiaru

AlignRx

Brand Revolution

Fulenwider Enterprises

UniWyo Credit Union

Fulenwider Enterprises, Inc.

Sarah Lorigan

Jozi Kohli

Alexa Holland

Michele Lewis

Judith Kerr

Sarasota Orchestra

Jon Hiivala

Florida Tech

Monomi Park

Cynthia Kelly

Charlotte Kistner

Karen Hill

Weaver

Vanessa Lopez

United Auburn Indian Community Wescom Inc.

Origami Risk

Susan Minotti

Tyler Mulvey

Jacquette Maynard

Hanna Nell

Brandon McClellan

Jennibel Nunez

Mutual Securities Inc. of California

Members 1st Federal Credit Union Tri-City Electrical Contractors, Inc.

The International Center for the Preservation of Wild Animals

3V Sigma USA Inc.

Shelby Kop’Kash

Katherine McLeod

Clifford Kramer

Lori Meader

Downstream Holding LLC dba Critical Flow Solutions

Emily Medlin

Victoria Marie Pacheco

Insight

Del Amo Construction LLC

Michael Latiolais

ISC Constructors, LLC

Shanika Lee

Rakesha McKentie Hilcorp Energy Company Insight

Arvig Enterprises,Inc. Trupanion

Brenda Mendivel

Nexion Health

Bakersfield Family Medical Group Inc.

Lora Lee

Krisztina Merritt

Ross Stores

Relevant Industrial

Crystal Olivar

SPEC Services, Inc.

Kathleen Olson

Incorporated County of Los Alamos

Paula Palella

TEN Credit Union

Cheryl Park

Stockbridge Capital Group

Monica Parkes

Girl Scouts of Wisconsin Southeast, Inc

Anil Patel

Trean Corporation

Lynn Paulson

Puget Sound Kidney Centers

Sadie PavaoCrossman

Lionbridge Technologies, LLC

Kyla Pennington WillScot

Jacqueline Perry

Coblentz Patch Duffy and Bass LLP

Sarah Peterson Life Link III

Lynn Peterson

Sarasota County Schools

Laura Phan

PwC US Group LLP

David Phillips

Axiom Resource Management, Inc.

Mario Pintor

G&A Partners

Christina Plewniak Avaya LLC

Savi Pooran

City of Cocoa

Kate Powers People415

Samantha Purcell

Powder Keg Inc. DBA Kemo Sabe

Bereniz Ramirez SchoolsFirst FCU

Lynn Redd-Kipper PK USA Inc

WELCOME NEW & RECENTLY CREDENTIALED MEMBERS!

Anna Reedy

The Landings Golf and Athletic Club

Stephanie Reichlen VISTA Technology Services, Inc.

Roseann Retter

Family Health West

Paula Lacson Roberts

Kellie Shaughnessy Wex

Bobbie Sherman Carle Health

Jill Sherman

Quonset Development Corporation

Maria Sherman

Kura Sushi USA Inc

Physicians Practice Enhancement LLC

Sandra Rodas

Rachel Shopf

Capital Lumber

Katherine Rogers

Ohio Machinery Co.

Keating Partners

Tracey Shuck

Acadian Group

Jodi Roodvoets

Ashlee Shultz

Cathryn Ross

Calvin Siemer

Walinga USA Inc Risk Strategies AKA Brown & Brown

Laurie Rueschhoff

Stormont Vail Health

Sasha Sagastume

Great HealthWorks

Melissa Salmani

Briljent

The Venetian Resort Las Vegas

Roxanne Signorile MGF US INC

Elizabeth Singh

Crossroads Talent Solutions, LLC

The Beacon Mutual Insurance Company

Joseph Sipe

Alysa Sasaki

Sonia Sisk

Renee Scalzi

Allison Slater

Glidewell

Rhode Island Community Food Bank

Katherine Schank Augsburg Fortress Publishers

Marco Technologies Sisk Solutions, LLC Treaty Oak Clean Energy

Sierra Sleeper

Oaktree Capital Management

Link Logistics

Jennifer Stevens PwC

Hilary Stone

HA International, LLC

Julie Strauss

Renaissance Learning, Inc.

Tamara Wakefield IMI Americas LLC

Yvette Waler

Independence Pet Holdings, Inc.

Hannah Welch

Arvig Enterprises, Inc

Dawna West

Hilcorp Energy Company

Mitchell County Hospital Health Systems

Marie Sullivant

Zachary Westbrook

Summit Group Retirement Planners, Inc.

Charlotte Sutton

East West Resorts

Liz Sutton Dermody

Karen Swafford General Atomics

Melinda Swearingen SDSU Research Foundation

Augusta Tennison Herschend

Twyla Thompson G&A Partners

Kathy Thompson

Credit One Bank

Jack Williams

JERA Americas Inc

Jay Wilson

University of Kansas Health System

Tammy Winsett Swoop.com, Inc.

Joseph Winter

Niagara University

Henny Wong Novavax

Ashley Young Reece USA

Sheila ZacharyMurdoch

Community First Credit Union of FL

Andrew Ulberg

Zhenyaun Zhou

Evonne Smith

Patty Van Laar

Whitney Schrock

Lori Smith

FORTNA

Elizabeth Stepp

Sherri Voris

Evan Zamora

Planned Systems International, Inc.

Lauren Sharrock

Illinois Valley Economic Development Corporation Head Start

Herschend

Kassi Towle

Arvig

Pembina Pipeline Corporation

Stephanie Stahlhut

Dacia Vigna

High Desert Medical Group

Shianna Smith

Stephanie Seabrook

Furniture Services Holdings, Inc

Seattle Credit Union

Becky SchouvillerFelker Ventra Health, Inc.

David Spink

Educational Systems Federal Credit Union

Lisa Solley

Morgan, Lewis & Bockius LLP

Treaty Oak Clean Energy Sesame Workshop Shipley Energy

Susan Varghese ACSESS

Reno Orthopedic Center PwC

10 WINTER 2025

PRESIDENT’S PAGE

by Brandon Diersch

Turning Change into Opportunity: Preparing for 2026 with Confidence PSCA continues to create and offer data, education, and practical tools that equip our community to face challenges and embrace innovation.

DEAR PSCA MEMBERS, Reflecting back on 2025, it was a year of transition and implementation, as we as plan sponsors moved from legislative awareness to operational change. SECURE 2.0’s staggered provisions reshaped plan design, eligibility, participant communications, and led to much integration work between payroll and recordkeeping platforms. I’m pleased with how the retirement industry navigated tax changes and continued governance, litigation, and cybersecurity challenges. As we enter 2026, success will be defined by precision execution—especially around Roth catch‑up administration, disclosure requirements, and par‑ ticipant engagement at scale. As always, the Plan Sponsor Council of America (PSCA) will continue to offer data, education, and practical tools that help our community move faster and with confidence.

2025: SECURE 2.0 & RISKS KEPT PLAN SPONSORS BUSY

SECURE 2.0 MILESTONES Sponsors adopted features that expand savings and broaden access: • Super catch‑up (ages 60–63, optional): New headroom for savings – but with added complexity around spillover logic, taxation, and targeted communications.

• Long‑Term Part‑Time (LTPT) eligibility: Service window tightened to two consecutive years of 500+ hours (effective 2025), expanding access while preserving testing relief.

• Mandatory auto‑enrollment for new plans: Defaults of three to ten percent with annual auto‑escalation standard in newly established plans, reinforcing escalation up to 10–15 percent became behavioral design.

• Benchmark your plan with PSCA’s Annual 401(k) Survey: Participation rate is near nine in ten workers, strong adoption of auto‑features and Roth, and ongoing growth in mobile access/managed accounts—even as hardship withdrawals rose amid economic pressure.

Explore: Industry Content  Research → Annual 401(k) Plan Survey GOVERNANCE, LITIGATION, AND CYBERSECURITY Fee benchmarking and prudent process documentation remained critical amid persistent ERISA litiga‑ tion risk. Meanwhile, sophisticated cyber threats pushed sponsors to strengthen vendor oversight (MFA, transaction holds, incident response playbooks) and revisit missing‑participant protocols. This will continue to be an area of focus for plan sponsors in 2026 and a focus for PSCA. We have educational content and resources to assist.

PSCA Education: Webcasts and conference sessions on governance, cyber, disclosures, and investment menus.

PSCA.ORG

LEGISLATIVE CHANGES IN 2025 While the sweeping One Big Beautiful Bill brought signifi‑ cant changes to the tax code, it notably did not alter the retirement system. 401(k) tax advantages and contribution limits remain intact, safeguard‑ ing the foundation of America’s employer-sponsored retirement system. This outcome under‑ scores a critical success: pro‑ tecting the integrity of the U.S. retirement system amid major legislative reform. For plan sponsors, it means confidence in plan design continuity and the ability to focus on enhance‑ ments, rather than defending core tax benefits.

LOOKING FORWARD TO 2026

CONTRIBUTION CEILINGS AND COMMUNICATIONS Inflation adjustments raised deferral ceilings for 2025, prompting updates to calculators, spillover rules, and participant materials.

IRS Announces 2026 401(k) Contribution Limits:

11 WINTER 2025

• Employee Salary Deferral Limit: $24,500 (up from $23,500 in 2025) • Catch-Up Contribution (Age 50+): $8,000 (up from $7,500 in 2025) • Super Catch-Up (Ages 60–63): $11,250 (unchanged from 2025; indexed separately) • Combined Employer + Employee Contribution Limit: $72,000 • Roth Catch-Up Threshold: Employees with more than $150,000 in prior-year FICA wages must make catch-up contributions on a Roth basis starting in 2026.

FINANCIAL WELLNESS & RETIREMENT INCOME: FROM PILOTS TO PROGRAMS Financial wellness pro‑ grams are no longer optional – they’re essential for improv‑ ing employee outcomes. By addressing budgeting, debt management, emergency savings, and long-term planning, these initiatives reduce stress, boost engagement, and enhance workplace performance. When integrated with retirement income planning, they help employees save effectively and convert assets into sustainable income streams. Features like HSAs, emergency savings, and behavioral nudges build resil‑ ience, while research shows such programs drive higher contribution rates, lower loan

IN TODAY’S COMPETITIVE TALENT LANDSCAPE, ROBUST FINANCIAL WELLNESS SOLUTIONS ARE CRITICAL FOR ATTRACTING AND RETAINING TOP TALENT WHILE FULFILLING FIDUCIARY RESPONSIBILITIES. defaults, and greater confidence in retirement readiness. Increasingly, personalization and integration of behavioral finance research have further increased the effectiveness of these tools. In today’s competitive talent landscape, robust financial wellness solutions are critical for attracting and retaining top talent while fulfilling fiduciary responsibilities.

PSCA CREDENTIALS: • Retirement Income for Plan Sponsors—Online Certificate (selection/monitoring framework; settlor vs. fiduciary clarity) • CPSP™—Credential for Plan Sponsors (governance maturity for committees/benefits teams)

REGISTER FOR PSCA NATIONAL CONFERENCE – MAY 4-6, 2026

Join us at the historic St. Louis Union Station Hotel in May for the PSCA National Conference. This is where retirement plan innovation meets practical solutions. Explore groundbreaking investment strate‑ gies, participant engagement tactics, and fiduciary best practices, plus sessions on AI-driven plan analytics and automation. Learn how artificial intelligence is transforming plan design, compliance monitoring, and participant communication. Connect with peers, gain fresh insights into the evolving benefits landscape, and prepare to lead with confidence. Don’t miss this opportunity to network, earn CE credits, and stay ahead of emerging trends. Register now to secure your spot!

LOOKING AHEAD TOGETHER

As we turn the page to 2026, I want to express my sincere gratitude to the PSCA community for your unwavering commitment to advancing retirement security. Your collaboration, insights, and advocacy have been instrumental in navigating a year of complexity and progress. The year ahead promises exciting opportunities—from implementing SECURE 2.0 provisions to innovating in financial wellness and retire‑ ment income solutions. I look forward to continuing this journey together and engaging with many of you in person at the PSCA National Conference in St. Louis this May. Let’s make 2026 a year of execution, innova‑ tion, and impact for America’s retirement system.

Brandon Diersch is a Director of Global Financial Benefits at Microsoft and PSCA’s current President.

PSCA.ORG

12 WINTER 2025

LEADERSHIP LETTER

by Will Hanson

A Year of Growth, Innovation, and Community New programs and resources launched this year as PSCA added more than 1,000 new CPSP members.

AS WE CLOSE OUT 2025, I FIND MYSELF REFLECTING ON WHAT HAS BEEN AN EXTRAORDINARY year for PSCA and our community. When I think about our mission to support plan sponsors and service providers in delivering world-class retirement benefits, I’m proud to say we’ve not only met that goal – we’ve exceeded it in ways that will resonate for years to come.

This year marked several significant milestones that demonstrate our commitment to evolving alongside the needs of our members. Earlier this year, we successfully launched the Retirement Income Certificate Program, a credential that addresses one of the most critical challenges facing plan sponsors today: helping participants transition from accumulation to decumulation. The enthusiastic response from our community confirmed what we already knew – you’re hungry for practical, actionable education that addresses the real-world complexities of retirement planning. This program equips plan sponsors with the tools and knowledge to guide participants through one of the most important phases of their financial lives, and I couldn’t be more pleased with its reception.

Our 2025 PSCA National Conference in Las Vegas was nothing short of exceptional. We saw a significant increase in overall attendance, bringing together plan sponsors, service providers, and industry thought leaders for three days of intensive learning, networking, and collaboration. The energy in those halls was palpable – from packed educational sessions to meaningful conversations that extended well beyond the conference rooms. When I walked through the exhibit floor and attended the various sessions, I was reminded that PSCA isn’t just an organization; it’s a community

EACH NEW CPSP REPRESENTS A COMMITMENT TO EXCELLENCE IN SERVING PLAN PARTICIPANTS. of professionals dedicated to improving retirement outcomes for millions of American workers.

One of my personal highlights this year was launching Will’s Weekly Wire. What started as an idea to create more touchpoints with our CPSP credential holders and service provider members has evolved into a weekly conversation about the issues that matter most to you. Nearly every week, I’ve had the privilege of sharing industry insights, advocacy updates, research findings, and yes, even the occasional random thought from my travels. The feedback has been overwhelmingly positive, and I’m grateful for the dialogue it’s created within our community.

We also recognized that engagement happens in many formats, which is why we expanded our virtual event offerings. From member orientations that welcome new faces into the PSCA family, to coffee chats where we tackle timely topics in an informal setting, to our ever-popular virtual roundtables that foster peer-to-peer learning – we’ve created multiple pathways for members to connect, learn, and grow. These virtual touchpoints have allowed us to reach members wherever they are, breaking down geographical barriers and creating flexibility in how you engage with PSCA. Perhaps most exciting is the growth in our CPSP community. This year, we added more than 1,000 new CPSP credential holders – a testament to the value of professional development and the recognition that specialized knowledge in retirement plan administration matters. Each new CPSP

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represents a commitment to excellence in serving plan participants, and collectively, they strengthen the entire retirement industry.

As I look ahead to 2026, my excitement is difficult to contain. Our National Conference is heading to St. Louis – my hometown – and I promise you an unforgettable experience in the Gateway to the West. We’ll continue our successful CPSP classroom programs, bringing comprehensive education to communities across the country. And while I can’t share all the details just yet, I can tell you that we’re working on announcing another new certificate program that will address an emerging need in our industry.

Thank you for making 2025 such a remarkable year. Your engagement, your feedback, and your dedication to improving retirement outcomes drive everything we do at PSCA. Here’s to finishing the year strong and building even greater momentum in the year ahead.

Will Hansen is PSCA’s Executive Director and Chief Government Affairs Officer for the American Retirement Association.

FOR PLAN SPONSORS CERTIFICATE

Learn More www.psca.org/ric Sponsored by

Cracking the Retirement Code: Income Replacement Rates Even with its foundational role in retirement planning, one critical concept often baffles participants and employers alike: the income replacement rate. This term, crucial for establishing realistic savings goals, refers to the percentage of pre-retirement income retirees need to maintain their standard of living in retirement.

While the concept may seem straightforward, the 12th annual American Century Retirement Study revealed a concerning gap in understanding among employers and employees about the ideal income replacement rate— exposing the risk that participants’ retirement savings could fall short of their needs.

Unlocking the Mystery of Income Replacement Rates Despite the importance of knowing how much income one needs to replace in retirement, employees, employers and industry professionals do not agree on an appropriate income replacement goal.

Stark Discrepancy in How Much Income Replacement Is Needed in Retirement •

75% Financial industry standard

•

51%-80% Employers’ responses

•

40%-100% Employees’ responses

The wide-ranging answers, particularly among participants, underscore that many retirement investors are not making informed decisions about their retirement savings. It also reveals a need for the retirement planning industry to educate and guide employers and employees in setting realistic and sufficient income replacement goals. Our 2025 survey revealed that plan sponsors believe their education is effective, but participants still feel unprepared and want more support to turn savings into income.

DC Plans vs. DB Plans as the Primary Retirement Vehicle Granted, the need for defined contribution (DC) plans to account for income replacement has evolved.

Historically, DC plans began as supplemental savings vehicles to defined benefit (DB) plans. Over the past two decades, however, employers increasingly froze or even eliminated their traditional pension plans. The result is that DC plans now serve as the cornerstone of retirement planning for most American workers. This shift necessitates a reevaluation of how these plans are structured and utilized.

Recognizing this evolution, many employers are now working toward establishing income replacement rate goals for their 401(k) plans. Additionally, a few plans are defaulting employees into investment options that allow them to convert all or part of their savings into guaranteed lifetime income.

What Participants Get Wrong About Target-Date Funds Why would employers consider a default retirement income option when they already have a target-date fund (TDF)? One of the most revealing aspects of the 2025 participant survey is the disconnect between what plan sponsors believe they are offering and the expectations of plan participants.

62% of participants believe TDFs guarantee them income at retirement.

34% of participants think they are guaranteed not to lose money.

45% of participants prefer a TDF that helps protect their savings from significant losses even if it means waiting out periods of underperformance.

46% of participants find a loss of more than 10% unacceptable when they are within five years of retirement.

Participants’ perceptions of TDFs highlight the need for clearer communication and education regarding the nature of TDFs and the risks involved. It also may explain why participants have a strong preference to have all their account balances protected in the form of a default investment— and then choose the amount of guaranteed income to take at retirement.

The Advisor's Role: Educator, Advocate and Innovator Even with workers' overwhelming interest in guaranteed lifetime income options, only about 5% of 401(k) plans in the U.S. currently offer such products. This gap points to the opportunity for advisors to step in to help employers align plan offerings with the needs and preferences of the workforce.

Employers’ responses to our survey showed their readiness to have these conversations: A staggering 94% of employers feel a responsibility to aid their employees in saving for retirement and managing their funds in their post-work years.

Moreover, 81% prefer that employees keep their retirement assets within the company plan, underscoring the importance of providing options that allow for the conversion of savings into reliable income streams upon retirement.

The Path Forward for Retirement Income Planning The findings from the American Century Retirement Study once again serve as a crucial wake-up call for the retirement planning industry. As we navigate an ever-evolving financial landscape marked by concerns over inflation, interest rates and market volatility, the need for robust, adaptable retirement planning strategies has never been greater.

By fostering a deeper understanding of the income replacement rate, clarifying the role and risks of investment options like TDFs and evolving the structure and offerings of DC plans, we can work toward a future where all participants can adequately meet their income needs in retirement.

Methodology: The participant survey was conducted between June 3, 2025, and June 23, 2025. The survey included 1,500 full-time workers between the ages of 25 and 70 saving through their employer’s retirement plan. The data were weighted to reflect key demographics (gender, income, and education) among all American private sector participants between 25 and 70.

The sponsor survey was conducted between May 20, 2025, and June 16, 2025. Survey included 500 plan sponsor representatives holding a job title of Director or higher and having considerable influence when it comes to making decisions about their company’s retirement plan (either 401(k), 403(b), or 457 plans). The data were weighted to reflect the makeup of the total defined contribution population by plan asset size.

Percentages in the tables and charts may not total 100 due to rounding and/or missing categories.

Greenwald Research of Washington, D.C. completed data collection and analysis.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ©2025 American Century Proprietary Holdings Inc. All rights reserved.

16 WINTER 2025

COVER STORY

by Hattie Greenan

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COVER STORY

17 WINTER 2025

PLAN DESIGN

Dive Muhammad imam hakiki / Shutterstock.com

What design trends are we seeing in PSCA’s annual research – and what trends are we watching for 2026?

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Retirement plan design continues to evolve as new products join the marketplace and new legislation is passed and implemented.

What plan design trends did we see in 2025 that are shaping retirement savings, and what is on the horizon for the new year?

Data from PSCA’s 68th Annual Survey of 401(k) Plans and its 2025 403(b) Plan Survey show similar trends – slight increases in plan participation, employers maintaining contributions, and slight increases in hardship withdrawals, along with plan design changes including Roth, automatic enrollment, investment advice, and SECURE Act optional provisions.

CURRENT DESIGN TRENDS

SECURE Acts Unsurprisingly, current design trends are largely influenced

by SECURE 2.0 legislation enacted in 2022 with implementation deadlines occurring steadily over the last few years, and more coming.

Roth Catch-ups The Roth treatment of catch-up contributions for high earners that goes into effect Jan 1, 2026, has dramatically increased the availability of Roth, particularly in 403(b) plans where availability had been lagging 401(k) plans. Both 401(k) and 403(b) plans also saw an increase in the percentage of participants making Roth contributions when available.

Data from PSCA’s Question of the Week (QOTW) in September showed that though most plan sponsors were not ready for the implementation of Roth catch-ups at that time, most were confident they would be by Jan 1, but most were also struggling with payroll logistics. There are many different considerations in the design and implementation of this provision from keeping catch-ups at all (most did), tracking participants who meet the income threshold for this requirement (which the recently released 2026 plan limits just changed from $145k to $150k), to whether

the catch-up design will be opt-in or opt-out (more employers are currently using a “spillover” (opt-out) design but a quarter are still deciding how to handle this).

Automatic Enrollment The use of automatic enrollment in 401(k) plans has become standard practice, and the SECURE Act provision requiring the use of automatic enrollment in new plans with 10 or more employees will continue this trend. The use of automatic enrollment in 403(b) plans has historically been low, but jumped by a third in the last two years and will continue to increase.

Availability of Roth Over Time 2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

401(k) Plans

59.9%

63.1%

69.6%

69.1%

75.1%

86.3%

87.8%

89.1%

92.5%

95.6%

403(b) Plans

28.6%

33.2%

37.4%

36.9%

46.8%

49.5%

58.8%

66.3%

68.2%

79.5%

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Plans with an Automatic Enrollment Feature

61.2%

59.7%

57.5%

60.2%

62%

60.2%

58.5%

63.9%

63.8%

64.3%

52.4% 41.5%

16.2%

2014

19%

2015

401(k) Plans

As automatic enrollment becomes standard across all plan types, we will continue to see evolution in defaults – rates, investments, automatic escalation, etc. The most common default rate across plan types continues to be three percent of pay (and the SECURE Act provisions requires a minimum default of three percent), but about 60 percent of 401(k) plans have a default rate more than that, compared to only a third of 403(b) plans.

More than half of 401(k) plans (53 percent) and 28 percent of 403(b) plans automatically escalate the default deferral rate over time. The SECURE Act provision mandating automatic enrollment also mandates auto escalation at a rate of one percent of pay a year up to 10-15 percent

21%

2016

23.9%

2017

24.4%

21.8%

2018

2019

28.7%

2020

26.5%

2021

31.4%

2022

35.5%

2023

2024

403(b) Plans

of pay unless the employee opts-out. The use of autoescalation has already been increasing and will continue to become prevalent. Since automatic enrollment is still relatively new to 403(b) plans, I expect as it becomes more established in nonprofits, we will see an increase in defaults and escalation as well.

One of the “newer” automatic features includes annual reenrollment of nonparticipants. This concept has been around for a while and the percentage of organizations doing it has increased a bit over time to 14 percent of plans, but there is also a legislative effort to provide a safe harbor for plans who reenroll once every three years. The idea here is that employees’ circumstances may change

over time so periodically reenrolling them allows them additional opportunities to participate when they may not take the initiative to do so on their own.

Optional Provisions Some of the more popular optional provisions of SECURE 2.0 are not necessarily the ones that had the most interest before enactment. Three-quarters of 401(k) plans and 60 percent of 403(b) plans have adopted the “super catch-up” feature for employees aged 60–63 that went into effect at the beginning of the year (there is some size correlation on the 403(b) side with only 30 percent of small nonprofits adopting it). Since most plans offer catchups, and most recordkeepers added it to the plan unless the employer opted-out, this one was pretty straightforward for plans to add, according to a QOTW on the topic.

Penalty-free distributions are becoming more common, with the natural disaster provision most widely adopted – 70 percent of 401(k) and 75 percent of 403(b) plans adopted it.

About half of plans adopted the QBAD distribution and about the same adopted the domestic violence provision, while 62 percent of 403(b) plans and 48 percent of 401(k) plans adopted the terminal illness provision. We will continue to see some evolution in these as organizations thoughtfully consider what is best for employees in balancing access to funds in critical situations with saving for the future.

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Optional Distribution Provisions allowed by the Plan Provision

403(b) Plans

401(k) Plans

Qualified Birth and Adoption (QBAD)

52.1%

50.8%

Natural Disasters

74.4%

70.6%

Terminal Illness

62.0%

47.7%

Emergency Withdrawal ($1,000 per year)

42.1%

36.1%

Domestic Violence

47.1%

54.2%

Other

4.1%

2.9%

INVESTMENT TRENDS

Other trends we are seeing that are not necessarily related to the SECURE Acts but influenced by trends in the marketplace revolve around investments. We are starting to see a lot more customization as more products come to market, increasing access and choice to participants.

Average Number of Funds The number of investment options available to participants through their 401(k) plan has more than doubled in the last 25 years. There was a rapid increase in the number of options in the early 2000s, then it held relatively steady for more than a decade at around 18-19 funds before steadily increasing again the last five years to an average now of 23 funds. When I started in this industry 20 years ago there was a lot of discussion about choice paralysis and the idea that too much choice makes it hard for people to make decisions – they are overwhelmed by options and can’t choose so choose nothing – this was maybe more so discussed in the 403(b) space as nonprofits have historically offered considerably more investment options.

But in the current landscape of evolving investments and hot topics such as in-plan annuities and private market investments, and adding choice for investors who want it, I think the point stands – how much choice is too much? One of the solutions to this is of course automatic enrollment and default investments which perhaps solves for the choice paralysis, but I do think it is worth keeping in mind from a behavioral perspective as we continue to expand investment lineups.

Average Number of Investment Options Available for Participant Contributions Over Time 1999

2004

2009

2014

2019

2024

401(k) Plans

53.7%

61.3%

58.6%

60.4%

57.2%

59.6%

403(b) Plans

90.7%

90.5%

85.1%

85.7%

88%

90.4%

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Types of Funds Added One of the ways some plan sponsors are adding choice for participants without adding a lot of extra funds to the lineup is through a brokerage window – 22.5 percent of plans offer one, including 44 percent of large plans. This was growing, but pulled back a bit in the 2025 reports, I expect we will continue to see this grow, particularly among large plans.

Target-date funds (TDFs) are another area where we are starting to see some evolution. TDFs are now almost universally available in large plans, available in 85 percent of plans overall, and used as the default investment option in nearly 90 percent of plans that have a QDIA. With their wide and easy use, some are looking to use them to solve the decumulation or retirement income dilemma the industry is currently trying to solve for. Nearly 14 percent of plans now offer a target-date fund that has a built in lifetime income option. Though these products are relatively new, more products are being released and interest is growing.

Another class of investment options that we are not seeing a lot of uptake of yet, but are being considered as part of a target date fund, is private equity/

COVER STORY

21 WINTER 2025

AMID THE CONVERSATION ABOUT PRIVATE MARKET INVESTMENTS/ PRIVATE EQUITY, THE PERCENTAGE OF 401(K) PLANS OFFERING A REAL ESTATE FUND/REIT IN THEIR LINEUP IS GROWING – 41.8 PERCENT OF PLANS NOW OFFER ONE, UP FROM 32.1 PERCENT FOUR YEARS PRIOR. private market investments.

Very few plans are currently offering them, for a variety of reasons, but there is a train of thought that including a them as a small portion of a TDF might make them more suitable to a 401(k) lineup. We asked members in a recent QOTW their interest level in TDFs with embedded lifetime income or a private equity sleeve and though interest is still low, it is growing.

Amid the conversation about private market investments/private equity, the percentage of 401(k) plans offering a real estate fund/REIT in their lineup is growing – 41.8 percent of plans now offer one, up from 32.1 percent four years prior. We may see continued growth in availability in these funds as plans continue to add additional options for asset growth.

Investment Advice The availability of investment advice has increased the last few years; in 401(k) plans it has increased nearly 50 percent over the last decade (now available at 42.2 percent of companies), while in 403(b) plans it is has doubled and is now available at 56.5 percent of organizations.

Though advice is growing in availably, likely through online platforms, its use by employees remains minimal.

We asked members in a QOTW about utilization and though many state that advice is underutilized by participants, most don’t know why. Some plans offer advice to employees at no additional cost, while some make it available for a fee, which can be a deterrent to use.

Managed Accounts Another trend we are seeing is the increase in availability of managed accounts. More than half of 401(k) plans (55 percent) now provide a managed account option, up 11 points in three years. The availability is lower in 403(b) plans but growing at about the same rate – 42.7 percent offer one, up from 33.6 percent three years ago.

Some trends we are not seeing take hold yet that I expect will continue to increase in the coming year(s) include Roth treatment of employer contributions and emergency savings. I do think we will see continued interest in TDFs with built in annuities/lifetime income options, but uptake is going to continue to be low in the next couple of years.

EMERGING TRENDS

Here are four plan design trends I think we will see continue or emerge in the next year: 1. R oth Employer Contributions: 20 percent of 401(k) plans now offer this feature, up from 13 percent in 2023, with a third of plans considering adding it. This will never be a universal option, but I expect availability to increase to 40 or 50 percent of plans within the next few years.

2. Emergency Savings: We will continue to see evolution here as there are legislative efforts to make PLESAs (Pension Linked Emergency Savings Accounts, also known as side-car accounts) easier to implement. Though only 1.3 percent of plans have added one, that is triple the number from the prior year. Even as organizations evaluate and decide not to add PLESAs, I think organizations will be looking at other emergency savings options for employees. More than a third of 401(k) plans (36 percent) have adopted the $1,000 per year emergency withdrawal provision and 42.1 percent of 403(b) plans have adopted it. This may grow as plans decide what type of support to provide to employees facing financial hardships.

3. Retirement income: I do not think we will see a jump in the percentage of plans adding an in-plan annuity/lifetime income option (it has hovered between 5 and 10 percent the last few years), but I do think we will see an increase in use of TDFs with an income feature and I think we will see an increase in managed payout options as organizations look to add help for retirees in receiving an income stream in retirement while balancing administrative hurdles and fiduciary risk.

4. F inancial wellness: Though the industry has discussed the importance of financial wellness programs for years, the needle has not moved much in terms of what and how its provided. I think AI will change that, and soon. Financial wellness programs and investment advice will be more personalized and readily available through the use of AI as companies figure out how to harness the power of artificial intelligence to provide personalized, accurate education and resources.

Hattie Greenan is the Director of Research and Communications for PSCA.

PSCA.ORG

22 WINTER 2025

FEATURE

by Fred Reish and Tamiko Toland

THE DOL’S LIFETIME INCOME ADVISORY OPINION The advisory opinion is a major development in the field of defined contribution plan design and retirement income planning. Here are the six key reasons why it matters.

PSCA.ORG

Geoffrey Prior / Shutterstock.com

FEATURE

PSCA.ORG

23 WINTER 2025

24

FEATURE

WINTER 2025

A

s Baby Boomers retire in a 401(k) world, they are confronted with converting “wealth” — their 401(k) accounts — into lifelong retirement income. In effect, their 401(k)-retirement income and Social Security payments will replace their paychecks.

While Social Security retirement income is guaranteed for life, 401(k) income is not. Retirement plans can provide a solution through a combination of investments and insurance products.

As this evolves, plan sponsors and fiduciaries will need to make informed and prudent decisions on what to offer. Fortunately, both Congress and the Department of Labor (DOL) are aware of this and are taking steps to help.

ISSUES FACING PARTICIPANTS

At first blush, the burden of managing investments and withdrawals in retirement is manageable for the average participant. However, this objective is complicated by the need for participants to manage risks arising from two unknown factors: investment performance and longevity.

The ongoing risks of market fluctuations and the unknown duration of retirement can make managing withdrawal strategies tricky for even the most sophisticated participants. As a result, many retirees face two choices: risk running out of money at an advanced age or, out of fear of that outcome, spend less early in retirement with a lower standard of living than they could reasonably afford.

The primary levers that an individual can use to manage longevity risk are underspending and risk pooling through insurance (in other words, an annuity). Lifetime income (including that from Social Security) also reduces the risk from market volatility.

Fortunately, government policy makers and retirement industry thought leaders are deeply concerned about this issue, so retirement income security is a policy priority that enjoys widespread support.

As a result, there are now more solutions available to plan sponsors than ever, with an increased focus on offering solutions as defaults — where participants will be placed in lifetime income products that give them the option to use the guarantee if they want.

For example, fiduciary relief for automatic enrollment and for investing the accounts of participants who do not elect investments has empowered plan sponsors to enroll participants in target date funds, even for those with little knowledge or foresight about investing and saving for retirement.

Reliance on default actions means that similar relief for default investments with lifetime income guarantees would likely increase their use in retirement.

SOLUTIONS INSIDE 401(K) PLANS

Over the past two decades, we’ve seen the qualified default investment alternative (QDIA) safe harbor drive the use of target date funds. In more recent years, we have witnessed insured lifetime income products included with QDIAs. Advances in the regulation and legislation of annuities in retirement plans reflect the importance of this issue as a policy matter (for example, the fiduciary safe harbor for selecting insurance companies in the SECURE Act). However, there are still concerns that fiduciary reluctance is stifling innovation.

Because of these concerns, existing guidance often errs on the side of broadness. For example, language in existing guidance that permits the use of annuities may reasonably be viewed as including the guaranteed lifetime withdrawal benefits (GLWB). (A GLWB is an annuity provision that assures that a retiree can take (contractually defined) withdrawals from their account and the insurer will continue to make payments even if the assets in the retiree’s account are depleted.)

However, the absence of explicit wording to that effect

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leaves room for doubt, creating an air of uncertainty that makes some plan sponsors hesitant to make a move. To this end, the industry has been asking the Department of Labor (DOL) for additional guidance to ease concerns about litigation risk.

On September 23, 2025, the DOL delivered just that in the form of an advisory opinion about AllianceBernstein’s Lifetime Income Strategy (LIS), which includes an allocation to the Secure Income Portfolio, which uses a bidding process to spread the guarantee among multiple insurers.

On its face, it may look like good news primarily for AllianceBernstein and its clients. However, the opinion should ease fiduciary concerns for a broad range of insured products.

There are two issues at hand: (1) the use of a GLWB, and (2) the role of the investment manager, as a 3(38) fiduciary, to rely on one of two available safe harbors to select and monitor insurers and to use a bidding system to allocate among those insurers.

We focus on these two issues and conclude with the six takeaways that mark this opinion as a significant

FEATURE

25 WINTER 2025

advancement for the industry as a whole and a positive step toward the adoption of lifetime income in retirement plans.

THE GLWB AS A QDIA COMPONENT

LIS isn’t unique in its use of the GLWB, and it’s a common format for guaranteed lifetime income among 401(k) solutions. Nevertheless, this is the first opinion that explicitly states that a GLWB can be used within a QDIA. Even though the AllianceBernstein approach uses a variable annuity, the provision of guaranteed lifetime income through a contractual guarantee (not annuitization) is the point.

Many of the products on the market today use a GLWB on a fixed annuity chassis or through a contingent deferred annuity, which guarantees the lifetime payment after the associated assets are depleted. The DOL has issued several pieces of guidance, including a recent advisory opinion (discussed later in this article), which are broad enough in their reasoning to cover the various forms of GLWB and annuity protections.

FIDUCIARY OVERSIGHT

In 2014, before the existence of the safe harbor for selecting insurance companies provided through the SECURE Act (2019), the DOL held that an investment manager could rely on the safe harbor in discharging its responsibilities as a 3(38) fiduciary for the selection of a provider and annuity contracts.

That concept provides relief

2. E ncouragement for plan sponsors to adopt lifetime income solutions. Many sponsors have hesitated to add in-plan lifetime income options because of regulatory and fiduciary uncertainty. This opinion signals regulatory openness to guaranteed lifetime income solutions in participantdirected plans and for QDIAs. Significantly, the opinion acknowledges that investment managers can serve as fiduciaries for the selection and monitoring of insurers and the particular contracts, relieving plan sponsors and fiduciaries of that fiduciary responsibility and concerns about liability.

3. Affirmation of fiduciary flexibility and continuity with safe harbors. The opinion doesn’t impose new, rigid obligations; instead, it bridges existing safe harbor frameworks to this new use-case. Most importantly, the opinion affirms that investment managers can rely on the regulatory and statutory safe harbors when selecting and monitoring insurance companies and the contracts.

4. Support for innovation and product development. The opinion reduces “regulatory drag” and encourages innovation and the design of products tailored for defined contribution defaults by signaling that a product is not explicitly described in the existing language.

5. M omentum for policy change and regulatory reform.

The opinion comes on the heels of an Executive Order on alternative assets in 401(k) plans. One of the categories of “alternative assets” in the Executive Order was “lifetime income strategies” in 401(k) plans. The DOL’s press release and the advisory opinion underline that this is part of a broader push to modernize retirement plan regulation. The opinion may also presage future rulemaking to further clarify fiduciary responsibilities in the alternative-asset / lifetimeincome context.

6. I mplications for litigation and fiduciary risk. This opinion will likely be a benchmark in disputes over the prudence of default investments or annuity selections in retirement plans. In other words, plan sponsors and 3(38) investment managers can point to the guidance as support for the prudent inclusion of retirement income products in 401(k) plans. This letter signals favorable policy implications on two fronts: •F irst, there is public policy favoring the availability of guaranteed retirement income in plans.

•S econd, because of the explicit approval of a process for selecting the insurers and products, including the use of third-party investment managers to relieve the burden on plan sponsors.

to plan sponsors who may be concerned that they lack the expertise to select and monitor insurers and their contracts (although plan sponsors will be fiduciaries for selecting and monitoring the investment manager).

The new opinion augments that earlier guidance by holding that the investment manager can rely on both fiduciary safe harbors and receive their protections.

While the primary plan fiduciaries will be relieved of fiduciary responsibility for selecting the insurer and the particular insured contract, they will still be responsible for prudently selecting and monitoring the 3(38) investment manager.

SIX BIG TAKEAWAYS

This advisory opinion is a major development in the field of defined contribution (DC) plan design and retirement income planning. Here are the key reasons it matters: 1. Green light by DOL for use of a GLWB feature within a QDIA. Prior to this, there was uncertainty whether a default investment could include or be paired with the use of GLWBs as lifetime income guarantees. The QDIA regulation mentions that investment guarantees, or annuity features, may be ancillary, but the DOL had not explicitly confirmed that an in-plan strategy with a GLWB could itself qualify as a QDIA. This opinion provides that clarity.

Fred Reish is a Partner with Faegre Drinker Biddle & Reath LLP. Tamiko Toland is the Founder and CEO of the 401(k) Annuity Hub

PSCA.ORG

26 WINTER 2025

NQDC

by Jason Stephens and David Bleiler

SECURE 2.0 Has Nonqualified Plan Sponsors Playing “Catch-up” The new Roth catch-up rules may make participating in a NQDC plan more attractive for high earners.

THE SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT (SECURE) 2.0 ACT OF 2022 INTRODUCED SWEEPING REFORMS TO THE U.S. RETIREMENT SYSTEM. It aimed to expand access to retirement plans, increase savings, and streamline plan administration.

While most provisions focus on qualified retirement plans such as 401(k)s and 403(b)s, the upcoming mandatory Roth catch-up contribution for high-income earners also affects nonqualified deferred compensation plans (nonqualified plans).

With implementation set for 2026, plan sponsors and executives must understand the implications for their nonqualified plans.

CATCH-UP AND SUPER CATCH-UP CONTRIBUTIONS

Under current IRS regulations, individuals aged 50 and older may contribute an additional $8,000 to their qualified retirement plans beyond the standard annual limit of $24,500. This catch-up contribution is designed to help older workers accelerate their retirement savings.

SECURE 2.0 introduced an optional super catch-up provision, effective for tax years beginning after December 31,

2024. This allows individuals aged 60 to 63 to contribute an additional $11,250 annually, raising the total limit to $35,750. These limits are generally indexed annually.

If permitted by their qualified retirement plan, participants may choose to make contributions on either a pre-tax or Roth basis. While Roth contributions do not offer immediate tax benefits, they allow for tax-free withdrawals in retirement, provided certain conditions are met. In contrast, pre-tax contributions reduce current taxable income and offer flexibility in future tax planning.

For high-income earners, pre-tax contributions are often preferable during peak earning years, when their effective tax rates are highest.

In retirement, distributions can be spread across multiple tax years, potentially lowering their overall tax burden.

MANDATORY ROTH CATCH-UP CONTRIBUTIONS FOR HIGH EARNERS

Beginning January 1, 2026, SECURE 2.0 mandates

that employees aged 50 and older who earned more than $150,000 in Federal Insurance Contributions Act (FICA) wages during the prior calendar year must make any catch-up contributions, including super catch-up contributions, on a Roth basis.

This change reduces the ability of high earners to make pretax contributions.

For retirement plans that do not currently offer a Roth feature, these plans must either be amended to include a Roth option or prohibit catch-up contributions for affected participants.

NONQUALIFIED PLANS: A STRATEGIC TOOL

As pre-tax savings opportunities for high earners become increasingly limited within qualified retirement plans, sponsors are reevaluating the strategic value of nonqualified plans.

These plans are exempt from the Roth requirement and offer significant pre-tax savings potential beyond traditional qualified plan limits. They also avoid many of the complex regulatory requirements

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imposed by the IRS and the Employee Retirement Income Security Act (ERISA). In the for-profit sector, nonqualified plans typically are subject to Internal Revenue Code Section (IRC) 409A, while in the nongovernmental not-for-profit space, they fall under IRC 457(b).

Sponsors looking to leverage nonqualified plans in response to SECURE 2.0 and the Roth catch-up mandate are weighing several key factors: Eligibility Eligibility is an important consideration when evaluating nonqualified plans as a solution to challenges high earners face under SECURE 2.0. One potential response to the Roth catch-up mandate is to make sure that nonqualified plan eligibility covers all impacted participants.

However, participation in nonqualified plans is generally limited to a senior group of management or highly compensated employees.

The Department of Labor (DOL) has not issued formal regulations defining an eligible group, but Advisory Opinion 90-14A is a commonly

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used benchmark. One key factor in the DOL opinion is compensation level, often interpreted using the IRC Section 414(q)(1)(B) definition of a highly compensated employee—set at $160,000 for 2026. This threshold is notably higher than the $150,000 FICA wage limit established under SECURE 2.0 as the Roth catch-up contribution cut-off.

The advisory opinion also emphasizes that nonqualified

plans should be limited to a select group, typically interpreted as no more than 10 percent of the total employee population. These constraints mean that even under generous eligibility definitions, a nonqualified plan may not be able to include all participants affected by SECURE 2.0 and the Roth catch-up requirement.

Despite limitations, a strategic review of

nonqualified plan eligibility prior to the next open enrollment period remains one of the most effective levers for addressing these constraints. One important note, defining eligibility based solely on compensation could lead to other unintended consequences—such as dividing employees with similar titles or responsibilities. Eligibility criteria are typically outlined

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in plan documents as well, so legal updates may be required for any changes.

Business Structure If considering a new nonqualified plan to counteract the limitations on high earners introduced by SECURE 2.0, it’s important to understand that they are not attractive for all business structures. Passthrough entities, such as S

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NONQUALIFIED PLANS, AT THEIR CORE, HELP EQUALIZE BENEFITS FOR HIGHLY COMPENSATED EMPLOYEES LIMITED BY FACTORS INCLUDING SECURE 2.0, COMPENSATION THRESHOLDS, AND NONDISCRIMINATION TESTING. corporations and Limited Liability Corporations (LLC’s), due to their treatment of compensation expenses under current accounting standards, may prefer alternative solutions.

Additionally, for companies that are unprofitable, or experience inconsistent cash flow, nonqualified plans may be less appealing to participants, who remain subject to general creditor risk until final distributions are made. Nonqualified plans tend to be most effective for stable C-corporations.

Plan Design Several design features can enhance both the appeal and effectiveness of a nonqualified plan. Among the most impactful features are employer contributions, distribution options, a robust investment menu, and benefit security through a rabbi trust. In the context of SECURE 2.0 and broader tax planning concepts, flexibility in contribution amounts

and distribution choices are especially valuable tools.

These features can help offset the limitations imposed by the Roth catch-up mandate.

Plan design changes typically have longer runways and require updates to documentation and sufficient time for administrative implementation, but they can be highly effective in addressing SECURE 2.0 challenges.

Participant Wellness & Advice Participant wellness and access to advice are growing priorities across the retirement landscape, and the nonqualified space is no exception. Sponsors and participants consistently report a lack of support in this area—a gap likely to widen with the added complexity of SECURE 2.0. Beyond regular plan advice and education, participants desire resources for broader financial and tax concerns. Providing access to these services could improve nonqualified plan utilization,

enhance outcomes, and reduce the burden on HR teams. Demand for these services is likely to spike during open enrollment, which for many nonqualified plans occurs near the end of the calendar year.

Culture Whether launching a new plan or enhancing an existing one, organizations must also consider cultural alignment.

Offering benefits targeted at high earners may conflict with some organizations’ core values or compensation philosophies.

This holds true even though nonqualified plans are widely viewed as valuable tools for recruiting and retaining top talent. Nonqualified plans, at their core, help equalize benefits for highly compensated employees limited by factors including SECURE 2.0, compensation thresholds, and nondiscrimination testing. Still, any new or enhanced benefit for high earners must align with the organization’s cultural framework.

SUMMARY

As the SECURE 2.0 Act reshapes the retirement landscape, organizations should proactively ensure their benefit strategies remain both competitive and compliant. For high earners facing new Roth contribution mandates, nonqualified deferred compensation plans offer a valuable alternative to preserve tax efficiency and support financial goals. By thoughtfully considering a nonqualified plan’s current or potential effectiveness based on eligibility, business structure, plan design, participant support, and cultural impact, employers can turn regulatory change into opportunity—enhancing executive benefits and aligning organizational goals.

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Disclosure: Individual investors have needs in planning for retirement. No single solution fits every investor. This material does not constitute legal, accounting, or tax advice.

This material has been prepared solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The information and statistics in this report are from sources believed to be reliable but are not guaranteed by CAPTRUST Financial Advisors to be accurate or complete. All publication rights reserved. None of the material in this publication may be reproduced in any form without the express written permission of CAPTRUST: 919.870.6822.

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by Adam Greetis

Outsourcing Your Investment Management: Pros and Cons for Plan Sponsors Outsourcing some investment management responsibilities has a lot of benefits, but also comes with some tradeoffs. This article will deep dive into the differences between 3(38) and 3(21) arrangements and provide questions you should ask when considering your options.

SHARED MODEL IN PLAIN LANGUAGE

THE SALES PITCHES SEEM TO COME IN WAVES. THE INVESTMENT CONSULTANT SLIPS IT INTO THE MEETING AGENDA. “WE’D LIKE TO TALK TO YOU ABOUT AN ERISA 3(38) ARRANGEMENT IN ADDITION TO REVIEWING THE PLAN’S INVESTMENT PERFORMANCE. We’ll only spend a few minutes on it.” The wave seems to be building these days particularly following the Wanek v. Russel Investments Trust Co. decision. This moment warrants that plan sponsors take a step back so they can review the key differences between the two kinds of investment fiduciary arrangements for defined contribution plans under ERISA: a 3(21) arrangement (the “Shared Model”) and a 3(38) arrangement (the “Outsourced Model”).

If you work in HR and help oversee your company’s defined contribution plan, this choice affects major plan responsibilities, including (1) how much control you have over your plan’s investments,

(2) how much time you spend on investment decisions, (3) how quickly you can make investment changes, (4) the cost, and, (5) perhaps most importantly, how much ERISA fiduciary liability you retain.

WHY NOW?

Many plan sponsors are being approached by investment consultants proposing the Outsourced Model. The sales pitch can be quite attractive. The consultants say they can reduce your legal risk, take work off your plate, and help you make faster decisions.

Those benefits can be real but there are trade-offs you should understand before moving forward.

Under the Shared Model, you keep the responsibility and authority to select and change the plan’s investment options.

You retain the steering wheel.

You typically hire an outside investment consultant who acts as a fiduciary and who shares responsibility. That consultant provides advice and recommendations but you ultimately decide whether to accept or reject the recommendations. Typically, the consultant reviews how funds are performing, compares your lineup to benchmarks and peers, and presents findings to the committee, often quarterly.

The consultant recommends which investments to add, keep, or remove but you have the final say.

Because both you and the consultant play a role in investment decisions, you share fiduciary responsibility.

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If something goes wrong, both you and the investment consultant can be held liable for fiduciary breaches. The upside is control and flexibility.

You can tailor the lineup as you see fit, include funds that are appropriate for the unique identity of your plan population and move at your own pace. The downsides are that it takes regular committee work to make decisions, it can take more time to make changes (i.e., you have to pull the committee together), and your internal fiduciaries retain liability.

OUTSOURCED MODEL IN PLAIN LANGUAGE

An Outsourced Model is different. Under the Outsourced Model, you give an outside investment manager full discretionary authority to select, monitor, and replace the plan’s investments. In practice, the investment consulting firm drives the car.

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Under the Outsourced Model, the fiduciary reviews the lineup and makes changes it believes are appropriate outside your view. The consultant does not need your approval to make those changes. Periodically, the consultant reports back to you but those meetings can happen less frequently (sometimes twice a year or even annually) and usually after the consultant has made the investment changes. The meetings tend to be shorter—

more of a summary of what they decided and why.

However, you still have a very important job. You must prudently monitor the investment consultant.

You are no longer asked to accept or reject investment recommendations, and you typically cannot override the consultant’s decisions.

If you don’t like how they are managing the lineup, your only remedy is to end the Outsourced Model arrangement and hire a

different provider (or return to the Shared Model).

The selling points of the Outsourced Model are meaningful. It can shift most investment-related fiduciary liability to the Outsourced Model provider, accelerate decision-making (no waiting for committee meetings), and reduce the time your internal team spends on investment choices. The trade-offs are loss of control, higher cost, the need to monitor the provider, and the possibility their

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decisions won’t align with your preferences.

COST DIFFERENCES

Costs are commonly structured differently between the two approaches.

Shared Model: Fees are often flat annual amounts.

They are typically lower than Outsourced Model fees because the consultant advises but does not take on discretionary authority.

Outsourced Model: Fees are typically higher

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because the provider accepts discretionary responsibility.

The fees are often charged as a percentage of assets (for example, 0.10%–0.35%). Assetbased fees rise as plan assets grow, so your total spend can increase over time even if the percentage stays the same.

focused on the changes the consultant made rather than choosing fund-by-fund moves.

The workload shifts from making investment decisions to overseeing the consultant’s performance, process, and adherence to your investment policy.

INTERNAL FIDUCIARY WORKLOAD

CONTROL AND ALIGNMENT

Shared Model: You can keep or include preferred funds and reflect your organization’s philosophy.

You can synchronize changes with payroll, recordkeeper constraints, or employee communications. You can also choose to move slower or faster based on what’s

ERISA LIABILITY: WHAT REALLY CHANGES?

Shared Model: Your internal fiduciaries share liability with the consultant. Because your

committee makes the final decisions, you carry ongoing liability for those decisions.

Outsourced Model: The provider takes on discretionary liability for the investment decisions themselves, which can significantly reduce your internal legal exposure.

However, your committee still must prudently select and monitor the consultant.

If you ignore red flags or fail to monitor, you can still face fiduciary exposure. So, while risk can be reduced, it is not eliminated.

SPEED AND EFFICIENCY

Shared Model: Changes typically wait for committee cycles, which can slow

WhoopieWhoopie / Shutterstock.com

Shared Model: Expect regular, detailed reviews (often quarterly), deeper discussion, and formal votes on recommendations.

This supports procedural prudence, but it consumes more committee time.

Outsourced Model: Expect fewer and shorter meetings

happening internally.

Outsourced Model: You give up day‑to‑day control of the lineup. The provider may make changes you would not have chosen. If alignment with certain preferences is important to your organization, you need to confirm in advance how the consultant will incorporate those preferences and what boundaries they agree to follow. If misalignment emerges later, your practical option is to replace the provider.

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CHOOSING BETWEEN A SHARED MODEL AND OUTSOURCED MODEL IS A GOVERNANCE DESIGN DECISION. A SHARED MODEL KEEPS CONTROL AND FLEXIBILITY WITH YOUR COMMITTEE, USUALLY AT A LOWER COST, BUT IT REQUIRES MORE TIME AND LEAVES MORE INVESTMENT‑RELATED LIABILITY WITH YOUR INTERNAL FIDUCIARIES. execution—particularly if meetings are quarterly and agendas are full.

Outsourced Model: The provider can act quickly in response to market or fund developments without convening the committee, improving responsiveness and reducing administrative friction.

WHEN EACH MODEL OFTEN MAKES SENSE

The Shared Model tends to fit sponsors that: • Have investment expertise or an experienced committee.

• Value keeping control over the fund menu.

• Are cost‑sensitive but still want fiduciary support.

• Want flexibility to include preferred funds.

The Outsourced Model tends to fit sponsors that: • Have limited time or investment expertise.

• Want to transfer as much investment‑related liability as practical.

• Face higher litigation risk concerns.

• Want faster, consultant‑ driven execution.

PRACTICAL QUESTIONS TO ASK BEFORE DECIDING

• Exactly what decisions will the provider make? Are there any guardrails or carve‑outs that preserve certain choices for your committee?

•H ow will the provider follow your investment policy statement, and do you need to revise it for an Outsourced Model?

•H ow often will you receive reports, and what will they include? Will you get enough information to monitor prudently?

• What is the fee structure (flat vs. asset‑based)? What services are included? How will fees change as plan assets grow?

• I f you want to exit, how do you terminate the arrangement and transition to another provider with minimal disruption to participants?

•H ow will the provider ensure their decisions reflect your organization’s preferences where appropriate?

MONITORING PROCESS

• Under Shared Model: Monitor both the plan’s investments and the consultant’s performance.

Meeting minutes should reflect the committee’s review of the consultant’s recommendations, the basis for decisions, and the decisions themselves.

• Under Outsourced Model: Focus monitoring on the provider’s process and results. Review performance, fees, adherence to your policy, and service quality. Document your monitoring steps and any actions taken.

If performance or alignment becomes unacceptable, be prepared to replace the provider.

BOTTOM LINE?

Choosing between a Shared Model and Outsourced Model is a governance design decision. A Shared Model keeps control and flexibility with your committee, usually at a lower cost, but it requires more time and leaves more

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investment‑related liability with your internal fiduciaries.

An Outsourced Model can meaningfully reduce that liability and speed up decisions, but it costs more, reduces your control over the investment menu, and still requires vigilant monitoring of the provider.

For HR professionals, the right answer often turns on your committee’s capacity and expertise, your risk tolerance, your need for speed, and your budget. If you value control and have a strong committee, a Shared Model can work well. If you need to simplify governance, move faster, and shift more responsibility to an expert, the Outsourced Model can be a good fit—so long as you set clear expectations, monitor effectively, and understand that the ultimate oversight responsibility remains with the plan’s internal fiduciaries.

Adam Greetis is a Partner with Seyfarth Shaw LLP and a member of PSCA’s Government Affairs Committee.

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by Scott Greenman

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PLAN DESIGN

Rule of 55: A Lifeline In May 2025, I found myself the unexpected recipient of a restructuring notice.

IN MAY 2025, I FOUND MYSELF THE UNEXPECTED RECIPIENT OF A RESTRUCTURING NOTICE. AT 58, I WASN’T PLANNING TO RETIRE – NOT FINANCIALLY, NOT PROFESSIONALLY, NOT PERSONALLY. I’d spent my career building, leading, investing, and contributing, and I fully expected to continue doing so. But within a single conversation, I had become a mid-career job seeker in an employment market that has not been as welcoming as I’d hoped.

In the days that followed, I did what most professionals in my position would do—I tried to make sense of my immediate financial options. That’s when I first ran across something I had heard of only in passing—the IRS Rule of 55. It sounded promising, and certainly helpful if my unemployment stretched on indefinitely, but I wasn’t certain that it applied to me. I had left employment well within the minimum and maximum age thresholds, but the specifics regarding my employer’s plan were anything but intuitive. Like many participants, I reached out to HR for clarity. I also contacted the plan consultant directly because—even after decades in the investment and retirement space—I wasn’t willing to rely on assumptions.

The answer, fortunately, was yes—I was eligible to make a penalty-free withdrawal from my 403(b) plan under the Rule of 55. But here’s the part that stays with me: by the time I asked the question, I was only a procrastinatory step away from rolling the entire balance into an IRA, unaware that doing so would have eliminated my eligibility entirely. That moment reframed the Rule of 55 for me. It isn’t just a technical footnote in the Internal Revenue Code. It’s a provision that can matter deeply—and personally—to the people who need clarity the most at a moment when their stability feels most fragile. And it reminded me how easy it is, even for seasoned professionals, to miss the fine print that carries real financial consequences.

UNDERSTANDING THE SCOPE OF THE RULE OF 55

The IRS Rule of 55 is more than an obscure retirement plan detail. Formally referenced in Internal Revenue Code Section 72(t), this rule allows workers who separate from service at age 55 or older (in the year they turn 55 or beyond) to access funds in their

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employer’s workplace retirement plan without triggering the usual 10 percent early distribution penalty. This exception applies specifically to qualified workplace defined contribution plans – principally 401(k) and 403(b) accounts.​ However, the boundaries of the rule are both precise and non-negotiable. Perhaps the most essential fact is that this benefit applies only to assets held in the plan of the employer from which you separate. If you leave your workplace at 55 or beyond and immediately roll over your account into a traditional or Roth IRA, the door to penalty-free early access slams shut. The same outcome applies to those who consolidate old workplace plans into an IRA before leaving employment.​ Further, the IRS Rule of 55 never applies to regular IRAs (Traditional, Roth, SEP, or SIMPLE), nor does it apply to funds parked in former employers’ plans that you haven’t transferred into your current employer’s plan prior to your departure. For plan administrators and HR teams, making this distinction clear is not mere legal hair-splitting—it can save participants from a major and irreversible penalty.​

WHY DOES THIS RULE EXIST?

The Rule of 55 was established as a nod to workforce realities: not all retirements are meticulously timed for age 65 or 67. Some careers end abruptly in the mid-to-late 50s due to layoffs, ill health, burnout, business closures, or shifting family needs. The provision allows participants to bridge the gap to other resources, such as Social Security, pensions, or new employment, without facing punitive tax penalties for accessing savings they have built for just such contingencies.​

WHAT THE RULE SAYS—AND WHAT IT MEANS

and EMTs, the minimum age is lowered to 50 (or 25 years of service, if earlier), as designated in a separate section of the Internal Revenue Code.​

DECIPHERING THE DETAILS: PLAN SPONSOR DISCRETION

It’s a common myth that if the IRS allows something, every plan must offer it. In reality, how you can use the Rule of 55 depends heavily on your employer’s plan design.

• Some plans offer broad, participant-friendly rules: partial withdrawals, installments, and systematic payments all available at will.

• Others restrict distributions to lump-sum only, forcing a choice between all or nothing, and potentially causing spikes in taxable income or accelerating outflows from a happy retirement nest egg.

The law does not require plans to offer partial distributions, installment payments, or in-service distributions for active employees (including those in phased retirement arrangements).

Sponsors determine which withdrawal options to permit, and those choices can significantly shape participant experience.​ Key Point for Plan Sponsors: Review your plan documents and Summary Plan Description (SPD). Make clear which withdrawal methods are available to separated participants aged 55 or older.

This is a threshold matter where confusion or ambiguity can set off years of administrative headaches.

THE RULE OF NO: CORE MISCONCEPTIONS AND HOW THEY HURT

To take full advantage of the Rule of 55: •Y ou must separate from service during or after the calendar year you turn 55. The rule doesn’t apply if you leave in the year you attained age 54—even if January 1 is just weeks away.​ •Y ou can be laid off, fired, or resign voluntarily. All types of separation qualify provided the age requirement is satisfied.

•T he window is plan specific. Only your current employer’s plan is eligible. If you roll your balance to an IRA or a new employer’s plan after separation, you forfeit the Rule of 55 privilege for that portion.​ • IRAs are always excluded. No matter the origin of funds, IRAs (including inherited IRAs) fall outside the Rule of 55’s boundaries.​ • Previous employer plans are excluded. If you hold balances with a previous employer, those funds don’t qualify unless they are merged into your current plan prior to separation.​ For certain public safety personnel, such as police, firefighters,

Several recurring legends swirl around the use of the Rule of 55, leading to costly mistakes for participants and extra burden for plan sponsors: • “I can use the Rule of 55 from any account.” No – you must leave funds in your current employer’s plan. Immediate rollovers to IRAs or attempting to access old 401(k)s do not work.​ • “I turned 55 after I left—I’m safe.” No – the rule pivots on your age at the time of separation, not withdrawal. You must leave no earlier than January 1 of the year you attain age 55—leaving even a day earlier disqualifies you.​ • “My plan has to permit this.” No – the IRS provision allows penalty-free withdrawals but does not require your plan to offer every distribution method or any withdrawals at all prior to normal retirement age distributions.​ • “The Rule of 55 is the same as a hardship withdrawal.” No – hardship distributions are governed by separate criteria, documentation, and often stricter limits. The penalty-free nature of Rule of 55 distributions is not related to hardship status; the triggers are entirely different.​

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BEYOND THE OBVIOUS: RARE BUT CRITICAL SCENARIOS

The IRS definition of “separation from service” can be complex— especially in the modern, matrixed workplace. Transfers between subsidiaries, phased retirements, and temporary leaves can create legal gray areas. If an employee moves to a subsidiary but remains in the same affiliated group, they may not have met the IRS test for separation even if their day-to-day job feels different. Plan sponsors should clarify and document internal rules and consult legal counsel when evaluating ambiguous scenarios.​ Another often-overlooked scenario involves rehiring. If someone leaves at 56, takes a Rule of 55 distribution, then returns as a rehire, their prior withdrawal remains valid. However, new contributions (made after rehire) generally cannot be accessed penalty free under the Rule of 55 unless another qualifying separation occurs.​ When companies offer voluntary early retirement or separation packages, interest in the Rule of 55 spikes. Sponsors should proactively arm HR and plan service teams with a ready FAQ document and communication templates to dispel rumors and ensure consistent, accurate responses.

PUBLIC SECTOR NUANCES: THE 50-YEAR DIVIDE

For state and federal public safety employees, including law enforcement, firefighting, and certain air traffic roles, the IRS lowers the age for penalty-free withdrawals to 50 (or even lower if the person completes 25 years of service before attaining age

50). It’s critical, however, to distinguish this public safety rule from the broader Rule of 55, as plan administrators must track and communicate both sets of eligibility criteria if they employ public safety employees.

TAXATION: NO PENALTY, BUT NOT TAX-FREE

Even when the Rule of 55 applies, any distributions taken are still subject to ordinary federal (and often state) income tax. There is no “tax-free” option; it’s simply an exclusion from the extra 10 percent penalty that usually applies to withdrawals before age 59½.​ Some additional points for both plan sponsors and participants: • The standard 20 percent withholding on lump sum distributions will usually apply, though periodic payments (over 10 years or more) may be exempt from flat-rate withholding.

• Large distributions in a single tax year can push the recipient into higher marginal tax brackets, increasing the total tax on withdrawn amounts.

• Draining the account too quickly can undermine long-term security, especially with longevity rising and retirement phases extending 30+ years for many participants.

IRS Form 5329 is the tax reporting tool individuals must use to claim their “separation from service after age 55” penalty exception.

Advising participants or exit planners to be prepared to document the age and date of separation, along with their plan’s distribution codes, on Form 1099-R is the best practice for avoiding costly confusion down the line.

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•P roactively review all plan documents – align withdrawal provisions, Summary Plan Descriptions, administrative forms, and staff training to minimize ambiguity or conflicting answers.

• Equip HR and front-line teams with a simple, accurate guide to Rule of 55 facts and common participant misconceptions.

•E mbed Rule of 55 education in separation materials – include it in exit packets, employee webinars, and anytime someone in the 54-to-59 age range approaches or inquires about distributable events.

• Regularly audit and update distribution procedures – ensure tax withholding, recordkeeping (especially 1099-R forms), and participant communications are accurate and up to date with both IRS and plan rules.

•S olicit participant feedback on clarity and usability of Rule of 55 information after separation events; the lessons from real-world confusion are a gold mine for improving future experiences.

BEHAVIORAL FINANCE INSIGHT—AND PLAN SPONSOR OPPORTUNITY

A technical exception in tax law does not guarantee sound financial decisions. Participants tend to overweight the appeal of present cash access, sometimes at the expense of their own future security. Framing is everything: presenting the Rule of 55 strictly as a “bridge,” rather than a “windfall,” steers decision-making toward moderation and long-term thinking.

Plan sponsors play a pivotal role in shaping outcomes by: • Providing immediate, just-in-time education for newly separated participants age 55+.

• Using side-by-side scenarios or tables to clarify options (compare Rule of 55, hardship distributions, 72(t) substantially equal periodic payments, and post-59½ withdrawals).

• Integrating longevity risk reminders in all withdrawal education and highlighting how premature or excessive distributions can have ripple effects decades into the future.

Questions Participants Should Consider Before Using the Rule of 55 • Does our plan allow partial or installment withdrawals for separated participants?

• Will I be required to take all assets out at once, or are smaller withdrawals allowed?

• What tax withholding will apply, and can I set a higher or lower rate?

• Can I roll some, but not all, of my account to an IRA and still use this exception?

• What documentation is required to demonstrate my eligibility?

• Are there deadlines, forms, or waiting periods that could trip me up?

BEST PRACTICES FOR PLAN SPONSORS

Effective administration of the Rule of 55 is about more than compliance; it’s an opportunity to build participant trust and reinforce plan value at a critical financial (and emotional) moment.

Consider the following ways to strengthen outcomes:

LOOKING AHEAD

As careers grow more dynamic and transitions more frequent, the Rule of 55 is likely to become a more central safety net—not just a little-known technicality. In an era where the average American will likely have multiple careers and job changes, ensuring that both HR staff and participants understand the mechanics and fine print is a valuable service, not a chore.

For plan sponsors, the path forward is clear: clarify, educate, and design plans to reduce inadvertent mistakes. The Rule of 55 is not simply about compliance – it’s about empowerment at one of the most consequential crossroads in a working person’s financial life.

Illuminating the right path means turning what could be a source of confusion, misunderstanding, or costly error into a moment of confidence and strategic possibility.

Even for those who have built their professional lives around retirement plans and financial strategy, the Rule of 55 carries lessons that reverberate far beyond the tax code. At the nexus of policy and personhood, plan sponsors have an opportunity and a responsibility to bring clarity and compassion to this conversation.

Scott Greenman is the Chair of PSCA’s Investment Committee.

Withdrawal Type

Minimum Age

Plan Types

Penalty-Free?

Still Taxable?

Plan Discretion?

Rule of 55 (Separation)

55 (50 PS)

401(k), 403(b)

Yes, if still in the employer’s plan

Yes

Yes distribution options

Hardship Distribution

Any

401(k), 403(b), IRA

Only in hardship, strict

Yes

Yes - hardship reasons set

Substantially Equal Periodic (72t)

Any

IRA, 401k/403(b)

Yes, if you follow the IRS formula

Yes

Standard Age Rule

59½

Yes

Yes

All retirement plans

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Yes - but rigid calculation Yes - plan discretion

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by Nevin E. Adams, JD

‘Inside’ Straits Do you know what’s inside your TDF? Do your participants? As discussion of private equity and income products in TDFs continue, educating participants on what is inside their TDF, and the glidepath used, is important.

A RECENT WALL STREET JOURNAL (WSJ) ARTICLE ASKED WHAT I VIEW AS A RHETORICAL QUESTION; “DO YOU REALLY KNOW WHAT’S INSIDE YOUR 401(K)?” RHETORICAL IN THAT I SUSPECT THE ANSWER FROM MOST PEOPLE – CERTAINLY IF THEY’RE HONEST – IS “NO.” Now there are many aspects to a 401(k) that bear scrutiny, but the article was focused on target-date funds (TDFs) – a mechanism that I think has been a boon for most of the novice investors (and savers) that I suspect most 401(k) participants (still) are.

You check one box (heck, these days that box is checked for you) and tap into the expertise – and ongoing expertise at that – of professional money managers to provide your retirement savings with a diversified portfolio mix. No longer do you have to concern yourself with weightings of stocks and bonds, value versus growth, domestic versus international – just leave it to the experts.

But the WSJ article’s focus was a cautionary note – mostly concerned at the unexpected things that a collective investment trust (CIT) vehicle (now 52 percent of all TDF assets, according to the article) might open the door to – specifically alternative investments, notably so-called “private

investments.” Which, the article points out, might undermine the cost advantages of the CIT with those alternative holdings that are more expensive, less transparent/readily valued, and illiquid.

Indeed, the author goes so far as to comment, “As far as the managers of private assets are concerned, the ‘target’ in target-date funds is you.” Of course, his concern is that the less rigorous reporting requirements of a CIT (compared to a mutual fund) would allow investors to be taken advantage of – as though they’re actually even skimming that mutual fund prospectus.

Let’s face it, target-date funds with all their simplicity (at least in the choosing) and promise have been pitched as a “do it for you” solution, and tens of millions of (too) busy, preoccupied participants have trusted their retirement savings to these vehicles assuming that the professional investment class – not to mention the

plan sponsor fiduciaries that screened them – know what they’re doing.

Unfortunately, in some cases, that trust may have been misplaced.

Something not mentioned in the WSJ article is that most of the manufacturers of those vehicles several years back embraced a “through” retirement date glide path, rather than the “to” retirement date that was the original “pitch.” The latter meaning that you’d gradually move to a much more conservative asset mix at your projected retirement date. And while there is still certainly a modest shift in that direction, the shift in emphasis means that I suspect there are a lot of folks nearing retirement that have a portfolio mix that is significantly more exposed to stocks than they might expect and/or want.

Some of this shift is, doubtless, a sense that individuals want to stay invested in those funds, irrespective of retirement date. Some doubtless a desire to report better returns, since I suspect most fiduciaries are (still) paying more attention to the current returns than the conceptual integrity of the glidepath.

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Regardless, it is, to my eyes, anyway, a shift from the original premise – and one that I suspect many participants haven’t noticed, and one on which plan fiduciaries may not have focused. The inclusion of alternative investments (particularly when folks are talking about 20 percent allocations) is one thing – but the structural glide path of these options, particularly when positioned as a default investment, strikes me as even more fundamental.

That said, and as the WSJ article closes, “None of this means you should turn your back on these funds, which can give you a powerful boost toward a sustainable retirement. It does mean you’ll need to know what you own and speak up if you don’t like it. The ultimate handsoff investment is going to require you to be a lot more hands-on.”

I would say that goes double for those responsible for the selection and monitoring of these plan options.

Nevin Adams is the former Chief Content Officer of the American Retirement Association.

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EDUCATION

by Jennifer Rayner

Participant Communication & Education as Retirement Nears Employers are often balancing timing and need of pre-retiree education – here are some considerations in helping employees transition out of the workforce and into the next stage of life.

AS EMPLOYEES APPROACH RETIREMENT, THE WORKPLACE CONVERSATION AROUND PLANNING OFTEN BECOMES MORE DELICATE THAN DIRECT. Employers want to ensure their people are wellprepared, but they also worry about unintentionally signaling that older employees are being pushed toward the door.

This tension raises a critical question: When and how should organizations provide retirement education in a way that supports individuals while strengthening—not straining—corporate culture?

The answer lies in balancing timing, tone, and tools. By carefully designing communication strategies and integrating resources such as income-for-life solutions, employers can provide peace of mind and predictability to their people, while reinforcing trust and community across the organization.

THE TIMING DILEMMA

For many HR teams, proactive outreach feels like the responsible approach.

Mailing retirement preparation packets at age 64, offering targeted seminars, or flagging available resources helps employees avoid

last-minute stress. Yet some leaders fear these efforts may be misinterpreted as subtle signals that it’s time to step aside.

This concern is not unfounded. Corporate culture is shaped not only by what leaders do, but by how employees perceive those actions. A well-intentioned packet arriving in the mail could feel supportive to one employee and exclusionary to another.

Employers generally take two approaches: •A ge-based outreach: Providing specific information at milestone ages (e.g., 59.5, 64, 70).

This creates clarity and structure but carries reputational risk if perceived as pressure.

•U niversal access: Making all resources available to everyone on an intranet or digital platform. This minimizes perception issues but may rely too heavily on employees to find and use the tools themselves.

Neither approach is inherently right or wrong.

The challenge is choosing—or blending—strategies that align with organizational culture while still equipping employees with timely, practical support.

CULTURE, CARE, AND CONFIDENCE

At its core, the retirement communication challenge is about more than benefits—it’s about culture. Employees want to feel cared for as individuals, not as data points in a workforce planning exercise.

When communication is framed inclusively and empathetically, it signals respect for experience and builds trust.

Some best practices emerging across industries include: • Age-neutral framing: Position resources around “planning your next chapter” or “financial confidence at every age,” rather than countdownto-retirement messaging.

• Voluntary, confidential options: Offering oneon-one coaching or digital learning modules allows employees to seek guidance privately,

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reducing stigma.

• Group workshops for all ages: Hosting company-wide sessions on long-term financial planning normalizes the conversation, so preretirees aren’t singled out.

These approaches reflect a simple truth: communication is not just about delivering information, but about reinforcing belonging.

THE “INCOME FOR LIFE” DIMENSION

One of the greatest anxieties employees carry into retirement is the fear of outliving their savings. Even those who have diligently contributed to their 401(k) or similar plans may feel uncertain about whether their nest egg will truly sustain them.

This is where income-forlife solutions—such as in-plan annuities, managed payout funds, or hybrid strategies— play an essential role. These tools can help transform a balance statement into a reliable paycheck, giving employees peace of mind and predictability.

For employers, the benefits extend beyond individual

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OPTIONS AT RETIREMENT: BEYOND INCOME FOR LIFE

While lifetime income solutions are gaining attention, they are only one part of the retirement landscape.

Employees also need clarity

on what happens to their plan assets at the point of retirement. This is where employer communication plays a critical role.

Key considerations include the following: • Plan Requirements: Some plans require distributions or rollovers once employment ends.

Others allow retirees to leave their assets in the plan indefinitely.

Employees often do not understand these rules until they are faced with a decision. Clear, early communication helps avoid rushed choices.

• Staying in the Plan: For many retirees, keeping

their assets in the employer plan can be advantageous. Benefits may include lower institutional investment fees, continued fiduciary oversight, access to institutional share classes, and in some cases, streamlined access to retirement income options. Communicating these benefits positions the employer plan as a trusted foundation even after employment ends.

• Recordkeeper Options: Most recordkeepers offer additional retirement products and services— such as IRAs, managed payout accounts, or

annuities. Retirees may be offered rollovers into these solutions, which can provide flexibility but also introduce new fee structures and investment considerations.

Employers should help participants weigh the pros and cons of these choices without overstepping fiduciary boundaries.

• Holistic Guidance: Employees benefit most when they can see the full spectrum of their options side by side. The employer’s role is not to prescribe, but to equip retirees with transparent information, impartial

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financial wellness. Employees who feel confident about their retirement readiness are more engaged and less distracted in their final years of work.

This translates into stronger performance, healthier transitions, and a more cohesive social fabric across the workplace. Retirement readiness, in this sense, is not just a financial outcome—it is a cultural investment.

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A WORKFORCE THAT FEELS SECURE ABOUT THE FUTURE IS MORE ENGAGED IN THE PRESENT. TRUST GROWS WHEN EMPLOYEES SEE THEIR EMPLOYER NOT ONLY AS A PROVIDER OF BENEFITS, BUT AS A PARTNER IN LIFE TRANSITIONS. education, and tools to make decisions aligned with their financial goals.

By addressing these choices proactively, employers ensure that employees enter retirement not only with confidence, but with clarity.

WHAT, WHEN, AND HOW TO COMMUNICATE

Effective retirement education requires three elements working in harmony: what is communicated, when it is shared, and how it is delivered.

What to provide: • Clear explanations of retirement income options, including Social Security claiming strategies and employer plan features.

• Personalized simulations or calculators that model lifetime income.

• Guidance on emotional and behavioral aspects of transitioning to retirement, not just the financial mechanics.

• Transparent explanations of plan requirements, distribution rules, and options for staying in or rolling over.

When to provide: •B egin earlier than age 64. A phased approach starting in the mid-50s allows employees to absorb information gradually and act intentionally.

• Offer “just-in-time” nudges at key decision points, such as eligibility for catch-up contributions, Medicare enrollment, or required minimum distributions.

How to provide: • Use multi-channel communication—digital platforms, printed guides, live workshops, and confidential one-on-one support.

• Employ a supportive tone that emphasizes empowerment and choice, not deadlines.

• Leverage storytelling and peer experiences to normalize the process and make resources relatable.

When these elements align, retirement education shifts from being a compliance exercise to a catalyst for confidence.

BUILDING A STRONGER WORKPLACE THROUGH RETIREMENT READINESS

When organizations take a thoughtful approach to preretirement communication, the impact ripples beyond individual employees. A workforce that feels secure about the future is more engaged in the present. Trust grows when employees see their employer not only as a provider of benefits, but as a partner in life transitions.

Moreover, preparing employees for retirement strengthens intergenerational dynamics at work. Younger employees observe that their employer supports colleagues at every life stage, which reinforces loyalty and signals that they too will be cared for when the time comes. This creates a cycle of confidence and connection that benefits the entire organization.

FROM INFORMATION TO EMPOWERMENT

The question of when and how to provide retirement information cannot be answered with a single policy or packet. It requires

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sensitivity to culture, attention to timing, and a commitment to treating employees as whole people—not just future retirees.

By embedding retirement education into the fabric of workplace well-being, and by offering solutions that range from income for life to clear guidance on plan and recordkeeper options, employers can transform a potentially fraught topic into one of empowerment.

The outcome is not only financially confident individuals, but also workplaces strengthened by peace of mind, predictability, and a shared sense of community. Retirement may mark the end of a career, but with the right communication and resources, it also becomes the beginning of a new chapter—one that employees can enter with clarity and confidence, and one that employers can take pride in having helped create.

Jennifer Rayner, Founder & CEO, Moniwell, for PSCA’s Education and Communication committee.

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WASHINGTON WATCH

by Josh Oppenheimer

Closing Out 2025 with Bipartisan Retirement Policy Wins With Congress back in session, we may end the year with passage of bipartisan retirement-focused legislation.

AS WASHINGTON EMERGES FROM THE 53-DAY GOVERNMENT SHUTDOWN—AND AS I WRITE THIS LOOKING OUT AT THE SEASON’S FIRST SNOWFALL—SPIRITS INSIDE THE BELTWAY ARE NOTICEABLY BRIGHTER. With federal agencies funded (at least through January 30) and Congress back at work, the retirement policy world has plenty to celebrate heading into the new year.

The past several weeks brought renewed focus in both chambers of Congress on curbing frivolous ERISA litigation, strengthening the long-term retirement savings landscape, and advancing longstalled parity for 403(b) plans. Add in a burst of bipartisan bill introductions following the restart of government operations, and it is safe to say that retirement policy will close out 2025 on a high note.

Before policymakers head home for the holidays, here is a breakdown of what has been happening and what lies ahead.

HOUSE AND SENATE SPOTLIGHT RETIREMENT SECURITY

On December 2, the House subcommittee responsible for writing ERISA updates held a spirited hearing examining how persistent litigation threats are affecting plan sponsors, service providers, and participant outcomes. Witnesses and lawmakers debated the scope of the problem, whether certain lawsuits should be considered frivolous, the role of the Supreme Court’s Cunningham v. Cornell University decision, and how litigation pressures may be discouraging plan innovation.

The American Retirement Association (ARA) submitted a Statement for the Record urging Congress to take meaningful steps to curb abusive litigation practices. Specifically, ARA called for modernizing pleading standards so plaintiffs must address statutory exemptions in their complaints, as well as restricting discovery until courts rule on threshold legal questions. These reforms would help reduce unnecessary litigation risk and support employers striving to offer high-quality retirement benefits.

Across the Capitol, the Senate Health, Education, Labor & Pensions (HELP) Committee is preparing for a hearing aptly titled “The Future of Retirement.” HELP Chair Bill Cassidy (R-La.) is expected to highlight two bipartisan bills he leads with Sen. Tim Kaine (D-Va.), both strongly supported by ARA. The first bill, the Helping Young Americans Save for Retirement Act (S. 1707), would allow workers to begin saving at age 18 rather than 21, unlocking years of compounding growth. By lowering the minimum eligibility age, millions of early-career workers, especially in industries where people start young, would gain earlier access to tax-advantaged savings.

The second bill likely to be discussed is the Auto Re-Enroll Act (S. 1831), which would give workers who previously opted out of their workplace plan fresh opportunities to participate. Research consistently shows that large shares of workers who previously declined to participate will choose to enroll when given a new default opportunity. By periodically resetting the default, the legislation leverages the proven power of inertia to nudge workers into stronger savings behaviors.

Taken together, these bills address two critical ends of the coverage gap: ensuring young workers can start saving earlier and ensuring those who opted out get a second chance to participate.

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BIPARTISAN RETIREMENT BILLS SURGE AFTER SHUTDOWN

With the government funded again, lawmakers wasted no time rolling out new bipartisan proposals.

In the weeks following reopening, several new bills were introduced that aim to simplify retirement savings and increase portability.

Retirement Rollover Flexibility Act (S. 3352 | H.R. 6450): Led by Reps. Darin LaHood (R-Ill.) and Linda Sánchez (D-Calif.), along with Sens. John Barrasso (R-Wyo.) and Michael Bennet (D-Colo.), this legislation would finally allow savers to roll over Roth IRA balances into designated Roth accounts within employer plans.

Given the rapid growth of state auto-IRA programs— almost all of which default to Roth IRAs—this change would dramatically improve portability and reduce the risk that small balances are lost or cashed out when workers change jobs. ARA CEO Brian Graff endorsed the legislation as “a smart, timely, and sensible solution” for workers

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navigating an increasingly fragmented savings system.

Emergency Savings Enhancement Act (S. 3333 | H.R. 6417): This bill aims to make pension-linked emergency savings accounts, or PLESAs, more appealing for adoption by retirement plans.

PLESAs, sometimes called sidecar accounts, were created by the SECURE 2.0 Act and permit employees who are not highly compensated employees (HCEs) to open emergency savings accounts connected to their retirement plans. The idea is to help workers save for retirement while addressing liquidity concerns.

Championed by Sens. Cory Booker (D-N.J.) and Todd Young (R-Ind.), along with Reps. Eugene Vindman (D-Va.) and Glenn “GT” Thompson (R-Pa.), the legislation would double the maximum account limit of PLESAs to $5,000 and reduce their administrative burden by allowing HCEs to participate.

Retirement Simplification and Clarity Act (H.R. 6324): Led by Reps. Jimmy Panetta (D-Calif.) and Darin LaHood (R-Ill.), this legislation would streamline rollover communication and provide new flexibility for workers approaching retirement.

The bill would allow workers aged 50 and older to roll over part of their 401(k) savings into an annuity while remaining actively employed, and implement recommendations made in a government report

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to simplify 402(f) notices during distributions. Together, these reforms would reduce confusion, improve portability, and empower older workers to secure guaranteed lifetime income.

CIT ACCESS FOR 403(B) PLANS MOVES TO THE HOUSE FLOOR

A major parity effort years in the making is finally reaching a milestone. The Retirement Fairness for Charities and Educational Institutions Act (H.R. 1013) will receive a House floor vote as part of the broader INVEST Act (H.R. 3383).

Today, 14.5 million Americans depend on 403(b) plans but remain unable to invest in collective investment trusts (CITs) because of outdated securities laws. For many savers—teachers, charity workers, and other nonprofit employees—CIT access would mean: • Fees up to 53% lower than comparable mutual funds • Average lifetime savings of up to $28,000, based on a modest 0.08% annual fee reduction • Access to more diversified and flexible investment structures.

The INVEST Act is expected to pass the House with broad support. In the Senate, attention will then turn to Senate Banking Committee negotiations, where Chair Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.) will shape the contours of their own, broader capital formation package.

ARA continues to elevate the importance of CIT parity as part of that debate.

LOOKING AHEAD

As policymakers prepare for a brief holiday reset, Congress faces a familiar challenge when it returns: avoiding another federal funding showdown. Negotiations over expiring Affordable Care Act premium subsidies will dominate early-January headlines, and another shutdown remains a real possibility.

But beneath the partisan noise, there is genuine bipartisan energy around strengthening America’s retirement system. From expanding access and portability to modernizing investment options and reducing litigation risk, Members on both sides of the aisle recognize the importance of retirement security as a unifying policy area.

With continued advocacy—and a bit of holiday optimism—2026 may bring even more momentum for the next generation of bipartisan retirement reforms.

From all of us on your ARA Government Affairs Team, happy holidays and thank you for your partnership this year.

Josh Oppenheimer is the American Retirement Association’s Senior Director of Federal Legislative Affairs.

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