Issuu

FALL 2026

napa-net.org

NAPA Net Insight for the Retirement Plan Advisor

THE ENVELOPE, PLEASE! THE 2026 TOP RECORDKEEPERS ARE IN

Without further ado, here are this year’s Advisors’ Choice winners. PLUS Perils of Older Age for 401(k) Retirees DOL Targets ‘Frivolous’ ERISA Suits Lessons from Top Gun and Tom Cruise

contents Cover Story

FALL 2026 Features

42 DOL Targets ‘Frivolous’ ERISA Suits With Proposed Safe Harbor Here’s what’s happening, and what it means for fiduciaries’ peace of mind. By Judy Ward

48 The Perils of Older Age for 401(k) Retirees The importance of protecting older adults from the risks of cognitive decline should be taken seriously, and financial institutions, insurance providers, and government regulators need to take explicit actions to ensure safe retirement outcomes. By Fred Reish and Chris Heye

52 ROBS Plans Under the Microscope

36 AI Generator / ChatGPT

The Envelope, Please! 2026’s Top Recordkeepers Are In Without further ado, here are this year’s Advisors’ Choice winners. By John Sullivan

Here’s what advisors need to know BEFORE a client asks. By Lauren Strobel

contents | fall 2026

Departments 12 Trends Setting AI isn’t replacing advisors, and retirement balances hit record highs (again)

20 Newly Credentialed Members A warm and happy welcome to new members

64 Litigation Landscape Benchmarks, Standing, and the Difference a Few Facts Can Make

70 Regulatory Radar Everyone ALWAYS Wants to Know What Regulators Have Planned

30 06 Editor’s Letter

30 Inside Marketing

34 Inside the Numbers

Rent-Seeking or Risk Management? The AI Debate Hits Retirement

Your Website Needs a Promotion

‘Success,’ More or Less?

08 Inside NAPA The 401(k) Success Story: Building Financial Security Across Generations By Alicia Malcolm

10 Inside the Beltway 401(k)s Favor the Wealthy? The Data Says Different By Brian Graff

78 Washington Watch Building SECURE 3.0’s Foundation, No Matter Who Wins in November

Columns

By John Sullivan

74 NAPA Firm Partners

By Rebecca Hourihan

32 Inside AI Why Your AI Keeps Losing the Thread on Plan Data (and the Fix) By Spencer X Smith

By Nevin Adams

62 Inside the Law Retirement AI Errors: Whose Fault Is It Anyway? By David Levine

QR Code to Digital Version* Use your phone to link directly to the Online Version! Gorodenkoff / Shutterstock.com

That's why we focus on a participant-first approach to retirement investing.

See why retirement is personal

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contributors | fall 2026

Nevin E.

Chris

Rebecca

Adams, JD

Heye, PhD

Hourihan

Former Chief Content Officer American Retirement Association

Founder Whealthcare Planning, LLC

Founder and Chief Marketing Officer 401(k) Marketing, Inc.

Former Chief Content Officer of the American Retirement Association. One of the industry’s most prolific writers, he’s served as the Employee Benefits Research Institute’s (EBRI) Director of Education and External Relations, Global Editor-in-Chief of PLANSPONSOR/PLANADVISER, and after two decades working with retirement plans, entered journalism as the originator, creator, writer and publisher of PLANSPONSOR.com’s NewsDash.

Chris Heye, PhD is Founder of Whealthcare Planning, LLC. and Whealthcare Solutions, Inc., whose behavioral assessments, planning guides, conversation scripts, and client communication materials to empower financial professionals to enrich and personalize the client experience.

Rebecca founded 401(k) Marketing in 2014 to assist qualified experts operate a professional business with professional marketing materials and ongoing awareness campaigns. Previously she held a variety of positions at LPL Financial, Guardian Life, Northwestern Mutual and Fidelity Investments. Rebecca writes the magazine’s “Inside Marketing” column.

Editor-in-Chief John Sullivan jsullivan@usaretirement.org Senior Writers Ted Godbout tgodbout@usaretirement.org John Iekel jiekel@usaretirement.org Paul Mulholland pmulholland@usaretirement.org Ad Sales Tashawna Rodwell trodwell@usaretirement.org Senior Director of Digital Marketing Joey Santos-Jones jsantos-jones@usaretirement.org Production Assistant Derin Oduye doduye@usaretirement.org NAPA OFFICERS President Lisa M. Drake (Garcia)

David N.

Fred

Brett

Levine

Reish

Shofner

Principal Groom Law Group, Chartered

Partner Faegre Drinker Law Firm

Co-Founder and President Hero7

Fred Reish is a partner in the Faegre Drinker law firm. His practice focuses on fiduciary standards of care, prohibited transactions, conflicts of interest, and retirement plans. He has been recognized as one of the “Legends” of the retirement industry by PLANADVISER and PLANSPONSOR magazines.

Brett Shofner is co-founder of Hero7 and President of Work Plan Retire. He specializes in integrated employee benefit solutions for mid-market employers.

David is an attorney who advises plan sponsors, advisors and service providers on retirement and other benefit plans, and is a popular speaker on plan design, fiduciary governance, regulatory and legislative issues. He writes the magazine’s “Inside the Law” column.

Spencer X.

Lauren

Bonnie

Strobel

Treichel

Founder AmpliPhi Social Media Strategies

Director of Ops & Strategic Relations Directed Equity

Chief Solutions Officer Endeavor Retirement

Lauren Strobel is Director of Ops & Strategic Relations with Directed Equity. She has more than a decade of experience in the retirement plan industry and specializes in plan compliance, business development, and process improvement at Directed Equity.

Vice President Doug Bermudez Secretary Lee Bethel Immediate Past President Keith Gredys Executive Director Brian H. Graff, Esq., APM NAPA Net the Magazine is published quarterly by the National Association of Plan Advisors, 4401 N. Fairfax Dr., Suite 600, Arlington, VA 22203. For subscription information, advertising and customer service, please contact NAPA at the above address or call 800-308-6714, or customercare@napa-net.org. Copyright 2026, National Association of Plan Advisors. All rights reserved. This magazine may not be reproduced in whole or in part without written permission of the publisher. Opinions expressed in bylined articles are those of the authors and do not necessarily reflect the official policy of NAPA.

Smith

Spencer is the founder of AmpliPhi Social Media Strategies. A former 401(k) wholesaler, he now teaches financial services professionals how to use social media for business development, and is a popular speaker on social media and the author of ROTOMA: The ROI of Social Media Top of Mind.

President-Elect Alicia Malcolm

Bonnie Treichel, the Founder of Endeavor Retirement and Endeavor Law, is an ERISA attorney that works with advisors, plan sponsors and others in the retirement plan ecosystem. She is a regular contributor to NAPA’s publications and enjoys working with advisors as a subject matter expert to NAPA and ARA training programs.

Postmaster: Please send change-of-address notices for NAPA Net the Magazine to NAPA, 4401 N. Fairfax Dr., Suite 600, Arlington, VA 22203.

The employee left. The work didn’t. Former employee retirement accounts can create ongoing work for the plans and partners who support them. Addresses change. Checks go uncashed. Participants become hard to reach. Eligible balances may need to move out of the plan. Inspira Financial helps retirement plan professionals support what comes next, with automatic rollover IRA solutions and related services that help address account transitions, participant communications, search efforts, benefit distributions, and uncashed check resolution. Because when employment ends, account administration often continues.

Explore retirement rollover solutions

Inspira Financial Trust, LLC and its affiliates perform the duties of a directed custodian and/or an administrator of consumer-directed benefits and, as such, do not provide due diligence to third parties on prospective investments, platforms, sponsors, or service providers and do not offer or sell investments or provide investment, tax, or legal advice. Å˷̻ͣʧͅǸ‫ ڑ‬ʧ˷Ǹ˷ɆʧǸ˓‫ڑ‬Ǹ˷ɒ‫ڑ‬Å˷̻ͣʧͅǸ‫ڑ‬Ǹͅɤ‫ͅڑ‬ɤʊʧͣʹɤͅɤɒ‫ͅʹڑ‬Ǹɒɤ˰Ǹͅˋͣ‫̇ڑ‬ʅ‫ڑ‬Å˷̻ͣʧͅǸ‫ ڑ‬ʧ˷Ǹ˷ɆʧǸ˓‫ڑ‬ƙͅ΃ͣʹջ‫ڑ‬ĘĘIռ‫ړ‬Å˷̻ͣʧͅǸ‫ ڑ‬ʧ˷Ǹ˷ɆʧǸ˓‫ڑ‬ƙͅ΃ͣʹջ‫ڑ‬ĘĘI‫ڑ‬ɒ̇ɤͣ‫ڑ‬ȿ΃ͣʧ˷ɤͣͣ‫ڑ‬Ǹͣ‫ڑ‬Å˷̻ͣʧͅǸ‫̇ͣͣ ڑ‬ɆʧǸʹɤͣջ‫ڑ‬ LLC in Arizona, California, Michigan, Nevada, Virginia, Washington, and Wisconsin. © 2026 Inspira Financial Trust, LLC. All rights reserved.

editor’s letter | fall 2026

Rent-Seeking or Risk Management? The AI Debate Hits Retirement From cars to electricity, to believe it or not, indoor plumbing, (most) people initially reject innovation. Here’s what it means for retirement saving.

s it rent-seeking, regulatory capture, or legitimate risk? Politico recently reported that top AI CEOs are reacting to public fears of a Skynet-style apocalyptic hellscape if innovation proceeds unchecked. When someone as brilliant as the late Stephen Hawking warns that artificial intelligence could eventually destroy humanity, people take notice. Their proposed “solution,” of course, is to self-regulate, an oxymoron if there ever was one (with deference to FINRA). Skeptics rightly note the power and privilege that AI companies currently enjoy and see selfregulation not only as a way to ensure light-handed oversight but also as a scheme to cement favorable terms and a competitive advantage. They’re not wrong. Conversely, The Wall Street Journal’s Andy Kessler argued that AI opposition and calls for strict regulation are little more than a return to the Luddites and their visceral reaction to innovation. Vandalized Waymo cars and destroyed autonomous fooddelivery devices bear a depressing resemblance to smashed stocking frames centuries earlier. Put simply, (most) people — at least initially — reject innovation. Cars were evil, electricity sorcery; even indoor plumbing faced stiff resistance.

So, how does this translate to their views of retirement and AI?

FOLLOW THE DISCUSSION…

@NAPA401K

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@NAPA401k

Seamlessly, as two reports in August illustrate. The first, from the National Institute on Retirement Security, a major pension proponent, found that although AI use is “widespread,” Americans are not using it for financial decisions. Nearly two-thirds have used an AI tool, but 61% have not used AI to answer questions about their finances, investments, or retirement, it noted. Nearly half are uncomfortable with AI playing a role in delivering financial advice, and there are “significant generational differences,” with younger Americans, unsurprisingly, more comfortable than older generations. “Despite their caution, Americans see potential uses for AI in personal finance,” it further noted. “Americans express interest in using AI for budgeting, investing, retirement planning, paying down debt, and tax planning, suggesting consumers may be more comfortable using AI as a financial resource than relying on it for financial advice.” However, a second report from WTW found that while employees might be wary, employers are more open. Its 2026 Defined Contribution Survey found nearly four in five employers are willing to use AI for plan analytics, 73% to automate routine processes, and

72% to personalize employee communications. However, “willingness wanes as stakes rise,” meaning only 37% would use it for compliance and risk management, 33% for recordkeeper oversight, and 29% for fiduciary governance, with data privacy and security the most common reservation at 74%. “Employers are most comfortable using AI where it can make retirement programs more responsive, efficient, and insight-driven,” said Chris West, WTW’s Senior Managing Director and Defined Contribution Strategy Leader. “The opportunity is to use these tools to better engage participants, streamline administration, and help sponsors understand where plan design, investment strategy, and participant support can have the greatest impact.” Interesting stuff — not only for what it reveals about retirement planning, but also about participant behavior overall — and it will only get more so from here. NNTM

John Sullivan Editor-in-Chief

Thirty Years In, the Best Is Yet to Come. Thank you for trusting us with your hardest questions and your highest expectations. We don't take that lightly.

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For the third year in a row, JULY is honored to be voted a

we make retirement plans smarter and more efficient,

NAPA Advisors' Choice Top Recordkeeper in the

helping advisors and their clients achieve better outcomes.

Small/Micro Market and Mid-Market categories. By pairing

Thank you for your support.

innovative technology with trusted expertise and service,

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inside napa | fall 2026

The 401(k) Success Story: Building Financial Security Across Generations It’s not only about the technical aspects of the plan; it’s what it means for participants and their families, for generations to come. By Alicia Malcolm

awmakers too often focus on what 401(k)s and the broader defined contribution retirement system don’t do, rather than what they do, and the successful outcomes they’ve enabled for millions of people. As financial professionals and industry advocates, we need to change that. Overall awareness of retirement plans, and their incredible importance in securing an affordable quality of life after a lifetime of hard work, has dramatically increased, thanks to your efforts and the implementation of legislation like the SECURE Act and SECURE 2.0. While the need for health insurance is widely acknowledged, retirement benefits have struggled to keep pace. We are starting to see this change. The recognition of the critical importance of both offering and engaging in a workbased plan is on the rise. Awareness and understanding of behavioral economics and the “auto”-revolution (enrollment, deferral, escalation) have led to incredible results in closing the coverage gap, and we now see that making it easy has workers beginning to save at much younger ages. This is especially exciting to see day to day. For instance, a client with over 1,000 employees and very pro-benefit initially rejected auto-enrollment and

auto-escalation, questioning their parental role and whether they were, in essence, forcing the employee’s hand. We requested permission to ask the following question during a company meeting: If you don’t elect to decide, would you prefer to be auto-enrolled or to do it yourself? Almost 90% of their hands were raised in favor of auto-enrollment. We then asked if they preferred a 1% automatic deferral increase annually up to 10% (with the ability to opt out) or would they rather do it themselves. Again, 90% of the hands were raised in favor of automatic escalation. While re-enrollment was lower at 70%, their committee was nonetheless shocked. We also see small business owners who might have had a SIMPLE IRA or similar offering that are now excited about 401(k)s. Simply put, it’s a sea change in awareness and action, and only growing stronger. For decades, a person or couple’s financial legacy largely consisted of their home, and retirement income came from a pension, if they were lucky enough to have one, and Social Security. While children may have inherited the family home, it was uncommon for them to inherit investable assets. Today, we see middle-class, blue-collar retirees leaving substantial sums to heirs,

Alicia Malcolm, CRPC®, CRPS® is a Financial Advisor and Senior Vice President- Wealth Management with UBS Financial Services, Inc.

solidifying the work-based plan’s role not only in providing a secure retirement, but, for the first time, in building generational wealth. They aren’t millionaires with high salaries, but they can diligently save through dollar-cost averaging over decades. When speaking with senators and representatives at the NAPA D.C. Fly-In Forum, we often encounter attitudes that focus on retirement plans as a product, or a tax deferral, and not realizing the true financial impact they have, or the financial freedom that they provide every day working Americans. Yes, it’s a tax-deferred savings vehicle, but it’s really creating wealth. It’s not only about the deferral rate, match, and other technical aspects of the plan; it’s what it means for participants and their families, not just over their lifetime, but for generations to come. The country’s private retirement savings system is far from perfect, and work remains to be done. Through advocacy, we need your help in highlighting its successes and expanding its reach to benefit all hardworking Americans. NNTM

Thank you—your trust earned us top honors We’re honored to be recognized in the NAPA Advisors’ Choice Awards, including being named a top service provider across all markets in:* Participant Experience Capabilities Plan Sponsor and Advisor Support

Our unwavering commitment to you remains strong, and we’re grateful for the opportunity to serve you.

*2026 NAPA Advisors’ Choice Awards, September 2026. The following link reveals the results of that assessment, the top three in each service category (sorted alphabetically). See the full ratings here: “https://www.napa-net. org/news/2026/9/announcing-the-2026-advisors-choice-top-recordkeepers/. NAPA is not an affiliate of any company of the Principal Financial Group®. Insurance products and plan administrative services provided through Principal Life Insurance Company®, a member of the Principal Financial Group®, Des Moines, IA 50392. Principal®, Principal Financial Group®, Principal Asset ManagementSM, and Principal and the logomark design are registered trademarks and service marks of Principal Financial Services, Inc., a Principal Financial Group company, in various countries around the world and may only be used with the permission of Principal Financial Services, Inc. © 2026 Principal Financial Services, Inc. PQ13929D-02 | 5880584-082026 | 09/2026

inside the beltway | fall 2026

401(k)s Favor the Wealthy? The Data Says Different Plan incentives not only encourage responsible long-term financial behavior but also provide greater assistance to those with greater need. By Brian H. Graff

want to call attention to an incorrect talking point often deployed in the consumer press by defined-contribution critics: that the benefits workplace plans provide favor the wealthy. It’s simply incorrect, and as a new report from the American Retirement Association proves, the assertion overlooks critical components of the system: employer contributions and the compounding benefits of tax-deferred investment growth. When you factor these in, the data tell a different story: workingclass Americans are the primary beneficiaries of retirement tax incentives. The report’s key findings are crucial to preserving the savings incentives inherent in 401(k) and similarly styled employerbased plans and the future of the country’s private retirement system as a whole, including: Working-class savers receive the most significant benefits relative to their tax burden. Moderate-income earners ($50,000–$100,000 annual AGI) pay only 9.1% of federal income taxes but receive 30.1% of retirement tax benefits. Lowincome workers receive nearly eight times more in tax benefits compared to their tax burden. High-income earners receive proportionally less in tax benefits despite paying more in taxes. High-income earners (over $200,000 annual AGI) pay 71.4%

of all federal income taxes but receive just 16.7% of retirement tax benefits. Tax benefits are concentrated among workingclass households. Americans earning under $100,000 annually receive nearly 53% of all tax advantages from defined contribution plans. Moderateincome earners ($50,000– $100,000 annual AGI) account for the single largest share of the tax benefits. Working-class Americans have the highest retirement account ownership. Over 60% of defined contribution accounts are held by people who make under $100,000 annually. Only 11% are held by those making over $200,000 annually. Modest earners turn tax advantages into real wealthbuilding opportunities. Nurses, restaurant managers, technicians, and other working-class savers use tax incentives and employer matches to build meaningful retirement wealth. The results of this comprehensive study underscore the need for retirement policy analysis to move beyond surfacelevel metrics. When employer contributions and long-term tax deferral are properly included, the data make clear that defined contribution plans are one of the most effective, progressive, and proworker wealth-building tools in the United States.

Brian H. Graff, Esq., APM, is the Executive Director of NAPA and the CEO of the American Retirement Association.

These findings have important implications for policy development. As policymakers consider proposals related to the tax treatment of defined contribution plans, our analysis conclusively demonstrates that the assertion that defined contribution plans primarily benefit the wealthy is false. The data clearly shows that working-class Americans benefit most from the tax-advantaged status of their 401(k) plans and other employer-sponsored defined contribution plans. Legislation that impacts the employer-sponsored defined contribution model should protect and preserve a framework that demonstrably benefits workingclass savers. Any reforms should be carefully evaluated to ensure they maintain or enhance the current incentives to provide access to retirement savings programs. The evidence presented in the paper should give policymakers confidence that the current system of retirement tax incentives represents sound progressive tax policy. These incentives not only encourage responsible long-term financial behavior but also provide proportionally greater assistance to those with greater need. As we look toward the continuing evolution of retirement policy, maintaining and building upon this progressive framework should remain a central priority. We encourage you to read more about the findings here. NNTM

THE BEST RECOGNITION COMES FROM YOU.

2026

Thank you for recognizing ADP Retirement Services as a 2026 NAPA Advisors’ Choice Top 5 Recordkeeper in the Mid-Market for the Plan Oversight and Reporting Capabilities category. Your trust in our capabilities is an honor we don’t take lightly. We’re committed to making plan oversight easier with a smart, embedded platform that helps simplify retirement plan administration, provides real-time visibility into plan health and compliance, and brings together innovative technology and experienced specialists to support better outcomes for you and your clients. Your vote inspires us. Let’s build better retirement plans TOGETHER!

ADP RETIREMENT SERVICES 71 Hanover Road, Florham Park, NJ 07932 • adp.com/advisors ADP, the ADP logo and Always Designing for People are trademarks of ADP, Inc. All other trademarks and service marks are the property of their respective owners. Copyright © 2026 ADP, Inc. All Rights Reserved. 99-7968-ADV-0926 M-993284-2026-08-27

department | fall 2026

Trends ‘Setting’ AI isn’t replacing advisors, retirement balances hit record highs (again), 401(k) plan sponsors place ‘growing trust’ in advisor expertise, and beyond accumulation and decumulation, why retirement plans matter …All this and more in this issue of Trends Setting.

AI isn’t replacing advisors: RIAs plan to grow headcount.

he fears of widespread advisor displacement by the advancement of artificial intelligence (AI) may be overstated, according to a new report. In fact, recent research conducted by Cerulli Associates finds, instead, that most registered investment advisors (RIAs) plan to increase advisor headcounts over the next two years as AI expands service capacity. According to the firm’s State of Wealth Management AI Adoption conducted in partnership with Vista Equity Partners, wealth management shops are increasingly deploying AI to enhance advisor productivity and create capacity for growth rather than reduce staffing levels. The research found that, over the next two years, RIAs are most

likely to add junior advisors (73%), client service associates (67%), and senior advisors (56%), underscoring the continued importance of human advice as firms use AI to serve more clients and support growth. What’s more, nearly twothirds (64%) report that AI has reduced manual and administrative work, while nearly half (46%) cite improved quality of client communication. “The conversation around AI in wealth management is shifting from headcount reduction to productivity,” stated Asher Cheses, Senior Director of Wealth Management at Cerulli Associates. “The firms seeing the greatest success are using AI to automate administrative work, improve client engagement, and give advisors more time for the planning conversations and relationship-building that technology can’t replicate,” he added.

Beyond firm size and spending, a clearer driver of AI success comes down to operating framework, the research further noted. Firms pulling ahead share a defined governance model, named ownership, formal training, and measurement of results — choices any firm can make regardless of its AUM or technology budget, Cerulli emphasized. Using a proprietary framework developed by Vista Equity Partners that assesses firmlevel AI maturity, firms were measured across governance and data readiness, operational efficiency, and innovation and revenue, and grouped into three tiers: Exploring (below 30), Scaling (30 to 60), and Leading (above 60). The resulting score gives firms a common benchmark for assessing their AI readiness and implementation against peers.

AI Generator / Shutterstock.com

Nothing to Fear But …

2026 NAPA ADVISORS’ CHOICE AWARDS WINNER

Thank you for your support and your partnership. Our advisor partners are an integral part of what we do at T. Rowe Price. From participant experience and education to regulatory support and retirement income solutions, this recognition reflects the commitment our teams bring to supporting advisors and the clients they serve. We look forward to even deeper collaboration and more shared success in the future.

AI Generator / Shutterstock.com

Discover what we can do together. © 2026 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design, and related indicators (troweprice.com/en/intellectual-property) are trademarks of T. Rowe Price Group, Inc. All other trademarks are the property of their respective owners. T. Rowe Price Retirement Plan Services, Inc. CCON0254851 202608-5848298

department | fall 2026

Half of firms surveyed remain in the lowest tier, Exploring, while 38% are Scaling and just 12% have reached the top tier, Leading. Cerulli noted that factors distinguishing these Leading firms include clear accountability and ownership, employee enablement, and formalized measurement of AI outcomes. These firms are also pairing strong governance and execution with a willingness to invest. “AI is transforming the way wealth management firms do business, from managing client relationships to running daily operations. This research confirms what we’ve seen firsthand, that the firms capturing the greatest advantage are pairing that transformation with real operating discipline,” said Dan Parant, Managing Director, Global Head of Private Wealth Solutions at Vista Equity Partners. “Firms getting this right aren’t treating AI as a costcutting tool. They’re treating it as a growth engine.” Meanwhile, as firms look to scale AI initiatives, Cerulli noted that AI-specific spending is projected to roughly double as a share of technology budgets, rising from 8% to 15% in 2026. The investment apparently is concentrated where firms have already proven value, including enterprise AI model licenses, purpose-built tools for advisor and operational workflows, and formalized training to support adoption. The research surveyed 68 RIA firms between May and July 2026 and included more than 20 qualitative interviews with executives, technology leaders, and senior advisors. Participation was limited to executives, technology leaders, and senior advisors with firmlevel visibility into AI strategy (59% of respondents were C-suite executives). Survey respondents represented approximately $1.2 trillion in aggregate assets under management (AUM), with an average firm size of $18 billion in AUM. - Ted Godbout

We’re Gettin’ High

Retirement balances hit record highs (again).

here’s quite a bit of good news in Fidelity’s newly released analysis of the savings behaviors and account balances for more than 55 million retirement account holders. The firm’s Q2 2026 Retirement Analysis reports that total average savings rates continued at record levels for the second consecutive quarter, remaining at 14.4% for 401(k) savers and 12% for

403(b) participants. This was even despite market fluctuations from earlier this year and ongoing concerns about the economy. Notably, the 401(k) rate was driven by a record-high employee contribution rate of 9.6%, combined with an average employer contribution of 4.8%, bringing many workers closer to the firm’s recommended 15% annual savings benchmark. Workers also continued to prioritize retirement savings, as the Q2 analysis shows that 12.1% of 401(k) participants

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department | fall 2026

increased their contribution rate, while more than 8 in 10 (81.2%) saved enough to receive their employer’s full matching contribution. IRA savers also increased contributions by 36% from Q2 of last year. As a result, average 401(k), 403(b), and IRA balances reached record highs, due in part to a strong stock market, with 401(k) balances growing 10.5% since last quarter, which the report noted was the strongest quarterly growth since Q4 2020 (10.8%). • 401(k): $155,800, up 10.5% from Q1 2026 and 75% from Q2 2016 • 403(b): $145,000, up 12% from Q1 2026 and 104% from Q2 2016 • IRA: $144,523, up 10% from Q1 2026 and 59% from Q2 2016 The firm also saw a record high number of 401(k)-created millionaires, reaching 769,000 in the second quarter. “The combination of record account balances, strong savings behaviors and effective plan design tell an encouraging story about how Americans are approaching retirement,” noted Sharon Brovelli, president of Workplace Investing at Fidelity Investments. “Workers continue to prioritize their financial future, saving at record levels and taking advantage of valuable benefits such as employer matching contributions. These steps can play a powerful role in strengthening long-term retirement readiness.” The Q2 analysis further observed that the quarter also marked notable milestones across both workplace retirement plans and IRAs, reflecting the benefits of sustained saving and investing. For instance, women who had continuously participated in a 401(k) plan for at least five years achieved an average balance of $273,400 in Q2 2026, while female IRA investors reached an average balance of $130,231, up 12% from a year ago. Additionally, women directed

The percentage of plans that utilize auto escalation for contributions continues to increase, with more than 1 in 4 employers (29%) now offering this feature as part of their plan design.

72% of their IRA contributions to Roth IRAs, up 3.4% from Q2 2025. Meanwhile, the average balance for Gen Z workers who have been in their plan for five years continuously reached $77,200. Likewise, Millennials continued to build retirement momentum. For this generational cohort, average 401(k) balances increased 14.2% in the second quarter, rising to $94,300, and 26.1% year over year. Millennials and Gen Z workers also led Roth 401(k) participation rates at 20.1% and 21.9%, respectively. In addition, Millennials and Gen X employees were the highest contributors to traditional IRA contributions, both averaging approximately $6,000. One of the only downsides to the report was that the overall percentage of workers with a loan increased to 19.5% in the quarter, but the percentage of workers taking out a new loan held steady at 2.8%. As to employer efforts to improve savings among their workforce, the analysis found the percentage of plans with auto enrollment climbed to 46.7% in Q2 2026, and more than half of the plans on Fidelity’s platform (51.6%) now offer a match formula based on a 5% employee contribution rate (100% on the first 3% and 50% on the next 2%), which the firm noted was the most popular.

In addition, the percentage of plans that utilize auto escalation for contributions continues to increase, with more than 1 in 4 employers (29%) now offering this feature as part of their plan design. Fidelity’s analysis also revealed good news about efforts to expand retirement plan access to small businesses, particularly given that small businesses employ nearly half of the U.S. workforce and more are participating in the gig economy. The firm reported significant growth in plan adoption and participation over the last five years, including a 178% increase in small business retirement accounts, such as the firm’s SelfEmployed 401(k), Self-Employed Roth 401(k), SEP IRA and Simple IRA — as well as a 46% increase in contributions to these accounts. Additionally, more than 25,000 participants are now saving through the firm’s pooled employer plan (PEP) for small businesses. The Q2 2026 401(k) analysis is based on 27,300 corporate DC plans and 25.8 million participants as of June 30, 2026 (the figures include the advisorsold market but exclude the tax-exempt market). The 403(b) data is based on 10,644 taxexempt plans and 9.49 million plan participants as of June 30, 2026, while the IRA data is based on 20.3 million IRA accounts as of the end of the second quarter. - Ted Godbout

Worth Your Weight 401(k) plan sponsors place ‘growing trust’ in advisor expertise.

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s sponsors navigate an increasingly complex retirement landscape, new research finds that advisors are helping them better address participant needs, evaluate investment options, and deliver participant education that strengthens plan outcomes. These findings come from Fidelity Investments’ 17th annual Plan Sponsor Attitudes Study, which surveyed more than 1,300 plan sponsors managing retirement plans across a broad range of recordkeepers. In fact, plan sponsors report that they are increasingly relying on advisor expertise and are

satisfied with the support they are getting. Nearly 70% of sponsors say their plan is achieving its objectives, while interest in advisor-led outsourcing continues to increase, with 41% preferring advisors to have full discretion over investment menu decisions — up from 36% in 2025. As a result, advisors are becoming more competitive and continue to enhance their value proposition through expanded service offerings. Over the past year, the most added services were financial planning and advice (48%), followed by broader benefits strategy consulting (42%). Employee education (42%) and advisor-managed accounts (42%) tied as the third most frequently added service. Plan sponsors also report that they are most commonly turning

to their advisors for support on industry, legislative, and fiduciary issues (56%), individual retirement planning assistance for employees (53%), analysis of plan metrics and recommendations (52%), and financial wellness education (52%). Overall, more than 9 in 10 plan sponsors surveyed (93%) said they work with an advisor as they navigate plan design and investment decisions, market complexity, and long-term retirement plan strategy. “One of the clearest themes in this year’s research is the growing trust plan sponsors place in their advisors and their increasing willingness to turn to outside expertise as retirement plans become more complex,” stated Mike Manosh, DCIO sales lead at Fidelity Investments. “This

department | fall 2026

year’s findings show sponsors are thoughtfully balancing advisor guidance, evolving investment capabilities, and education to help meet changing participant needs and improve retirement outcomes.”

Investment Options

Fidelity’s study further revealed that plan sponsors are expanding the range of investment solutions available to participants as they look beyond traditional plan menus to deliver greater choice and flexibility. To that end, nearly 9 in 10 sponsors (89%) plan to add new investment options over the next 12 months. Among plan advisors, target date funds with embedded annuities (55%) and target date funds with stable value components (52%) generated the strongest interest, followed by managed accounts (41%) and active exchange-traded funds (31%). Notably, the study found that more than half of plan sponsors (52%) are also considering replacing their current target date funds, with most favoring options that may be more expensive but have historically delivered stronger net-of-fee performance.

Retirement Readiness

Meanwhile, sponsor confidence in their plans’ ability to support participant retirement readiness continues to grow, with 79% of plan sponsors believing participants are saving enough for retirement, a 12-percentage-point increase from last year. Fidelity noted that this optimism comes even as participant concerns about rising living expenses have increased, reaching 49% — up 1.6x year-over-year. To help participants continue making progress toward their retirement goals, plan sponsors intend to enhance employeefocused content and education, with an emphasis on financial planning (37%), retirement income (36%), and retirement plan investment options (35%). - Ted Godbout

Plan ‘Principles’

Beyond accumulation and decumulation, why retirement plans matter.

ffering a retirement plan appears cut and dried, and in many ways it is. But it’s not just figures and accounts — there are underlying principles behind offering a plan. What motivations might there be behind offering a plan, and what factors are involved beyond the administration of the plan and participants’ accumulation/ decumulation? Industry experts offer their perspectives and insights.

Good for Business

The main reason to offer a retirement plan is to give employees a way to save for the future and build a more secure retirement after they leave the employer’s workforce. It’s compensation, but it also has a degree of magnanimity. But the benefits of offering a retirement plan aren’t limited to individual participants, their dependents, and their beneficiaries. Offering one can also be…good business. The decision about whether to offer a retirement plan, and what features that plan will include, is

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“no longer a ‘back office’ decision, Alexandra Richardson, Principal Consultant and Operations Team Leader at Mercer, said in an Aug. 27 Mercer webinar, “Cost Crunch to Competitive Edge: Efficiencies in Retirement, Benefits, and Total Rewards.” Rather, she said, “it’s part of a business strategy.” Retirement plan coverage matters to employees. The National Institute on Retirement Security (NIRS), in its study “Retirement Insecurity 2026: Americans’ View of Retirement,” reports that 41% of workers said retirement benefits have become more important to them over the past year. One manifestation of that is the role retirement benefits can have as a tool for attracting and retaining employees. Mercer’s research lends empirical credence to that function. They found in 2023 and again this year that retirement benefits are among the top eight things prospective employees want from a potential employer. They also found that retirement benefits figure even more heavily as a feature that helps keep employees on the payroll; in 2023 and 2026, retirement benefits were among the top four reasons employees told Mercer they stayed with their employer. Additional research suggests that employers may want to consider that simply offering a retirement plan may not be enough for it to be effective in satisfying employees and meeting their needs. For instance, just over 60% of respondents in the NIRS study said they are at least somewhat concerned that they won’t be able to achieve a financially secure retirement; 24% are very concerned. The Employee Benefits Research Institute (EBRI), too, found in the 2026 Retirement Confidence Survey conducted with Greenwald that just because employees are satisfied with a plan doesn’t necessarily mean that they are confident they have saved enough for retirement. A little more than half of the respondents to the EBRI/

In 2023 and 2026, retirement benefits were among the top four reasons employees told Mercer they stayed with their employer.

Greenwald study — 57% — said they believe their retirement savings will last for their lifetimes. More than one-third believe the retirement plan would improve if it also included investment options that provide guaranteed lifetime income. Richardson suggested that employers that are not mindful of employees’ interest in retirement benefits will pay a price for it. Literally. “The cost of replacing an employee who leaves for benefits reasons is incredible,” she told attendees. In an Aug. 25 Broadridge webinar, Mark Christensen, Pooled Employer Plans Sales Director for Retirement Plans at The Standard, added another consideration when an employer is considering offering a benefit — the prospect that doing something for its employees can, in turn, improve service to its clients. “Make sure you’re doing your due diligence — not only for your practice, but also for your clients,” he said.

Avoid Inertia

Richardson warned that inertia regarding a retirement plan can be risky. “It kind of runs like a cruise ship,” she said, adding, “make sure it’s not a forgotten benefit.” If an employer treats a retirement plan as a “forgotten” benefit, Richardson warned, it may become a “noisy benefit” if a plan sponsor suddenly makes changes. Doing so, she said, evokes a reaction among participants. Mercer suggests strategies a plan sponsor can follow to

ensure a retirement plan meets participants’ current and future needs and is well run. • Make a checklist to identify operational costs. • Conduct strategic evaluations of plan aspects. • Consider outsourcing. • Gain an understanding of what drives outcomes. • Find out which cost increases deliver the best return on investment. • Proactively monitor how factors that drive outcomes change over time. Richardson argued that it’s useful for a plan sponsor to make sure it’s “getting the most out of dollars spent on a retirement plan.” She suggested ways to do that include communicating with participants and making sure employees know what the plan includes and what the employer offers.

The Big Picture

Richardson urged attendees to remember the end goal of offering a retirement plan and to keep in mind that offering one affects real people. “The numbers never tell the whole story,” said Richardson, continuing, “Understanding the goal of the retirement plan is important in considering the plan’s offerings and costs.” And Richardson suggested that an employer ask itself some questions. “Do you have the right structure in place to monitor it?” and, even more fundamental, “Ask the deep question — why do you have this benefit?” - John Iekel

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NAPA

Topic Spotlight HOW THE PENSION PROTECTION ACT RESHAPED RETIREMENT PLANS

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Happy Birthday, PPA: How the Pension Protection Act Reshaped Retirement Plans While there’s still work to be done, its enduring legacy is the help it provides in ensuring workers make the most of their retirement planning and saving options. BY JOHN SULLIVAN HAPPY BIRTHDAY, PPA! The Pension Protection Act of 2006 is all grown up. On the heels of celebrating ERISA’s 50th birthday in 2024, the PPA, another incredibly consequential piece of federal retirement plan legislation, reached a significant milestone when it turned 20 years old this summer. 1 2

Containing important provisions to address funding issues with defined benefit (DB) plans, the law also solidified innovation in 401(k)s and similarly-styled defined contribution (DC) plans while encouraging improvements in participant behavior that are often taken for granted today. Before its passage, several high-profile companies either

underfunded or terminated their DB plans—largely due to higher costs from increasing longevity—which stranded their employees and strained the resources of the government’s federally mandated backstop, the Pension Benefit Guaranty Corporation (PBGC).1 Additionally, the rapid decline in companies offering a DB plan as part

“Understanding the Pension Protection Act and Your Retirement.” Elder and Disability Law Firm. california-elder-law.com. Jul 2, 2018. “H.R.4 - Pension Protection Act of 2006.” Rep. Boehner, John A. congress.gov. July 28, 2006.

of their benefits packages and the simultaneous rise in those offering a DC plan meant that incentives and design changes were needed to encourage workers to save, especially at younger ages. No longer the company’s responsibility, the individual was now on their own to secure potentially decades’ worth of retirement funding.

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Politicians noticed. Understandably nervous about pension plan insolvency, the future of the country’s retirement saving system, and the potential spending impact on Social Security and other social programs, Congress got to work. Sponsored by eventual House Speaker John Boehner (R-Ohio) with significant input from fellow Ohioan and thenCongressman (eventually Senator) Rob Portman, the bipartisan, bicameral PPA passed both houses of Congress that summer, which President George W. Bush signed into law on August 17, 2006.2 Now, two decades later, did it achieve its stated goals, and in ways originally intended? Where did it fall short, if at all, and what’s still left to be done? “The PPA was a sweeping piece of bipartisan legislation, addressing among other things defined benefit funding, pension accounting, and cash balance plans,” former American Retirement Association Chief Content Officer and PPA historian Nevin Adams recently wrote.3 “However, to my eyes, the most lasting influence of the PPA was on the defined contribution side, where it helped change not just plan design, but the industry’s thinking about participant behavior.” With that as a focus, the following article will examine the law’s significant provisions and greatest successes. It will also review related legislation prompted by the PPA, concluding with a look at its legacy and a

“The PPA was a sweeping piece of bipartisan legislation, addressing among other things defined benefit funding, pension accounting, and cash balance plans. However, to my eyes, the most lasting influence of the PPA was on the defined contribution side, where it helped change not just plan design, but the industry’s thinking about participant behavior.” ——— Nevin Adams discussion of what comes next. The goal is to produce a more informed and complete picture of PPA’s impact on retirement plan saving and coverage, what still needs to be done, and the innovation fueling it all.

SIGNIFICANT PROVISIONS

To Adams’ point, it’s called the PENSION Protection Act for a reason [emphasis added] and was meant to secure funding for DB plans and to ensure companies kept their promises to workers made years, sometimes decades, earlier. To that end, the legislation included the following:4 • Required companies that underfund their

pension plans to pay additional premiums; • Extended a requirement that companies that terminate their pensions provide extra funding for the pension insurance system; • Required that companies measure the obligations of their pension plans more accurately; • Closed loopholes that allow under-funded plans to skip pension payments; • Raised caps on the amount that employers could put into their pension plans, so they could add more money during good times and build a cushion that could keep their pensions solvent in lean times; and

• Prevented companies with under-funded pension plans from “digging the hole deeper” by promising extra benefits to workers without paying for the promises up front. Yet the PPA’s DC provisions provided the proverbial “shot in the arm” to boost retirement plan assets and participation to where they are today. The Investment Company Institute’s most recent tally places defined contribution assets at almost $14 trillion as of the first quarter of 2026 (with $10 trillion of 401(k) assets, the largest share of employer-sponsored DC plans) covering 70 million active workers in roughly 730,000 individual plans.5 It did so by including the following items, among others:

“20 Years Later, Did the PPA Really Change Everything?” Nevin Adams. napa-net.org. August 11, 2026. “Fact Sheet: The Pension Protection Act of 2006.” georgewbush-whitehouse.archives.gov. August 17, 2006. “Resource Hub – 401(k).” ici.org. Q1 2026.

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Automatic Enrollment: Although many employers were offering 401(k) plans to their employees in the 1980s and 1990s, participation rates were low. The reason? Workers had to affirmatively choose to opt in to the retirement plan, according to Robert Pozen, former MFS Investment Management Executive Chairman and current nonresident senior fellow at the Brookings Institution. “However, behavioral economists found that the participation rates in DC plans were much higher under an arrangement called auto enrollment with an opt-out,” Pozen explained in a recent Brookings DC plan regulatory release. “In this arrangement, the employer automatically enrolls all its employees at a specified contribution level in a specified investment, but any employee may opt out entirely or choose a different contribution level or plan investment. The PPA expressly allowed employers to utilize auto enrollment in their DC plans, Pozen added, and Congress “also created exemptions from complex non-discrimination tax testing if an employer’s contributions or matching contributions reached specified levels.”6 Qualified Default Investment Alternatives (QDIA): Once enrolled, participants must choose where to invest their contributions. “Since employees do not actively sign up for a DC

plan with auto enrollment, they do not initially choose an investment option for their contributions,” Pozen noted. “Therefore, the employer must select a Qualified Default Investment Alternative (QDIA)—which an employee may choose to change.” In other words, it’s a place to invest the contributions on the participant’s behalf until the participant affirmatively makes a change. According to the Department of Labor, a QDIA may be one of the following:

• Lifecycle or targeted date funds (TDF); • Balanced funds; or • Professionally managed accounts. TDFs are by far the most popular QDIA, and roughly 86% to 98% of retirement plans use them as their default investment option for participants that are automatically enrolled in a plan.7 Assets in the vehicles have grown from about $100 billion in 2005 to $4.3 trillion as of year-end 2024. Among the $9.2 trillion in 401(k) plans, $3.4 trillion (nearly 37%) is in TDFs, and over 65% of all 401(k)

TDFs are by far the most popular QDIA, and roughly 86% to 98% of retirement plans use them as their default investment option for participants that are automatically enrolled in a plan. Assets in the vehicles have grown from about $100 billion in 2005 to $4.3 trillion as of year-end 2024.

contributions go into TDFs.8 Yet, Adams noted that in 2006, they were still a developing concept. “Today, they are a central part of the defined contribution investment landscape and the default investment for millions of participants, who, it’s worth noting, would otherwise have been left to their own devices in choosing— and maintaining—those portfolios.” Professional Investment Advice: PPA removed legal barriers, allowing workers in 401(k)s and similar plans to receive professional investment advice under safe-harbor exemptions. More specifically, it added an ERISA-prohibited transaction exemption, allowing advisors to assist plan participants without the risk of severe liability. Advice must be delivered via a level-fee structure in which the advisor’s compensation does not vary with the chosen investments, or through an unbiased, certified computer model. However, it does not exempt plan sponsors from their fiduciary duty to employ a prudent process when selecting and monitoring the advisors they offer to plan participants.9 “The PPA didn’t invent these provisions,” Adams said. “What it did was provide a structure and a roadmap for companies and individuals to adopt these approaches. But, importantly, not only a roadmap of how to do it,

“Defined contribution plan investments: A regulatory explainer.” Robert C. Pozen. brookings.edu. July 15, 2026. “The Evolution of Qualified Default Investment Alternatives: Key Developments and Trends in 2024.” Sean McCaffery. fiducientadvisors.com. April 4, 2025. 8 “U.S. Defined Contribution Distribution 2025.” Chris Bailey. cerulli.com. 9 “U.S. Labor Department proposes rules on investment advice exemption for 401(k) plans and IRAs.” Employee Benefits Security Administration. dol.gov. August 21, 2008. 6 7

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but the assurance of a safe harbor if they did choose to include the approaches.”

GREATEST SUCCESS

When hailing the PPA’s success, it’s natural to mention auto-enrollment, QDIAs, and professional advice described above, as well as: • direct Roth IRA rollover conversions from a 401(k), 403(b), or 457 plan, • higher contribution limits, • catch-up contributions for those age 50 and older, and • participant access to investment performance information. Yet one result that receives less attention is something trumpeted by the Bush Administration when the law’s 2006 passage was announced—it solidified the “higher contribution limits for IRAs and 401(k) s that were passed in 2001, enabling more workers to build larger retirement nest eggs.” The 2001 legislation it referred to was the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which included a massive tax cut during Bush’s first term and many provisions now credited to the PPA. Originally scheduled to sunset in 2010, the PPA made these critically important EGTRRA items permanent. Originally scheduled to sunset in 2010, the PPA made these critically important EGTRRA items permanent.

While the retirement plan industry was traditionally good at providing information and options to participants, participants didn’t always act. The PPA therefore cemented many of the behavioral incentives needed to help participants help themselves. In addition to those previously mentioned, they also include the Saver’s Credit and expanded portability.

RELATED LEGISLATION

Just as the PPA built upon 2001’s EGTRRA, so too did the more recent Setting Every Community Up for Retirement Enhancement (SECURE) Act and SECURE 2.0 Act build upon the PPA. This is most pronounced with automatic enrollment. While the latter didn’t introduce the concept of automatic enrollment, it provided legal protection for companies to include it in their plan designs. SECURE 2.0 made this provision mandatory and now requires 401(k) and 403(b) plans to automatically enroll participants in the respective plans upon becoming eligible (employees may opt out of coverage). Under the legislation, the initial automatic enrollment amount is at least 3% but not more than 10%. Each year thereafter, that amount increases by 1% until it reaches at least 10%, but not more than 15%. The changes generally apply to 401(k) and 403(b) plans established after December 29, 2022, and to plan years beginning after December 31, 2024.10

The PPA also made it easier for employers to adopt default investment choices, such as targetdate funds. SECURE 2.0 expanded further on plan design options by adding student loan payment matches and creating emergency savings accounts linked to pensions.11

LASTING LEGACY

MFS research noted that 20 years after the PPA’s passage, the retirement plan landscape has transformed: traditional DB plans are rare, while DC plans dominate. “There are more than three times the number of participants covered by 401(k) plans than by DB plans today,” it explained. “The PPA’s legacy is a retirement system with greater individual

responsibility and less employer risk — with less guaranteed lifetime income for most workers.” While there’s still work to be done to close the retirement plan coverage gap by expanding access to retirement plans for more companies and employees, PPA and its successors have put the pieces in place to help ensure it happens. Its enduring legacy is the help it provides in ensuring workers make the most of their planning and saving options to achieve a successful and affordable quality of life after years of hard work, and that they’re not on their own when doing so, especially during a sea change in the scope and structure of the country’s retirement plan system.

How Much Does 401(k) Auto-Enrollment Help Workers Save for Retirement? Munnell, Alicia. crr.bc.edu. January 9, 2025. “SECURE 2.0 Passed. What Made It In?” Sprick, Snyderman, Akabas. bipartisanpolicy.org, Dec.22, 2022.

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Before investing, consider the fund’s investment objectives, risks, charges, and expenses. For a prospectus, or summary prospectus, containing this and other information, contact MFS or view online at mfs.com. Please read it carefully. Important Lifetime Fund Risk Considerations: The fund may not achieve its objective and/or you could lose money on your investment in the fund. You may experience losses near, at, or after the target date. There is no guarantee of the fund’s principal value, including at the target date, or that the fund will provide adequate income at and through your retirement. Stock: Stock markets and investments in individual stocks are volatile and can decline significantly in response to or investor perception of, issuer, market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. Bond: Investments in debt instruments may decline in value as the result of, or perception of, declines in the credit quality of the issuer, borrower, counterparty, or other entity responsible for payment, underlying collateral, or changes in economic, political, issuer-specific, or other conditions. Certain types of debt instruments can be more sensitive to these factors and therefore more volatile. In addition, debt instruments entail interest rate risk (as interest rates rise, prices usually fall). Therefore, the portfolio’s value may decline during rising rates. Portfolios that consist of debt instruments with longer durations are generally more sensitive to a rise in interest rates than those with shorter durations. At times, and particularly during periods of market turmoil, all or a large portion of segments of the market may not have an active trading market. As a result, it may be difficult to value these investments and it may not be possible to sell a particular investment or type of investment at any particular time or at an acceptable price. The price of an instrument trading at a negative interest rate responds to interest rate changes like other debt instruments; however, an instrument purchased at a negative interest rate is expected to produce a negative return if held to maturity. International: Investments in foreign markets can involve greater risk and volatility than U.S. investments because of adverse market, currency, economic, industry, political, regulatory, geopolitical, or other conditions. Underlying Funds: MFS’ strategy of investing in underlying funds exposes the fund to the risks of the underlying funds. Each underlying fund pursues its own objective and strategies and may not achieve its objective. In addition, shareholders of the fund will indirectly bear the fees and expenses of the underlying funds.

NAPA Topic Spotlight

Sponsor Spotlight

A discussion with MFS Lead Retirement Strategist and Managing Director Jeri Savage about the PPA and its impact.

Q Did the Pension Protection Act of 2006 (PPA) achieve its intended goals? A Yes. The PPA fundamentally changed the retirement system by making it easier for workers to save and invest for retirement. Automatic enrollment, automatic escalation, and Qualified Default Investment Alternatives (QDIAs) increased participation and helped move participants into diversified, professionally managed investments. Just as important, the law gave plan sponsors a clearer framework for using these features with confidence. Over the past 20 years, these provisions have reshaped defined contribution plans and helped millions of workers build retirement savings. While retirement readiness challenges remain, the PPA successfully transformed how employers design plans and how participants engage with them. Q Were there any unintended consequences, good or bad? A One positive unintended consequence was the rapid adoption of target date funds and other professionally managed solutions. While policymakers hoped to improve participation, they may not have anticipated how dramatically QDIAs would reshape participant investment behavior or how quickly targetdate funds would become the dominant default option in many plans.

The law also accelerated a broader shift in responsibility from employers to individuals. As traditional pension plans continue to decline, workers have gained more control over their retirement savings and have also assumed greater responsibility for achieving successful outcomes. As a result, today’s retirement system offers greater flexibility but less guaranteed retirement income than previous generations enjoyed. Q How did PPA lay the foundation for later retirement legislation and regulation like the SECURE Act and SECURE 2.0? A The PPA demonstrated that plan design matters. By showing that automatic features could significantly improve savings behavior, it created a roadmap for future retirement policy and helped establish the idea that outcomes can be improved through better defaults. SECURE and SECURE 2.0 built on those lessons by expanding automatic enrollment, encouraging broader plan coverage and increasing focus on retirement income and participant outcomes In many ways, the PPA marked the first major modernization of the defined contribution system, while later legislation sought to close gaps that emerged as the system evolved. Q Twenty years later, what aspects of the PPA have had the most lasting impact on participant outcomes?

A The most enduring impact has been the combination of automatic enrollment and the creation of QDIAs. By providing fiduciary protection for sponsors that defaulted participants into diversified investments such as target-date funds, the PPA helped move participants away from cashheavy allocations and toward ageappropriate portfolios designed for long-term retirement investing. Automatic enrollment helped move participants from inaction to participation, while QDIAs helped ensure that those contributions were invested more appropriately for long-term goals. Q The PPA set a 3% default savings rate (to start), which is generally agreed to be too low. What have we learned over the last 20 years about default contribution rates and participant saving behavior? A Experience has shown that defaults are powerful. Participants often treat the default as an endorsement and tend to stay where they are placed. While a 3% starting rate helped encourage adoption of automatic enrollment, higher savings rates and automatic escalation are often needed to support long-term retirement goals. The lesson is not simply to enroll people, but to design plans that gradually help them save at more meaningful levels. Retirement readiness is also highly personal. Default contribution rates can help

The views expressed in this are those of MFS and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product.

participants get started, but improving outcomes ultimately requires a combination of plan design, participant engagement and a long-term savings strategy that reflects individual needs and circumstances. Q If “It’s a Wonderful Life” applied to the PPA and the law never passed, what would retirement and retirement saving look like today? A Without the PPA, the retirement landscape would look dramatically different. Participation rates would likely be lower, fewer plans would use automatic features, and many participants might remain in cash or other conservative default investments rather than diversified portfolios designed for long-term growth. Plan sponsors also may have been slower to adopt participant-friendly design features without the legal clarity the PPA provided. Perhaps more importantly, the retirement industry may not have embraced behavioral finance to the extent it has today. One of the PPA’s most important contributions was recognizing that individuals often benefit from systems that make good decisions easier. Twenty years later, its legacy can be seen not only in higher participation and greater adoption of professional investment solutions, but also in a fundamental shift in how we think about helping workers prepare for retirement.

Sponsored by

inside marketing | fall 2026

Your Website Needs a Promotion Have you reviewed your website lately? By Rebecca Hourihan AIF, PPC

ot to update your contact information or share your bio, but to click around, read the content, and experience the website like a prospect. If the answer is “unsure” or “maybe a few years ago,” start here. Technology changes, design changes, search changes, and, most importantly, the way people research financial professionals is changing right before your eyes. As a general rule, if your website hasn’t had a meaningful refresh in three years, take a closer look. You may not need a total rebuild, but make sure the technology, design, and content still reflect your business today.

Basic Accessibility Setup Before we get all fancy with AI, advertising, and prospect

intelligence, let’s cover an unsexy topic: accessibility. People need to be able to read your website. This happens with readable fonts and sufficient color contrast. Contrast guidelines generally call for a ratio of at least 4.5:1 for normal text and 3:1 for large text. Here is a free online contrast checker. Click around, and you’ll easily learn if your text passes the test: https://color.adobe.com/ create/color-contrast-analyzer. In the real world, this looks like blue words on a slightly paler blue background. That may look sophisticated, but if no one can read it, it loses its charm.

Your Website Is Not a Billboard

For years, advisor websites followed a familiar formula: Who

we are. What we do. Who we serve. Contact us. Check. Check. Check. Done. Except that your website should never be “done.” Think of it less like a billboard and more like a news channel. It should be living, breathing, and regularly providing useful information to the people you serve and those you hope to serve someday. This information might include: • Fiduciary education • Plan sponsor guides and checklists • Benchmarking insights • Participant education • Financial wellness resources • Videos, articles, and FAQs • Commentary on issues employers are asking about now You don’t have to create every piece from scratch. The point is

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to build a system to consistently source, customize, and publish relevant content so your website stays current without becoming another full-time job. The goal is to give people a reason to stay and come back.

What if Your Website Became Your Best Salesperson?

Most advisors we meet seek more qualified prospects. Imagine if your website worked as part of your prospecting engine. A plan sponsor sees one of your digital ads on LinkedIn: “401(k) committees carry real risk. How are you protected?” They click and land on a page designed around fiduciary risk. That visit can generate valuable digital signals. With the right website technology, analytics, consent frameworks, and data subscriptions, you can understand things like the company visiting, pages viewed, repeat visits, referral sources, and other behavioral signals. Your website just raised its hand and said, “Psst…someone may be interested over here.” It’s about business-building data.

One Visit Doesn’t Make a Prospect

Someone visiting your website once probably won’t immediately email and hire you to advise their company’s $10 million retirement plan. Instead, think about building familiarity. Re-marketing can help your brand continue appearing as prospects go about their normal digital lives - on LinkedIn, Meta, Google, and other supported channels. Meanwhile, your business development can become more intentional. Here’s how: •R esearch the company and decision-makers •C onnect, follow, and

thoughtfully engage on social media • Look for mutual connections who can make a friendly introduction • Develop a targeted email outreach • Continue to provide useful digital touchpoints Familiarity grows when someone sees you consistently and begins to trust you. Traditionally, that relationshipbuilding happened in person. Today, it is increasingly occurring online. Technology doesn’t replace relationships. It helps you identify where to focus them.

Ready for the Advanced Class

Take the process another step with intent data. Certain data platforms can help identify companies demonstrating increased research activity around topics relevant to your business. Examples include retirement plan advisor, defined contribution, cash balance plans, financial wellness, or fiduciary services. Instead of asking, “Who should we prospect this month?” you can ask a much more interesting question like “Who is already looking?” It doesn’t automatically make them a lead. But it adds another layer of intelligence to your sales and marketing efforts.

And Then There Is AI

If you’re thinking, “This already sounds like a lot,” here’s one more acronym: AEO. Answer Engine Optimization. Consumers are using tools like ChatGPT, Gemini, and Claude to research questions, organize information, compare options, and discover solutions. Think back to your website and reflect: When someone asks AI a question about a 401(k) problem that you can solve, does your firm have a chance to be part of the answer?

Here’s an easy place to start: Ask your website provider what they’re doing to make your site understandable and discoverable by both traditional search engines (SEO) and AI-powered answer engines (AEO). If they don’t have an answer, it’s a chance to provide useful information. Ask about structured data, site architecture, crawlability, authority, content categories, FAQs, and how your content strategy is evolving as search behavior changes. Unfortunately, there is no magic “put me in ChatGPT” button. Remember all that useful, regularly updated content we talked about earlier? This is another reason it matters. The more clearly your website demonstrates what you know, who you serve, and the questions you can answer, the more useful your digital footprint becomes for prospects, search engines, and AI systems alike.

Start Small and Today

You don’t need intent data, re-marketing campaigns, a new content engine, and an AEO strategy by Friday. Start by opening your website and really looking at it. Is it current, readable, and helpful? Does it demonstrate your expertise? Are you publishing something worth reading? Can you tell what happens after someone visits? Now choose one thing to improve because the advisor website of the future isn’t an online brochure quietly collecting digital dust. It is a content hub. A credibility engine. A source of prospect intelligence. A connection point between marketing and sales. And, increasingly, a source of information for people and machines. Your website has been sitting there working at the front desk for years. Maybe it’s time to promote it. Thanks for reading & Happy Marketing! NNTM

inside AI | fall 2026

Why Your AI Keeps Losing the Thread on Plan Data (and the Fix) You’re not talking to a single assistant that’s getting to know your practice. You’re talking to a new hire every time you open a chat. By Spencer X Smith

’ve been fortunate enough to see the behind-thescenes workings of companies both large and small in the retirement plan space. Here’s a pain point I hear constantly: an RFP or feebenchmarking project that should take an afternoon eats a week instead, because the AI keeps getting something wrong buried in a stack of PDFs.

You’re Not Working with One AI

You’re not talking to a single assistant that’s getting to know your practice. You’re talking to a new hire every time you open a chat, or even every time that chat runs long enough. Each response comes from an instance that knows nothing about your last conversation, your last plan, or the numbers you already gave it ten minutes ago. The only way it catches up is by reading the entire conversation from the top before it says a word back to you. That’s fine for a short exchange. It’s the reason a long RFP thread starts forgetting a constraint you set at the beginning, or a benchmarking comparison suddenly loses track of which vendor’s numbers are which.

Why the Same Document Trips It Up Twice Now add the document

problem, because this is where it costs you the most time and energy. A 408(b)(2) fee disclosure or a Form 5500 usually comes to you as a PDF. When you upload it, the text comes out fine; nothing needs to be scanned or read as an image. It’s great for humans for readability and portability, but machines struggle to read it. A PDF has no logic to designate the number in the third column that belongs with the plan name in the first. Columns are just characters that happen to line up on a page, so the AI has to guess at your table’s overall purpose before it can use a single figure from it and it does that guessing without telling you when it gets it wrong. That guess gets made once, when you upload the file, not on every turn after. But if the guess was wrong, that wrong structure is now what the AI is working from for the rest of the conversation. And a dense PDF page runs somewhere in the range of 1,500 to 3,000 tokens, so a stack of fee disclosures can crowd out the very conversation you’re trying to have with it. A misread number that makes it into an RFP response or a fee benchmarking table in front of an investment committee is a credibility problem, and it’s the kind that’s hard to walk back once a plan sponsor has seen it. I rarely see anyone double-check the

number that looked right the first time. The fix has nothing to do with better prompting; it’s about the files themselves.

Ask for a Format That Doesn’t Require Guessing

1.) CSV first. If a recordkeeper or vendor can export the census, the fee data, or the plan-level detail as a CSV instead of a PDF report, ask. Rows and columns are already defined, so there’s nothing to infer. 2.) E xcel second. Workable, but it’s carrying formatting the model doesn’t need. 3.) P DF last, and only when there’s no other option. If it’s the only format you can get, at least know that’s the tradeoff you’re making.

Template: Verified Table Extraction

Use this when you have to work from a PDF and can’t risk a misread number showing up in a client-facing document. “Extract the following fields from the attached document into a table: [LIST THE FIELDS, e.g. plan name, total plan assets, recordkeeping fee, advisory fee]. For each row, quote the exact line from the source document you pulled it from. If you are inferring a value rather than reading it directly, mark that row as inferred instead of presenting it with the same confidence as the rest.”

It won’t stop the AI from guessing, but it will stop it from hiding the guess from you.

Keep One RFP or Benchmarking Effort in One Place

elenabsl / Shutterstock.com

Don’t run a fee benchmarking project as one long chat that also mixes in three other clients. Most tools now offer a project or workspace feature. Start one per RFP or per benchmarking cycle, name it for the engagement, and keep every document for that effort inside it. When the thread gets too long, ask the AI to “prep this conversation for a new chat” before you paste the summary into a fresh window. That’s a briefing for the next new hire instead of a novel it has to read cold.

Tell It Who You Are Before You Ask It Anything Most advisors don’t fill in the custom instructions field, so every new chat starts with nothing but your name and a blank slate. Give it your role, your firm’s

compliance posture, the standard disclosures you always include, and the plan work you spend most of your day on. In Claude, that’s Settings, then Personalization, then Edit Instructions. ChatGPT and Copilot both keep the same option under Settings, then Personalization, then Custom Instructions. Don’t try to write it yourself. Tell the AI to interview you about your practice and draft the instructions from your answers. You’ll get a better result in five minutes than an hour of staring at a blank field would produce, and every new chat after that starts already knowing who it’s working for.

Put It into Action

Here’s a four-week rollout if you want to test this on your next RFP cycle rather than overhauling everything at once. Week 1: Pull out your last three RFPs or benchmarking projects and count how many source documents arrived as PDFs versus CSVs. Week 2: Fill in your custom instructions, and open one project

or workspace for your next active RFP or benchmarking effort. Week 3: Run the verified extraction template on a document you’ve already checked by hand and compare its output against what you know is correct. Week 4: Track how much time the new process saved on a live RFP, and whether it caught a bad number before it reached a client or a committee.

Your Takeaway

Your AI isn’t confused when a benchmarking table comes back wrong. It made a structural guess about a document that never told the answer, and nothing in the conversation caught the mistake before it reached you. Give it CSVs where you can, ask it to show its guesses where you can’t, and keep one engagement’s documents out of everyone else’s chat. Next time a number comes back wrong, ask yourself: was it the file format, or was it a chat that had three other clients’ worth of history sitting in it? NNTM

inside the numbers | fall 2026

‘Success,’ More or Less? I’ve never been particularly fond of the probability-of-success measures commonly used in retirement planning. By Nevin Adams

hat does it mean to have a 75% probability of success? I’ve never been particularly fond of the probability-of-success measures commonly used in retirement planning. It’s not that the calculations aren’t useful — or that I have a better crystal ball. I’m just not convinced that most people understand what the resulting percentage means, much less how to apply it to their retirement decisions. After all, a 75% probability of success sounds like a grade — and not a particularly good one. It also sounds as though there is a 25% chance that your retirement will be a complete and unmitigated failure. Neither interpretation is necessarily accurate. A recent paper from David Blanchett at PGIM, aptly titled “Successfully Failing,” takes on that conventional measure and suggests that it may not simply be confusing. It may actually lead retirees — and those advising them — to make less-than-optimal decisions.

Success ‘Measures’

Probability-of-success calculations generally run a retirement strategy through hundreds or thousands of different scenarios. If the retiree’s assets last through the prescribed

retirement period, the scenario is labeled a success. If the money runs out before the end, it is deemed a failure. It’s all — or nothing. A scenario that comes up $1 short is a failure. So is one that comes up $100,000 short. A portfolio exhausted in the final month of a 30-year retirement receives the same failing grade as one depleted after 15 years. For that matter, the success side can be just as uninformative. A plan that finishes the period with $1 remaining is successful. So is one that leaves the retiree with $1 million —though those outcomes may say very different things about how much the retiree could have enjoyed spending along the way. In effect, probability of success answers one narrowly defined question: In how many of our modeled scenarios did the portfolio avoid hitting zero before a date we selected? That may be useful information for academics or retirement planners, but it doesn’t strike me as the question actual people are trying to answer.

Goal ‘Oriented?’

Blanchett suggests an alternative: goal completion percentage. Rather than sorting every outcome into one of two buckets — success or failure — it measures how much of the desired spending was actually funded.

Consider the paper’s simple example: a retiree wants to generate $100 annually for 10 years. Across 10 modeled scenarios, only half provide the entire $1,000. That produces a probability of success of just 50% — a number likely to send most retirees scrambling for the nearest spending cut. And yet, averaged across those same scenarios, 96% of the desired spending is funded. Same assumptions. Same outcomes. Very different — and arguably much more useful — description of the result. Most people can probably get their arms around being able to fund 96% of what they hope to spend. They can consider what comprises the other 4%, whether they are willing to do without it and what adjustments might close the gap. That seems more tangible than being told that their retirement plan has a 50% chance of “failure.” It also acknowledges something these models frequently overlook: retirees (not to mention nonretirees) don’t generally set a spending plan on the day they retire and then blindly follow it for the next 30 years. They adjust. They postpone a trip, replace a car later than anticipated, reduce gifts or make other changes as their circumstances evolve. A disappointing market doesn’t automatically cause them to spend their portfolio down to zero without noticing.

Akmalism Photography / Shutterstock.com

Indeed, Blanchett estimates that viewing the same risks through goal completion rather than a traditional probabilityof-success threshold could allow some retirees to spend 20% more without taking on additional risk. That is potentially a significant improvement in retirement — not because the investments performed better, but because the measurement did. Not to mention the understanding of what the measurement means.

Successfully ‘Failing?’

That said, goal completion percentage isn’t a perfect measure. Knowing that a plan funds 90% of projected spending still doesn’t tell us when the shortfall occurs — or what kind of spending will have to be sacrificed. Funding 90% of a budget containing substantial discretionary travel is different from funding 90% of one already pared down to food, shelter and healthcare. Still, it gives retirees something that probability of

success generally doesn’t: a sense of the size of the potential problem. And that creates an opportunity to make informed choices rather than merely reacting to the absolutism of a passing or failing grade. After all, a retirement that delivers 96% of what you hoped for may technically have “failed” by some measures. But a measurement that can’t help folks distinguish that kind of outcome from financial catastrophe surely has. NNTM

AI Generator / ChatGPT

cover story | fall 2026

THE ENVELOPE, PLEASE! THE 2026 TOP RECORDKEEPERS ARE IN Without further ado, here are this year’s Advisors’ Choice winners. BY JOHN SULLIVAN

cover story | fall 2026

IT’S THAT TIME OF YEAR! Introducing the 2026 Advisors’ Choice Top Recordkeepers!

hich recordkeepers stand out? Who provides the best services, support, products, and processes? We introduced the Advisors’ Choice award in 2021 to acknowledge the nation’s best recordkeepers and the superior work that they do. That said, a lot has happened in the past year — but the services these institutions provide are, if anything, more important than ever. Advisors work with a variety of recordkeepers to support plans of all sizes and levels of complexity. As such, they are extraordinarily well positioned to compare and evaluate the strengths (and weaknesses) of this critical service — and their collective opinion matters. BUT we’ve made some (serious) changes this year to make it MUCH easier to evaluate them, including reducing or combining product categories and market segments. On the advice of our leadership council advisors, we reduced the number of market segments from five to three and the number of service offerings from 13 to seven. Then, beginning in May, we asked advisors (only) to vote for the recordkeeper(s) that provide plan sponsor clients with the level of support and services you deserve. They rated them with one of the following: • “World-class” service capabilities • Functional • Needs improvement The three market segments are: • Mega/Large Market: More than $100 million in plan assets • Mid-Market: $10 million - $100 million in plan assets • Small/Micro Market: Less than $10 million in plan assets The seven service categories are: 1. Participant Experience Capabilities 2. Plan Sponsor and Advisor Support 3. Regulatory and Compliance Support 4. Staff Expertise and Credentials 5. Participant Education and Engagement Resources 6. Plan Oversight and Reporting Capabilities 7. Retirement Income Solutions So, without further ado, here are the 2026 winners (again, broken out by market size):

MEGA/LARGE MARKET PLANS Mega Market Plans are considered plans totaling > $100 million in plan assets.

Participant Experience Capabilities • Empower • Fidelity Investments • Principal Financial Group • Schwab Retirement Plan Services • Voya Financial Inc.

Regulatory and Compliance Support • Empower • Fidelity Investments • Schwab Retirement Plan Services • Transamerica • Voya Financial Inc.

Plan Sponsor and Advisor Support • Empower • Fidelity Investments • Principal Financial Group • Schwab Retirement Plan Services • Voya Financial Inc.

Staff Expertise and Credentials • Fidelity Investments • Principal Financial Group • Schwab Retirement Plan Services • Transamerica • Voya Financial Inc. Participant Education and Engagement Resources • Empower • Fidelity Investments • John Hancock Retirement Plan Services • Schwab Retirement Plan Services • Voya Financial Inc.

Plan Oversight and Reporting Capabilities • Empower • Fidelity Investments • Principal Financial Group • Schwab Retirement Plan Services • Voya Financial Inc. Retirement Income Solutions • Empower • Fidelity Investments • Schwab Retirement Plan Services • Transamerica • Voya Financial Inc.

cover story | fall 2026

MID-MARKET PLANS Mid-Market Plans are considered plans totaling $10 million - $100 million.

Participant Experience Capabilities • Empower • Fidelity Investments • Principal Financial Group • Transamerica • TruStage

Regulatory and Compliance Support • Empower • July Business Services • Principal Financial Group • Transamerica • TruStage

Plan Sponsor and Advisor Support • Fidelity Investments • July Business Services • Principal Financial Group • The Standard • TruStage

Staff Expertise and Credentials • Fidelity Investments • July Business Services • Principal Financial Group • Transamerica • TruStage Participant Education and Engagement Resources • Empower • Fidelity Investments • July Business Services • Principal Financial Group • TruStage

Plan Oversight and Reporting Capabilities • ADP Retirement Services • Empower • July Business Services • Transamerica • TruStage Retirement Income Solutions • Empower • July Business Services • T. Rowe Price • Transamerica • TruStage

SMALL/MICRO MARKET PLANS Small/Mirco Plans are considered plans totaling less than $10 million in plan assets.

Participant Experience Capabilities • 401GO • Fidelity Investments • Principal Financial Group • T. Rowe Price • TruStage

Regulatory and Compliance Support • 401GO • Ascensus, LLC • July Business Services • T. Rowe Price • TruStage

Plan Sponsor and Advisor Support • 401GO • Fidelity Investments • July Business Services • Principal Financial Group • TruStage

Staff Expertise and Credentials • Fidelity Investments • John Hancock Retirement Plan Services • July Business Services • T. Rowe Price • TruStage Participant Education and Engagement Resources • 401GO • July Business Services • T. Rowe Price • TruStage • Voya Financial Inc.

Plan Oversight and Reporting Capabilities • 401GO • July Business Services • Principal Financial Group • TruStage • Vestwell Retirement Income Solutions • 401GO • Ascensus, LLC • John Hancock Retirement Plan Services • July Business Services • TruStage

feature | fall 2026

afe S DOL Targets ‘Frivolous’ ERISA Suits With Proposed

HERE’S WHAT’S HAPPENING, AND WHAT IT MEANS FOR FIDUCIARIES’ PEACE OF MIND. BY JUDY WARD

Dennis MacDonald / Shutterstock.com

eHarbor

feature | fall 2026

As a former U.S. Assistant Secretary of Labor for Employee Benefits, and subsequently an ERISA attorney in private practice who works with financial services providers and plan sponsors, Bradford Campbell has seen the evolution of lawsuits against retirement plan fiduciaries. He’s concerned about an upswing in what he views as frivolous suits. In recent years, plaintiffs’ law firms increasingly have figured out how to leverage a couple of realities, thinks Campbell, a Washington, D.C.-based partner at law firm Faegre Drinker Biddle & Reath LLP. First, ERISA intentionally gives plan fiduciaries some flexibility in their decision-making, and plaintiffs’ lawyers can try to exploit that grey area to argue that plan sponsors act imprudently. Second, because fighting a participant lawsuit through discovery and trial can cost an employer millions of dollars, employers often settle, regardless of the suit’s merit.

So, it didn’t surprise him that the Employee Benefits Security Administration arm of the U.S. Department of Labor (DOL) opted on March 30 to issue a proposed regulation on fiduciary duties in selecting designated investment alternatives, seeking to clarify those duties and establish a new safe harbor. In tandem, the DOL has recently changed the tone of its amicus (friend of the court) brief filings in retirement plan lawsuits to support employers. “The DOL is saying, ‘We perceive that this problem has gotten out of hand, and it is hurting plan fiduciaries and plan participants,’” Campbell said. If the final rule takes effect, plaintiffs with a legitimate claim of fiduciary imprudence still will be able to pursue a lawsuit, he said. “But the DOL is trying to reduce frivolous ERISA litigation: to establish that no, this is not just another economic opportunity for plaintiffs’ attorneys to game the system,” he added. “I think this will make it harder to pursue cases that try to exploit a grey area in the law, just to get a settlement.” Campbell and five other attorneys discussed key takeaways from the DOL’s efforts so far and what happens next.

The Asset-Neutral Approach Likely Will Stay

The proposed new rule’s release followed President Donald Trump’s Executive Order 14330, Democratizing Access to Alternative Assets for 401(k) Investors. Some people were surprised that the DOL’s proposed regulation covered more than alternative investments.

If finalized as proposed, the new rule would apply to the selection of any individual plan investment, said David Levine, a Washington, D.C.-based principal at Groom Law Group. That’s consistent with previous DOL policy. “The Department of Labor has been very focused on an asset-neutral approach: They’ve been saying for a while now that they’re not here to say what is the right investment, or what is the wrong investment, for a plan,” Levine explained. “They are just trying to create a level playing field.” And the Trump administration has taken the stance that the DOL should “get its thumb off the scale” of trying to excessively control the decisions that plan sponsors make, said Andrew Oringer, a New York-based partner at The Wagner Law Group. So, it wouldn’t make sense for the upcoming final rule to include a safe harbor that only applies to incorporating alternative investments prudently. “The DOL is saying, ‘OK, let’s talk about what the fiduciary’s job is in general, and do it in a way that collaterally makes it easier for plans to allow investment in alternative investments and private equity,’” Oringer said.

The Process-Driven Standard Will Remain Key

The proposed regulation reiterates ERISA’s intention, as well as decades of subsequent legal rulings, that fiduciary decision-making should have a processbased legal standard—not a result-based legal standard, Campbell said. Its process-based safe harbor reflects the fact that ERISA doesn’t require fiduciaries to be right in their investment decisions; it requires fiduciaries to make those decisions the right way, he said. The final rule almost surely will reflect that standard. “This means that the right question to ask a fiduciary will be, ‘Did you employ a prudent process in making this decision?’” Campbell said. “That’s true whether the decision later turns out to be right or wrong.” The proposed safe harbor breaks out six non-exhaustive investment factors for fiduciaries to consider: performance, fees, liquidity, valuation, performance benchmarks, and complexity.

Andy Dean Photography / Shutterstock.com

If finalized as proposed, the rule essentially would establish that if a plan’s fiduciaries follow a process that sufficiently addresses those six factors, the plan’s fiduciaries should be presumed to have met ERISA’s prudentconduct standard, Oringer said.

Plaintiffs’ Burden of Proof Would Increase

Assuming that the presumption of prudence for a plan’s fiduciaries who satisfy the safe harbor remains in the final rule, Levine said, in a lawsuit filing the plaintiffs then would need to affirmatively make the case that the plan’s fiduciaries made an investmentselection decision imprudently. “In their filing, plaintiffs will need to say more than, ‘It looks bad,’” Levine said. “They’re going to need to show real evidence of imprudence.” To avoid their lawsuit’s early dismissal, he added, “Plaintiffs are going to be pushed to have more detail and make concrete allegations in the initial complaint they file.” With the presumption of prudence, plaintiffs would have to show overwhelming evidence that a fiduciary acted imprudently, said attorney Fred Reish, Los Angeles-based director of ERISA compliance and fiduciary strategy at Prime Capital Financial. That poses a big challenge for plaintiffs, since the employer in question holds the documentation on the plan fiduciaries’ actions. Plaintiffs’ attorneys don’t have access to that documentation as they prepare to file a suit. He likens the difference the new rule would make to the distinction in the burden of proof between a criminal case and a civil lawsuit. In a civil suit, the plaintiff must establish only a 51% weight of the evidence that the defendant is liable for the claims made. In a criminal case, the prosecution must prove the charges beyond a reasonable doubt. And while the new regulation wouldn’t establish a standard of proof that is quite that high for plaintiffs in ERISA civil lawsuits, it’s in the ballpark, he said.

An Initial Legal Challenge Probably Will Arise

The DOL probably will issue a final regulation by the end of 2026 or in early 2027, Campbell said, with a likely 60-day

effective date. One or more lawsuits challenging the DOL’s authority to establish the investment selection safe harbor probably will arise at that point. One type of legal challenge could come from organizations, such as consumer groups, that think including alternative investments in defined contribution plans would harm participants, and that the DOL can’t enact regs that harm participants. Another type of legal challenge could come from plaintiffs who object to the new safe harbor on procedural grounds. Opponents may argue that the DOL doesn’t have the authority to issue this safe harbor on its own through regulatory action, and that Congress would need to pass legislation authorizing it. How long it takes for one or more challenges to the DOL’s rulemaking

authority to work their way through the legal system will depend on how far the challenges go in the courts, Reish said. “Starting from the DOL issuing the final regulation, it could be five years after that before we know if it’s a valid rule,” Reish said.

The Safe Harbor Will Crop Up in Participant Lawsuits An initial, broad legal challenge to the safe harbor seems unlikely to succeed, Campbell thinks, since the DOL based the safe harbor on wellestablished prudent processes. But the safe harbor will likely become an ongoing litigation issue as specific participant lawsuits include related allegations, he said. “Within the safe harbor’s six factors, there are still going to be some grey areas,” said Emily Seymour Costin, a

The Amicus Briefs’ Changing Upshot

The Labor Department has changed the tone of amicus briefs it files in lawsuits against retirement plan fiduciaries. “What’s different now is that in this Trump administration, the DOL is really focusing on filing amicus briefs on the core issues, in defense of the plan sponsor, to an extent that we haven’t seen the DOL do in recent years,” Faegre Drinker Biddle & Reath’s Bradford Campbell said. The DOL during both the Biden and Trump administrations has weighed its decision about whether to file an amicus brief both in terms of whether it could help prevent a nuisance lawsuit from succeeding as well as in terms of whether it could help stop harm to a plan’s participants and beneficiaries, The Wagner Law Group’s Andrew Oringer said. When the Biden administration’s DOL filed an amicus brief, however, it typically leaned toward supporting the plaintiff. “Clearly, in terms of prioritizing between those two types of considerations, there has been a tonal shift recently as to what the DOL is primarily worrying about,” Oringer said. “Now the tone is, how can the DOL promote a system where plan sponsors and fiduciaries are not being unnecessarily and unduly challenged legally, while at the same time protecting the interests of participants and beneficiaries?” Amicus briefs can influence legal decisions and offer insight into the DOL’s current thinking on important issues. “Filing these briefs gives the DOL the ability to get their views out there in a far easier, less time-consuming way than the rulemaking process,” Alston & Bird’s Emily Seymour Costin said. “An amicus brief is an easier way than rulemaking for the DOL to more quickly influence court decisions.”

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Washington, D.C.-based partner at Alston & Bird. “And how thoroughly, and how deeply, the six factors were considered by fiduciaries will be a discussion point in future litigation. But adhering to these six steps, and documenting that adherence, will be a pivotal defense for fiduciaries if a participant lawsuit is filed.” Reish sees at least a couple of ways participant lawsuits may allege violations of the new safe harbor, even when a plan’s fiduciaries believe they have satisfied its requirements. Plaintiffs could argue that a plan’s fiduciaries didn’t adequately consider each of the framework’s specified factors, so didn’t satisfy the safe harbor requirements overall. Plaintiffs also could assert that a plan’s fiduciaries didn’t consider additional relevant factors in making an investment-selection decision. The final regulation could expand the number of factors. Still, the proposed safe harbor’s six factors didn’t break out factors such as participant demographics, conflicts of interest, and risk, he said.

Sponsors Will Have a Decision to Make

The proposed safe harbor lists specific factors for plan fiduciaries to consider, and once the rule becomes final, fiduciaries should treat it as a roadmap, Costin said. But ultimately, it will be up to a plan’s fiduciaries whether to try to meet all of the safe harbor’s criteria. “Certainly, it will be a guideline for plan fiduciaries to follow,” Costin said. “And I think it is going to be viewed as a best practice.” Not following the guidance would not be considered imprudent, Levine said. And the Labor Department has not portrayed the proposed safe harbor’s sixfactor framework as the be-all-and-endall list of investment factors to consider, he said. Even fiduciaries aiming to meet the final rule’s safe harbor criteria could consider additional, relevant factors. “Especially once the safe harbor is finalized and if it’s upheld in court, I think you are going to see a lot of ERISA investment advice crafted around the safe harbor,” Oringer said. “But in cases where there are unusually risky investments in a plan, or risky new investments added to a plan, you may

see the plan’s advisor saying, ‘Look, we’re using this safe harbor as a basic foundation for our advice.’” The idea would be that advisors are free to evaluate additional investment factors.

The Safe Harbor Presumably Will Remain Subjective

The proposed regulation includes a process-based safe harbor. The final regulation probably will, too, and likely won’t include a checklist-type safe harbor with highly specific guidelines to follow. “The proposed safe harbor is a subjective safe harbor, rather than an objective safe harbor,” Campbell said. “This safe harbor is not a ‘check the box’ exercise.” A check-the-box safe harbor has the advantage of making it very clear to plan fiduciaries if their plan is in it, he said, but it also can constrain fiduciary decision-making for those seeking it. “This new safe harbor is rooted more in an evaluation of the fiduciaries’ conduct: Did they appropriately consider these six factors?” he added. If enacted, the regulation will create what Anne Becker, a Chicagobased partner at Winston Taylor LLP, characterized as a “facts and circumstances” safe harbor. “This type of safe harbor is different than a safe harbor that has definitive parameters,” Becker said. “This is a safe harbor based on facts and circumstances, so I don’t think that it offers the same sort of black-and-white protection.” However, Becker said that once finalized, the new safe harbor will help plan sponsors home in on a good process for fiduciary decisions. The facts-and-circumstances nature of it will leave some aspects of good fiduciary decision-making open to interpretation, she added. “Without definitive regulatory parameters, it may fall to the courts to provide more of the definitive parameters that plan fiduciaries would desire,” Becker said.

It’s Not Too Early to Discuss with Clients

Before the final rule’s issuance, it probably doesn’t make sense for plan fiduciaries to enact any investment-

selection process changes to qualify for the safe harbor, Levine said, since the final safe harbor could change from the proposed one. But before the final rule’s release, he said, a plan’s advisor could give the plan committee an overview of the proposed regulation and talk about how the advisory firm’s investmentselection process relates to the proposed safe harbor’s framework. “The proposed regulation provides an outline of a prudent fiduciary process, so it’s a good check on a committee’s own fiduciary process,” Becker said. She works mostly with large employers that have committees with informed members and wellestablished processes, and that work with a fiduciary investment advisor. Their processes generally align well with the proposed safe harbor; she’s finding as she helps committees start thinking about the safe harbor. Becker’s plan client committees that want to seek the safe harbor are holding off on making related changes to their investment-selection processes until after the DOL issues the final regulation. Once that happens, some committees may make specific tweaks, such as adjusting their plan’s investment policy statement to describe how plan fiduciaries will consider a particular qualitative or quantitative factor. But before the final regulation’s issuance and any ensuing legal challenges, the safe harbor’s impact may begin to be felt as some advisors start structuring the investment recommendations they give to plan committees in harmony with the safe harbor’s parameters, Oringer said. “Even at the proposed-rule stage, I think the regulation will affect the contours of the advice given to plan sponsors on investments,” Oringer said. “Right now, you have got the DOL coming to a preliminary conclusion as to what it means for a sponsor to be procedurally prudent. Why would anyone ignore that? As a fiduciary, I have now got a regulator telling me what I need to do, as a baseline. Why wouldn’t I make sure that I’m at least doing the baseline?” NNTM

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THE PERILS OF OLDER AGE FOR 401(k) RETIREES

THE IMPORTANCE OF PROTECTING OLDER ADULTS FROM THE RISKS OF COGNITIVE DECLINE SHOULD BE TAKEN SERIOUSLY, AND FINANCIAL INSTITUTIONS, INSURANCE PROVIDERS, AND GOVERNMENT REGULATORS NEED TO TAKE EXPLICIT ACTIONS TO ENSURE SAFE RETIREMENT OUTCOMES.

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BY FRED REISH AND CHRIS HEYE

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s the first generation of 401(k) participants move into retirement and rolls over their benefits into individual retirement accounts, the perils of a 401(k) retirement are becoming clear. This article discusses those risks and possible solutions.

But, first, let’s look at the 401(k) world as it currently exists. In its earliest days, 401(k) plans were intended to be “supplemental”; that is, the personal savings in 401(k) plans would augment, or supplement, the guaranteed benefits of pension plans and Social Security. Over time, they became primary plans. In the process, ERISA and the Internal Revenue Code were amended to improve employees’ ability to accumulate retirement benefits. Think of changes such as automatic enrollment, automatic deferral increases, and qualified default investment alternatives, including target date funds. However, while those changes improved 401(k) plans for accumulating retirement benefits, little was done to improve them as retirement income vehicles. Instead, both plan sponsors and participants believed the benefits would be rolled over into IRAs and then responsibly invested and withdrawn over participants’ retirement years. While that approach looks good on paper, it has some serious issues in reality. Most participants will retire and roll over their benefits in their 60s, but that is not the end of the story. It is only the beginning. If you assume that a retiree in their 60s is reasonably knowledgeable about investing for income and understands how much can be

withdrawn sustainably, that assumption is likely to fall apart as a retiree ages into the 70s, 80s or 90s. As the next part of this article explains, the incidence of diminished cognitive abilities increases dramatically over those later years.

From Accumulation to Decumulation

Retirement planning has historically been about asset accumulation. How much should I save? How should I invest? How can I maximize long-term returns? These are important questions, but they largely focus on investment portfolio optimization. Advisors can model savings rates, portfolio allocations, tax strategies, expected returns, and the effects of compounding with reasonable precision. Although markets are never fully predictable, the accumulation phase is focused on optimizing a relatively small set of quantifiable variables that determine long-term financial outcomes. But arguably the real challenges arise once retirement begins. Retirement marks the beginning of a different phase of financial life: decumulation. Rather than building wealth, retirees must begin drawing income from the assets they spent decades accumulating. For many individuals, this phase may last twenty or thirty years.

Importantly, as retirement shifts from accumulation to decumulation, the quality of a retiree’s financial decisions becomes increasingly important. Today, retirement increasingly requires people to make a continuous series of decisions under conditions of often extreme uncertainty. Moreover, we are asking retirees to make these important financial decisions precisely at the stage of life when their capacity to make good decisions is diminishing due to cognitive decline. Behavioral economists have spent decades showing that emotions, biases, heuristics, and other cognitive shortcuts influence financial decisions. More recently, researchers have begun examining another challenge to sound financial decision-making: cognitive decline. Studies suggest that financial decision-making ability peaks in the early 50s and gradually declines thereafter.[i] At the same time, Americans are living longer and spending more years in retirement. And the risk of cognitive decline rises with age, increasingly rapidly by the time a person reaches their mid-70s. An estimated 11% of adults over 65 in the US are living with Alzheimer’s disease, the most common form of dementia, and an additional 3% suffer from related conditions such as vascular or frontotemporal dementia. In total, approximately 14% of people over 65 have dementia.[ii] Many older retirees also experience Mild Cognitive Impairment (MCI), a condition that involves measurable decline in cognitive capacity beyond normal aging but does not meet the clinical definition of dementia. Approximately 15% of adults over 65 are estimated to suffer from MCI.[iii] Taken together, these figures suggest that nearly 30% of adults over 65 are experiencing some form of diminished decision-making capacity. Because the likelihood of both dementia and MCI increases with age, the prevalence of diminished decision-making capacity rises significantly among individuals in their late 70s and 80s. The cumulative financial consequences of declining decisionmaking capacity can be significant. Missed bill payments, credit card

While it isn’t possible to fully protect retirees from their own cognitive decline and fraudsters’ efforts, they can take steps while they are still cognitively capable.

delinquencies, declining credit scores, payments to fraudulent individuals or organizations, impulsive spending, and poorly organized personal finances can gradually erode household wealth. Research employing data from the Health and Retirement Study estimates that households managed by individuals who later develop dementia experience a decline in net worth of approximately $124,000 over the six years preceding diagnosis, or roughly one quarter of total household assets.[iv] These data highlight the perils of today’s commonly held view that retirees will intelligently manage their IRA investments and reasonably withdraw income sustainably over a lifetime. As those retirees age into their 70s, 80s, and beyond, many will have lost the cognitive ability to make sound decisions. To make matters worse, those retirees will be more vulnerable to financial fraud and abuse, including cyber theft. That raises the question - what is the alternative?

Discussion of Alternatives

While it isn’t possible to fully protect retirees from their own cognitive decline and fraudsters’ efforts, they can take steps while they are still cognitively capable. Almost any financial transaction, whether it’s selling an asset, reallocating a portfolio, choosing an investment product, or just paying a bill, creates an opportunity for mistakes, impulsive actions, or financial exploitation. Simplifying financial accounts and placing as many household financial decisions as possible on “safe autopilot” can therefore play an important role in protecting retirement security. Another useful action is to assemble a team of trusted family members,

friends, and professionals who can help ensure sound financial decisionmaking. These individuals can help monitor financial decision-making and provide guidance during times of high uncertainty or stress. For retirees who can afford it, seeking advice from ethical, knowledgeable financial advisors who can manage investments and withdrawals consistent with a comprehensive financial plan can help protect and preserve wealth. While hiring financial professionals may only be an option for wealthier individuals and families, all retirees can simplify their personal finances and reduce the number of required, ongoing financial decisions. One way to do this is to commit a portion of wealth to sustainable protected income. Retirees can purchase guaranteed lifetime income through an annuity, which supplements their Social Security income and any pension benefits. If retirees are fortunate, they may have worked for an employer that included guaranteed income products in its 401(k) or 403(b) plan with fiduciary protections. Congress has recognized the need for guaranteed income for retirees by providing a fiduciary safe harbor for the selection of insurance companies in the first SECURE Act in 2019.[v] As a result, plan sponsors and fiduciaries can provide guaranteed income through their plans without concern about liability for selecting the insurer.

Choosing to purchase a lifelong stream of protected income serves multiple purposes. First, most bad actors who steal from the elderly are looking for wealth, and this income substitute is less attractive to the thieves. Second, the income that retirees receive from an annuity does not need to be actively managed – it simply arrives regularly. The key financial management decision is made when purchasing the annuity contract. The risk that a retiree will make a sub-optimal withdrawal decision is substantially reduced. Finally, research has shown that households holding a greater share of their wealth in protected income products spend more than retirees who hold more of their wealth in savings.[vi] These findings suggest that annuities may offer a “license to spend” that boosts guilt-free consumption and raises the quality of life throughout retirement.

Conclusion

The importance of protecting older adults from the risks of cognitive decline should be taken seriously, and financial institutions, insurance providers, and government regulators need to take explicit actions to ensure safe retirement outcomes. Because many retirees hold a significant portion of their savings in retirement accounts but cannot afford professional financial advice, making protected income products more readily available and easier to understand is critical to ensuring long-term financial security. NNTM

FOOTNOTES [i] Agarwal S, Driscoll JC, Gabaix X, Laibson D: The age of reason. Financial decisions over the life-cycle with implications for regulation. Brookings Papers on Economic Activity 2009; Fall: 51-101 [ii] Alzheimer’s Association. (2019). 2019 Alzheimer’s disease facts and figures. Alzheimer’s Association. [iii] American Academy of Neurology. (2018). Practice guideline update summary: Mild cognitive impairment. [iv] Li, McGarry, Nicholas & Skinner (2026), Dementia and Long-Run Trajectories in Household Finances, NBER Working Paper 34659. [v] SECURE Act section 204 enacted ERISA section 404(e). [vi] Blanchett, D., Finke, M (2024). Guaranteed Income: A License to Spend, Retirement Income Institute.

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ROBS Plans Under the Microscope HERE’S WHAT ADVISORS NEED TO KNOW BEFORE A CLIENT ASKS. BY LAUREN STROBEL, QKA

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Have you ever had a client tell you they want to leave their job, start or buy a business, and use retirement assets to help fund it — without taking a large taxable distribution? Maybe the client has already heard about a Rollover as Business Startup (ROBS) plan and asks whether it is legitimate. Or maybe they simply ask whether there is a way to keep their retirement dollars invested while using them to help capitalize their business.

Consider Kendra, age 48. After more than 20 years in corporate America, she has accumulated a substantial 401(k) balance and is ready to leave her job to open the boutique fitness studio she has always wanted to own and operate. She needs capital to get started, but taking a taxable distribution could reduce the amount available for the business through income taxes and, absent an applicable exception, an additional 10% early withdrawal penalty before age 59 ½. Rather than reduce her retirement assets through taxes and penalties before the business even opens, she would prefer to keep those dollars invested — just in a very different type of asset. Private and nontraditional investments continue to be an important topic across the retirement industry. A ROBS arrangement brings that concept into the small-business setting, where the retirement plan becomes a shareholder in the business the client intends to own and operate, and the corporation receives working capital through the plan’s stock purchase. As an advisor, that scenario may immediately raise two questions: •H ow does a ROBS arrangement actually work? •A nd isn’t that a prohibited transaction? To answer those questions, it helps to first understand how a ROBS transaction works — and what it is and isn’t.

A Closer Look at the ROBS Transaction

In a ROBS arrangement: •E ligible tax-deferred retirement funds are moved through a direct rollover into a qualified profit-sharing plan sponsored by a C corporation. ROBS arrangements are structured with a C corporation because the qualified plan purchases employer stock as part of the funding

the business owner. The retirement plan remains the investor and holds corporate stock as a plan asset. •T he corporation can then use the resulting capital for legitimate business purposes such as an acquisition, franchise costs, equipment, inventory, payroll or other operating expenses. The plan’s purchase of employer stock is where ERISA and Internal Revenue Code prohibited-transaction rules come into play. ERISA generally prohibits retirement plans from engaging in certain transactions with parties connected

to the plan, including the sponsoring employer, while the Internal Revenue Code contains parallel prohibitedtransaction rules. Within that same statutory framework, Congress also created statutory exemptions for qualifying employer-securities transactions when specific conditions are satisfied. ERISA §408(e), together with IRC §4975(d) (13), provides relief from those prohibited-transaction rules for these employer-stock transactions. A properly structured ROBS arrangement therefore does not sidestep these prohibited-transaction rules — it operates within them, relying

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transaction. An LLC or partnership cannot issue corporate stock, while an S corporation election can create unrelated business taxable income for a qualified plan shareholder. • The plan then purchases newly issued qualifying employer securities (stock of the sponsoring C corporation), and the corporation receives the proceeds as working capital. Since this is an equity investment, it is not a loan to the business and does not create a repayment schedule or interest obligation. Nor is it a taxable distribution to

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on those statutory exemptions when the applicable requirements are met.

Where Compliance Risk Comes into Focus

With an acronym like “ROBS,” Rollover as Business Startup plans have developed a complicated reputation within the retirement industry. In October 2008, the IRS issued an internal memorandum titled Guidelines Regarding Rollovers as Business StartUps, describing the arrangements as “questionable” and directing examiners to consider issues including nondiscrimination, stock valuation, plan permanency and prohibited transactions on a case-by-case basis. Yet it also acknowledged that ROBS arrangements may serve legitimate tax and business-planning needs and that not all transactions could be challenged as noncompliant simply because of their form. Today, the ROBS Compliance Project on IRS.gov takes a similarly measured position: “ROBS plans, while not considered an abusive tax avoidance transaction, are questionable because they may solely benefit one individual.” The IRS also warns that discriminatory operation or prohibited transactions can jeopardize the plan’s qualified status. Those IRS warnings are precisely why it’s important to understand the key compliance risks associated with a ROBS plan. A 2011 Daily Tax Report analysis published by The Bureau of National Affairs noted that the IRS examination process should look much like a routine employee-plan examination, with additional attention paid to issues created by the employer-stock investment. On the transaction side, execution matters. The prohibited-transaction exemptions do not make every employerstock transaction compliant. For a proper ROBS arrangement, the business must be structured as a C corporation, the stock transaction must satisfy the adequate-consideration requirement, the plan must be properly designed and operated, and the arrangement must continue to comply with the requirements applicable to a qualified retirement plan. Since the statutory exemption depends in part on the plan acquiring

As the advisor, you do not need to administer the plan, value the business or resolve every ERISA issue, but you can play an important role in making sure the client has the right retirementplan, tax, legal and valuation professionals involved as the business evolves.

qualifying employer securities for adequate consideration, valuation is particularly important. The value of the employer stock should be reviewed regularly and supported by a reasonable methodology. As a prudent practice, when there has been a material change in the business — or when a subsequent transaction involving the employer stock is contemplated — an independent third-party valuation should be obtained to support fair market value. An unsupported or deficient stock valuation can do more than create a reporting problem; it can jeopardize the prohibited-transaction exemption itself. The IRS also identified promoter fees as a potential prohibited-transaction concern, particularly where payment arrangements implicate plan assets or fiduciary rules. Understanding how ROBS provider fees are structured and from what source they are paid can help advisors recognize potential compliance concerns. On the plan-operation side, once the initial stock transaction is complete, the plan does not stop being a qualified

retirement plan. Plan permanency remains a qualification requirement, meaning the plan must be intended and operated as an ongoing retirement program — not simply established to complete the initial business-funding transaction and then terminated. Many of the compliance obligations — and many of the failures that can occur — are therefore familiar qualified-plan issues. Eligibility and coverage rules still apply as employees are hired. The plan must satisfy top-heavy requirements and applicable nondiscrimination requirements, including those applicable to employersecurities investment rights. It must also operate according to its governing document, complete required amendments, maintain appropriate records and satisfy applicable annual Form 5500 filing requirements. Corporate and retirement-plan decisions can also have unintended consequences. Changes in ownership, subsequent stock transactions and tax elections should be evaluated in advance in light of the plan’s ownership interest. • For example, a CPA who is unaware that the qualified plan owns company stock may recommend an S corporation election without considering the resulting tax consequences. • Similarly, a payroll company or other provider may recommend a separate 401(k) plan without realizing a qualified plan already exists. Before establishing another plan, the client and its advisors should first consider whether the existing plan can accomplish the desired objectives. If multiple plans are maintained, they must be coordinated because they may affect contribution limits, nondiscrimination testing, top-heavy requirements and other qualification obligations. This intersection of qualified-plan administration, privately held employer securities and corporate governance is why ongoing professional support matters. As the advisor, you do not need to administer the plan, value the business or resolve every ERISA issue, but you can play an important role in making sure the client has the right retirement-plan, tax,

legal and valuation professionals involved as the business evolves.

The Advisor’s View: Ask the Right Questions, Stay for the Full Lifecycle

Even when a ROBS arrangement can be structured within the applicable rules, it is not appropriate for every client. Understanding the structure can help you ask the right questions to assess whether ROBS may be a good fit for your client, recognize when specialists should be involved and remain a trusted resource as the client moves from employee to entrepreneur and through the business lifecycle. So, what should you be asking when a client brings ROBS into the conversation? No. 1: Are you starting or buying an active operating business — and will you work in it? ROBS is designed around an active operating business. The entrepreneur should have a genuine intent to work in the business as an employee of the sponsoring corporation and receive W-2 compensation for services actually performed — not simply use retirement assets to make a passive investment. No. 2: How much retirement capital should you actually commit? ROBS requires eligible tax-deferred retirement funds that can be rolled into the new plan. However, don’t just ask, “How much can you roll over?” Instead, ask, “How much of your retirement wealth should you expose to one privately held business?” This is where you can help determine what combination of ROBS capital, financing, personal funds and retained liquidity provides the strongest overall financial position for your client. Other funding sources may also be part of the conversation; for example, ROBS can be used alongside SBA financing, allowing retirement assets to provide some of the equity while debt finances another portion of the project. Since this is a concentrated investment in a privately held business, the client must be prepared for the possibility that some or all of the retirement assets invested could be lost if the business fails. No. 3: Are you prepared to operate an ongoing retirement plan? The responsibilities do not end when the business receives its capital.

The company now sponsors a qualified retirement plan that must continue to operate as such. As employees are hired and become eligible, the plan can also become a meaningful employee benefit. Depending on your practice and your role with the plan, you may remain involved by advising on diversified plan assets, helping the employer evaluate investment options for the broader eligible employee population, providing participant investment education and helping the business owner rebuild diversified retirement wealth through future contributions. Certain small employers may also qualify for federal tax credits associated with retirement-plan startup costs and automatic enrollment, subject to applicable eligibility requirements, which advisors can help clients identify for further evaluation with their tax professional. No. 4: What are your long-term plans for the business — including how you may eventually exit? Businesses rarely follow a straight line, and a client’s personal and financial circumstances can change along with them. Asking about long-term plans early on can help you build flexibility into the client’s broader retirement and financial planning strategy. Changes in ownership, personal circumstances, acquisitions, financing decisions and other corporate events may have implications because the retirement plan remains a shareholder. An advisor who understands the ROBS structure can recognize when the plan administrator, CPA, ERISA counsel or

valuation professional should be brought into the conversation. Eventually, planning may shift toward the client’s exit. A business sale, stock redemption or other transaction can raise important questions involving valuation, taxation, diversification and the disposition of plan-held employer securities. The Big Picture: Knowing When to Say Yes — or No ROBS is not appropriate for every entrepreneur. However, advisors who understand the structure well enough to identify when it may fit — and when it may not — can help clients make more informed decisions and bring in the right specialists when needed. That knowledge can support a relationship that extends well beyond the initial funding decision, through business growth, ongoing retirement-plan participation and ultimately exit planning. Understanding ROBS is not simply about understanding the legal framework and mechanics of a funding strategy. It is about understanding how that strategy can support the client’s business goals, broader retirement strategy and longterm financial journey. NNTM Lauren Strobel is Director of Ops & Strategic Relations with Directed Equity. She has more than a decade of experience in the retirement plan industry and specializes in plan compliance, business development, and process improvement at Directed Equity. Since joining the firm in 2017, she has focused on helping entrepreneurs and their advisors navigate the compliance complexities of ROBS structures.

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More Lessons from Top Gun:

STOP

CROSS-SELLING AND START CROSS-SOLVING IN PART 1, WE EXPLORED THE TOM CRUISE MINDSET: ELEVATE THE ENTIRE EXPERIENCE, NOT JUST YOUR PART IN IT. NOW COMES THE HARDER QUESTION: IF TOP-DOWN VISION IS THE DESTINATION, WHAT OPERATIONAL ROADBLOCK STANDS IN THE WAY? BY BRETT SHOFNER

I 60

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In Top Gun, the problem isn’t talent; it’s focus. Maverick breaks formation to chase the kill. It looks bold, even brilliant, yet it violates the mission: protect the team and complete the objective. The consequences are immediate. Risk spikes, trust erodes, and tragedy follows. That same misalignment shows up every day in workplace benefits. Across benefits and financial services, cross-selling is a tiring and predictable focus problem. It’s an obsession with what you want to sell, not what the customer needs. Candidly, sometimes the customer doesn’t know what they need, which makes the advisor’s mission even more critical. Internally, cross-selling signals an organizational push to increase wallet share. Externally, it lands as tone-deaf because employers don’t care how a firm’s products fit together. They care only whether the total solution advances workforce strategy, improves people outcomes, and produces defensible ROI for their organization. Like Maverick chasing the kill, crossselling optimizes the moment, not the mission.

The Trap of Cross-Selling

Cross-selling emerged in an era when advisors were rewarded for adding line items: a voluntary benefit here, a point solution there, another managed account overlay. The result is the fragmented landscape we diagnosed in Part 1—where employers juggle dozens of vendors while employees see a cluttered menu instead of a clear, personalized experience. Bottom-up marketing then tries to rescue adoption by pushing each new feature to employees in isolation, which rarely durably changes culture or engagement. Organizations also underestimate how difficult cross-selling is to execute. Divisional profit-and-loss targets, siloed leadership, and misaligned incentive

structures render “collaboration” elusive. Externally, employer clients do not buy the idea of a “cross-sell” because they want outcomes. When teams lead with “more products” instead of “more proof,” employers see a selfserving sales strategy, not a strategic partnership. Cross-selling also trains advisors to lead with the wrong questions. Instead of “What outcomes are you trying to achieve with your people strategy?”, the conversation starts with “Have you considered adding X?” That product-first posture relegates benefits to the vendor table instead of the strategic level where CEOs, CFOs, and CHROs engage and make decisions.

What Cross-Solving Really Means

Cross-solving reverses this sequence by starting with employer priorities and designing a strategic “benefit stack” before any product pitch shows up. The advisor behaves like the director we described in Part 1— the experience architect — clarifying the story first: What are you trying to fix, protect, and grow in your workforce over the next three to five years? Products then become casting decisions. Still critical, but always in service of the employer’s overall script. Some get starring roles. Some are supporting characters. And some never make the cut, and that is the point. Ironically, cross-selling can work, but only when it rides on the back of crosssolving. When advisors cross-solve, the engagement orbits around a few nonnegotiable conditions instead of a long list of features: A unified value proposition — a clear, client-facing North Star such as measurable benefits ROI Mutual economic lift — both internal teams and the employer win economically from the expansion. Aligned incentives — teams are rewarded for collaboration, not territorial protection. Platform-enabled delivery — through shared systems, not manual heroics. Outcome measurement — success tied to business KPIs like retention, engagement, and optimized claims.

Most current benefit portfolios are built backward… starting with a shiny point solution and then trying to jam it into the rest of the benefit stack. Cross-solving flips that model: define the stack and story first, then select only those vendors that clearly reinforce the architecture and can be operationalized without adding friction to the employee benefit experience.

Once those conditions are explicit, the advisor can architect a stack: retirement, health, protection, timeoff, financial wellness, and workplace experience elements that work together instead of competing for attention. The “sale” becomes the integrated solution and governance model, not the incremental product. Crosssolving is the discipline that creates those conditions—one coherent story, one benefit stack architecture, one measurement lens.

A Simple Benefit Stack Model

A practical way to shift from crossselling to cross-solving is to anchor every conversation in a benefit stack model with four tiers: 1. Foundation: Core health, retirement, and protection programs that must be stable, understandable, and equitable. 2. Differentiators: Programs that make this employer stand out—flexibility, caregiving support, student loan tools, or unique workplace experience investments. 3. Targeted Tools: Point solutions that address specific, high-value risks or populations rather than broad “nice to have” add-ons. 4. Experience Layer: Communication, decision support, and workplace experience design that tie everything into a single narrative employees can navigate and trust. Most current benefit portfolios are built backward… starting with a shiny

point solution and then trying to jam it into the rest of the benefit stack. Crosssolving flips that model: define the stack and story first, then select only those vendors that clearly reinforce the architecture and can be operationalized without adding friction to the employee benefit experience.

Cross-Solving in Action

Consider a 400-person software company facing a C-suite crisis: 22% annual attrition in engineering roles, $2.1 million in replacement costs, and a CFO demanding ROI proof on the $8.8 million benefits spend. A cross-solving advisor would anchor the stack this way: Foundation — Simplify core medical to two high-value options. Auto-enroll the 401(k) at 6% to reduce decision fatigue and increase participation. Differentiators — Add student loan matching (targeting the under-35 engineering demographic) and four-day summer Fridays to increase retention and offer-acceptance rates in recruiting. Targeted Tools — Deploy financial coaching for equity compensation decisions and mental health navigation for high-stress teams. Measure by utilization in priority populations and correlation to retention. Experience Layer — Rebrand total rewards as “Career Fuel” with quarterly statements reflecting and quantifying lifetime employer investment per employee. Measure by engagement survey scores on “feeling valued.”

The Result — Twelve benefit elements instead of 28, each mapped to C-Suite KPIs (retention, cost-per-hire, productivity) and a benefits-ROI story the CFO can defend to the board. Here’s the kicker: the cross-sell opportunities naturally surface as the stack proves value. Voluntary benefits, supplemental coverages, and expanded wellness all become easier conversations because the foundation delivers measurable business outcomes. You don’t have to push products when the architecture pulls them in.

What Comes Next

Cross-solving gives advisors the framework. But frameworks don’t implement themselves. In [Part 3], we’ll explore the operational transformation required; what it means to become a cross-solving advisor, how firms must change internally, and why the power dynamic with vendors is about to shift permanently. Maverick learned to fly for the mission, not the kill. The benefit stack is the mission plan. Now it’s time to talk about who flies the plane. NNTM

This is Part 2 of a three-part series. [Part 1: Tom Cruise, Top Gun, and the Future of Employee Benefits] introduced the case for top-down experience design in workplace benefits. Brett Shofner is co-founder of Hero7 and President of Work Plan Retire. He specializes in integrated employee benefit solutions for midmarket employers.

inside the law | fall 2026

Retirement AI Errors: Whose Fault Is It Anyway? An advisor who understands the difference between using and training an AI model and watches for errors can provide significant value and support. By David Levine, Groom Law Group, Chartered

n a recent NapaNet article, I wrote about how AI-related discussions had shifted to a focus on its practical uses. Now I am seeing the next evolution. We have moved from “what can AI do for my clients and me?” to “who owns the data, who trained on it, and who is responsible when it is wrong?” Before diving in, it is important to keep one basic concept in mind: using AI is not the same as training AI: • Using an AI Model. Using AI is like using Microsoft Excel to do math. You provide information, Excel provides an answer, and, with your privacy settings set properly, nothing you type is kept or reused afterward. • Training an AI Model. Training an AI model (such as OpenAI’s Astra, Google’s Gemini, or Anthropic’s Opus) is different. It means the information you provide is absorbed into the AI model itself and becomes part of what the AI model “knows” going forward. This distinction is key. Data run through a well-configured tool can often be walled off and later deleted — if you are hearing the phrase “zero data retention” (or ZDR), that can be a good

thing. Data used for training, by contrast, can be hard if not impossible to recover once a model has learned from it. With that distinction in mind, let’s turn to the AI questions people are talking about today. First, there are several places where errors can occur: • Errors in Advice. AI can tailor savings nudges and education to a participant’s age, balance, and behavior. But a confident, well-worded answer can still be wrong. A “hallucinated” figure or an outdated assumption can look “right” to a participant even when it is not. Because no system is perfect, understanding how systems are tested for this potential situation can, in some cases, be a valuable step. • Errors in Testing. Compliance and nondiscrimination testing depend on accurate data and AI “understanding” the correct logic. An AI that miscategorizes employees or applies the wrong testing method can generate results that appear “right” but, when reviewed, are wrong. Importantly, because these errors may be buried deep in the calculations, a quick review may miss them.

Errors in Plan Operations. From processing distributions to drafting participant notices, AI increasingly touches day-to-day operations. A misread instruction or an incorrectly generated document can have real impacts on participants, such as a missed deadline to return a form or an incorrect payment. Second, given there will be errors, the next question is who owns the error: •T he AI Does Not Own the Error. Just like with all the automation we have had for decades, a machine making a mistake does not give everyone else a free pass. A fiduciary who relies on an AI-generated result generally remains responsible for that result. •H ow AI Errors Are “Owned.” Determining ownership of errors is where advisors can play an important role. General contract language may cover who “owns” the errors, but it isn’t always the case. If language isn’t clear, clarifying — whether in the advisor’s own contracts or in contracts betweaen third parties and advisors — can be beneficial because, as noted, errors will occur. Third, the training question

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Determining ownership of errors is where advisors can play an important role. General contract language may cover who “owns” the errors, but it isn’t always the case. If language isn’t clear, clarifying — whether in the advisor’s own contracts or in contracts betweaen third parties and advisors — can be beneficial because, as noted, errors will occur. raises another key question: • When Your Data Becomes Training Data. If a party uses your or your client’s information to train its models, confidential planrelated information can be incorporated into an AI model and, in a worst case, the data can “leak” into outputs for other customers.

While each situation is unique, understanding whether and how a service provider is training AI on your or your client’s data can be a beneficial step. Importantly, none of these questions suggests that plans, plan fiduciaries, advisors, and other service providers should avoid AI. The efficiency and

personalization gains are real, and the tools keep improving. But an advisor who understands the difference between using and training a model, watches for where errors occur, and reads the fine print on responsibility can provide significant value and support to clients in their role as a trusted advisor. NNTM

litigation landscape | fall 2026

Benchmarks, Standing, and the Difference a Few Facts Can Make Here’s what you need to know for emerging trends in the most recent quarter of ERISA litigation. By Nevin E. Adams, JD & Bonnie Treichel, JD

he third-quarter litigation landscape offered what might seem to be conflicting lessons. Courts continued to dismiss claims based on hindsight, speculation, weak comparisons and injuries that had not actually occurred. At the same time, other plaintiffs survived dismissal, or revived previously dismissed claims, by supplying more specific facts, better comparators or a different theory of injury. However — and as the courts repeatedly reminded both sides this quarter, the difference between speculation and a plausible claim — and between disappointing results and fiduciary imprudence — is often found in the details, so let’s dive into the details you need to know.

Here’s What You Really Need to Know

• The “meaningful benchmark” remains a powerful defense against investmentunderperformance claims, but courts are increasingly emphasizing that it is not necessarily the only way to establish imprudence. However, the Supreme Court will take on the “meaningful benchmark” issue on October 6, so this might be the most important concept to watch right now.

•P ension risk transfer suits continue to turn on standing, with most courts finding that retirees receiving promised benefits have no concrete injury requiring a remedy, or even a trial. •F orfeiture reallocation challenges continue to be filed, and while most are rejected at the motion to dismiss stage, the challenges show no sign of fading. • Courts remain skeptical of plan provisions that require individualized arbitration when those provisions effectively eliminate the Employee Retirement Income Security Act’s (ERISA) plan-wide remedies. Let’s dive in!

Benchmark ‘Marks’

Perhaps no issue dominated the quarter more than the role of a “meaningful benchmark” in ERISA investment litigation and with the Supreme Court scheduled to hear Anderson v. Intel on October 6, the timing could hardly be better. The quarter began with a reminder of the standard’s practical power. In a suit challenging the Fidelity Stable Value Fund, a federal judge rejected a “cherry-picked assortment of comparators.”1 Merely placing investments in the broad stable value category did not

make them comparable; strategy, assets, risk and potential return all mattered. The case was dismissed with prejudice after the plaintiff had already amended the complaint. The Court of Appeals for the 3rd Circuit supplied an even more fundamental reminder in litigation involving the Quest Diagnostics plan.2 Affirming summary judgment for the fiduciaries, the court began with a refreshingly straightforward observation: “Sometimes, even a good process produces disappointing results.” Quest’s committee hired an outside consultant, met quarterly, reviewed reports, met with investment managers and received annual fiduciary training. Shortterm underperformance did not require immediate removal, and better-performing alternatives did not prove that the selected investments were imprudent. Significantly, the court could describe the process precisely because it had been documented. The victory reflected evidence that the committee reviewed information, sought more when needed, understood its advisor’s recommendations and remained involved. Then came a pair of targetdate fund (TDF) decisions that, at first glance, seem to point in opposite directions. In Scholin v. Digi-Key Corp.,

M.Bangoura / Shutterstock.com

a Minnesota federal judge dismissed a challenge to the American Century TDF series because the complaint did not adequately explain the objectives, strategies or risk profiles of the proposed comparator suites.3 Naming Vanguard, T. Rowe Price, Capital Group and BlackRock TDFs and charting their returns was not enough since, after all, TDFs bearing the same retirement year can have materially different glidepaths, allocations, active/ passive approaches and risk objectives. By contrast, plaintiffs challenging 3M’s custom TDFs got a second chance after an earlier dismissal and made more of it.4 Their amended complaint supplied detailed comparisons

involving asset allocation, Morningstar categories, risk ratios, management strategy and investment structure. The court found several proposed alternatives sufficiently similar to serving as meaningful benchmarks, allowing portions of the case to proceed.5 The Court of Appeals for the 11th Circuit complicated the narrative further.6 In the Royal Caribbean litigation, the district court granted summary judgment because the plaintiff failed to establish that Russell TDFs were objectively imprudent compared with funds having the same strategy and risk profile. The appellate panel reversed, explaining that an ERISA plaintiff does not need an apples-to-

apples comparator in every case. A fiduciary process based on “prayer, astrology or just blind luck” would not become prudent merely because the investment performed acceptably. That does not render benchmarks irrelevant. It recognizes that a benchmark — or more precise comparisons to a relevant benchmark — is circumstantial evidence of a deficient process, not the statutory duty itself. Direct evidence of a flawed process, or other circumstantial evidence supporting that inference, may also establish imprudence.

Pension Risk ‘Transfers’ — Standing Still Matters During the quarter, the

litigation landscape | fall 2026

pension risk transfer (PRT) litigation wave also produced decisions that appear to diverge, though most continue to turn on whether plaintiffs have suffered a concrete, current injury. In these cases, participants generally allege that a plan sponsor transferred pension obligations to an insurer that is less safe than a traditional carrier.7 While permitted under ERISA, the transfer ends the federal insurance protection of the Pension Benefit Guaranty Corporation (PBGC), replacing it with that provided by state insurance regulation and guaranty associations. Yet plaintiffs typically continue receiving every dollar promised, a fact that has proved difficult to overcome. In the ATI litigation, involving approximately $1.5 billion in pension obligations transferred to Athene, concerns about the insurer’s structure, investments and possible future default were deemed “pure speculation,” not an actual or imminent injury.8 Under the Supreme Court’s Thole decision, participants receiving their promised benefits lacked Article III standing.9 A Colorado federal court reached much the same conclusion in the Lumen case, involving roughly $1.4 billion and 22,600 participants.10 Athene had made every required payment, and neither an asserted reduction in value nor the possibility of future default established a present or imminent injury. The case was dismissed without prejudice, allowing plaintiffs to try again. During the quarter, the Department of Labor (DOL) weighed in on the fiduciaries’ side in the Bristol-Myers Squibb appeal, arguing that undertaking a PRT is a settlor decision and that fiduciary duties attach to selecting the annuity provider — not the transfer itself.11 The loss of ERISA and PBGC coverage, it argued, is an intended consequence of a transaction

which ERISA permits, not a separate injury. According to its brief, no annuity selected in a PRT transaction over the past three decades has defaulted. However, Piercy v. AT&T demonstrates that PRT litigation does not always end at the courthouse door. A magistrate judge recommended dismissing AT&T but allowing a claim against State Street Global Advisors (the independent fiduciary that recommended the PRT provider) to proceed.12 The amended complaint supplied comparisons with other annuity providers and alleged that Athene was comparatively riskier. It still did not show that AT&T interfered with State Street’s selection, knew the process was defective, or failed to monitor. Delegation did not eliminate AT&T’s obligations, but plaintiffs needed facts showing a breach. The allegations against State Street were different. Plaintiffs cited its alleged connections with Apollo and Athene, its role in other Athene PRTs and its compensation as an independent fiduciary. The magistrate concluded that those allegations could support an inference of disloyalty or a flawed process. Of course, that recommendation still awaits the district judge’s action, and the plaintiffs still must prove their allegations. Nonetheless, the

decision highlights an important point: hiring an independent fiduciary can be a powerful procedural protection, but the independent fiduciary’s own process, conflicts and documentation remain subject to scrutiny.

CITs, Forfeitures, and a Fee Claim That Survived

This quarter also brought two variations of a familiar “kitchen sink” complaint, combining challenges to the use of forfeitures to offset employer contributions, allegedly excessive recordkeeping fees and the newer claim that selecting collective investment trusts (CITs) was imprudent. In a case involving Centene, the court dismissed allegations that the plan acted imprudently by selecting CITs instead of mutual funds. Describing CITs as “structurally opaque” and speculating about liquidity risk did not establish to the court’s satisfaction that the participant paid more, lost money or faced imminent harm.13 The recordkeeping comparisons were similarly deficient: identifying three other “jumbo” plans without describing their services or other relevant characteristics did not render them meaningful comparators. The court also dismissed the forfeiture claims. Aside from the legality of the option, the plan

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document expressly allowed Centene to use forfeitures either to pay administrative expenses or reduce employer contributions. Although the court acknowledged that choosing between those options could be a fiduciary act, the complaint did not plausibly allege that the choice was imprudent or disloyal. The court ruled that an incidental benefit to the employer did not constitute a reversion of plan assets, particularly where the forfeitures remained in the plan, and contribution obligations owed to participants were satisfied. That said, the plaintiffs were given leave to amend, though that revised complaint met largely the same fate in September. Fiduciary defendants also prevailed in a suit involving Lithia Motors, at least on allegations involving the use of plan forfeitures and a transfer of plan assets to a CIT.14 The court acknowledged that the majority of courts addressing forfeitures have rejected the theory when the governing document authorizes their use to reduce employer contributions.15 This time the forfeiture claims were dismissed without leave to amend because the legal theory — not merely the factual pleading — was deficient. Similarly, allegations that converting mutual-fund TDFs to CITs reduced participant transparency did not explain how the structure impaired the fiduciaries’ own monitoring or caused a loss. “Opacity” may sound ominous, but it is not itself an injury or a fiduciary breach, according to the court.

Multiplier ‘Effects’

That focus on fees and provider compensation also appeared in one of the quarter’s largest developments: a proposed $48 million settlement involving the $4.4 billion ADP TotalSource Retirement Savings Plan.16 The case, filed in 2020, alleged excessive fees, poorly

performing investments, self-dealing and prohibited transactions. With trial approaching after six years of litigation, the parties— plaintiffs again represented by Schlichter Bogard LLC — reached agreement covering roughly 50,000 participants. The defendants admitted no wrongdoing, and a settlement is not an adjudication. Even so, its size and nonmonetary provisions deserve attention. In addition to the substantial cash award, the settlement agreement calls for a full TDF review, consideration of at least three alternatives and restrictions on TDF-provider revenue sharing beginning in 2028. A competitively selected independent fiduciary must also review certain payments from plan assets to ADP. This follows the substantial verdict and settlement involving Pentegra’s multiple employer plan (MEP).17 The facts differ, but the common structure is hard to ignore. When one provider stands at the center of an arrangement serving many employers, compensation can look like part of the product rather than an expense requiring periodic evaluation. Scale can also turn modest perparticipant amounts into very large alleged losses. For pooled and multiple employer arrangements, scale can provide purchasing power, but it can also create litigation magnitude. Someone must own the obligation to identify every form of direct and indirect compensation, assess the services received, benchmark the arrangement and document why it remains reasonable. As pooled employer plans (PEPs) continue to grow and expand, this will bear watching.

Courthouse ‘Doors’ — and Who Gets Pulled Through Them

Finally, several decisions addressed not the substance of

a fiduciary claim, but whether, and at what personal risk, a participant can pursue one. The Court of Appeals for the 9th Circuit refused to enforce Capital Group plan terms requiring individualized arbitration of a participant’s fiduciary-breach claims.18 The plan committee had unilaterally added mandatory arbitration and a waiver of class, collective and representative actions. Although federal law generally favors arbitration, the provision effectively prevented the participant from pursuing the plan-wide relief ERISA expressly authorizes under section 502(a) (2). The court therefore found the provision unenforceable under the “effective vindication” doctrine. The decision adds to the authority rejecting arbitration provisions that eliminate a statutory remedy rather than merely selecting a forum. The circuit split remains, but an individual arbitration clause may not keep plan-wide claims out of court. Meanwhile, a newly filed suit may expand both the range of benefits challenged and the potential fiduciary defendants. In McCalla v. USI Insurance Services, LLC, participants sued their employer, an insurance brokerage and consulting company, over voluntary benefits funded through participant-paid premiums. Unlike most recent VBO suits, this one effectively combines the employer, broker and consultant roles in a single defendant.19 The complaint alleges that USI acted as a fiduciary in selecting and placing voluntary benefit products while also helping determine — and receiving — the commissions and administration fees embedded in participant premiums. Plaintiffs claim USI could influence whether its compensation was a high firstyear “heaped” commission, level commission, flat payment

litigation landscape | fall 2026

or administration fee through its authority over the plan’s insurance arrangements. Those remain allegations, and USI has not yet tested them at the motion-to-dismiss stage. Still, the suit raises not only whether participants may pursue planwide relief, but which providers may be treated as fiduciaries. Receiving commissions or performing services alone does not create fiduciary status. But if a provider exercises discretion over plan management, product selection or its own compensation, plaintiffs will argue that it crossed the line from selling or administering benefits to exercising fiduciary authority. The case also reinforces the emerging focus on voluntary benefits that employers may have viewed as participant-paid and therefore largely outside their fiduciary risk. At the other end of the access-to-court debate, the Court of Appeals for the 4th Circuit upheld a $122,951 attorney-fee award against a participant whose unsuccessful case arose from an attempted market-timing transaction.20 The appellate court largely rejected his benefits and fiduciary claims, though it concluded that the plan’s administrative services agreement was a document under which the plan operated and therefore should have been produced upon request. The participant has requested en banc review of the fee award, arguing that imposing defense fees against unsuccessful benefit claimants’ conflicts with ERISA’s remedial purpose and could deter legitimate claims. The Supreme Court itself recently pointed to fee shifting as one tool courts can use against meritless ERISA litigation. The difficult question is where deterrence ends and chilling access to the courts begins.

Action Items for Plan Sponsors

• Document the Analysis, Not Merely the Decision. Committee calendars and consultant reports are useful, but the Quest decision shows the value of documenting what fiduciaries actually considered, questioned and concluded. •P ressure-Test Investment Comparators. For TDFs, stable value funds and other specialized investments, confirm that benchmarks reflect objectives, glidepath or strategy, risk, asset allocation and structure. A name-brand index or higher-performing peer is not necessarily a meaningful comparator, but one may well exist even for a “custom” fund. •R eview Independent Fiduciary Delegation and Monitoring (including PRT). Document the selection and monitoring of any independent fiduciary, the scope of its authority and the safeguards used to evaluate potential conflicts.

• Align Forfeiture Practice With the Plan Document. Confirm that the plan document expressly permits the plan’s current use of forfeitures and that operations match its terms. Ambiguous language or inconsistent administration creates needless exposure to litigation. • Unbundle the “Package.” Whether the arrangement is a single-employer plan, MEP or PEP, identify and periodically evaluate direct fees, indirect compensation, revenue sharing and proprietaryproduct economics. • Examine Litigation Provisions Carefully. Arbitration may remain available, but provisions that foreclose plan-wide statutory remedies face substantial judicial resistance. Feeshifting provisions and litigation strategies should likewise be evaluated with counsel in light of developing circuit law. NNTM

FOOTNOTES Hensley v. Molson Coors Beverage Co. USA LLC Governance Committee, No. 2:25-cv-01371 (E.D. Wis. June 30, 2026). Johnson v. Quest Diagnostics Inc., No. 24-2866 (3d Cir. 2026). Scholin v. Digi-Key Corporation et al., No. 0:26-cv-01485 (D. Minn. filed Feb. 2026). [4] Batt et al. v. 3M Company et al., No. 0:25-cv-03149 (D. Minn.) [5] Of course, surviving dismissal is not proving imprudence; it means only that the allegations, assumed true at that preliminary stage, permit discovery. Still, the case shows why leave to amend matters: a complaint lacking adequate comparisons may return with the missing details. [6] Johnson v. Russell Investments Trust Co. et al., No. 25-10692 (11th Cir. Aug. 17, 2026). [7] To date, most have targeted Athene, a private-equity-backed insurer. [8] Schoen et al. v. ATI Inc. et al., No. 2:24-cv-01109 (W.D. Pa. July 27, 2026). [9] Thole v. U.S. Bank N.A., 590 U.S. 538 (2020). [10] Dow et al. v. Lumen Technologies Inc. et al., No. 1:24-cv-02434 (D. Colo. Sept. 1, 2026). [11] U.S. Department of Labor, Amicus Brief, Doherty v. Bristol-Myers Squibb Co., No. 26-1021 (2d Cir. filed July 21, 2026), https://www.dol.gov/newsroom/releases/dol/dol20260721. [12] Piercy et al. v. AT&T Inc. et al., Report and Recommendation on Motions to Dismiss Plaintiffs’ Amended Consolidated Class Action Complaint, No. 1:24-cv-10608 (D. Mass. Aug. 31, 2026) (Levenson, Mag. J.). [13] Clark v. Centene Corp., No. 3:25-cv-09743 (N.D. Cal. July 17, 2026). [14] However, Lithia did not win everything. The complaint alleged that direct recordkeeping fees reached approximately $61 per participant in 2024, compared with $3 to $31 for three plans of similar asset and participant size. The court found those allegations sufficiently specific to support prudence and loyalty claims. It also allowed the related prohibited-transaction claim to proceed, rejecting the defendants’ arguments concerning party-in-interest status and the statute of limitations. [15] Berkelhammer et al. v. ADP TotalSource Group, Inc. et al., No. 2:20-cv-05696 (D.N.J. filed May 2020). [16] Khan et al. v. Board of Directors of Pentegra Defined Contribution Plan et al., No. 7:20-cv-07561 (S.D.N.Y. filed 2020).

[1] [2] [3]

han et al. v. Board of Directors of Pentegra Defined Contribution Plan et al., No. 7:20-cv-07561 (S.D.N.Y. filed 2020). K Pover v. The Capital Group Companies, Inc., No. 24-5298 (9th Cir. July 30, 2026). [19] McCalla et al. v. USI Insurance Services, LLC, No. 7:26-cv-07691 (S.D.N.Y. filed Sept. 8, 2026). [20] Kelly v. Altria Client Services LLC, No. 25-2080 (4th Cir. 2026). [17]

[18]

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regulatory radar | fall 2026

Regulatory Radar

Pay to Play

SEC moves to rescind the rule on investment advisors’ political contributions.

he Securities and Exchange Commission recently issued a proposal to rescind its so-called “pay-to-play” rule concerning political contributions made by investment advisers. Under the existing rule, investment advisers are prohibited from providing compensated investment advisory services to a government client for two years after making a political contribution to certain elected officials or candidates. The rule includes a de minimis exception, where individuals are permitted to make aggregate contributions — without triggering the two-year time out — of up to $350 per election to an official or

candidate for whom the individual is entitled to vote, and up to $150 per election for whom the individual is not entitled to vote. The proposal would rescind the rule in its entirety and amend the recordkeeping rule under the Investment Advisers Act to eliminate provisions requiring a registered investment adviser to maintain records in connection with the rule. Specifically, the proposal would rescind Advisers Act Rule 206(4)-5 and amend the Advisers Act recordkeeping rule to eliminate the corresponding provisions related to the political contribution rule. “After more than 15 years of experience administering the ‘pay-to-play’ rule, it is clear that it is overly prescriptive and has produced a host of unintended consequences,” SEC Chairman Paul Atkins said in a

statement. “Beyond operational implementation challenges, it has imposed serious penalties for small, often impulsive donations to candidates in both parties, and routinely punishes and handicaps advisory firms for an employee making a donation even before joining the business.” Atkins further suggested that implementation of the rule by advisers has effectively resulted in the suppression of political speech. “Ultimately, matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations — not by the SEC,” he argued.

Unintended Consequences The SEC contends that, since its adoption in 2010, the rule has led to significant unintended consequences, such

Andrii Yalanskyi / Shutterstock.com

Everyone ALWAYS wants to know what regulators have planned, and retirement plan advisors are no exception. The SEC moves to rescind a rule, a reminder about Trump Accounts, and the GAO revisits participant data privacy recommendations.

71 as prohibitions by some advisers on political contributions at the state and local level. The rule was intended to reduce the possibility that campaign contributions and other support of elected officials and candidates for public office by investment advisers and covered associates would result in fraudulent activity. The Commission noted, however, that advisers have indicated that the rule is operationally challenging to implement, and creates a de facto strict liability standard, which can lead to situations where small donations or “foot faults” potentially trigger substantial prohibitions and fines. In a fact sheet, the SEC explained that investment advisers play a “vital role” in helping governments manage pensions funds for public-sector employees and retirement benefit plan participants. It added, however, that “Public pension plans may be unable to hire the most qualified or cost-effective advisers or may ultimately lose the services of an existing adviser because of contributions by the adviser’s covered associates during the twoyear lookback period.”

To that end, the SEC contends that the existing rule may make government contracts less appealing and disincentivize investment advisers from seeking such contracts. Moreover, the SEC suggests that rescinding the rule would help save firms from extensive compliance costs, including those associated with ongoing monitoring of employee contributions, compliance training, recordkeeping, and related expenses. The proposal estimates that rescinding the rule would result in annual compliance savings of approximately $3,750 per smaller firm, $161,500 per medium firm, and $323,000 per larger firm, resulting in annual cost savings of approximately $416 million. As to the scope of the market, the proposal observes that State and local government retirement funds currently have $9.6 trillion in assets, representing 33% of all U.S. pension assets, while Federal government employee retirement funds have $4.9 trillion, and Staterun qualified tuition plans currently manage $603 billion in assets. In addition, 36 million people (including inactive employees not currently contributing to

pensions but eligible for future benefits) participated in State and local retirement plans as of 2024. “Even modest improvements in net-of-fee returns resulting from increased competition could generate substantial benefits for the 36 million plan participants who depend on these funds,” the proposal suggested. It should be noted that the current SEC consists of only three commissioners representing Republicans, but no members representing Democrats. The Commission usually consists of five members, with no more than three from one party. And while organizations, such as the Investment Company Institute, hailed the proposed rescission, Sen. Elizabeth Warren (D-Mass.) expressed her strong opposition, stating that “President Trump’s SEC just proposed to rescind a 15-year-old rule that prevents elected officials from rewarding wealthy campaign donors with lucrative contracts to advise government investments.” A public comment period will remain open for 60 days after the proposing release is published in the Federal Register. - Ted Godbout

Up and Running

Trump IRA website is now live and providing new details for savers.

ust a reminder that TrumpIRA.gov, the website powering the new Trump IRA savings accounts, is officially live. TrumpIRA.gov is described as a new federal platform “that connects working Americans — independent contractors, parttime workers, small-business employees, and the selfemployed — with high-quality, low-cost Individual Retirement Accounts, plus up to $1,000 per year in federal matching contributions.” Under an Executive Order issued by the president announcing the accounts, Treasury will officially launch TrumpIRA.gov on Jan. 1,

regulatory radar | fall 2026

2027. The website will provide information on IRAs, with a focus on workers without access to an employer-sponsored retirement plan. It also includes a link to sign up for updates. Treasury and IRS anticipate that the website will list financial institutions that offer IRAs, accept Saver’s Match contributions, and satisfy other criteria. They also anticipate that more information for IRA providers that want to be listed on TrumpIRA.gov will be available later this year.

The new TrumpIRA.gov website also includes an example of the power of compounding for those who begin saving at an early age. It notes that a 25-yearold worker who saves about $165 per month and qualifies for a $1,000 annual Saver’s Match could retire with roughly $465,000 at age 65. That’s based on a steady 6% rate of return — and nearly $155,000 of the final balance comes directly from the federal match. “The earlier you start, the more compounding works for you. TrumpIRA.gov makes starting simple,” the website emphasizes.

In addition, Treasury and IRS announced in early August that they will propose regulations on the Saver’s Match and begin implementing the Executive Order. Issued in Notice 2026-48, the 41-page advisory addressed certain questions related to Saver’s Match contributions under Section 6433 of the Internal Revenue Code (IRC) that the agencies intend to address in their proposed regulations. The specific Q&A sections addressed include eligibility and calculation of Saver’s Match contributions; claiming and payment of contributions; reporting requirements; treatment of contributions for determining an applicable retirement savings vehicle’s tax status; and improper contributions, among others. With the Saver’s Match program set to begin in 2027, the notice also includes a request for comments on contributions, including whether the methods for claiming and paying contributions under consideration should be simplified or revised to ease implementation. Under IRC Section 6433, the Saver’s Match will provide certain low- and moderateincome taxpayers with a maximum 50% match on the first $2,000 of qualified retirement savings contributions made to an employer-sponsored retirement plan or IRA, up to $1,000 annually. The matching contribution will be paid by Treasury (or the Secretary’s delegate) to applicable retirement savings vehicles for eligible taxpayers starting in 2028, based on contributions made for the 2027 tax year. The program, enacted as part of the SECURE 2.0 Act, replaces the Saver’s Credit with respect to retirement savings contributions. - Ted Godbout

Participant Privacy GAO revisits participant data privacy recommendations.

n a recent “WatchBlog” post, the Government Accountability Office has revisited recommendations from a report issued earlier this year that the Secretary of Labor should provide additional guidance concerning participant data privacy for retirement plan sponsors and service providers. The blog post by Kris Nguyen, Director of Education, Workforce and Income Security at GAO, explains that the Department of Labor (DOL) issued cybersecurity guidance in 2021 on retirement plans’ use of participant data, but didn’t specify what participant information should be considered private. She did note that the 2021 guidance says that plan sponsors should “clearly address” service providers’ obligation to keep

“Such guidance could also identify best practices including for providing individual participants with choice, to the extent practicable, about how their personal information may be used, sold, or shared,” it added. The report further contended that plan sponsors and recordkeepers want DOL to create industry data privacy standards, “… given the lack of comprehensive national data privacy legislation, differing state requirements, and concerns about lawsuits.” GAO noted that DOL “neither agreed nor disagreed” with the recommendations, but added that the agency “will carefully consider, as resources permit, whether supplemental guidance aligned with the recommendation could or should be issued.”

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What GAO Found

private information private, and that plan sponsors should prevent the use or disclosure of information without written permission, but added that it did not provide information about when service providers should get written permission. Consequently, Nguyen pointed to the report — which was publicly released in March — recommending that the DOL should clarify what participant information should be considered private and the circumstances in which service providers should obtain written permission before using or sharing this information. “We believe more specific guidance is warranted to help ensure service providers have sufficient clarity on how to appropriately use and share participant data,” GAO noted in “Retirement Plans: Department of Labor Guidance Could Mitigate Privacy Risks for Participants.”

The GAO began looking at this in 2024, following a request from Democratic members of the Senate Health, Education, Labor and Pensions Committee, and the House Education and Workforce Committee. Among other things, the agency examined how selected retirement plans use and share participant data; how selected service provider policies incorporate leading privacy practices; and how federal agencies and selected states protect consumer data privacy as it applies to retirement plans. In reviewing privacy disclosures for 31 service providers to determine who has access to it and why, GAO found that 29 service providers did not limit their ability to share participant data for marketing, noting that they either explicitly allowed data sharing or did not specify whether they would share participant data for this purpose. Additionally, more than half of service providers did not limit their ability to sell participant data to data brokers or other

third parties, while only two providers explicitly indicated that they do not allow sharing data. “We also found that while some plan participants can opt out of having their information shared for marketing, others cannot. For example, just 12 of the 31 service providers we looked at had privacy disclosures allowing for opt out,” Nguyen noted. In the earlier report, the GAO warned that, as more entities gain access to participant data, “the chance that their information may be inadvertently exposed increases, putting participants at greater risk of identity theft or other fraudulent activity.” However, the service providers that GAO interviewed noted that greater use and sharing of participant information helped them to more effectively target products and services that might benefit participants. Meanwhile, Nguyen’s blog post and the report itself noted that Federal agencies and states have taken some steps to protect consumer data privacy but suggested that the DOL has not taken actions against retirement plans for sharing participant data. Nguyen added that, while ERISA governs most employersponsored retirement plans and sets protections for participants and responsibilities for plan sponsors and service providers, the statute doesn’t include explicit provisions addressing data privacy in this digital age. Additionally, the blog post and report noted that questions remain about whether state privacy laws apply to retirement plans, as ERISA generally supersedes state law. In the report’s findings, GAO noted that DOL officials said the agency believes that ERISA’s duties of prudence and loyalty “should sufficiently deter plan sponsors and service providers from unauthorized uses of participant data.” - Ted Godbout

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washington watch | fall 2026

Building SECURE 3.0’s Foundation, No Matter Who Wins in November Why ARA has spent 2026 pairing Republicans and Democrats on every major retirement bill. By Josh Oppenheimer

s I write this, both political parties are deep into the final sprint toward the November 3 midterm elections, and Washington is doing what Washington does best in an election year: holding its breath. Committee calendars are lighter, leadership is more cautious, and nearly every vote is viewed through the midterm lens. The stakes for control of Congress are real. Republicans currently hold the House by a narrow 218-213 margin, and the Senate 53-47, but neither majority is safe. Political pundits

rate roughly a quarter of House seats as genuinely competitive, and most forecasting models now show Democrats favored to retake the House. At the same time, the Senate remains close enough that either party could end up in control. Whatever happens on Election Day, the Congress that returns in January will look at least somewhat different from the one in place today: new committee chairs, a different freshman class, and possibly a change in which party holds the gavel in one or both chambers. For an industry that has spent the better part of two years building

toward the next comprehensive retirement package – what we have taken to calling SECURE 3.0 – that kind of uncertainty could easily be cause for concern. Instead, your ARA Government Affairs team has treated it as a planning problem with a clear answer: make sure that as many of our priority bills as possible already have real, working bipartisan, bicameral support before a single vote is cast in November.

A Deliberate Blueprint, Not an Accident

Look closely at the retirement bills ARA has helped shepherd

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79 onto Capitol Hill this year, and a pattern emerges. None of them have a lead sponsor from only one party, and almost none exist in only one chamber. The Retirement Investment in Small Employers (RISE) Act, which would expand the small-employer startup tax credit and allow the service provider to claim the credit on behalf of the employer, was reintroduced in May with House leads spanning both parties and both coasts – Claudia Tenney (R-N.Y.), Brad Schneider (D-Ill.), Linda Sánchez (D-Calif.), and Adrian Smith (R-Neb.) – alongside Senate leads Maggie Hassan (D-N.H.) and Ted Budd (R-N.C.). The Charity Parity Act, which would let savers make qualified charitable distributions directly from 401(k)s and 403(b)s the way they already can from IRAs, carries House leads Mike Kelly (R-Pa.) and Don Beyer (D-Va.), with a fourmember Senate team split evenly between the parties. The Small Nonprofit Retirement Security Act, extending startup and auto-enrollment credits to tax-exempt employers, pairs Vern Buchanan (R-Fla.) and Jimmy Panetta (D-Calif.) in the House with Catherine Cortez Masto (D-Nev.) and James Lankford (R-Okla.) in the Senate. The Retirement Rollover Flexibility Act, permitting Roth IRA assets to roll into workplace plans, has already cleared its second introduction with Darin LaHood (R-Ill.) and Linda Sánchez (D-Calif.) in the House and John Barrasso (R-Wyo.) and Michael Bennet (D-Colo.) in the Senate. And the Form 5500 Filing Simplification Act – a more technical fix that nonetheless matters enormously to plan sponsors – cleared the House Education and the Workforce Committee in May on a bipartisan vote led by Glenn Grothman (R-Wis.) and Donald Norcross (D-N.J.). It has subsequently been introduced in the Senate by Jim Banks (R-Ind.) and Cory Booker (D-N.J.). None of that is accidental. It reflects ARA’s conscious choice to insist on bipartisan, bicameral partnership as the price of admission for a bill to be a top

priority. It is slower, and it means some good ideas move at a more deliberate pace than they otherwise might. But it also means that regardless of which party chairs Ways and Means, Education and the Workforce, Finance, or HELP next year, the building blocks for SECURE 3.0 will already have supporters on both sides of the aisle.

Insurance Against a Change in Control

Think of it as an insurance policy. If Republicans hold both chambers, these bills already have Republican leads ready to press forward. If Democrats retake the House, the Senate, or both, the same bills already have Democratic leads with equal ownership and equal incentive to keep moving them. Either way, nobody has to start from scratch rebuilding a coalition in a new Congress, and nobody can credibly dismiss these ideas as belonging to the other party. That matters because both prior comprehensive retirement packages – the original SECURE Act in 2019 and SECURE 2.0 in 2022 – took years of quiet, stafflevel relationship building before they came together into single bills. We don’t have the luxury of waiting to start that process until we know who has the gavel. Some of our sponsors will not be back next year regardless of the election outcome – Rep. Buchanan, for example, is retiring – which is exactly why we are already working to add Rep. Blake Moore (R-Utah) as a future lead on the Small Nonprofit Retirement Security Act. Succession planning is part of the job now, not an afterthought. It is also worth being candid about what a change in control would and would not mean for retirement policy specifically. A Democratic House would likely put the Ways and Means gavel in the hands of Richard Neal (D-Mass.), a longtime retirement champion who helped author both the original SECURE Act and SECURE 2.0 – a frankly favorable development for this agenda, and a reminder of how much continuity exists on these issues regardless of which party is in charge.

Even so, it would not change the underlying math: any retirement package still needs 60 votes in the Senate and a signature from a Republican president, which means it still has to be truly bipartisan to move at all. A Republican Congress, for its part, would still need Democratic votes in the Senate for the same reason. In an unusually polarized Washington, retirement policy remains one of the few areas where that math consistently works in both directions – which is precisely why it is worth the extra effort to build it that way from the start.

What Plan Sponsors and Advisors Should Watch For

Expect the pace of new bill introductions to slow through the fall as Members of Congress focus on their campaigns, then pick up quickly after November 3, regardless of outcome. The lameduck session and the opening months of the new Congress will be an important window – not necessarily for passing SECURE 3.0 itself, but for reintroducing and building cosponsor lists on the bills described above, so they are positioned to be rolled into a larger package when the opportunity arises. For plan sponsors and advisors, the message is the same one we have carried through each edition of Washington Watch this year: engagement matters more, not less, in a Congress that could look meaningfully different come January. Members who hear directly from the professionals who help their constituents save for retirement are more likely to sign on as cosponsors and more likely to keep these bills moving after the election, whichever party they represent. We built this year’s advocacy strategy on the assumption that we would not know the outcome of the midterms until it was too late to react to it. That is exactly why the strategy does not depend on knowing it. ARA will keep working both sides of the aisle and both chambers so that whenever the window for SECURE 3.0 opens, the groundwork is already in place. NNTM

P L AY I T B O L D .

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