Spotlight on Benefits

Second Circuit Adopts “Meaningful Benchmark” Pleading Standard in ERISA Cases

In Singh v. Deloitte LLP, et al., No. 23-1108, 2024 WL 5049345 (2d Cir. Dec. 10, 2024), the Second Circuit Court of Appeals upheld a district court’s dismissal of a complaint alleging that plan fiduciaries caused an ERISA-governed 401(k) plan to pay excessive recordkeeping fees. This article discusses the Singh case and its impact on excessive-fee claims.

As more and more employers face lawsuits alleging that their 401(k) plans paid excessive recordkeeping and administrative fees, courts continue to grapple with the standard required for plaintiffs to plead plausible claims that survive motions to dismiss. The Second Circuit is the most recent Court of Appeals to adopt the “meaningful benchmark” pleading standard for claims alleging excessive recordkeeping or administrative fees, and it is among the most stringent pleading standards yet.

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DOL Lost & Found Database for Retirement Savings Goes Live

If you have ever found $10 in the pocket of a coat that you have not worn for some time, you are familiar with the delight of finding lost money that belongs to you. The Department of Labor’s new Retirement Savings Lost & Found Database (Database) seeks to recreate that feeling in the employee benefits realm by reuniting missing participants and beneficiaries with benefits they may have accrued under job-based retirement plans.

The importance of locating missing participants

Taking steps to find participants and beneficiaries who may be owed a benefit is important to companies that sponsor retirement plans for several reasons.

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PBGC Issues Technical Update on Accelerated Due Date for 2025 Premium Filings

The Pension Benefit Guaranty Corporation (PBGC) has issued its first technical update of the year to provide guidance on the accelerated premium filing date for plan years that begin in 2025.

As required by a provision in the Bipartisan Budget Act of 2015, for plan years that begin in 2025, the PBGC premium filing due date for all plans is the 15^th day of the 9^th calendar month that begins on or after the first day of the plan year. This is a change from the normal due date under the PBGC regulations, which is the 15^th day of the 10^th calendar month that begins on or after the first day of the plan year. The provision also supersedes the special due dates that typically apply for certain new plans and plans that complete a standard termination before the normal premium due date.

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ERISA Moments Ep. 28: The 2024 Election and What it Means for Retirement Policy

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, The 2024 Election and What it Means for Retirement Policy, below.

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IRS Issues 83(b) Election Form

Internal Revenue Code Section 83(b) elections can now be made on a standard IRS Form 15620. Previously, 83(b) elections were made on self-drafted forms. Individuals making an 83(b) election can still submit a self-drafted form, if desired.

Background on 83(b) Elections

An 83(b) election is typically made at the time a taxpayer receives a grant of unvested property, like restricted stock or profits interests. Under Code Section 83(a), property is taxed when vested and no longer subject to a substantial risk of forfeiture. Code Section 83(b) allows a taxpayer to accelerate the timing of the income tax inclusion to be as of the date of grant (prior to the property right vesting and becoming nonforfeitable). Taxpayers will make an 83(b) election in the hopes that the property’s value is lower as of the grant date than the vesting date, and to ease the administrative burden of determining the value of property at various vesting dates.

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Correcting Automatic Enrollment Errors

The SECURE 2.0 Act made it easier for retirement plan sponsors to correct automatic enrollment errors. As a policy matter, Congress strongly supports automatic enrollment provisions in retirement plans, and making it easier to correct errors should (hopefully) encourage retirement plan sponsors to add such features to their plans. This post focuses on the automatic enrollment correction provisions of the SECURE 2.0 Act. (For an overview of the SECURE 2.0 Act for defined contribution plan sponsors, click here.)

Correcting Automatic Enrollment Errors

Section 350 of the SECURE 2.0 Act codified a safe harbor correction for automatic enrollment errors into the Internal Revenue Code. Prior to the SECURE 2.0 Act, automatic enrollment errors were eligible for correction under EPCRS (Employee Plans Compliance Resolution System) but were often subject to a sunset provision by the IRS (although that sunset provision had been extended previously).

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ERISA Moments Ep. 27: The SEC Staff Speaks Out on Standards for Rollover Recommendations

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, The SEC Staff Speaks Out on Standards for Rollover Recommendations, below.

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IRS Announces 2025 Retirement Plan Limits

The Internal Revenue Service (IRS) recently announced the 2025 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2025. The following limits apply to retirement plans in 2025:

The limit on elective deferrals under 401(k), 403(b) and eligible 457(b) plans increased to $23,500.
The limit on catch-up contributions by participants aged 50 or older did not change and remains at $7,500. This means that the maximum amount of elective deferral contributions for those participants in 2025 is $31,000.
The enhanced catch-up contribution limit for those ages 60-63 in 2025 is $11,250. This means that the maximum amount of elective deferral contributions for these participants in 2025 is $34,750.
The Internal Revenue Code (Code) Section 415 annual addition limit is increased to $70,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $280,000 for defined benefit plans.
The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $350,000.
The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) increased to $160,000 (which, under the look-back rule, applies to HCE determinations in 2026 based on compensation paid in 2025).
The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $230,000.

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Trends in Optional Features Available Under Secure Act 2.0

During our October 30, 2024 webinar, “It’s 2024 and … It’s Decision Time in the Retirement Plan World!” we polled our audience on their interest in adding optional features available under Secure Act 2.0 (discussed in our prior blog post). The results are in!

Based on the responses to our polls:

There is very little interest in adding Pension-Linked Emergency Savings Accounts with 60 percent of respondents selecting “Strong No” and an additional 13 percent responding “Lean No,” for a total negative response rate of 73 percent.
Similarly, a strong response against adding Emergency Personal Expense Distribution with a collective 65 percent of respondents selecting “Strong No” or “Lean No.”
Student Loan Matching Contributions were not given a passing grade with a collective 56 percent of respondents selecting “Strong No” or “Lean No.”
In contract, there was more interest in adding Qualified Birth or Adoption Distribution (a collective 40 percent “Strong Yes” or “Lean Yes”) and Domestic Abuse Victim Distribution (a collective 39 percent “Strong Yes” or “Lean Yes”).
The Disaster Recovery Distribution was in the middle, with 43 percent responding “Maybe,” 29 percent not interested in adding these to their plan and 15 percent planning to add this option to their plan.

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Retirement Philosophy

As qualified retirement plan sponsors evaluate the various new distribution options available under SECURE 2.0 (read our overview here), it is worth asking: What is your company’s retirement philosophy? The answer to this question will help guide plan sponsors (including, where applicable, the benefits committee) in determining what changes, if any, they’d like to make to their plans.

As we’ve been advising and discussing the new SECURE 2.0 distribution options with our clients, there are three different philosophies we’ve seen:

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