2025 Retirement Plan Challenges and Opportunities
This is Eric Wietsma, President and CEO of Pentegra. Starting with this post, I’ll be writing a monthly blog that explores retirement plan trends, legislative and regulatory developments, and challenges and opportunities for plan sponsors and advisors.
As we move into 2025 and experience a new White House administration, this may be a good time to make a few observations about some of the challenges that retirement plan sponsors face. As with most challenges, we expect that significant opportunities will also present themselves. As always, Pentegra will monitor and analyze these developments to help employers achieve the best possible retirement plan outcomes.
Retirement Rules Are Constantly Evolving
Having recently celebrated the fiftieth anniversary of ERISA’s enactment, you may continue to see articles that recount the many changes to the retirement plan landscape over the years. Although there has undoubtedly been monumental change in the last 50 years, let’s focus on a couple of changes that have happened in just the past several years.
The SECURE 1.0 and 2.0 Acts
Following quickly on the heels of the SECURE Act of 2019 came the SECURE 2.0 Act of 2022. Combined, these two bills introduced over 100 retirement plan provisions. Analyzing and implementing these new rules has taken considerable effort from plan sponsors, service providers, and even participants.
Certain provisions have also generated considerable buzz and/or have created practical obstacles. Here is a small sample:
- Plan sponsors can allow participants to elect to have employer contributions made to Roth accounts.
- Plans established on or after December 29, 2022, must generally contain an automatic enrollment feature.
- Access to multiple employer plans (MEPs) and pooled employer plans (PEPs) has increased.
- More exceptions to the 10% early distribution penalty are now available.
- Long-term, part-time employees must be allowed to make elective deferrals.
Plan Sponsors Are Flooded with Choices—And Mandates
Congress’s constant tinkering with retirement plan rules is well intentioned. Sure, certain provisions are designed primarily to raise additional revenue, but most of the new provisions in the SECURE Acts have at least some positive impact on retirement savers.
Part of the issue may be that all these changes have created many choices for plan sponsors—and it’s not just the wealth of options; it’s implementing the options that creates challenges. For example, even if plan sponsors would like to offer the Roth option for employer contributions to their participants, the lack of initial guidance from the IRS resulted in a relatively slow rollout by plan sponsors and service providers.
Add to the mix of options another burden: some provisions are required by the SECURE Acts. For instance, we recently received proposed regulations from the IRS on the mandatory SECURE 2.0 Act provision that requires participants over a certain earnings threshold to make any catch-up contributions as designated Roth contributions. Originally set to be effective for 2024 plan years, the IRS delayed implementing this provision until 2026, based on pleas from the many parties affected by this new rule. Given that we just received proposed regulation, we will likely see new concerns raised during the comment period—and the IRS response to these concerns will likely affect plan operations.
Pentegra Can Help Manage These Challenges
All that most employers want to do is to create and grow their businesses without undue complication or burden. They want to provide good benefits to their workforce. One of the ways Pentegra helps plan sponsors is by providing retirement plan fiduciary services. The services are designed to ensure plan compliance in light of continually changing retirement plan rules. Our team helps clients and advisors analyze guidance and communicate complex concepts understandably. By providing clients with a higher level of oversight, we’re able to reduce workloads, lessen retirement plan burdens and responsibilities to help clients focus on their business priorities.
In general, retirement plan legislation could be simpler, and as a fiduciary, we will continue to advocate for rules that benefit businesses and plan participants—in the meantime, we will continue working with plan sponsors to lessen their plan complexity and to increase compliance, helping them do what they really want to do: run their businesses.