We think that the lack of knowledge around annuities as well as the continuing issue of employees who do not have sufficient 401(k) savings for retirement, will continue to drive interest in pensions as a trend in 2025.
2024 was full of dramatic moments. Given that, it might be easy to have missed some of the key details and trends in the less dramatic world of employee benefit plans. We thought a review of trends and regulations could be helpful for those whose attention may have been drawn to elsewhere. And for others, a review of the year also can serve as a chance to think of how those developments and trends might play out in 2025.
As to regulatory agencies, including the SEC and FINRA, we noticed a continued move towards greater transparency in their enforcement process, a positive trend for plan sponsors, especially given increasing litigation in the private sector. We noted, however, that some agencies had a, let’s say, less than successful time in advocating their agendas. That includes a rare moment of bipartisanship in moving against the SEC’s position on booking cryptocurrency as a liability (not an asset). [1]
Additionally, we also noted that the Supreme Court’s decisions in a handful of cases, including Jarksey and Loper Bright, may have curtailed the discretionary abilities of agencies to both make regulations and enforcement. In Loper Bright, the Supreme Court overturned forty years of precent allowing regulators to create rules in the absence of clear direction from Congress. While the result of the case did not change any existing rules, it may mean a slow down in new regulations, at least in 2025. The Court in Jarksey also disallowed agencies, such as the SEC, to prosecute private actions (things like fraud) in its internal courts. Instead of using administrative law judges, the Court requires agencies to bring such cases in federal courts. That potentially could further increase transparency in enforcement actions.[2]
Early in the year, we discussed the resolution of the Hughes case, involving recordkeeping fees and class actions. While the Supreme Court heard certain aspects around whether plan participants could sue for various recordkeeping allegations (and the requirements for showing those allegations) in 2022, the actual determination of the case didn’t arrive until this year. We had thought that further guidance on this kind of litigation might come from the court in 2024, but it was mostly silent. In fact, the Court even side-stepped a ruling on the requirements for pleading fraud in risk statements in the Facebook case. [3]
While no further information may have come from the Hughes case, recordkeeping cases did stay on the radar. That includes the case against Humana that would have covered 48,000 plan participants, among the larger class action cases on benefits of late.[4]
Another regulatory change we kept an eye on this year concerned small accounts and cash out rules stemming from the SECURE Act 2.0’s section 304 (concerning increasing the small account cash out limit) and section 348 (addressing defined benefits with cash balances). We discussed IRS guidance for sponsors on the first issue. And we thought that guidance could show a trend towards allowing some aspect of flexibility to plan sponsors in their application of new regulations.[5]
We also caught a potential change in the enforcement priorities for the Department of Labor’s EBSA, its enforcement wing. It seemed to us that the EBSA could be said to be focusing on the amount rather than volume of cases. In other words, EBSA is choosing to prosecute larger enforcement actions over more enforcement actions: going high instead of going wide. We thought that the change could be due to the new leadership of EBSA that occurred with the appointment of Lisa Gomez in late 2022. At this time, it seems that former and President-elect Trump has opted to nominate Representative Lori Chavez-DeRemer of Oregon to lead the Department of Labor. While the director of the EBSA is an appointment requiring the advice and consent of the Senate, it is often a nomination that is made later in the process. We will watch this nomination closely.
As to trends, this year we caught a kick up in the mentions of pensions during 2024. This included experts and opinion writers, such as those at the Wall Street Journal, as well as in surveys.[6] “[A] new report by the National Institute on Retirement Security (NIRS) highlights that rise in interest. Their report makes recommendations for private, non-union based, pension plans. Given an interest by public pensions such as CalPERS in how they manage assets to hedge risks, the NIRS recommendations indicate a change towards positively viewing pensions.”[7] We think that the lack of knowledge around annuities as well as the continuing issue of employees who do not have sufficient 401(k) savings for retirement, will continue to drive interest in pensions as a trend in 2025.
Another trend includes an interest in employees around high interest savings accounts. As we discussed, emergency accounts are quickly rising to the top of employees’ interests. Yet, that might be without a full awareness of their pros and cons.[8] Its also worth noting that the popularity of offering student loan payments as a benefit dried up in 2024. Surveys showed that two thirds of sponsors planned not to implement those benefits.[9]
Lastly, we covered a trend among younger generations to want to step away from work for an extended leave. Some have dubbed this the microretirement trend. For employers who have a workforce that allows for extended leave, there are strong incentives to consider it. However, from a benefits standpoint there are sticky issues around equity, premiums, and vesting.[10]
[1] https://www.bcgbenefits.com/blog/enforcement-actions-and-litigation-sec
[2] https://www.bcgbenefits.com/blog/penalties-without-a-jury
[3] https://www.bcgbenefits.com/blog/keeping-records-on-your-recordkeeping-fees
[4] https://www.bcgbenefits.com/blog/recordkeeping-suits-dismissed
[5] https://www.bcgbenefits.com/blog/common-cash-concerns-guidance-secure
[6] https://www.bcgbenefits.com/blog/pension-popularity
[7] https://www.bcgbenefits.com/blog/penchant-for-pensions
[8] https://www.bcgbenefits.com/blog/employee-savings-plans
[9] https://www.bcgbenefits.com/blog/the-state-of-student-loans
[10] https://www.bcgbenefits.com/blog/microretirements-trend
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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