Fiduciary Hot Topics | Q1 2025

We want to ensure that you as a retirement plan advisor are on top of what's new and upcoming in the retirement planning space, which is why we have our quarterly Fiduciary Hot Topics. Your plan sponsors may bring these topics up with you, but on this page, you will learn how to position these discussions with them and be prepared. This quarter's edition is straight out of the RPAG oven and features the IRS's 2025 Plan Limit increases, student loan matching guidance, disaster relief notices, changes to plan overpayments, as well as a couple of DOL updates.

IRS Increases Some IRA and Plan Limits for 2025

On November 1, 2024, IRS Notice (2024-80) includes the 2025 cost-of-living adjustments (COLAs) for IRA and retirement plan related dollar limits. Key numbers are shown in the tables in this document. For additional information see IRS News Release IR-2024-285.

IRS Notice 2024-63 Gives Guidance on Student Loan Matching Contributions

On August 19, 2024, the IRS released Notice 2024-63, providing guidance under SECURE Act 2.0 on an employee’s Qualified Student Loan Payment (QSLP) matching contributions in 401(k), 403(b), governmental 457(b) and savings incentive match plans for employees (SIMPLE) IRA plans.

The notice applies for plan years beginning after December 31, 2024. For plan years beginning prior to January 1, 2025, plan sponsors may rely on a good faith, reasonable interpretation of Section 110 of SECURE Act 2.0. Further guidance in the form of regulations and a model amendment is expected.

DOL Clarifies Application of 2021 Cybersecurity Guidance

On September 6, 2024, the DOL issued the EBSA’s Compliance Assistance Release No. 2024-01, clarifying that the cybersecurity guidance it issued in April 2021 applies to all employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), including both employee pension benefit plans, (e.g., tax-qualified defined contribution and defined benefit retirement plans), and health and welfare plans. Consequently, employers, plan sponsors, fiduciaries and plan participants of employee pension benefit plans and health and welfare plans should follow the guidance and maintain strong cybersecurity practices.

DOL Celebrates ERISA’s 50th Anniversary with a New Webpage

It was Labor Day 1974 when then-President Gerald Ford signed the Employee Retirement Income Security Act (ERISA) into law to help protect the health, retirement and other benefits of U.S. workers. In honor of ERISA’s 50th anniversary, the Department of Labor, the federal agency charged with enforcing ERISA, launched a website focused on the accomplishments of ERISA through the years.

IRS Issues Numerous Disaster Relief Notices in Wake of Devastating Events

Taxpayers and plan sponsors need to be aware of the many disaster relief news releases issued by the IRS in the past weeks and months. These releases often provide individuals and business owners more time to file tax returns, make tax payments and complete required reporting such as filing the various versions of IRS Form 5500, Annual Return/Report of Employee Benefits Plan. A cumulative list of these disaster relief notices can be found here: Tax Relief in Disaster Situations.

IRS Provides 403(b) Plan Sponsors with Guidance on Long-Term, Part-Time Employee Rules

IRS Notice 2024-73 provides guidance for ERISA-covered 403(b) plans related to the long-term, part-time (LTPT) coverage rules introduced by SECURE Act 1.0 and updated by SECURE Act 2.0. An ERISA 403(b) plan is one where the employer provides contributions or in some other manner controls the plan. Non-ERISA 403(b) plans as well as governmental and nonelecting church plans are not subject to the LTPT rules.

IRS PLR Allows Contribution Choice Among 401(k) and Other Benefit Arrangements

On August 23, 2024, IRS released a private letter ruling (PLR202434006)12 found no fault with an arrangement under which a sponsor allows employees to choose to have an employer contribution allocated among four employee benefit accounts it offers:  

• A 401(k) plan, a health reimbursement arrangement (HRA),
• A health savings account (HSA), and an
• Educational assistance program (ESA, that, among other things, permits student loan repayments).

A PLR may be relied on only by the taxpayer who requested it and cannot be cited as authority or precedent by another taxpayer. Nevertheless, a PLR may provide insight into the IRS’s thinking on a particular issue

IRS Notice 2024-77 Addresses SECURE 2.0 Changes to Plan Overpayments

On October 15, 2024, the IRS published Notice 2024-77, providing guidance with respect to SECURE Act 2.0 changes to the treatment of “Inadvertent Benefit Overpayments.” The guidance in the notice applies with respect to overpayments and rollovers (regardless of the date of overpayment), on the date of issue. For overpayments/rollovers prior to that date sponsors/participants may “rely on a good faith, reasonable interpretation” of the statute.

Plan Sponsors Win Two More Forfeiture Decisions 

Plaintiffs have filed several cases in the past months claiming the use of 401(k) plan forfeitures to reduce employer contributions, rather than to reduce participant-paid plan expenses, violates the ERISA fiduciary duty to act solely in the best interests of the plan participants.

Except for Naylor (in which the court found that the plan document mandated the plan use forfeitures to reduce employer contributions), all of these cases involve plan documents that give the plan sponsor/sponsor fiduciaries discretion to use forfeitures either to reduce employer contributions or to pay plan expenses. Bottom line: The courts are divided on what rule should apply in that circumstance.

Legislative Update

Many provisions of the 2017 “Tax Cuts and Jobs Act” (TCJA) are set to expire in 2026, generating a tax increase for many individual taxpayers. The Joint Committee on Taxation estimates that extending current individual tax rules for another 10 years (the “budget window”) would increase “primary deficits” by $3.3 Trillion. 

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