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Quick Takes

  • SECURE 2.0 requirements continue to take effect. Roth catch-up mandates now live for high earners.
  • Regulators remain focused on missing participants, forfeiture practices, and documented fiduciary processes.
  • Participant confidence remains high, but data shows gaps in preparedness—impacting workforce planning and retirement timing.

Fiduciary Support Spotlight: Reducing Risk Through Outsourcing

Many sponsors reduce fiduciary burden by outsourcing select responsibilities through ERISA 3(21), 3(38),
or 3(16) arrangements, or by exploring pooled employer plans (PEPs).

Align Supports You By:

  • Helping evaluate fiduciary support options
  • Clarifying roles and responsibilities
  • Supporting prudent selection and ongoing monitoring

Participant Trends:

While many participants feel confident about retirement, data shows gaps in savings behavior, financial
literacy, and investment decision-making. More employees are delaying retirement—creating workforce
and cost implications for sponsors.

Opportunities for Sponsors:

  • Reinforce financial education and plan fundamentals
  • Leverage plan features such as automatic enrollment and escalation
  • Monitor retirement timing trends and participant behavior

REGULATORY UPDATE

Action Required | Roth Required Catch-Up Contributions

Sponsors must be able to identify impacted participants (W2 earnings of $150,000 or more in 2025) and ensure
correct payroll and recordkeeper coding for 2026.

Take Action | Align Can Help:

  • Identify impacted participants and coordinate with payroll and recordkeeper partners
  • Communicate the new rules to affected employees
  • Confirm correction procedures for catch-up contribution errors
  • Support required plan amendments by December 31, 2026

Action Required: Missing Participants

DOL guidance continues to emphasize record maintenance, periodic outreach, and documented search procedures
when participants cannot be located.

Take Action | Align Can Help:

  • Promote regular updates to participant contact and beneficiary information
  • Establish and document a consistent search process
  • Maintain records of outreach efforts and outcomes

LITIGATION UPDATE

ERISA litigation continues to expand beyond fees and investments, with increasing focus on fiduciary
process, documentation, and oversight. Recent cases highlight growing exposure in three areas: forfeiture
reallocation practices, cybersecurity and participant data use, and missing participant procedures.
Forfeiture Reallocation Practices
Courts are scrutinizing not only whether forfeiture use is permitted under plan documents, but how
fiduciaries decide to use forfeited assets. Claims alleged sponsors improperly favored employer contribution
offsets while participants paid plan expenses that could have been covered by forfeitures.
While courts have dismissed similar cases when plan terms clearly authorized the practice, litigation risk
increases when sponsors cannot demonstrate a documented decision-making process or periodic review.
Cybersecurity and Participant Data Use
Cybersecurity litigation continues to accelerate, with courts reinforcing that participant data protection is a
fiduciary responsibility under ERISA. Recent cases highlight exposure not only from data breaches, but also
from alleged misuse of participant data by service providers for proprietary or marketing purposes.
Fiduciary risk extends beyond cyberattacks to how participant data is accessed, shared, and used.
Documentation of vendor due diligence and ongoing oversight is critical.
Missing Participants
Missing participant enforcement and litigation remain active. Courts consistently emphasize the need for a
documented, diligent search process. Risk increases when records are outdated or when search efforts are
informal or inconsistent.
Courts focus less on whether participants are ultimately located and more on whether fiduciaries can
demonstrate a prudent, repeatable process supported by documentation.
The Takeaway
Across all three areas, the message from regulators and courts is consistent: process matters. Sponsors who
follow plan terms, document decisions, and maintain consistent fiduciary practices are better positioned to
manage litigation and regulatory risk.

WHAT ALIGN IS WATCHING

  • Increased scrutiny of fiduciary decision-making and documentation
  • Expansion of cybersecurity and participant data litigation
  • Heightened enforcement around missing participant practices
  • Ongoing efforts to limit ERISA litigation exposure

YOU’RE NEVER ALONE WITH ALIGN

With experience, structure, and steady guidance, Align helps plan
sponsors navigate change with confidence. Explore what’s possible…