SECURE 2.0 was enacted over two years ago, and its changes continue to significantly impact plan sponsors. This legislation represents the most substantial update to the Employee Retirement Income Security Act of 1974 (ERISA) in decades. Its primary goal is to improve access to retirement plans while supporting both short-term and long-term retirement planning.
With SECURE 2.0 implemented in multi-year phased deadlines, plan sponsors are experiencing both confusion and implementation fatigue. This is understandable as the law involves more than 90 updates, imposing substantial changes that can create uncertainty for plan sponsors and turmoil on what the right approach is. Without clear guidance, this uncertainty can snowball and lead to regulatory and compliance lapses.
The challenge SECURE 2.0 presents is further compounded by the provisions which have come into effect this year alongside the looming updates also coming in 2026, including higher catch-up contributions, big changes to required minimum distributions, matching for Roth accounts and changes for annuities.
These ongoing changes are forcing plan sponsors to stay on their toes and remain diligent in understanding the continuous adjustments brought about by SECURE 2.0. In doing so, they are not only able to successfully advise their clients but also be better equipped to enhance their support for employees' financial well-being while remaining compliant.
ERISA litigation remains under a microscope
ERISA-related litigation cases have increased over the last year, in fact, the numbers indicate that 136 ERISA-related lawsuits occurred in 2024. Many of these cases are a result of misuse of 401(k) forfeited funds, which are no longer considered “nuisance lawsuits” and are now top of the radar for many law firms. This trend shows no signs of slowing down. As the severity of this type of litigation is on the rise, plan sponsors need to remain vigilant in ensuring they have the proper guardrails in place to avoid risk of lawsuits.
Officials are paying close attention to the cases, including Daniel Aronowitz, recently confirmed Head of the Employee Benefits Security Administration, who has laid out a case for why he believes ERISA needs a specialized court. Aronowitz stated that ERISA was meant to provide uniform national standards, but says the current system yields inconsistent rulings on the same fiduciary issues.
The ongoing legal inconsistencies also encourages forum-shopping, which could further drive-up litigation costs for plan sponsors. The increase in ERISA litigation should be concerning, with potential further impacts due to new provisions from SECURE 2.0 coming into effect.
Peak 65 causing more pain points
According to reports, 2025 is the peak of “Peak 65” with an average of 11,400 Americans turning 65 every day. This means 4.18 million people will reach the traditional retirement age in a single year. Peak 65 presents a challenge for plan sponsors as they face increased demand for preferred withdrawal strategies, navigating funding strains, employing proper compliance measures and more.
These pressures create additional complexities, where any error can have major implications for both plan sponsors and their organizations. In fact, one of SECURE 2.0’s latest provisions permits participants aged 60-63 to contribute up to $11,250 or 150% of the standard catch-up limit, whichever is greater.
Plan sponsors are already facing challenges due to the increasing number of individuals reaching retirement age. The introduction of this provision that specifically affects those nearing retirement adds another layer of complexity for plan sponsors to manage. This situation raises the risk of fiduciary breaches and potential lawsuits.
Therefore, it is crucial for plan sponsors to think ahead and remain adaptable. They need to familiarize themselves with these new provisions to minimize risks, as mismanagement or neglect of accounts can increase the likelihood of fiduciary breaches.
Risk management tools to keep pace with evolving updates
Litigation risks and yearly new provisions can make plan sponsors feel like they are always catching up; just when they understand SECURE 2.0, another change occurs. Employers and plan sponsors may continue to feel increased pressure to avoid any missteps further proving that implementing a rigorous risk management plan can be essential.
There are a wide range of tools and safeguards that help ensure compliance and support informed decision-making, including technologies to streamline retirement plan management while also improving employee engagement. Modern financial technologies can offer easy access to retirement resources, educational materials and allows employers to access their insurance and issue bonds instantaneously, further empowering employees to make informed decisions about their future.
Related: Industry group urges IRS, Treasury to implement additional SECURE 2.0 guidance for plan sponsors
Of course, pitfalls will occur, and an important part of the risk management plan will be to ensure there is a safety net for when alleged breaches of fiduciary duty occur. Establishing a solid insurance plan, including fiduciary liability insurance, will protect both employee benefit plan decision-makers and their employers and offer defense coverage and funds settlements or judgments for liabilities under ERISA.
2026 and beyond – rolling with the changing tides
Changes to SECURE 2.0 continue past this year, with 2026 provisions approaching. New provisions require individuals earning over $145,000 in a calendar year and all catch-up contributions to a workplace plan for those aged 50 or older to be made to a Roth account using after-tax dollars. Employers will also be able to provide employees the option of receiving vested matching contributions to Roth accounts. Starting to consider and plan for the 2026 provisions can prove beneficial to plan sponsors and can help to alleviate some of the confusion caused by new changes.
It is crucial for plan sponsors to stay alert and ensure they have risk mitigation processes and protection plans established, as ERISA-related litigation shows no signs of slowing down. Implementing these measures will be key to the success of plan sponsors.
Richard Clarke is the Chief Insurance Officer of Colonial Surety Company.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.