Policies evolve to support growing needs of plans and participants

Recent years have seen significant developments in retirement policy, particularly with the SECURE Acts of 2019 and 2022. Looking ahead, tax reform will be a primary focus for Congress in 2025, potentially affecting retirement policy, along with several legislative and regulatory themes outlined in this section.

• Tax reform is imminent: With the expiration of several major provisions of the Tax Cuts and Jobs Act at the end of 2025, tax reform is imminent. Amid political discourse and partisan polarization, the search for revenue sources could target the retirement industry, including:
  • “Rothification” of retirement contributions, i.e., transitioning from traditional pretax to Roth (after‑tax) contributions
  • Implementing caps on certain high‑level IRAs
• Parity for 403(b) plans: Current securities laws prevent 403(b) plans from utilizing CITs in the same way as other retirement plans. The SECURE 2.0 Act initiated changes to address this, but further legislation is required for 403(b) plans to fully utilize CITs and unregistered insurance company separate accounts. Congress is working toward passing securities legislation to address these needs.
• SECURE 2.0 Act enhancements: This law ushered in a host of mandatory and optional changes, but further guidance is still needed for several provisions. We expect updates and technical corrections to provide greater clarity and guidance on:
  • The structure and management of PLESAs
  • Implementing student loan matching provisions
  • The implementation of Roth catch‑up contributions
• Fiduciary Rule pause: The 2024 Fiduciary Rule, which aimed to revise the standards and scope of fiduciary responsibilities for financial professionals under the Employee Retirement Income Security Act of 1974 (ERISA), faced significant legal challenges, delaying its implementation. Additional litigation or Department of Labor (DOL) action will determine its future.
• Potential environmental, social, and governance (ESG) Rule challenges: The U.S. Supreme Court’s June 2024 Loper Bright decision¹ struck down the long‑held standard for judicial review of rulemakings by regulatory agencies and shifted interpretative authority from the executive branch to the judicial branch. This change could influence several federal court rulings challenging the DOL’s ESG rule.
• Congressional themes for 2025 and beyond: Ongoing congressional discussions focus on two themes:
  • Increasing retirement coverage—there is a concerted effort to bring new people into the system and expand access to retirement plans. Proposals range from mandating employer‑provided retirement plans to reducing plan eligibility age from 21 to 18.
  • Retirement income—after years of prioritizing the accumulation of savings, the industry focus is shifting to the spending phase, aiming to help ensure that savings last throughout retirement.
• Litigation reform: ERISA‑related class action litigation and settlements have surged over the last decade. In 2023, class action settlements totaled $353 million.² Fear of litigation was the top deterrent listed to the implementation of retirement income solutions in our DC Consultant Study. The industry is pursuing legislative changes to address these concerns.
• Social Security: Social Security is vital to millions of Americans, but the Social Security Trust Fund is projected to exhaust its reserves by 2033, which could lead to a potential 20% cut in benefits.³ Prompt congressional action is needed as further delay narrows the set of options to fix the program.

T. Rowe Price will continue to monitor these emerging issues and provide updates to help employers and financial professionals stay informed on policy changes and their implications.

 

 

Appendix

2021 Defined Contribution Consultant Study: The study included 51 questions and was conducted from September 20, 2021, through November 2021. Responses are from 32 consulting and advisory firms with more than $7.2T in assets under administration.

2023 Retirement Savings and Spending Study: The study was conducted between July 24, 2023, and August 13, 2023. It included 3,041 401(k) participants, full‑time or part‑time workers who never retired, currently age 18 or older, and either contributing to a 401(k) plan or eligible to contribute with a balance of $1,000 or more. The survey also included 1,176 retirees who have retired with a Rollover IRA or left‑in‑plan 401(k) balance.

2024 Defined Contribution Consultant Study: This study included 48 questions and was conducted from January 12, 2024, through March 4, 2024. Responses are from 35 consulting and advisor firms with over 134,000 plan sponsor clients and more than $7.5 trillion in assets under administration.

2024 Defined Contribution Plan Sponsor Considerations and Actions on Retirement Income Study: The survey was fielded from November 14, 2023, through December 22, 2023. Data reflect responses from 119 plan sponsors that have a role in overseeing and/or selecting their organization’s DC plan investment offerings and indicated a combined approximate DC plan asset size of $100 million or greater.

2024 Exploring Individuals’ Retirement Income Needs and Preferences Study: Data reflect responses from 2,582 individual investors age 40 to 85 who were currently enrolled in a DC plan and had at least $100,000 saved in their plan accounts. The survey was fielded from December 2023 through February 2024.

2024 T. Rowe Price Retirement Savings and Spending Study: The study was conducted between July 17, 2024, and August 7, 2024. It included 3,005 401(k) participants, full‑time or part‑time workers who never retired, currently age 18 or older, and either contributing to a 401(k) plan or eligible to contribute and have a balance of $1,000+. The survey also included 1,012 retirees who have retired with a Rollover IRA or a left‑in‑plan 401(k) balance.