Navigating Uncertainty: Strategic Actions for 401(k) Sponsors

Navigating Uncertainty: Strategic Actions for 401(k) Sponsors
May 21, 2025 7 mins

Navigating Uncertainty: Strategic Actions for 401(k) Sponsors

Navigating Uncertainty: Strategic Actions for 401(k) Sponsors

Faced with operational challenges, regulatory changes, and fiduciary risks, some employers are turning to a newer approach to 401(k) plans.

Key Takeaways
  1. SECURE 2.0 provisions present significant challenges. While a top priority for 42% of sponsors, about 1 in 4 are still unsure of key optional provisions.
  2. Rising fiduciary risks and evolving workforce expectations present new opportunities for 401(k) sponsors.
  3. Strategic solutions like PEPs can offer a lower-risk path for sponsors to better meet the evolving sentiments and needs of participants while reducing costs.

Introduction

Today’s 401(k) plan sponsors face a perfect storm of complexity: operational and regulatory challenges, escalating fiduciary risk, and a workforce with rising expectations for financial support. Compounding this are bouts of economic and market volatility that make long-term planning, such as providing an appropriate mix of investment options, a moving target. In such an environment, merely staying compliant is no longer enough. To thrive, sponsors must rethink how they manage risk, simplify plan oversight, and deliver real value to employees.

Navigating an Evolving Legislative Landscape

Staying current with retirement plan legislation has always been a challenge but the scope and speed of change are pushing many plan sponsors to their limits. SECURE 2.0 remains a top concern: 42% of sponsors call it a priority, yet a quarter remain unclear on many of its 90-plus provisions like Roth catch-up contributions and “super catch-up” rules. Missteps, such as the 2024 IRS administrative error for catch-up contributions, underscore the fragility of compliance efforts.

Beyond what’s already law, sponsors know they should brace for further regulatory shifts. New mandates, revised tax incentives, and evolving fiduciary standards could fundamentally reshape the already demanding work of staying compliant, not to mention contribution strategies and plan design.

SECURE 2.0 provisions also unfold as they “stage” year over year. All told this evolving legislative landscape creates a conundrum for sponsors working on their own. As Eric Neumann, Sr. Director of Compensation, Benefits & HRIS at APTIM, aptly states: “We're good at what we do, but nobody on my team is an absolute 401(k) expert, so there's always the worry of did we miss something because we don't know what we don't know.”

42%

While SECURE 2.0 remains a top priority for 42% of sponsors, about 1 in 4 are still unsure on key optional provisions.

The Asymmetric Legal Liability Facing Sponsors

Unlike other corporate risks, fiduciary liability is personal and expansive. Aon’s Fiduciary Liability Study found that inadequate fee benchmarking, poor documentation, and lack of OCIO support are major red flags from the point of view of insurance providers. That’s due in part to those same factors being the targets of litigation. Lawsuits, which are increasingly routine with cases often seeking tens of millions in damages, highlight the disproportionate risks sponsors shoulder.

A cottage industry popped up to target employer plans, enlist employees and bring suits. Plaintiffs firms have notched many wins via signed settlements since 2020. The Employees enlisted in litigation often see little return, $25 per employee on the high end of settlements. Legal fees run into the millions for many of these suits. Meanwhile, plan sponsors can face reputational damage and financial exposure. “The fear of making an honest mistake kept me up at night,” says Neumann. The liability equation is lopsided—and untenable for many organizations.

Rising Employee Demand for Financial Wellbeing Support

Plan sponsors, meanwhile, want to spend more time meeting the needs of employees who want more than a retirement plan. Instead, they want more holistic financial wellbeing support. Aon’s Employee Sentiment Study found that 45% of U.S. workers want help saving for retirement, while 37% seek financial education.

Employers are responding to this sentiment. Forty percent of sponsors already prioritize broader wellbeing, with one-third planning to expand offerings within two years. One area of increasing focus is personalized financial guidance, which is especially applicable for today’s multigenerational workforces, where one-size-fits-all plans often miss the mark.

Strategy vs. Operational Demands: The Sponsor Dilemma

While enhancing benefits is strategically important, sponsor time, staff, and budget are constrained by the fiduciary demands described earlier. The dilemma helps explain a persistent support gap. Financial stress affects 80% of employees and contributes to absenteeism and disengagement. Yet only 28% of employers offer comprehensive financial wellness programs. The data also tells us that benefits influence retention: 58% of employees would leave for better benefits, while 43% stay because of them.

A strong retirement plan isn’t just a compliance requirement—it’s a competitive advantage. But supporting it shouldn’t come at the expense of broader business goals.

45%

Aon's Employee Sentiment Study found that 45% of U.S. workers want help saving for retirement.

Rebalancing the Model: Pooled Employer Plans as a Strategic Solution

Pooled Employer Plans (PEPs) are changing the retirement landscape. By consolidating plan management under a professional Pooled Plan Provider (PPP), sponsors can offload the heavy burden of fiduciary responsibilities, simplify administration, and reduce costs.

The lift for internal teams is substantial: audit hours are reduced, vendor management is centralized, and compliance is outsourced. “We’ve saved dozens of hours on audits,” says APTIM’s Eric Neumann.

11.4%

Aon PEP participants have seen participation rates increase by 11.4% and deferral rates by 5.2%.

Quote icon

We’ve saved dozens of hours on audits.

Eric Neumann
Sr. Director of Compensation, Benefits & HRIS, APTIM Corporation

They can instead focus their energy on adapting plan design to the needs of their people and communicating their offerings. Aon PEP participants have seen participation rates increase by 11.4% and deferral rates by 5.2%.

Why Now: The Case for Considering a PEP

No longer niche, PEPs are gaining widespread market adoption. One in five plans is either participating in or exploring a PEP. Fiduciary insurers now prefer larger, reputable PEP providers, which means participating sponsors may see more favorable insurance terms.

And sponsors maintain flexibility. Within a PEP, they still control key aspects like match design and eligibility rules while reducing oversight burdens.

Less Risk, More Focus, Better Outcomes

Now is the time for plan sponsors to rethink their retirement strategy. As Ahnaf Bashir of Advance Financial suggests: “Ask yourselves and your leadership, are you better off being a fiduciary yourself—or better off letting someone else do it for you?”

Quote icon

Ask yourselves and your leadership, are you better off being a fiduciary yourself—or better off letting someone else do it for you?

Ahnaf Bashir
Head of Human Resources, Advance Financial

With fiduciary risks rising, and workforce expectations evolving, the ROI of the current structure deserves scrutiny. Sponsors should assess whether PEPs offer a more effective, lower-risk path that opens up the possibility to better meet the evolving sentiments and needs of employees.

Reimagining plan oversight means doing it smarter rather than doing more. The right retirement structure, and PEPs in particular, can relieve administrative strain, reduce exposure, and deliver stronger outcomes for employees.

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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