5 Key Focus Areas for Plan Sponsors in 2025

For plan sponsors, 2025 presents unique opportunities and challenges – especially with the transition to a new presidential administration. Evolving regulations, market and economic uncertainties, technological advancements, and shifting participant expectations will require plan sponsors to remain engaged and proactive. This article outlines five key areas that retirement plan sponsors need to focus on in 2025 to ensure compliance, optimize plan performance, and deliver the most value to participants.

1. REGULATORY CHANGES AND COMPLIANCE

SECURE Act 2.0 has introduced several provisions effective in 2025 that require careful consideration and timely implementation by plan sponsors, as well as communication to employees:

Super catch-up contributions. Effective January 1, 2025, plan sponsors may now allow participants who attain ages 60, 61, 62, and 63 during the calendar year to make catch-up contributions up to the greater of $10,000 (indexed) or 150% of the regular catch-up limit. For 2025, the “enhanced” catch-up contribution limit for this group is $11,250. This change may require additional efforts from the plan sponsor’s payroll and/or human resources information system team. However, this design change can be valuable for recruiting and retaining employees by allowing participants to put away even more for retirement.

Automatic enrollment. For 401(k) plans that were not in effect before the signing of SECURE 2.0, many plan sponsors will be required to automatically enroll new employees in 401(k) plans.

Long-term, part-time employees. In 2024, plan sponsors were required to extend plan access to long-term, part-time employees who worked at least 500 hours annually for three consecutive years. That threshold has changed to two consecutive years in 2025.

Lost and found database. SECURE 2.0 also directed the Employee Benefits Security Administration to establish, by December 29, 2024, a search tool to help missing participants and their beneficiaries find their retirement benefits. The database is meant to allow people to search for balances earned under their Social Security number from prior plans. In a proposed information collection request issued last year, the DOL anticipated asking plan administrators for extensive historical information to populate the database, but the DOL submitted a narrower ICR after receiving criticism during its comment period. The database information intake site launched on time and is currently available here.

Besides SECURE Act 2.0 provisions, another important compliance and regulatory focus area in 2025 is cybersecurity. With the DOL issuing guidance on cybersecurity best practices, sponsors are expected to implement robust measures to protect participant data. This includes regular risk assessments, comprehensive incident response plans, and vendor management protocols to mitigate breaches.

In addition, with the Republicans controlling both the executive and the legislative branches, there will likely be a shift toward easing regulatory efforts around retirement security and fiduciary responsibilities. Many industry analysts expect to see additional legislative efforts related to ESG investing and alternative assets (such as a more accommodating stance on the inclusion of digital assets in DC plans).

2. Economic and Market Trends

The global economic landscape in 2025 presents familiar challenges that directly impact retirement plans. Plan sponsors should continue monitoring these challenges, which include geopolitical tensions, uncertainty around inflation, fluctuating interest rates and market volatility. Adhering to a sound Investment Policy Statement (IPS) and maintaining a formal, disciplined process for selecting, monitoring and replacing investments will continue to be critical.

During presidential transitions and other times of change, it is important to regularly educate employees to not let headlines knock them off course. Maintaining a disciplined investment approach, long-term time horizon and regular portfolio rebalancing plan remain sound elements of an employee education strategy.

3. Emphasizing Participant-Centered Plans

In 2025, retirement plans must prioritize participant needs to remain competitive and effective. With a more diverse and multigenerational workforce, sponsors must tailor their plans to address varying financial goals and challenges.

Financial wellness programs continue to gain traction as an essential component of participant-centered plans. These programs go beyond traditional retirement planning, offering education on budgeting, debt management, HSAs and emergency savings accounts. Sponsors who invest in comprehensive financial wellness initiatives can help improve participant engagement and retirement outcomes.

Additionally, the workforce now spans several generations, from Gen Z to Baby Boomers. Each group has unique needs and expectations. For example, younger employees may prioritize student loan repayment programs, while older participants may seek advice on catch-up contributions and retirement income planning. Sponsors must offer flexible solutions and personalized communication to address these diverse needs.

Technology also plays a crucial role in participant engagement. Mobile apps, online dashboards, and personalized investment recommendations can empower participants to take greater control of their retirement savings. Sponsors should collaborate with plan providers to enhance the user experience and drive participation.

4. Leveraging Technology in Plan Administration

Technology continues to transform the retirement plan industry. In 2025, sponsors have access to new and evolving digital tools to help administer and manage their plans more efficiently. Artificial intelligence (AI), automation, and analytics are transforming how plan sponsors do their jobs.

For example, AI-powered tools can streamline administrative tasks, such as enrollment and contribution tracking. These tools can also provide personalized investment guidance, helping participants make informed decisions and helping them to achieve successful retirement outcomes.

Automation reduces errors and saves time, allowing sponsors to focus on strategic initiatives rather than manual processes. Analytics are increasingly valuable for understanding participant behavior and identifying trends. For instance, sponsors can analyze data to determine which plan features drive engagement or identify participants who may need additional support.

The rise of technology also brings heightened cybersecurity concerns. Potential cyberattacks targeting retirement plans could result in significant financial and reputational damage. Sponsors must work with providers to implement multi-factor authentication, data encryption, and regular security audits to safeguard participant information.

5. Preparing for Litigation Risks

Litigation risks are likely to remain a significant concern for retirement plan sponsors in 2025. Lawsuits related to excessive fees, underperforming investments, and inadequate disclosures continue to make headlines. In addition, there has been an increase in litigation associated with plan forfeitures. More than 30 lawsuits have been filed against employers since 2023, all with allegations of using forfeited 401(k) funds to help reduce future employer contributions. Sponsors must take proactive steps to mitigate these risks.

One effective strategy is to conduct regular plan reviews to ensure fees are reasonable and investment options are competitive. Sponsors should also document decision-making processes to demonstrate compliance with fiduciary duties. Engaging with experienced plan advisors and legal counsel can further reduce exposure to litigation.

Litigation risks are likely to remain a significant concern for retirement plan sponsors in 2025. Lawsuits related to excessive fees, underperforming investments, and inadequate disclosures continue to make headlines. In addition, there has been an increase in litigation associated with plan forfeitures. More than 30 lawsuits have been filed against employers since 2023, all with allegations of using forfeited 401(k) funds to help reduce future employer contributions. Sponsors must take proactive steps to mitigate these risks.

One effective strategy is to conduct regular plan reviews to ensure fees are reasonable and investment options are competitive. Sponsors should also document decision-making processes to demonstrate compliance with fiduciary duties. Engaging with experienced plan advisors and legal counsel can further reduce exposure to litigation.

Informational Resources: MFS Investments: Retirement Outlook 2025 (December 2024); Paychex: “Retirement Trends: What You Need to Know in 2025” (November 14, 2024); T. Rowe Price: “2025 U.S. Retirement Market Outlook” (January 14, 2025); JD Supra: “401(k) Plans, 2025, and You, The 401(k) Plan Sponsor” (December 16, 2024); Congruent: “How AI Can Help 401(k) Retirement Plan Administration” (January 6, 2025).