401(k) Oversight: How Sponsors Can Stay Ahead of Legal Risks
As 2025 winds down, plan sponsors are facing increasing legal and regulatory scrutiny surrounding their 401(k) plans, driven by shifting legal standards, increased participant awareness, and more aggressive enforcement by government agencies. These pressures are reshaping how sponsors manage their plans and protect their organizations.
Escalating Litigation Risk
In recent years, lawsuits against plan sponsors have risen over such issues as excessive fees, improper use of forfeitures, and cybersecurity breaches. The latter has become especially urgent, with industry reports indicating that over 70% of sponsors experienced some form of data breach in the past year, raising questions about fiduciary responsibility and participant data protection.
Courts are also holding sponsors accountable for the investment options offered within 401(k) plans. This includes scrutiny of ESG funds, private equity, and other non-traditional investments that may not align with the Employment Retirement Income Security Act of 1974 (ERISA) standards.
Mounting Regulatory Pressure
Alongside litigation, regulatory oversight is intensifying. The Department of Labor (DOL) and the Internal Revenue Service (IRS) have increased audits and enforcement actions, focusing on plan governance, fee transparency, and cybersecurity protocols. Sponsors should remain informed about legislative developments, including the implementation of SECURE Act 2.0 provisions.
The Value of Partnership
In this environment, professional guidance becomes more important. Managing a 401(k) plan requires specialized knowledge and strategic foresight. Partnering with an experienced retirement plan team can provide sponsors with the tools and insights needed to help address risk and enhance plan performance. These professionals can offer support in areas such as fiduciary training, investment menu design, fee benchmarking, and cybersecurity audits—all critical components of a well-governed plan.
A retirement plan partner can also serve as a proactive resource, helping sponsors anticipate regulatory changes and prepare for potential legal challenges. Their experience can be helpful in crafting policies, conducting internal reviews, and responding to inquiries from regulators or legal counsel, which could help reduce the likelihood of a costly enforcement action.
Why It Matters
Litigation and regulatory risk in 401(k) plans is not just a legal issue; it’s a matter of trust. Participants rely on their employers to safeguard their retirement savings and act in their best interests. Sponsors can take proactive steps to strengthen their governance frameworks, enhance transparency, and ensure compliance with all applicable laws and regulations.
At Savant, we are ready to serve as a resource and partner to plan sponsors. Give us a call today to learn how we can help.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Patricia L. Hutchinson
Director of Retirement Plan Services
AIF®, MBA