401(k) Plans

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On November 1st, the IRS released a number of inflation adjustments for 2024, including to certain limits for qualified retirement plans. As expected, this year’s adjustments are more modest than last year’s significant increases. The table below provides an overview of the key adjustments for qualified retirement plans.

Qualified Defined Benefit Plans
20232024
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We have previously blogged on the flurry of class action lawsuits challenging 401(k) plan investments in the BlackRock LifePath Index Target Date Funds. District courts around the country—seven of them in total—have granted motions to dismiss claims by 401(k) plan participants because their copy-cat allegations of underperformance were insufficient to raise a plausible inference of imprudence. That is, until now. Last week, a federal district court judge in the Eastern District of Virginia became the first to conclude that the participants’ allegations of imprudence related to the BlackRock Funds were plausible. Trauernicht v. Genworth, No. 22-cv-532, 2023 WL 5961651 (E.D. Va. Sept. 13, 2023).

On Friday, the IRS released Notice 2023-62, which addresses certain pressing implementation issues related to the SECURE 2.0 requirement that catch-up contributions for participants with FICA wages of more than $145,000 during the prior calendar year from the employer maintaining the plan must be made on a Roth basis.

In welcome news for plan sponsors, the guidance announces a two-year “administrative transition period” for implementation of this requirement, which was otherwise set to take effect on January 1, 2024.  The notice confirms that, despite a drafting quirk in the SECURE 2.0 statute which suggested that catch-up contributions would be discontinued after 2023, catch-up contributions will continue to be available.  The notice also outlines future guidance that Treasury and the IRS intend to issue on other Roth catch-up requirement topics.

A third district court has dismissed with prejudice a complaint alleging that defendants breached their fiduciary duties under ERISA by offering 401(k) plan participants the option to invest in BlackRock LifePath Index Target Date Funds (the “Funds”).  Beldock v. Microsoft, Case No. 22-cv-1082 (W.D. Wash. Apr. 24, 2023).  Although the outcome of the court’s ruling here is consistent with earlier decisions, the rationale underlying the Beldock decision arguably goes further than in prior rulings, thus providing additional food for thought.