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How SECURE 3.0 Could Reshape the 401k Fiduciary Regulatory Landscape—and Why That’s a Good Thing
by Christopher Carosa, February 19, 2025
Whether they know it or not, 401k plan sponsors and fiduciaries sit on the brink of another significant regulatory transformation. As Congress considers the next evolution of retirement policy, SECURE 3.0 is shaping up to be a substantial piece of legislation aimed at modernizing retirement plans, increasing participation, and enhancing financial security.
The law would likely build upon previous SECURE ACTs, which expanded access to employer-sponsored plans and introduced lifetime income options. As concerns over Social Security’s long-term sustainability grow, lawmakers might seek solutions that will encourage more significant private savings while providing more flexibility for both employers and employees. Experts agree that SECURE 3.0 could address many gaps in the current system while ensuring long-term financial stability for retirees.
If past trends hold, the next iteration of the SECURE ACT may include significant changes to the tax treatment of ERISA plans. Policymakers are likely to consider ways to incentivize retirement savings while reducing regulatory burdens on businesses. Shifting political winds are expected to meaningfully influence regulatory environments.
“Under a Trump administration, potential legislative changes to the tax treatment or benefits of ERISA plans could significantly reshape the retirement planning landscape,” says Richard Bavetz, investment advisor at Carington Financial in Westlake Village, California. “Given the administration’s historical focus on tax cuts and deregulation, plan sponsors and fiduciaries should prepare for possible modifications aimed at promoting business interests and reducing governmental oversight.”
The sustainability of Social Security and the adequacy of retirement income are pressing concerns that SECURE 3.0 might address. A major anticipated component of any future SECURE 3.0 is an increased emphasis on lifetime income solutions. With Social Security benefits unlikely to keep pace with rising retirement costs, structured income options may become an essential tool for financial stability.
“Given the fact that Social Security payments could be leaner than promised, SECURE 3.0 may be just the solution as it propels retirement plans that include lifetime income solutions,” says Eric Steffy, founder & CEO at Federal Solutions Support in Daytona Beach, Florida. “Beyond reducing anxiety, lifetime income solutions have already proven themselves to be a life-changing solution, preserving income levels and self-sufficiency for many retirees.”
The blend of traditional and modern retirement plan types could evolve further with SECURE 3.0. Congress may also use SECURE 3.0 to revisit traditional pension plans. While defined contribution plans like 401k plans have largely replaced defined benefit pensions, some policymakers are pushing for a middle ground incorporating features of both systems.
“After IBM re-opened its pension plan, Senate HELP held hearings to try to promote defined benefit plans,” says John Lowell, a partner at October Three Consulting in Woodstock, Georgia. “In addition to the obvious 401k changes, look to see Congress finding ways to encourage employers to offer more defined benefit plans, but not necessarily the type that we saw 40 years ago. The trend is clearly toward making DC plans look more like DB with the in-plan lifetime income options, so analogously, we might expect DB plans to look more like DC with more focus on account-based plans with glide path type investments.”
The new legislation could also focus on accessibility and simplicity in retirement plan management. Broadening retirement access for more workers could be another priority under SECURE 3.0. In particular, Congress may follow the Trump administration in exploring ways to simplify plan compliance for employers while making it easier for part-time and gig workers to participate.
“SECURE 3.0 could expand access to retirement plans, simplify compliance for employers, and provide new savings options like emergency savings linked to 401k plans,” says Brandy Burch, CEO, Benefitbay in Kansas City, Missouri. “These changes would enhance both participation and retention rates, making the retirement system more robust.”
The tax implications of retirement savings policies under SECURE 3.0 are multifaceted. Like previous SECURE Acts, SECURE 3.0 is predicted to emphasize augmenting retirement savings opportunities while considering the long-term effects on tax revenue. Some experts argue that while the legislation could temporarily reduce government revenue, it would ultimately help reduce dependence on public assistance programs.
“The SECURE Acts previously enacted were primarily about improving retirement plans and methods to save, so any new SECURE Act would hopefully follow suit,” says Christine Mueller Coley, wealth advisor at SteelPeak Wealth Management in Woodland Hills, California. “While allowing more people to save for retirement could potentially limit some tax revenue now, it’s likely to help in the long run as it would make fewer Americans depend on public programs. I’ve seen ideas like lowering the age for people to participate in pension plans or requiring IRA contributions to be classified as Roth versus pre-tax (which may or may not be ideal depending on your specific tax situation), however, there are rumblings that there could be some policies that increase taxes in other ways – but with any new tax legislation there is always some give and take.”
Clarifying regulatory guidance on investment options within retirement plans could also be on the table. Such clarification could lead to more innovative retirement solutions. Plan sponsors have expressed concerns over ambiguous Department of Labor (DOL) rules that have discouraged the inclusion of alternative investment options.
“Congress can pass retirement legislation that provides regulatory certainty for the industry, resulting in access to more investment options for savers,” says Liana Magner, EVP, Head of Retirement and Institutional for Natixis Investment Managers in Boston, Massachusetts. “For example, they could put into law that DC plans can offer alternative investments (as part of a professionally managed portfolio), eliminating ambiguity around previous DOL guidance.”
Another key aspect of SECURE 3.0 could be escalating automatic enrollment policies and increased catch-up contributions for older workers. These measures could help close participation gaps and encourage more Americans to save earlier in their careers.
“A SECURE 3.0 could further enhance the retirement savings landscape by expanding automatic enrollment requirements, increasing catch-up contribution limits, and providing greater access to employer-sponsored plans for part-time and gig workers,” says Bavetz. “This could simplify plan administration and improve so-called decumulation or lifetime income options, making it easier for employers to offer and employees to maximize their retirement benefits. These changes would be a good idea because they address key gaps in participation and savings rates, ensuring more Americans are prepared for retirement. By modernizing regulations, SECURE 3.0 could build on past reforms and encourage broader financial security.”
One of the boldest ideas being floated is allowing private-sector workers access to the Thrift Savings Plan (TSP)—the federal government’s low-cost, high-quality retirement plan. Supporters argue that making the TSP available to more Americans would significantly boost retirement readiness while reducing administrative costs.
Bavetz envisions a groundbreaking feature for SECURE 3.0 that could democratize retirement savings. He says, “Opening up the TSP to everyone could be a transformative idea for SECURE 3.0, as it would provide standardized access to a low-cost, well-managed retirement plan with proven investment options. By allowing private-sector workers and gig economy employees to participate, it would expand retirement savings opportunities to millions who lack employer-sponsored plans. This could enhance overall savings rates and retirement readiness while leveraging an existing, efficient system. Including this in SECURE 3.0 would align with its goal of broadening access and modernizing the retirement system.”
If enacted, SECURE 3.0 could bring sweeping changes to retirement planning, from extended access and automatic enrollment to pension-style benefits and investment flexibility. While there are still many details to iron out, experts agree that modernizing retirement regulations is a necessary step toward greater financial security for American workers. Plan sponsors and fiduciaries must keep a close eye on these developments if they wish to adapt with agility to the evolving retirement landscape. By focusing on participation, innovation, and sustainability, this legislation could mark a new era in retirement security for millions of Americans.
And if Congress gets this right, maybe—just maybe—future retirees won’t have to rely on winning the lottery to afford a comfortable retirement.
Next Week: New Ingredients To The Cake: Possible New Forms Of Investments For 401k Plans?
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Christopher Carosa is an award-winning online news producer and journalist. A dynamic speaker, he’s the author of 401(k) Fiduciary Solutions, Hey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions.