Navigating the New 401(k) Regulatory Landscape

Published on October 30, 2025 by Disha

The US retirement savings system has undergone a substantial shift in recent years. Technically, changes to 401(k) regulations have predominantly increased the Department of Labor’s (DOL’s) oversight and lengthened fiduciary obligations. This will likely redefine how wealth managers, financial advisers and plan sponsors engage with clients.

Ironically, these reforms, launched to protect employees’ retirement savings, have introduced legal challenges. Now wealth managers and retirement plan providers need to mandatorily focus on documentation, transparency and accountability.

What is 401(k)?

401(k) is a retirement savings account created by US employers for their employees. Here, an employer is the ‘plan sponsor’ and administrator, whereas an employee is an ‘account holder’ and investor. An employer sets up the plan, chooses the provider, establishes rules and manages compliance. Employees, on the other hand, own their individual account within the plan and contribute part of their salary through payroll deduction. An employer may match the contributions made by its employees.

401(k) comes under the ambit of the Employee Retirement Income Security Act (ERISA) – also called the retirement law in the US. An employer has to file legal documents as the sponsor of the plan under ERISA. Funds in 401(k) are not taxed until an employee withdraws them at retirement. If an employee exits a company, they can roll over the account to an individual retirement account []) or save funds in a fresh account created by the new employer.

What is a rollover and why does it matter to wealth managers?

A rollover is the movement of funds saved by an employee in their retirement account to another retirement account without inviting taxes or penalties. This rollover can be from one employer’s 401(k) to another employer’s 401(k) or from a 401(k) to an IRA. In either case, the funds retain their tax-deferred status until the employee retires.

Historically, rollovers have represented the largest inflow of client assets for many wealth managers. An adviser would want their clients’ 401(k) assets rolled over to the IRAs they manage, giving them more control and bringing fees. This is where the DOL and its fiduciary rules come into play.

DOL-focused regulatory angle

The DOL believes rollovers lead to conflict of interest because advisers may push for a rollover for their own benefit. It is, thus, important that advisers prove they recommended the rollover because it was in their clients’ best interest and not just to earn fees. Advisers must document why a rollover makes sense (e.g., better investment options in the IRA, lower fees or improved services, simplicity in terms of account consolidation and/or better features). This is where fiduciary duty language and documentation become critical for advisers.

What’s changing under the new rules

The DOL has updated its guidance, widening the definition of a fiduciary when offering retirement advice. What this means for wealth managers is that more activities are classified as fiduciary conduct under ERISA. Key aspects include:

• Expansion of fiduciary duty – Advisers providing advice on rollover or investment options must prove they acted in their clients’ best interest (e.g., to increase financial returns), as well as ensure fee transparency, conflict of interest disclosures and suitability of clients’ requirements.

• Scrutiny of rollover – Advisers are required to maintain documentary evidence of the benefits of rollover to a client. This DOL regulation calls for a comparison of fees, investment choices, services and access to funds between the old 401(k) and the new account.

• Fee and disclosure requirements – To ensure clients are well informed about costs and the choices they make, the employers (plan sponsors) and advisers must make clear and consistent disclosures about fees.

• Governance and documentation – Several documentation (such as meeting minutes, investment policies, compliance records and thorough governance frameworks) needs to be maintained by fiduciary committees and plan sponsors. These will be crucial in audits or litigation.

Why this matters to wealth managers

Under the new DOL framework, any misstep could trigger regulatory audits, fiduciary breach claims or litigation under ERISA. Advisers must not only offer prudent advice but prove they acted prudently. This calls for airtight contracts, robust disclosure processes and well-documented fiduciary practices.

Wealth managers need to update every client contract. Plus they need to review all vendor/adviser agreements to avoid conflict of interest. This will help them remain compliant and avoid lawsuits.

How Acuity Knowledge Partners can help

At Acuity, we support US wealth managers, retirement plan providers and financial advisers with the legal support they need to navigate this new era. Our services include:

• Drafting and reviewing advisory agreements with fiduciary duty language

• Preparing rollover disclosure forms and documentation

• Reviewing custodian, recordkeeping and vendor contracts to identify risks and ensure transparency

• Maintaining fiduciary committee governance records and board resolutions.

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