PPA 20th Anniversary, Continuing Litigation Risk Among Key Themes Shaping 2026
The new year has a lot in store for the retirement industry.
MFS’s latest Retirement Outlook report uncovers the latest trends defining the retirement market for 2026, including the 20th anniversary of the 2006 Pension Protection Act (PPA) and regulatory insights for the year ahead.
Authors Jonathan Barry, a senior managing director of MFS Strategy and Insights Group, along with Retirement Lead Strategist Jeri Savage, explore the most impactful changes brought on by the PPA, including the introduction of automatic enrollment and qualified default investment alternatives (QDIAs). Today, 96% of all defined contribution (DC) plans offer target-date funds (TDFs), and 64% of all contributions are directed to TDFs, according to Vanguard’s How America Saves survey.
For defined contribution (DC) plans, auto-enrollment and escalation have amplified participation, especially for younger and lower-income workers. For defined benefit (DB) plans, the law has added stricter funding rules and increased PBGC premiums, which in turn has led to “significant” growth in pension risk transfer activities like annuity buyouts and lump-sum cashouts, reports MFS.
As DB plans have diminished drastically since the PPA was enacted, MFS observes how workers today struggle with less guaranteed income.
“The PPA’s legacy is a retirement system with greater individual responsibility and less employer risk — with less guaranteed lifetime income for most workers,” wrote Barry and Savage in the research.
In the coming years, DC plan sponsors will have to consider accumulation strategies, including monitoring the plan’s QDIA option and its appropriateness for participants to generate sufficient retirement income.
For DB plans, MFS recommends employers evaluate the long-term goal of the plan, including whether it will be reopened, terminated, or will hibernate. According to the report, sponsors who want to keep their DB plans should “consider how to structure growth assets in a de-risked portfolio and refine the duration of their fixed income as liabilities mature.”
‘Busy Year of Rulemaking and Guidance’
The new year will likely be shaped by new legislation and regulation, MFS predicts.
The Department of Labor (DOL) previously indicated it would publish changes to environmental, social, and governance (ESG) and fiduciary advice rules, and an August executive order by President Donald Trump will likely bring on guidance on the inclusion of alternative investments in DC plans.
Litigation risk could also be on the horizon for the new year, as lawsuits alleging excessive fee risk continue to rise. According to ERISA law firm Mayer Brown, since September 2023, there have been almost 80 ERISA class action lawsuits alleging forfeiture claims.
MFS recommends plan sponsors stay informed and prepared for potential regulatory changes this year, and continue to document all processes, including a review of plan fees, investment options, and administrative practices to protect against fiduciary risk.
Moving towards AI and Alts
MFS forecasts further innovation in DC plan menus, as the industry shifts towards a focus in artificial intelligence (AI) technology and the possible inclusion of alternative assets in private market plans. Firms, they say, are moving away from retirement income implementation and instead turning to alternatives to drive returns.
Among what plan sponsors should know when evaluating alternatives are understanding other solutions that can fit participants’ needs, and what they’re looking to solve with the investments, MFS states.
“We believe that actively-managed public equity and fixed income strategies can provide participants with the returns and diversification benefits they need to build durable portfolios, with better liquidity, transparency and lower fees as compared to private assets,” MFS reports.
Additional findings from the MFS Retirement Outlook report can be found here.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.