• A new executive order may allow 401(k) plans to invest in private equity, hedge funds, and other alternatives typically reserved for institutions.

• Plan sponsors must weigh higher returns against risks like illiquidity, valuation challenges, and increased fiduciary oversight responsibilities.

• Legal and regulatory frameworks are evolving fast, requiring plan providers to strengthen transparency, fee structures, and participant education.

—

On August 7, 2025, President Trump signed an executive order directing the Department of Labor (DOL) and Securities and Exchange Commission (SEC) to expand access to alternative assets — including private equity, real estate, and digital assets — for 401(k) plans. The goal: open the door to private equity, hedge funds, real estate, and even crypto in retirement plan menus. As both 401(k) auditors and trusted advisors, MGO is helping plan sponsors understand what this expanded access to private equity means for governance and compliance.

Why This Matters Now

With fewer public companies and growing demand for diversified retirement options, private equity firms and plan administrators have been advocating for broader access to private markets. Major players like Blackstone, KKR, and Apollo are pushing to offer these strategies to everyday savers through target date funds and pooled investment options.

Regulators are responding, Trump’s executive order is expected to accelerate this trend by instructing the DOL and SEC to build a framework for oversight and access. This move is positioned as a retirement security initiative to democratize access to high-quality investment options, aiming to empower over 90 million Americans currently excluded from alternative asset opportunities.

Potential Benefits

• Higher return potential: Private equity has historically delivered strong long-term performance, with average annual returns nearing 14% compared to ~8% for public equities.

• Diversification: Adding private market exposure can reduce correlation to public stocks and may help smooth volatility over time.

• Tax deferral: Returns on alternative investments in 401(k)s keep the same tax advantages as traditional plan assets.

• Expanded access: Ordinary investors gain exposure to asset classes previously reserved for accredited or institutional investors, democratizing retirement portfolio options.

Risks and Concerns

• Liquidity and transparency: Private investments are harder to value, less liquid, and more complex to manage than traditional funds.

• Fee structures: Management and performance fees are significantly higher than index funds, which can erode participant returns.

• Fiduciary exposure: Plan sponsors carry legal responsibilities under the Employee Retirement Income Security Act (ERISA). If alternatives are misused or misunderstood, liability risk increases.

• Focused investment risk: Private equity funds may concentrate on specific sectors or strategies, which can increase exposure to market shifts or operational volatility.

• Potential for loss: Like all investments, private equity carries risk — including the possibility of capital loss — despite the perception of higher returns.

Regulatory Momentum

The Trump administration’s order builds on a 2020 DOL information letter that cautiously allowed private equity in defined contribution plans — but few sponsors acted. The new order goes further by directing agencies to build consistent frameworks for oversight, pricing, and participant protections.

The order also instructs the SEC to revise applicable regulations to support the inclusion of alternative assets in participant-directed defined contribution plans. The SEC has indicated it may issue new valuation and fee disclosure rules to support this shift.

What Plan Sponsors Should Do

How MGO Can Help

As plan sponsors consider adding private equity or other alternatives to 401(k) lineups, fiduciary responsibilities and audit requirements become more complex. MGO offers guidance to help organizations evaluate these changes, manage risk, and stay compliant with ERISA and DOL expectations.

Our employee benefit plan (EBP) audit team conducts hundreds of 401(k) plan audits annually. We understand the documentation, disclosures, and governance needed to support evolving investment strategies. Whether you’re navigating new guidance, restructuring plan offerings, or preparing for audit readiness, we bring the insight and experience to support your goals. Contact us today to learn how we can help you.

The post Private Equity Access in 401(k) Plans Gains Steam appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The DOL’s VFCP update is now effective and includes a self-correction path for limited ERISA fiduciary breaches.

• Self-correction applies to certain late deposits and loan errors with lost earnings of $1,000 or less.

• Plan sponsors must correct issues within 180 days and retain documentation, even without a DOL no-action letter.

—

Understanding the VFCP Update

Effective compliance with fiduciary responsibilities under ERISA remains key to managing your employee benefit plans. While many plan sponsors maintain strong oversight, errors can and do occur, so it’s important to be vigilant. The Department of Labor (DOL) has long offered a path to voluntary remediation through the Voluntary Fiduciary Correction Program (VFCP) to address certain fiduciary breaches. 

As of March 17, 2025, the VFCP includes a new Self-Correction Component (SCC), which provides additional flexibility to resolve specific issues without submitting a full application. This enhancement may influence how plan sponsors approach correction procedures going forward. 

What Is the Voluntary Fiduciary Correction Program? 

Ultimately, the DOL established the VFCP to encourage fiduciaries to voluntarily correct losses suffered by employee benefit plans due to breaches of ERISA fiduciary duties. The program provides a structured process to help you address specific fiduciary violations that resulted in financial harm to the plan. 

According to DOL guidance, as a plan sponsor who’s complete the VFCP process, you may: 

• Avoid potential civil enforcement actions by the DOL. 

• Gain greater clarity around your fiduciary responsibilities. 

• Help restore your plan integrity by remediating errors. 

Fiduciaries can apply to the VFCP if they are not currently “under investigation” as defined by the program. The standard process includes compiling documentation, calculating corrective payments (including lost earnings), and submitting a complete application package. If the DOL concurs with the submission, it issues a “no action” letter, which indicates that no further enforcement will be pursued for the corrected issue. 

How the VFCP Update Impacts Fiduciary Correction Procedures 

DOL’s recent update to the VFCP introduces the Self-Correction Component (SCC), simplifying the correction process for certain limited ERISA compliance failures. The SCC went into effect on March 17, 2025. 

What the SCC Covers 

Under the SCC plan, sponsors and fiduciaries may resolve certain issues without submitting a full VFCP application. Instead, you will need to submit a notice through DOL’s online tool. Note that the SCC applies only to the following situations: 

• Delinquent participant contributions or loan repayments — if the total lost earnings are $1,000 or less. 

• Eligible inadvertent participant loan failures, where you didn’t comply with plan provisions such as repayment schedules or loan limits.

Process and Documentation Requirements 

Unlike the traditional VFCP, SCC submissions don’t result in a no-action letter. Instead, the DOL simply acknowledges receipt of the submission. While this doesn’t carry the same legal weight, it does demonstrate a fiduciary’s good-faith effort to correct the issue. 

To qualify: 

• Your corrections must be completed within 180 days of failure or withholding. 

• You should monitor remittances more frequently — monthly or per payroll — rather than relying solely on year-end reviews. 

Fiduciaries must also complete the SCC Record Retention Checklist and provide documentation to the plan administrator, including: 

• A written explanation of the error 

• Proof of correction and payment of lost earnings 

• Results from DOL’s Online Calculator 

• Updated procedures to prevent recurrence. 

• SCC notice acknowledgment and summary 

• A signed Penalty of Perjury Statement

Practical Considerations 

While SCC offers a more efficient resolution pathway, it’s not a replacement for fully correcting prohibited transactions under ERISA. Plan sponsors should assess whether additional process improvements — such as remittance tracking or loan monitoring — are necessary to help prevent recurring issues. 

Other Correction Options Outside the VFCP 

The VFCP isn’t the only method available to you to correct fiduciary breaches. In some cases, plan sponsors may choose to correct issues outside the program. This typically involves: 

• Restoring affected amounts to the plan, including lost earnings. 

• Filing IRS Form 5330 to report and pay any excise tax. 

These steps generally resolve the issue — from the IRS’s perspective. However, the DOL may still view the error as a fiduciary breach under ERISA. Because of this, you may want to opt to use the VFCP to limit your potential enforcement exposure. 

It’s critical that you continuously monitor any errors and resolve them quickly to maintain your ERISA compliance and safeguard your plan assets.  

The Path Ahead 

Further guidance from the DOL may clarify whether the SCC applies only to transactions occurring on or after March 17, 2025, or retroactively to earlier events. On March 18, 2025, DOL released a model Notice to Interested Parties to support SCC submissions. 

You should evaluate which correction path — VFCP, SCC, or an alternative — is most appropriate based on the facts and timing of each case. 

Supporting Plan Sponsors with Regulatory-Focused Audit Services 

MGO provides employee benefit plan audit services tailored to meet the complex and evolving requirements of ERISA, DOL, and IRS regulations. Considering updates to programs like the Voluntary Fiduciary Correction Program, accurate reporting and proactive oversight are critical. Our experience spans a wide range of plan types — including 401(k), 403(b), defined benefit, and health and welfare plans — allowing us to deliver audit services aligned with fiduciary responsibilities and regulatory expectations. We assist plan sponsors in meeting their obligations with confidence in today’s dynamic compliance environment. Contact us to learn more.  

The post Guide to Navigating DOL’s Update to Voluntary Fiduciary Correction Program appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Monitoring business structure changes ensures compliance with ERISA regulations and reduces financial risk.

• IRS penalties, retroactive benefit obligations, and legal risks arise when group status is not properly decided.

• Businesses with shared ownership may be subject to group rules, affecting compliance and plan costs.

—

Why Controlled Group Identification Matters to You 

If you have a business with multiple entities, it’s critical that you accurately find controlled group status. These rules affect a lot— tax obligations, employee benefit plans, and needed Form 5500 filings, to name a few. A misclassification can burden you with unexpected costs, IRS penalties, and compliance challenges, and since ownership structures often change, plan sponsors should regularly review business relationships to avoid potential risks.  

Our guide breaks down controlled groups through a fictional case study, illustrating how specific ownership and control patterns can trigger group status. 

Types of Controlled Groups and Key Tests

Controlled groups exist when multiple companies share common ownership or control. There are three main types. 

1. Parent-Subsidiary Controlled Groups: A controlled group exists when a parent company owns at least 80% of a subsidiary.  

2. Brother-Sister Controlled Groups: In this group, five or fewer individuals must own at least 80% of each entity and have at least 50% identical ownership across businesses.  

3. Combined Groups: This is a mix of parent-subsidiary and brother-sister groups, where one company has overlapping ownership in two related entities.  

If a business isn’t a part of a controlled group, it may still be classified as an affiliated service group — and this can also change benefit plan compliance. 

Case Study: The Consequences of Misidentifying a Controlled Group 

For over 25 years, the owners of Company Alpha, a successful children’s clothing retailer, expanded their business interests. They launched a clothing manufacturing facility (Company Beta), a luxury hotel and spa (Company Kappa), and two restaurants (Companies Delta and Epsilon). Ownership was distributed among family members, with each individual holding shares across multiple companies. Some family members also worked across the businesses in various roles. 

Each company supported its own employee benefit plan, with different contribution levels, retirement plan structures, and health insurance offerings. Company Alpha’s plan was the most generous, offering higher employer-matching contributions and broader healthcare options. The business owners and their plan administrator believed they were in full compliance with ERISA and tax regulations—until an IRS audit revealed otherwise. 

The IRS Findings and Financial Consequences 

During the audit of Company Alpha, the IRS found interwoven ownership structures and overlapping management responsibilities, ultimately determining that all five businesses formed a controlled group under ERISA rules. 

As a result … 

• The IRS mandated retroactive benefit inclusion, requiring all employees from the related entities to be covered under Company Alpha’s generous benefit plan for past years. 
• The businesses were assessed fines and penalties for non-compliance with controlled group rules. 
• Employees who had previously received lower benefits had to be compensated retroactively, significantly increasing employment costs. 
• The companies had to revise their benefit plan structure to follow IRS and Department of Labor regulations moving forward. 

This unexpected financial and administrative burden disrupted cash flow, strained business operations, and required extensive legal and compliance work to rectify the situation. 

What Could They Have Done Differently? 

Had the business owners and plan administrators conducted annual reviews of ownership structures and applied controlled group tests, they could have shown the issue early and adjusted their benefit plans accordingly. Collaborating with third-party advisors and legal professionals before expansion would have helped them avoid costly missteps. 

Your Best Practices for Controlled Group Compliance 

Being in business, you know that business relationships evolve. That’s why it’s essential for plan sponsors to regularly review ownership structures to figure out if it changes impact-controlled group status. When you conduct annual compliance reviews, you unearth shifts in ownership, stock attribution, or management that could affect a group classification. Given the complexity of ERISA regulations, collaborating with experienced advisors can help navigate these rules and reduce compliance risks. Overlooking controlled group requirements can result in costly penalties, retroactive benefit obligations, and legal challenges. Taking an initiative-taking approach to compliance helps you manage your benefit plans effectively and avoid unnecessary financial exposure. 

How MGO Can Help 

Our employee benefit plan audits team works with plan sponsors to find risks, improve governance, and meet reporting obligations under ERISA and IRS regulations. With experience across industries like manufacturing, technology, life sciences, and entertainment, MGO provides guidance to businesses with multi-entity structures.

We help in assessing controlled group status, reducing compliance risks, and aligning benefit plans with business goals. From Form 5500 reporting to retirement plan audits and compliance consulting, MGO helps organizations avoid costly errors and regulatory penalties while supporting financial health and fiduciary responsibility. Contact us to learn more.  

The post Controlled Groups Under ERISA: What Plan Sponsors Need to Know appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The Employee Retirement Income Security Act (ERISA) of 1974 marked a crucial turning point in U.S. retirement security, laying the groundwork for employee protections that are still evolving today.  
• Its foundation led to reforms that eliminated gender-based discrimination in retirement plans and introduced spousal protections, including the requirement of spousal consent for some benefit elections.
• ERISA served as a spark to light the fire for continuous enhancements to employee protections with legislation that covers aspects of an employee’s health, family benefits, and retirement.  

—

The Employee Retirement Income Security Act of 1974 (ERISA) represents a key moment for retirement security in the United States — and September 4, 2024, marked its 50th anniversary.

While its enactment is certainly an important milestone, ERISA’s most enduring impact may be that it began an era of continued enhancements to employee protections and contributed to the reduction of discriminatory treatment of U.S. workers. The 1974 landmark act opened the door for new laws and regulations, paving the way for many of the employee protections now considered standard for the American workforce.

Setting the Stage: The Political Climate of 1974

While ERISA coalesced years of growing concern to improve protections for U.S. workers’ retirement, it came about in direct response to a pivotal point in U.S. history. In 1974, the United States was navigating a tumultuous period marked by the ongoing Vietnam War and the Watergate scandal. Following President Richard Nixon’s resignation, President Gerald Ford came into office looking for opportunities to unify the country and restore public trust in the government. Ford and Democratic House Speaker Tip O’Neill collaborated on bipartisan legislation that pulled together existing draft legislation to quickly construct the Employee Retirement Income Security Act of 1974.

Enacted on Labor Day 1974, less than a month after Ford took office, ERISA was not as comprehensive as has often been assumed and required subsequent legislation to address its missing or incomplete components. Despite these initial shortcomings, ERISA laid the groundwork for the modern era of employee retirement security and employee protections in the United States. There have since been significant subsequent reforms and enhancements that have built on ERISA’s foundation.

Gender-Based and Spousal Discrimination

One of the early areas of reform was the elimination of gender-based and spousal discrimination in retirement plans. In 1978, the U.S. Supreme Court’s Manhart decision removed the requirement for female plan participants to pay more into a plan to account for their longer actuarial lifespans.

The Retirement Equity Act of 1984 (REA) furthered these protections by creating spousal protections and recognizing qualified domestic relations orders (QDROs). The REA required written spousal consent for married plan participants to elect a benefit other than a qualified joint and survivor annuity and provided spousal death benefits for terminated vested participants not in pay status. It also protected the prior vesting service for those taking parental leave or a break-in-service of less than five years’ duration.

Age-Based Discrimination

Later reforms addressed age-based discrimination. The Age Discrimination in Employment Act of 1967 (ADEA) had eliminated the mandatory retirement age and allowed participants to continue accruing benefits even if they worked past the normal retirement age. The Older Workers’ Benefit Protection Act of 1990 amended the ADEA to further ensure equal benefits for older employees and provide additional safeguards against age discrimination in the workplace.

Health Discrimination

Health discrimination was another critical area in need of reform, and saw it in the form of:

• The Americans with Disabilities Act of 1990 (ADA), which prohibits discrimination against individuals with disabilities and requires reasonable accommodations for disabled employees.
• The 2008 Genetic Information Nondiscrimination Act (GINA), which prevents the denial of insurance coverage or higher premium costs to a healthy individual based on a genetic predisposition to a disease.
• The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), which ensures mental health or substance use disorder benefits are on par with medical and surgical health benefits.

Expanded Health Benefit Protections

Protections focused on employee health benefits have been expanded significantly since 1974. Here are some ways:

• The Consolidated Omnibus Reconciliation Act of 1986 (COBRA) established rules governing the continuation of health coverage, including provisions for limited-period health coverage continuation for employees and beneficiaries following certain life events that would otherwise result in a reduction in benefits.
• The Affordable Care Act of 2010 (ACA) prohibits insurance companies from denying coverage or charging higher premiums based on pre-existing conditions.
• The Family and Medical Leave Act of 1993 (FMLA) provides job-protected leave for serious health conditions and family care for eligible employees, including 12 weeks of unpaid parental leave for the birth and care of a newborn.
• The Health Insurance Portability and Accountability Act of 1996 (HIPAA) implemented data security measures, expanded employee protections, and ensured the privacy and security of health information.

Other notable expansions relate specifically to women and children, including:

• The Newborns and Mothers Health Protection Act of 1996, which mandates minimum hospital stays for childbirth.
• The Women’s Health and Cancer Rights Act of 1998, which ensures insurance coverage for mastectomy reconstruction.
• The Children’s Health Insurance Program (CHIP), which provides health coverage for children from low-income families.

The Evolution of Employee Protections

Since ERISA’s enactment, employee protections for U.S. workers have evolved significantly. While some legislation was met with initial resistance, the protections introduced have become indispensable to many in the U.S. workforce. As we celebrate the half-century mark for ERISA, we’re reminded that human capital is a company’s most valuable asset and employee protection helps maintain a thriving workforce.

How MGO Can Help

At MGO, we know that complying with the complexities of ERISA and the employee-related laws that followed can be challenging. Our Audit team leverages years of experience and knowledge to address your concerns about benefit plans, as well as offer suggestions based on your specific circumstances. Reach out to us today to learn more.

The post How the Legacy of ERISA Impacts Your Business Today appeared first on MGO CPA | Tax, Audit, and Consulting Services.