With the leaves changing colors and the holidays around the corner, it’s time for retirement plan sponsors to review their plan documents to comply with year-end amendment deadlines, confirm operational compliance with changes in law, and satisfy participant notice requirements. This is the case even though for most plans (see below for an exception for non-governmental 457(b) plans), the deadline to adopt amendments for changes in law under the SECURE Act, CARES Act, and SECURE 2.0 is no earlier than December 31, 2026.
Year-End Plan Amendments
Retirement plan sponsors need to consider the following potential year-end plan amendments:
- Amendments for 2025 Plan Changes. Retirement plans will need to be amended by the end of the 2025 plan year for any “discretionary” plan changes that took effect in 2025. These discretionary changes may include plan design changes, changes in plan administration impacting the provisions in the plan document, and changes to plan provisions pursuant to collective bargaining agreements.
- Amendments for 2026 Plan Changes. In some cases, plan documents may need to be amended to reflect plan design changes before they take effect. For example, plans implementing a new safe harbor 401(k) plan design based on matching contributions must be amended before the beginning of the plan year, with advance notice to participants. Changes to existing 401(k) safe harbor plans, and in some cases, the reduction of matching or non-elective contributions in non-safe harbor 401(k) plans, may also require a prospective amendment and participant notice. (And keep in mind that terminating plans must also be amended to reflect all compliance and discretionary amendments before the plan termination date.)
- Compliance Amendments for Non-Governmental 457(b) Plans. Although IRS Notice 2024-2 extended the SECURE Act, CARES Act and SECURE 2.0 Act amendment deadline for most retirement plans, it did not address non-governmental 457(b) plans. As such, plan sponsors of non-governmental 457(b) plans are encouraged to amend their plans on or before the last day of the 2025 plan year (December 31, 2025 for calendar year plans) to reflect the applicable changes (the updated required minimum distribution rules, and if applicable, the increase in the involuntary cash-out limit to $7,000).
GROOM INSIGHT: Even if not yet required, plan sponsors may wish to amend their plans this year for certain changes that are already in effect, or to reflect changes that will take effect in 2026. Plan sponsors that wait until the legal deadline to amend their plans for SECURE Act, CARES Act, and SECURE 2.0 changes should keep a running list of the effective dates for any optional provisions, as they may have gone into effect several years before the legal amendment deadline.
Operational Compliance
The following are important SECURE 2.0 operational provisions that defined contribution plan sponsors need to be thinking about now:
- Mandatory Roth Catch-Up Requirement. Plan sponsors should be working with payroll administrators and plan recordkeepers to ensure they will be prepared to administer the SECURE 2.0 requirement to comply with the mandatory Roth catch-up requirement for participants with more than $145,000 (as indexed) in prior year FICA wages. Most plans must comply with this new requirement beginning January 1, 2026. Later effective dates may apply to multiemployer plans maintained pursuant to collective bargaining agreements. See here for our detailed alert on the recently issued final catch-up regulations.
- Controlled Group Clarification – Increased Catch-Up Limit (“Super Catch-Ups”) for Employees Turning Age 60-63. The recently issued final catch-up regulations clarified that if one employer in a controlled group adopts the increased catch-up limit for employees turning age 60-63, the “universal availability” rule requires all employers in the same controlled group to do the same, even if they maintain separate plans.
- Long-Term Part-Time Employee Eligibility. Under the SECURE Act, long-term part-time employees who are not collectively-bargained generally must be eligible to participate in a 401(k) plan once they have (i) reached age 21 and (ii) worked at least 500 hours in three consecutive 12-month periods beginning in 2021. SECURE 2.0 reduced the service period to two consecutive 12-month periods, and extended this eligibility rule to 403(b) plans subject to ERISA, beginning in 2025. Long-term part-time employees could first become eligible to contribute under the SECURE 2.0 rules on January 1, 2025 (see our prior alerts on guidance relating to these rules here and here).
Next Steps for Plan Sponsors
In the weeks to come and before year end, retirement plan sponsors should take the following steps to ensure their plan documents and plan operations are compliant and ready for 2026:
- Review and Amend Plan Documents. Review and amend plan documents to ensure they reflect all discretionary plan changes (including design changes that became effective during the year or, in some cases, will become effective next year).
- Review Plan Operations. Review plan operations to determine whether conforming plan amendments may be required and to ensure that changes in law are timely implemented. With respect to changes relating to catch-up contributions, coordinate with payroll administrators and plan recordkeepers to implement the mandatory Roth catch-up requirement. Coordinate with employers in the same controlled group to comply with the universal availability rule for the increased catch-up limits for employees turning ages 60-63.
- Consider Plan Corrections. If the plan document and operational review indicates potential non-compliance, talk to counsel to evaluate possible corrective measures in accordance with the IRS’s Employee Plans Compliance Resolution System (“EPCRS”).
GROOM INSIGHT: SECURE 2.0 enhancements now give retirement plan sponsors greater flexibility to self-correct “eligible inadvertent failures” and manage plan overpayments (see our prior alerts here and here). Consulting counsel early can help determine the most efficient correction approach and mitigate potential penalties or administrative burdens.
- Participant Notices and Communications. Confirm that legally required participant notices (e.g., 401(k) safe harbor notices, QDIA/automatic enrollment notices, fee disclosures, 402(f) notices, and if applicable, unenrolled participant notices) are compliant in form and provided by the applicable deadlines using the appropriate delivery method. Review and confirm that any other participant communications are up-to-date, and remember to provide an updated summary plan description (or summary of material modifications) for any material plan changes within 210 days after the end of the plan year in which the changes are adopted.
- Update Systems for Forthcoming 2026 Retirement Plan Limits. The IRS’s annual cost-of-living adjustments for retirement plan limits are expected soon—typically by late October or early November. Once released, review the new limits promptly and coordinate necessary updates to payroll, recordkeeping and administrative systems to ensure smooth implementation for the 2026 plan year.
Here at Groom, we are reviewing plans to determine if any amendments are needed, and addressing operational requirements needed to keep plans in compliance for 2026. Please contact your Groom attorney if we can be of assistance.
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