Employee Benefit Plan Year-End Considerations

We hope this E-Alert finds all of our clients and friends well. As you know, we try to keep our E-Alerts to a minimum because we know your inboxes are already filled with "breaking news" from numerous outlets. But this year is different because there are several important developments affecting retirement and health and welfare plans that we want to bring to your attention as we head into year-end.

RETIREMENT PLANS

The 2026 Plan Amendment Deadline Is Finally Here— “Kind of”

For the past several years, December 31, 2026 has been viewed as the general amendment deadline for most nongovernmental qualified retirement plans (e.g., 401(k) plans and defined benefit pension plans) and 403(b) plans under SECURE 1.0, SECURE 2.0, and the CARES Act. The IRS recently provided some welcome clarification: while December 31, 2026 generally remains the deadline for discretionary law change provisions that have been implemented, certain required amendments may be adopted later under the applicable IRS Required Amendments List. For example, for individually designed plans, amendments for items included on the 2025 Required Amendments List generally are not due until December 31, 2027.

Even with that clarification, most of our clients are moving forward with their amendment work this year.

So, what needs to go into the amendments, you ask? That will depend on the plan and the provisions it has implemented. The immediate focus for the 2026 deadline generally will be discretionary changes the plan actually implemented, such as enhanced catch-ups for ages 60–63, student loan matching, the increased $7,000 cash-out threshold, Roth employer contributions, terminal illness distributions, disaster recovery distributions, and other optional provisions. Plans also will need to reflect required changes, such as updated required minimum distribution rules, mandatory Roth catch-up contributions, and the long-term part-time employee rules, although some of these amendments may have later deadlines under the Required Amendments List process. Amendments will also have to include any CARES Act distributions, expanded loans, and the 2020 RMD waiver if not already reflected in the plan document. (Of course, the preceding is not an exhaustive list.)

Remember that not all plans have the same amendment deadline. As we noted in our October 2025 E-Alert, 457(b) plans sponsored by tax-exempt employers had an earlier deadline of December 31, 2025. If that deadline was missed, please contact us immediately. Collectively bargained plans generally have until December 31, 2028, while governmental plans and 403(b) plans maintained by public schools generally have until December 31, 2029.

Recommendation: Because the applicable amendment deadline depends on both the type of change and the type of plan, this is not a one-size-fits-all exercise, and we recommend starting well before December. We have prepared charts describing the required and optional SECURE 1.0 and SECURE 2.0 provisions, along with our recommendation for each, including which optional features we generally do not recommend. Please contact us so we can determine what needs to be amended now and what can wait, help confirm that the plan document matches how the plan is being administered in operation, and prepare or review your amendment or restatement package.

Check in on Mandatory Roth Catch-Up Contributions

2026 is the first year in which participants whose prior year FICA wages exceeded the applicable threshold ($150,000 in 2025 wages, for purposes of 2026 catch-ups) must make catch-up contributions on a Roth basis. The IRS final regulations generally become applicable beginning in 2027. For 2026, plans may operate under a reasonable, good faith interpretation of the statutory requirements.

Recommendation: With most of the first implementation year now behind us, this is a good time to review how the process has worked in practice, including whether all employees subject to the Roth catch-up requirement were correctly identified and whether any operational errors need to be corrected. Because the available correction methods depend on both timing and the plan’s procedures, identifying issues before the 2026 Form W-2s are issued is ideal. Please contact us if you would like us to review your 2026 implementation and/or assist with any necessary corrections before year-end.

“Trump Accounts” — A New Benefit Design Question

Beginning July 4, 2026, employers may contribute up to $2,500 per employee per year to the newly-permitted “Trump Accounts” for employees or their dependents under a written Trump Account contribution program. The $2,500 cap applies per employee (not per dependent), and generally may be contributed only while the beneficiary is still in the Trump Account “growth period.”

Helpfully, the DOL has stated that Trump Accounts generally are not employee pension benefit plans under Title I of ERISA, provided certain requirements are satisfied. This guidance removes a significant barrier for employers considering offering Trump Accounts.

The IRS also recently issued proposed regulations addressing how employer Trump Account contribution programs may be structured and administered, including the written plan requirement, employee notices, nondiscrimination testing, contribution procedures, reporting, and corrections. Employers may rely on the proposed regulations now, so programs can be designed without waiting for final rules.

Recommendation: If a Trump Account contribution program is on the table for 2027, now is the time to begin the design and document work. Please contact us if you would like help determining whether this benefit fits your workforce, designing and documenting the program, or addressing the related tax, nondiscrimination, administrative, and ERISA considerations.

The Saver’s Match Is Coming in 2027

Beginning with the 2027 tax year, the SECURE 2.0 Saver’s Match replaces the existing so-called “Saver’s Credit” for retirement plan and IRA contributions. Eligible lower- and moderate-income individuals may receive a federal matching contribution of up to 50% of the first $2,000 they contribute to their IRA, 401(k) or 403(b) plan, or other specified retirement accounts, for a maximum annual match of $1,000. The first Saver’s Match contributions will be paid in 2028 based on contributions made for 2027.

In Notice 2026-48, the IRS previewed the rules it expects to propose for administering the new program, including several possible ways for participants to direct Saver’s Match contributions to employer plans.

Plans are not required to accept Saver’s Match contributions, but they (along with IRA providers) are encouraged to do so. Plans that choose to do so will need to be amended and will have additional reporting, tax, and distribution-restriction obligations.

Recommendation: Many of our plan sponsor clients currently do not intend to accept Saver’s Match contributions directly, so for them this is primarily a monitoring item rather than a need to take immediate action. We include it now so employers are aware of the issue and can make an informed decision when recordkeepers begin asking how the plan intends to handle Saver’s Match contributions. Please contact us if you would like to discuss whether accepting the contributions makes sense for your plan or to review any recordkeeper proposal or plan amendment.

Retirement Plan Fiduciary Update—Supreme Court and DOL’s Proposed Alternative Investment Safe Harbor

There is a lot happening on the retirement plan fiduciary front. Earlier this year, the Supreme Court agreed to hear Anderson v. Intel Corp. Investment Policy Committee, which addresses what a plaintiff must allege to state a claim that plan fiduciaries acted imprudently in selecting or retaining a plan investment. In particular, the Court will consider the role of a “meaningful benchmark” in pleading an ERISA prudence violation. This decision could have a significant impact on how easily these lawsuits survive the pleading stage and, in turn, on retirement plan fiduciary litigation generally. We are monitoring this litigation and will likely be discussing it at 2027 committee meetings.

Separately, the DOL has proposed regulations establishing a process-based safe harbor for fiduciaries selecting designated investment alternatives for participant-directed plans. Although the proposal applies more broadly, one of its significant purposes is to provide greater clarity for fiduciaries considering plan investment options that include alternative assets, such as private equity, real estate, private credit, and similar assets.

The proposal is not final and should not be viewed as insulating fiduciaries from liability. Rather, it would provide a presumption of prudence when fiduciaries follow the prescribed process in evaluating relevant considerations, such as performance, fees, liquidity, valuation, benchmarks, and complexity. Most observers expect the realistic near-term implementation to be alternative sleeves inside target date or multi-asset vehicles rather than standalone menu options.

Recommendation: We do not think there is a need for committees to take action simply because this rule has been proposed, and we would caution against treating the proposed safe harbor as a green light for alternative investments. If your committee is being asked to consider alternative investments or other unfamiliar investment products, please contact us so that we can help ensure that the committee follows and documents an appropriate fiduciary process and works with qualified investment professionals in evaluating the proposal.

HEALTH AND WELFARE PLANS

Year-End and Early-2027 Deadlines

Here is a short checklist of some of the items that should be on plan sponsors’ calendars:

• Gag clause prohibition compliance attestation — due December 31, 2026. Fully insured plans may rely on the issuer’s attestation; self-insured plans may contract with a TPA to submit it, but the legal responsibility remains with the plan. Self-insured plan sponsors should confirm with their TPA in writing who is filing the required attestation.
  
• FSA year-end. Remember that absent a grace period (or carryover in the case of a health FSA), unused amounts remaining in a health FSA or dependent care FSA are forfeited at plan year-end (December 31 for calendar-year plans) to the extent qualifying expenses are not incurred by that date (and submitted by the applicable deadline to submit reimbursement claims). Additionally, such forfeitures can only be used for the purposes set forth in the health FSA and/or dependent care FSA plan document.
  
• Medicare Part D creditable coverage. Confirm the annual creditable coverage notice for 2027 will be sent to participants before October 15, 2026 and that the associated CMS disclosure will be made within 60 days after the start of the plan year (March 1, 2027 for calendar year plans).
  Note that the changes to the simplified method that were made by the Inflation Reduction Act—significantly increasing the prescription drug thresholds needed to satisfy creditable coverage requirements—are mandatory for the first time in 2027. Sponsors of self-insured health plans should therefore ensure their TPAs are applying these increased thresholds to determine creditable coverage. This is important to Medicare Part D eligible participants as they may be subject to a late Medicare Part D enrollment penalty if the prescription drug coverage in which they are enrolled before enrolling in Medicare Part D does not satisfy creditable coverage requirements. Part D does not satisfy creditable coverage requirements.
  
• RxDC and Healthcare Spending reporting. This reporting for the 2026 reference year is due June 1, 2027. Self-insured plans may contract with third-party reporting entities (such as a PBM, TPA or other vendor) to complete the reporting, but the legal responsibility remains with the plan. Self-insured plan sponsors should confirm that healthcare and prescription drug information needed to complete the reporting are appropriately coordinated between vendors responsible for the reporting. Because of this required coordination and plan-specific information needed from plan sponsors, vendor data-collection timelines run months ahead of that date.
  
• ACA reporting. Forms 1094-C and 1095-C for 2026 are due in early 2027. The IRS continues to enforce both the assessment of employer shared responsibility payments (Letter 226J) and the associated reporting requirement itself (Letter 5699).
  
• ACA affordability for 2027. Rev. Proc. 2026-26 sets the affordability percentage at 10.22% for plan years beginning in 2027 — up from 9.96% and above 10% for the first time. Rev. Proc. 2026-22 sets the indexed shared responsibility payment amounts. If open enrollment contribution rates are still being finalized, this gives applicable large employers modest additional room.

Section 129 Dependent Care Assistance Nondiscrimination Testing

This summer, the IRS issued proposed regulations providing long-awaited guidance on the nondiscrimination requirements for dependent care assistance programs (“DCAPs”) under Section 129 of the Internal Revenue Code. Although Code Section 129 has been on the books for more than 40 years, employers have had little regulatory guidance on how to apply its nondiscrimination rules.

The proposed regulations provide considerably more clarity, including detailed rules for the contributions and benefits, eligibility, owner concentration, and average benefits tests. Fortunately, although the regulations are not yet final, plan sponsors may rely on them now.

Recommendation: In light of this recent guidance, now is a good time to evaluate how your DCAP testing is being performed and whether your existing approach is consistent with the proposed rules. Please contact us if you would like us to review your testing methodology, work with your administrator on the testing process, or otherwise assist with your compliance efforts.

Mental Health Parity: Nonenforcement Is Not No Enforcement

This is the item we most often see misunderstood, so it is worth being precise. As background, in connection with the ERISA Industry Committee’s lawsuit challenging the 2024 final rule under the Mental Health Parity and Addiction Equity Act (MHPAEA), the regulators announced in May 2025 that they would not enforce provisions of the 2024 rule that are new relative to the 2013 rule — the meaningful benefits requirement, the prohibition on discriminatory factors and evidentiary standards, the outcomes data evaluation, and the heightened comparative analysis content requirements. That policy runs until the litigation is finally resolved, plus an additional 18 months.

Importantly, this does not mean MHPAEA compliance or the comparative analysis requirement has gone away. MHPAEA’s statutory requirements (including the requirement added by the Consolidated Appropriations Act, 2021 to perform and document comparative analyses of nonquantitative treatment limitations (“NQTL”)) remain in effect.

The DOL recently provided additional clarity on how it intends to enforce those continuing requirements, stating that it will prioritize its NQTL comparative analysis enforcement in three areas that it believes present the greatest potential for significant participant harm: separate treatment limitations and exclusions; medical necessity standards and review processes; and network adequacy standards, with particular attention to network admission standards and provider reimbursement methodologies. The DOL also provided practical guidance on its website identifying plan provisions and practices that may raise parity concerns. (See: Identifying Potential Problems: If You See the Following in Written Plan Provisions or Plan Operations, Think Twice about Possible MHPAEA Compliance Problems | U.S. Department of Labor.) This guidance from the regulators is very helpful because it gives plan sponsors considerably more visibility into where the DOL intends to focus its enforcement efforts. However, it does not limit MHPAEA compliance to these areas or eliminate the obligation to maintain a compliant process.

Recommendation: The 2025 nonenforcement announcement should not be viewed as a reason to put MHPAEA compliance efforts on hold. The new DOL guidance provides a useful opportunity to revisit existing comparative analyses and assess them against EBSA’s current enforcement priorities. Please contact us if you would like us to review your plan’s comparative analysis, evaluate the areas now receiving heightened enforcement attention, or review the contractual allocation of responsibility with your vendors for MHPAEA compliance.

Health and Welfare Fiduciary Litigation Continues to Expand

As we have discussed in a number of prior E-Alerts, plaintiffs’ firms continue to expand their focus on health and welfare plans, often applying theories familiar from retirement plan litigation. Lawsuits include allegations of fiduciary breaches and noncompliance involving employee-paid voluntary benefits (accident, critical illness, cancer, hospital indemnity), pharmacy benefit manager (PBM) selection and monitoring, excessive fees, HIPAA tobacco surcharge administration, as well as the administration of other wellness programs that offer incentives (or impose penalties) for completing health-related activities (such as the provision of health information or biometric screenings).

Recommendation: Our recommendation has not changed. Plan sponsors should be able to demonstrate that they have an appropriate fiduciary process for governing their health and welfare plans, selecting and monitoring service providers, evaluating fees and potential conflicts, and reviewing key contractual protections.

We regularly help clients review and strengthen their fiduciary governance processes, including committee structures and charters, fiduciary training, vendor selection and monitoring, compensation disclosures, contracts, benchmarking, and RFPs. Where outside benchmarking or market support is appropriate, we also work with several firms that provide cost-effective benchmarking and RFP support which we oversee so that the fiduciary record supports the decision. Please contact us if you would like us to review your current process or assist with an upcoming vendor renewal, RFP, or other fiduciary decision.

FINAL THOUGHTS

We realize this is a great deal of information to absorb. If you take only one thing from this E-Alert, it should be that now is the time to check in with us about the year-end retirement plan amendment deadlines and make sure that the necessary document work is underway.

The other developments discussed above will not affect every plan in the same way. We would be happy to help you determine which items require attention now, which can wait, and what steps make sense for your plans.

Please contact us if we can assist with any of your compliance efforts, and we hope for a terrific Q4 for everyone!