JASMA

Retirement Plan Updates That Deserve Immediate Attention

Apply the 2026 Retirement Plan Contribution Limits

Payroll and recordkeeping systems should reflect the correct limits before enrollment materials and employee elections are finalized. The principal 2026 retirement plan limits include:

Participants who are at least 50 by the end of 2026 may generally contribute up to $32,500 when the standard catch-up applies. Employees who turn 60, 61, 62, or 63 during the year may be eligible for the enhanced $11,250 catch-up instead, bringing their potential total deferral to $35,750.

That age-based distinction sounds simple until payroll discovers that “age 60 through 63” is not the same as “over age 59½,” “age at enrollment,” or “age when the contribution was deposited.” Sponsors should test birth-date data, payroll coding, and recordkeeper logic before the first enhanced contribution reaches the plan.

Prepare for the Roth Catch-Up Contribution Rules

SECURE 2.0 requires certain higher-paid participants to make catch-up contributions on a Roth basis. For 2026, the indexed wage threshold is $150,000 in prior-year FICA wages from the employer sponsoring the plan.

Final regulations generally apply to contributions made in taxable years beginning after December 31, 2026, with later applicability dates for certain collectively bargained and governmental plans. Even so, 2026 should be treated as an implementation runway rather than an invitation to nap.

Plan sponsors should determine whether the plan document permits designated Roth contributions, confirm how payroll will identify affected employees, and decide how elections will be handled when a participant crosses from regular deferrals into catch-up contributions. Payroll providers and recordkeepers should also agree on correction procedures for contributions that are mistakenly deposited as pre-tax amounts.

Recheck Automatic Enrollment Requirements

Many 401(k) and 403(b) plans established after December 29, 2022, became subject to SECURE 2.0 automatic enrollment requirements for plan years beginning after 2024. Exceptions may apply to certain small businesses, new businesses, governmental plans, and church plans.

Covered plans generally must automatically enroll eligible employees at a qualifying contribution percentage and increase that percentage over time, subject to statutory limits. At year-end, sponsors should verify that newly eligible employees were enrolled on time, escalation occurred correctly, opt-out elections were honored, and required notices were delivered.

Automatic enrollment errors tend to reproduce like rabbits. One incorrect eligibility date can create missed deferrals, missed matching contributions, corrective contributions, lost earnings calculations, and several awkward emails. A sample-based audit of new hires and rehires can reveal problems before they become a full payroll archaeology project.

Identify Long-Term, Part-Time Employees

Plans should review service records for long-term, part-time employees who may have become eligible to make elective deferrals. SECURE 2.0 shortened the service requirement from three consecutive years with at least 500 hours to two consecutive years for applicable periods beginning in 2025.

The rules may also affect certain 403(b) plans. Sponsors need accurate hour-of-service records, particularly for employees who transfer between locations, return after termination, or move between part-time and full-time classifications. Job titles alone do not determine eligibility; the plan’s service rules and the employee’s actual hours do.

Complete the Retirement Plan Year-End Cleanup

Year-end retirement plan administration should include more than updating contribution limits. Sponsors should review:

• Required minimum distributions for participants who have reached the applicable age, generally 73, subject to employment and ownership rules.
• Participant loan defaults, deemed distributions, and outstanding loans for terminated employees.
• Forfeiture balances and whether they were used within the period required by the plan document.
• Safe harbor, automatic enrollment, qualified default investment alternative, and other annual notices.
• Required minimum, matching, profit-sharing, and corrective contributions.
• Beneficiary records, especially for participants with no valid designation on file.
• Nondiscrimination testing data, controlled-group information, and employee census classifications.
• Investment fees, revenue-sharing arrangements, and the continuing prudence of the plan’s investment lineup.

A plan sponsor’s fiduciary responsibility does not disappear because an outside vendor performs the calculations. Vendors may operate the machinery, but the sponsor still owns the factory.

Health and Welfare Plan Updates for 2026

Update HSA, HDHP, FSA, and HRA Limits

Several health-related limits increased for 2026, requiring updates to open enrollment materials, payroll deductions, summary plan information, and vendor systems.

The annual dependent care assistance exclusion also increased to $7,500 for 2026, or $3,750 for a married employee filing separately. Employers that wish to offer the higher dependent care FSA limit should confirm that their cafeteria plan document, enrollment platform, payroll system, and nondiscrimination testing process are updated accordingly.

The limit increase does not automatically rewrite an employer’s plan. A plan that still states a lower maximum may need a timely amendment before employees can elect the higher amount.

Account for Expanded HSA Eligibility

Beginning in 2026, federal law expanded HSA eligibility in several important ways. Bronze and catastrophic individual-market health plans may be treated as HSA-compatible even when they do not satisfy every element of the traditional HDHP definition.

Telehealth and remote-care services may also be offered before the HDHP deductible is met without automatically disqualifying participants from HSA contributions. In addition, qualifying direct primary care arrangements can coexist with HSA eligibility when statutory requirements and monthly fee limits are satisfied.

These changes are welcome, but they create communication risks. Employees may hear that “bronze plans now work with HSAs” and assume every form of overlapping coverage is harmless. General-purpose health FSAs, certain HRAs, Medicare enrollment, and other first-dollar medical coverage can still affect HSA eligibility. Employee education should explain both the expanded opportunities and the remaining restrictions.

Review ACA Affordability and Cost-Sharing

For plan years beginning in 2026, the Affordable Care Act affordability percentage is 9.96%. Applicable large employers should test the employee contribution required for the lowest-cost self-only option that provides minimum value.

Because employers generally do not know an employee’s household income, they typically rely on one or more regulatory safe harbors, such as the federal poverty line, rate-of-pay, or Form W-2 safe harbor. The chosen approach should be modeled before contribution rates are approvednot after enrollment materials have already been printed and distributed with remarkable confidence.

A plan generally provides minimum value when it covers at least 60% of expected allowed benefit costs and includes substantial inpatient hospital and physician coverage. Applicable large employers should also verify that qualifying coverage is offered to at least 95% of full-time employees and their dependents.

For 2026, the maximum annual cost-sharing limit for many non-grandfathered plans is $10,600 for self-only coverage and $21,200 for coverage other than self-only. HSA-qualified HDHPs are subject to the lower HSA out-of-pocket limits shown above. Sponsors should not casually swap these two sets of numbers; they are related, but they are not twins.

Finish Transparency and Reporting Duties

Group health plan sponsors should maintain a compliance calendar covering obligations that may be completed by insurers, pharmacy benefit managers, or third-party administrators on the plan’s behalf. Delegation should be documented, and the sponsor should obtain written confirmation that submissions were completed.

Important responsibilities may include:

• Gag Clause Prohibition Compliance Attestation: Covered plans generally must submit an annual attestation by December 31.
• Prescription Drug Data Collection: RxDC information is generally due annually by June 1 for the preceding reference year.
• ACA information reporting: Applicable large employers and sponsors of self-insured plans should confirm accurate Forms 1094-C and 1095-C data and electronic filing procedures.
• Medicare Part D creditable coverage: Sponsors should determine whether prescription coverage is creditable, deliver required participant notices, and complete the disclosure to CMS.
• Transparency in Coverage: Sponsors should confirm that required machine-readable files are publicly available and that contractual responsibilities are clearly allocated.

The safest approach is to ask vendors for evidence, not reassurance. “We always handle that” is a pleasant sentence. A dated confirmation, submission receipt, or compliance report is a much better file attachment.

Do Not Ignore Mental Health Parity

The federal departments announced a nonenforcement policy for portions of the 2024 Mental Health Parity and Addiction Equity Act final rule that added new requirements beyond the earlier regulations. That relief is tied to ongoing litigation and does not erase the underlying statute.

Plans that impose nonquantitative treatment limitations, such as prior authorization, provider admission standards, reimbursement methodologies, network restrictions, or step-therapy requirements, must still take existing mental health parity obligations seriously. Statutory duties to perform and document comparative analyses remain important.

Self-funded plan sponsors should ask their administrators for current comparative analyses rather than assuming the carrier owns the entire issue. The sponsor may need access to provider-network data, claim denial information, reimbursement methods, and utilization-management criteria to evaluate compliance.

Coordinate Plan Documents, Vendors, and Employee Communications

The most common year-end problems are not caused by obscure legal theories. They occur because one system was updated while another was not.

For example, payroll may accept a $7,500 dependent care election while the cafeteria plan document still caps benefits at $5,000. A recordkeeper may recognize the age 60 catch-up limit while payroll continues applying the standard age-50 amount. An insurer may revise cost-sharing while the summary of benefits and coverage displays last year’s figures.

Before year-end, sponsors should compare the following materials against one another:

• Signed plan documents and amendments
• Summary plan descriptions and summaries of material modifications
• Enrollment guides and employee-facing websites
• Payroll deduction tables
• Recordkeeper and administrator system settings
• Insurance policies and administrative services agreements
• Board, committee, or authorized-officer approvals

Any inconsistency should be assigned to a specific owner with a deadline. “HR and the vendor will work it out” is not an owner. It is a fog bank.

A Practical Year-End Checklist for Plan Sponsors

1. Confirm all 2026 and upcoming 2027 dollar limits with payroll and vendors.
2. Audit retirement plan eligibility, automatic enrollment, escalation, and catch-up coding.
3. Review long-term, part-time employee service records.
4. Verify required minimum distributions and corrective contributions.
5. Reconcile contribution deposits against payroll on a pay-period basis.
6. Review forfeitures, participant loans, uncashed checks, and missing participants.
7. Complete nondiscrimination and top-heavy testing as early as practical.
8. Test ACA affordability before finalizing employee premiums.
9. Confirm HSA, FSA, HRA, and dependent care limits in every system.
10. Obtain proof of RxDC, gag clause, ACA, and other vendor-supported filings.
11. Review mental health parity analyses and vendor data-access provisions.
12. Document fiduciary committee decisions, fee reviews, and investment monitoring.
13. Prepare amendments, notices, and employee communications with enough time for review.

Experience-Based Lessons From Year-End Plan Administration

Year-end plan work repeatedly demonstrates that the smallest operational details can create the largest cleanup projects. A plan may have excellent legal language and a nationally recognized recordkeeper, yet still fail because an employee’s hire date was entered incorrectly or a payroll code was mapped to the wrong contribution source.

One common experience involves late retirement plan deposits. A finance team may believe contributions are timely because every deposit is made by a familiar monthly deadline. For participant contributions, however, the governing standard generally focuses on how quickly amounts can reasonably be segregated from employer assets. A company that can transmit payroll taxes within days may have difficulty explaining why employee deferrals sat in its operating account for several weeks.

The practical lesson is to measure deposits by actual payroll date. A simple reconciliation showing the deduction date, transmission date, funding date, and amount can expose delays immediately. It also creates a useful record demonstrating that the sponsor monitors its process rather than discovering problems during an audit three years later.

Another recurring issue appears when an employee changes status. Someone moves from part-time to full-time, transfers to a related company, is rehired, or begins working enough hours to qualify as a long-term, part-time employee. Human resources may understand the employment change, but the eligibility file sent to the recordkeeper does not. The employee then misses enrollment, matching contributions, or both.

Successful sponsors do not merely ask whether the eligibility file was sent. They test individual cases. Selecting a few new hires, rehires, transfers, and part-time employees each quarter often reveals more than a polished annual compliance report.

Health plans produce similar mismatches. During open enrollment, the benefits guide may advertise a new deductible while the insurer’s system retains the old amount. An FSA election limit may be updated on the enrollment platform but not in payroll. Employees discover the inconsistency only after the first claim or paycheck, which is an impressively efficient way to turn a technical correction into an employee-relations problem.

The best year-end process therefore includes a “pretend participant” test. Sponsors can walk through enrollment, payroll deductions, claim examples, employer contributions, and termination procedures as though they were employees. This reveals confusing instructions, broken links, contradictory numbers, and vendor assumptions that formal legal review may miss.

Vendor oversight is another area where experience changes behavior. New sponsors often assume a contract clause assigning reporting responsibilities means the task is finished. Experienced sponsors request proof. They ask who submitted the report, when it was accepted, which plans and participants were included, and what data came from the employer.

That approach is especially valuable for ACA reporting, RxDC submissions, Medicare creditable coverage determinations, and gag clause attestations. Responsibility may be delegated, but accountability has a habit of returning to the plan sponsor’s desk.

Finally, effective plan committees document decisions while memories are fresh. Minutes should identify the information reviewed, questions asked, advice received, and actions approved. They do not need to read like a courtroom transcript. They should demonstrate a prudent process.

The most reliable year-end strategy is surprisingly unglamorous: start early, reconcile data, challenge assumptions, collect evidence, and assign every task to a named person. Compliance rarely rewards dramatic last-minute heroics. It prefers quiet preparation, accurate records, and calendars with fewer red exclamation marks.

Retirement and health plan sponsors that follow this approach enter the new year with cleaner data, more dependable vendors, clearer employee communications, and fewer expensive corrections. That is not merely administrative housekeeping. It is part of protecting employees’ benefits and fulfilling the sponsor’s fiduciary and compliance responsibilities.