2025 End-of-Year Plan Sponsor “To Do” List (Part 3) Qualified Retirement Plans
As 2025 comes to an end, we are pleased to present our traditional End-of-Year Plan Sponsor “To Do” Lists. This year, we present our “To Do” Lists in four separate SW Benefits Updates. Part 1 addressed health and welfare plan issues, Part 2 covered the annual cost of living adjustments, this Part 3 focuses on qualified retirement plan issues, and Part 4 will discuss executive compensation issues. Each SW Benefits Update provides you with a “To Do” list of items on which you may want to take action before the end of 2025 or in early 2026.
As always, we appreciate your relationship with Snell & Wilmer and hope that these “To Do” Lists help focus your efforts over the next few months.
With year-end approaching, employers should consider reviewing their key administrative, operational and compliance responsibilities for their qualified retirement plans. Year-end is an ideal opportunity for employers to confirm that they have adopted required amendments, that their operational processes are up to date, particularly in light of the ongoing implementation of the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) and the SECURE 2.0 Act of 2022 (“SECURE 2.0”), and that contributions, testing and participant communications are on track. An employer’s thoughtful review now can help prevent future compliance issues and ensure that qualified retirement plans continue to operate in the best interests of participants heading into 2026.
For your convenience, we have broken this “To Do” List into four categories.
“To-Do” Categories
- All Qualified Plans “To Do” List
- Defined Contribution Plans (Including Section 401(k) Plans) “To Do” List
- Defined Benefit Plans “To Do” List
- Section 403(b) Plans “To Do” List
All Qualified Plans “To Do” List
- Review 2026 Plan Limits: Become familiar with the 2026 plan limits. See Part 2 – Annual Cost of Living Adjustments for more information.
- Adopt Design Changes by the End of the Plan Year: If an employer made any design changes during the year, the plan generally must be amended to reflect those design changes by the last day of the 2025 plan year (i.e., December 31, 2025, for calendar year plans).
- Review IRS Required Amendments and Operational Compliance Lists: Employers should review the Required Amendments Lists published by the Internal Revenue Service (the “IRS”) (including the still-applicable 2024 list) to determine whether they need to make necessary plan amendments, as well as the IRS Operational Compliance List, which highlights qualification changes and guidance that may require amendments or operational updates.
- Review Required Plan Amendments under the SECURE, SECURE 2.0, and CARES Acts: The SECURE Act and SECURE 2.0 include numerous provisions affecting qualified retirement plans. While operational compliance is required now, most plan amendments are not due until December 31, 2026. Employers should review which provisions apply to their plans and track what amendments will be necessary to implement these provisions. The IRS has also extended the deadline to amend plans for changes under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), including 2020 required minimum distribution (“RMD”) waivers, increased loan limits, loan repayment relief, and coronavirus-related distributions until December 31, 2026 for most plans.
- Consider Department of Labor (the “DOL”) Cybersecurity Guidance: Cybersecurity continues to be a major threat to retirement benefits. The DOL has issued guidance for plan sponsors, fiduciaries, recordkeepers and participants. Employers should review the DOL’s best practices, assess whether their cybersecurity programs and service provider agreements address these expectations, and consider sharing the DOL’s Online Security Tips with plan participants.
- Update Beneficiary Designations: Encourage participants to review and update beneficiary designations to ensure they align with their current intentions.
- Locate Missing Participants: Review processes for locating missing participants as this is an ongoing compliance focus for the DOL and IRS.
- Update and Distribute Summary Plan Description: Summary plan descriptions must be updated and distributed once every five years if the plan has been amended during the five-year period and once every ten years for other plans.
- Review Committee Charters and Plan Governance Structure: Review and update fiduciary committee memberships, amend committee charters, and assess the need for changes to current policies and procedures to ensure the plan is ready for the next plan year.
- Provide Fiduciary Training: Conduct annual training for fiduciaries on ERISA duties, prohibited transactions, service provider oversight, cybersecurity, and recent legal developments.
- Review ERISA Bond and Fiduciary Liability Insurance: Confirm that ERISA bond coverage is at least 10% of plan assets (within statutory limits) and ensure fiduciary liability insurance remains adequate for the plan’s size and features.
- Make RMDs: Plan administrators should ensure that plans make all 2025 RMDs by December 31st, taking into account the delayed required beginning dates under the SECURE Act and SECURE 2.0. Under SECURE 2.0, the age for starting RMDs increased to age 73 (effective in 2023) and will rise to age 75 in 2033. Plan administrators also should confirm that plan operations and administrative procedures align with the 2024 final and proposed RMD regulations.
Defined Contribution Plans (Including Section 401(k) Plans) “To Do” List
- Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List apply to defined contribution plans, including Section 401(k) plans.
- Consider Changes Made by SECURE 2.0:
- Roth Catch-Up Contributions: Beginning in 2026, certain catch-up contributions for participants age 50 and older with FICA wages over $150,000 in 2025 must be made on a Roth (after-tax) basis. Employers may rely on a good faith interpretation of the rule for 2026. Special effective dates apply for collectively bargained plans. Plan sponsors have flexibility in applying the rules, including whether to aggregate wages from related employers, and may implement the requirements using a “deemed Roth” or a “zero-out” approach. Employers should document their chosen elections and implementation methods to ensure proper plan amendments in 2026.
- Increased Catch-Up Contribution Limits for Older Participants: Effective January 1, 2025, SECURE 2.0 allows participants who turn ages 60-63 during the plan year to make additional catch-up contributions. If the participant is subject to the Roth catch-up rules, these super catch-up contributions must be made on a Roth basis. For 2026, the super catch-up limit is $11,250. Adoption of super catch-up contributions is optional, but if adopted, it must be implemented across all plans of related employers. Special rules apply for collectively bargained employees.
- Automatic Enrollment and Escalation Requirements for New Section 401(k) Plans: SECURE 2.0 requires that any Section 401(k) plan that is newly established on or after December 29, 2022 (a “New Section 401(k) Plan”) satisfy certain automatic enrollment and automatic escalation requirements for plan years beginning after December 31, 2024. This requirement does not apply to Section 401(k) plans that were in existence before December 29, 2022, or to plans sponsored by certain new and small businesses. Under SECURE 2.0, a New Section 401(k) Plan must include an initial automatic enrollment amount of at least 3% but not more than 10%. For each year thereafter, this amount must increase until it reaches 10% but not more than 15%. Employers that have implemented a New 401(k) Plan or that are considering doing so should work with counsel to ensure compliance with these requirements.
- No RMDs for Roth Accounts: Beginning with the 2025 taxable year, participants are no longer required to take RMDs from Roth accounts in qualified retirement plans, aligning plan-based Roth accounts with the Roth IRA rules.
- Increased Cash-Out Limits: SECURE 2.0 increases the maximum amount that may be involuntarily cashed out of a qualified plan from $5,000 to $7,000 for distributions made after December 31, 2023. This is an optional change, so plan sponsors should consider whether they want to adopt this change and, if so, the effective date for such change.
- Track Hours of Service for Long-Term, Part-Time Employees: The SECURE 2.0 long-term, part-time employee rules took effect on January 1, 2025. They require that Section 401(k) plans permit long-term, part-time employees (i.e., employees who have reached age 21 and worked at least 500 hours in 2023 and 2024) make salary deferrals pursuant to the plan. The IRS issued proposed regulations on these requirements in November 2023, but it has not yet issued final regulations.
- Consider Adopting Optional SECURE 2.0 Changes: Employers may choose to adopt optional SECURE 2.0 provisions, including offering a student loan 401(k) match (treating qualified student loan payments as elective deferrals for matching purposes) and other optional features such as emergency distributions, terminal illness distributions, domestic abuse distributions, and pension-linked employee savings accounts.
- Provide Annual Notices and Participant Communications: Plans must provide several notices to participants each year. The following notices must be distributed at least 30 and not more than 90 days before the beginning of each plan year (December 2, 2025, for calendar year plans):
- Safe Harbor Notice (Sections 401(k)/401(m) matching safe harbor) (if applicable): Annual notice explaining the plan’s safe harbor match, eligibility, and participant rights.
- Automatic Enrollment Notice (if applicable): Annual notice describing the automatic enrollment features, default deferral rates, opt‑out rights, and applicable withdrawal rules.
- Qualified Default Investment Alternative (“QDIA”) Notice: Informs participants about the plan’s default investment option used when the participant does not provide investment direction.
- Additional required annual participant communications include:
- Participant Fee Disclosure Notice: Annual disclosure of plan‑level and investment‑level fees, including a comparative chart of the plan’s investment options.
- Participant Benefit Statements: Must be provided at least annually, and quarterly for participant-directed plans.
- Summary Annual Report: A summary of the Form 5500 information that is due nine months after the end of the plan year (or two months after an extended Form 5500 due date).
- Prospectus or Prospectus Update: Required for plans offering employer securities to reflect any material plan changes during periods in which offers or sales occur.
- If Adding a Qualified Automatic Contribution Arrangement (“QACA”) or an Eligible Automatic Contribution Arrangement (“EACA”) for 2026, Adopt Amendment Before the 2026 Plan Year: Neither a QACA nor an EACA may be adopted mid-year. Accordingly, if an employer wishes to add a QACA or an EACA to its plan for the 2026 plan year, it must adopt an amendment by December 31, 2025, for calendar year plans.
- Use or Allocate Plan Forfeitures: Ensure forfeitures are used or allocated no later than 12 months following the end of the plan year in which they occur, consistent with the plan document’s terms. Plan administrators should review plan terms and forfeiture account balances and confirm they are fully applied by year-end (for calendar year plans, by December 31, 2025).
- Review Plan Forfeiture Provisions: Since 2023, plaintiffs have filed multiple class-action lawsuits against employers over the use of 401(k) plan forfeitures. In short, plaintiffs argue that plan fiduciaries breach their fiduciary duty to act in the best interest of plan participants when they choose to use plan forfeitures to reduce future employer contributions instead of reducing participants’ fees. Plaintiffs are making these claims despite plan documents expressly permitting plan administrators to use forfeitures for either purpose. While many district courts have sided with plan fiduciaries on these claims to date and granted their motions to dismiss, other district courts have allowed plaintiffs’ claims to proceed. In light of this litigation risk, plan sponsors who intend to use forfeitures to fund employer contributions should consider reviewing their plan document to confirm that it expressly requires the plan administrator to use forfeitures to fund employer contributions prior to reducing any participant fees. Including this requirement in the plan document makes the use of forfeitures a settlor decision (rather than a fiduciary decision) and eliminates the fiduciary decision required when the plan document allows forfeitures to be used for either purpose.
- Alternative Investments: Executive Order 14330: Democratizing Access to Alternative Assets for 401(k) Investors aims to expand 401(k) plan access to alternative investments like private equity, real estate, commodities, and crypto. The law has not changed yet, as regulators are still reviewing guidance and considering potential fiduciary safe harbors. Plan fiduciaries are reminded to continue to apply a careful, thoughtful process when selecting plan investment options. They should consider reviewing plan investment policies, exploring available products, and learning about potential risks so they are prepared if changes occur.
Defined Benefit Plans “To Do” List
- Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List apply to defined benefit plans.
- Post Portions of Form 5500 on Company’s Intranet: A plan sponsor of a defined benefit plan that maintains an intranet website for the purpose of communicating with employees (and not the public) is required to post portions of the defined benefit plan’s Form 5500 on the intranet.
- Provide Annual Notices and Participant Communications: Plan administrators should ensure participants receive all required notices, including:
- Annual Funding Notice: Single-employer defined benefit plans must provide participants with the plan’s funding status within 120 days after the end of the plan year. Small plans (fewer than 100 participants) may wait to provide the annual funding notice until the Form 5500 is due.
- Adjusted Funding Target Attainment Percentage (“AFTAP”) Notice (if applicable): If the AFTAP is below 80%, participants must be notified of any restrictions on benefit payments. Participants already in pay status do not require this notice.
- Participant Benefit Statements: Must be provided every three years or upon request. Plans may satisfy the requirement by notifying participants annually that the statement is available and how to access it.
- Suspension of Benefits Notice (if applicable): If required by the terms of the plan, plan administrators must provide notice of the suspension of benefits to participants who continue employment beyond normal retirement age and to rehired retirees. This notice should be given in the first month for which the benefit is suspended.
Section 403(b) Plans “To Do” List
- Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List apply to Section 403(b) plans.
- Consider Changes Made by SECURE 2.0:
- Roth catch-up contributions: Beginning in 2026, certain catch-up contributions for participants age 50 and older with FICA wages over $150,000 in 2025 must be made on a Roth (after-tax) basis. Employers may rely on a good faith interpretation of the rule for 2026. Special effective dates apply for collectively bargained plans. Plan sponsors have flexibility in applying the rules, including whether to aggregate wages from related employers, and may implement the requirements using a “deemed Roth” or a “zero-out” approach. Employers should document their chosen elections and implementation methods to ensure proper plan amendments in 2026. It is important to note that employees of qualified organizations who are permitted to make special 403(b) catch-up contributions under Section 402(g)(7)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) (up to $15,000 for employees with at least 15 years of service) (“Special Catch-Ups”) are not required to make Special Catch-Ups on a Roth basis, even if they meet the FICA wage threshold in the prior year. The mandatory Roth catch-up requirement applies only to catch-up contributions that exceed the Special Catch-Ups.
- Increased Catch-Up Contribution Limits for Older Participants: Effective January 1, 2025, SECURE 2.0 allows participants who turn ages 60-63 during the plan year to make additional catch-up contributions. If the participant is subject to the Roth catch-up rules, these super catch-up contributions must be made on a Roth basis. For 2026, the super catch-up limit is $11,250. Adoption of super catch-up contributions is optional, but if adopted, it must be implemented across all plans of related employers. Special rules apply for collectively bargained employees. Further, if a Section 403(b) plan participant is eligible to make Special Catch-Ups and super catch-ups in the same year, then any catch-up contribution will be treated as Special Catch-Up first and then as a super catch-up (which must be made on a Roth basis for those who meet the FICA wage threshold in the prior year).
- Automatic Enrollment and Escalation Requirements for New Section 403(b) Plans: SECURE 2.0 requires that any Section 403(b) plan that is newly established on or after December 29, 2022 (a “New Section 403(b) Plan”) satisfy certain automatic enrollment and automatic escalation requirements for plan years beginning after December 31, 2024. This requirement does not apply to Section 403(b) plans that were in existence before December 29, 2022, or to plans sponsored by certain new and small businesses. Under SECURE 2.0, a New Section 403(b) Plan must include an initial automatic enrollment amount of at least 3% but not more than 10%. For each year thereafter, this amount must increase until it reaches 10% but not more than 15%. Employers that have implemented a New 403(b) Plan, or that are considering doing so should work with counsel to ensure compliance with these requirements.
- No RMDs for Roth Accounts: Beginning with the 2025 taxable year, participants are no longer required to take RMDs from Roth accounts in qualified retirement plans, aligning plan-based Roth accounts with the rules for Roth IRAs.
- Increased Cash-Out Limits: SECURE 2.0 increases the maximum amount that may be involuntarily cashed out of a qualified plan from $5,000 to $7,000 for distributions made after December 31, 2023. This is an optional change, so plan sponsors should consider whether they want to adopt this change and, if so, the effective date for such change.
- Track Hours of Service for Long-Term, Part-Time Employees: SECURE 2.0 amended ERISA and the Code to provide new rules for long-term, part-time employees in ERISA Section 403(b) plans (“ERISA LTPT employees”). The IRS clarified in Notice 2024-73 that ERISA Section 403(b) plans are permitted to continue to exclude all student employees, but they no longer can exclude ERISA LTPT employees, which includes part-time employees who complete a period of service with the employer that extends beyond the earlier of (1) the completion of one year of service or attaining age 21, or (2) the first 24-month period that consists of two consecutive 12-month periods during which the employee worked at least 500 hours. Notice 2024-73 also clarified the new vesting rules that apply to ERISA LTPT employees and the application of certain nondiscrimination rules. ERISA Section 403(b) plans were required to operationally comply with the new rules beginning on January 1, 2025. The IRS has not yet issued proposed regulations with respect to these new rules.
- Consider Adopting Optional SECURE 2.0 Changes: Employers may choose to adopt optional SECURE 2.0 provisions, including offering a student loan 403(b) match (treating qualified student loan payments as elective deferrals for matching purposes) and other optional features such as emergency distributions, terminal illness distributions, domestic abuse distributions, pension-linked employee savings accounts, and expanded hardship withdrawal sources.
- Make RMDs: Plan administrators should make 2025 RMDs by December 31st for all participants who have attained their required beginning date, taking into account the delayed required beginning date provided by the SECURE Act and SECURE 2.0.
- Provide Annual Notices and Participant Communications: Section 403(b) plans must provide several notices to participants each year. The following notices must be distributed at least 30 and not more than 90 days before the beginning of each plan year (December 2, 2025, for calendar year plans):
- Safe Harbor Notice: Annual notice explaining the plan’s safe harbor match, eligibility, and participant rights.
- Automatic Enrollment Notice: Annual notice describing the automatic enrollment features, default deferral rates, opt‑out rights, and applicable withdrawal rules.
- QDIA Notice: Informs participants about the plan’s default investment option used when the participant does not provide investment direction.
- Additional required annual participant communications include:
- Participant Fee Disclosure Notice: Annual disclosure of plan‑level and investment‑level fees, including a comparative chart of the plan’s investment options.
- Participant Benefit Statements: Must be provided at least annually, and quarterly for participant-directed plans.
- Summary Annual Report: A summary of the Form 5500 information that is due nine months after the end of the plan year (or two months after an extended Form 5500 due date).
- Ensure Compliance with the Universal Availability Rules: Noncompliance with the universal availability (“UA”) rules is a common defect in Section 403(b) plans. The UA rules ensure that if an employer allows one employee to make salary deferrals, the employer offers the same opportunity to all employees, with certain exceptions. The IRS requires that the plan provide each employee with an “effective opportunity” to participate, which is determined by all of the facts and circumstances, including notice of eligibility, the period of time during which an election may be made, and any other conditions on elections.
- If Adding an Actual Contribution Percentage (“ACP”) Contribution Safe Harbor for 2026, Adopt Amendment Before the 2026 Plan Year: ACP contribution safe harbors may not be adopted mid-year. Accordingly, if an employer wishes to add an ACP contribution safe harbor to its Section 403(b) plan for the 2026 plan year, it must adopt an amendment by December 31, 2025, for calendar year plans.