Key insights
- New rules for 2026: Roth catch-up contributions and annual paper statements are coming for many retirement plans.
- Contribution and income limits have increased, so it’s a good time to review your plan’s numbers.
- The Department of Labor is focusing on audit quality — choosing an experienced auditor matters more than ever.
- Alternative investments like private equity and real estate are gaining interest, but they come with extra risks to consider.
Stay informed with the latest employee benefit plan rules.
Navigating employee benefit plans in 2026 means adapting to new regulatory requirements, compliance deadlines, and evolving investment strategies.
Review highlights of recent important updates, including SECURE 2.0 Act changes, contribution limits, and leading practices for plan sponsors.
SECURE 2.0 Act: What’s new for 2026
The SECURE 2.0 Act of 2022 continues to reshape retirement plans, introducing new requirements and opportunities for both employers and employees. For 2026, several provisions stand out:
- Mandatory Roth catch-up contributions — Starting January 1, 2026, employees aged 50+ with prior-year FICA wages over $150,000 must make catch-up contributions as Roth (after-tax). If a plan doesn’t offer Roth contributions, these employees can’t make catch-up contributions. Plans may use a deemed Roth election, allowing participants to opt out. Full compliance is required by 2027, but plans must operate under a reasonable, good-faith interpretation in 2026.
- Annual paper statement requirement — Defined contribution plans must provide at least one paper benefit statement per year unless the participant opts for electronic delivery. Defined benefit plans must provide a paper statement every three years, with the same opt-out option. This applies to plan years beginning after December 31, 2025.
- Plan amendment deadline — All SECURE 2.0-related amendments must be adopted by December 31, 2026 (with later deadlines for governmental and collectively bargained plans). Operational compliance is required starting January 1, 2026.
2026 contribution and income limits
The IRS released updated limits for retirement accounts, reflecting cost-of-living adjustments. Highlights include:
- Defined contribution limits — Employee deferrals up to $24,500; maximum annual additions $72,000; catch-up contributions (age 50+) $8,000; enhanced catch-up (age 60–63) $11,250
- Defined benefit limits — Annual benefit limit $290,000
- IRA limits — Contribution limit $7,500; catch-up (age 50+) $1,100
- Compensation limits — Annual compensation limit $360,000; highly compensated employee threshold $160,000; key employee threshold $235,000
- Mandatory Roth catch-up wage threshold — $150,000
- Social Security taxable wage base — $184,500
Retirement plan forfeitures
Forfeitures of non-vested employer contributions are under increased scrutiny. Common uses include reducing future employer contributions, paying qualified plan expenses, or reallocating to active participant accounts.
The IRS has proposed regulations requiring forfeitures to be used within 12 months after the end of the plan year following the year of forfeiture, but these are still pending. Until finalized, sponsors should consult their plan documents for guidance.
Private investments and alternative strategies
Retirement plans are increasingly considering alternative investments (“alts”), such as private equity, venture capital, private credit, real estate, hedge funds, and crypto. These offer potential for higher returns and diversification but come with risks like higher fees, illiquidity, limited transparency, and wide dispersion of manager returns. Fiduciaries should carefully evaluate these options and consider working with experienced advisors.
DOL focus on audit quality
The U.S. Department of Labor (DOL) continues to review the quality of ERISA plan audits, with its latest study examining 2020 filings. Of more than 300 audits sampled, 30% had at least one deficiency — an improvement from 39% in the prior study. However, 8% had five or more deficiencies, down from 48%. Common issues involved participant data and contributions, as well as distributions, internal controls, investments, party-in-interest transactions, and audit planning.
Audit quality strongly correlates with a firm’s experience. Firms performing 100+ audits annually had an 18% major deficiency rate, compared to 25% for firms with 25+ audits and 55% for those with fewer than 25. Despite quality gains, the number of CPA firms handling these audits fell from 7,330 in 2011 to 4,300 in 2020, even as plan audits increased. Firms doing only 1–2 audits dropped from 3,684 to 1,729.
The DOL is working with state boards and the AICPA to strengthen sanctions and peer reviews. It urges plan sponsors to choose auditors based on training and experience, noting quality is critical for compliance. Many issues are addressed in SAS 136, effective for plan years starting in 2021, whose impact will be assessed in future studies.
Other accounting and auditing matters
- Timely remittance — The DOL emphasizes prompt remittance of participant withholdings.
- Reportable findings — Auditors must communicate findings in writing, including noncompliance, governance issues, and internal control deficiencies.
- Common errors — Auto-enrollment failures, missed deferral opportunities, and incorrect compensation definitions are frequent and require corrective actions.
New DOL self-correction program
The Voluntary Fiduciary Correction Program (VFCP) now includes a self-correction component (SCC), allowing plan sponsors to correct certain ERISA violations without a full application. Key criteria include limits on lost earnings and timely remittance. The SCC can reduce administrative burden and costs for minor errors.
Retirement plan insurance
Plan sponsors should consider ERISA bonds, fiduciary liability insurance, and cyber liability insurance to mitigate risks associated with retirement plans.
The 80/120 rule and audit requirements
Recent changes to Form 5500 have renewed interest in the 80/120 rule, which allows plans with 80–120 participants to avoid or delay audit requirements under certain conditions.
Compliance and nondiscrimination testing
Annual compliance tests (ADP, ACP, top-heavy, coverage, annual additions) are required to enable fairness and legal compliance. Corrective actions must be taken if tests are failed. Failure to comply can result in penalties, plan disqualification, or corrective contributions.
Strong practices for plan management
- Cybersecurity — Implement robust controls and training.
- Fiduciary responsibilities — Act prudently, monitor vendors, communicate clearly, and keep comprehensive records.
- Service organization control reports — Review SOC 1 reports for effective internal controls.
- Service provider changes — Maintain complete records and verify proper data transfer.
- Payroll provider changes — Enable accurate data mapping and compliance.
- Benchmarking investments — Regularly assess investment performance and fees.
- Missing participants — Document efforts to locate participants.
- Fee reasonableness — Review and document fee disclosures.
- Defaulted loans — Monitor and manage participant loans.
- Administrative user access — Control and review privileged access.
- Mergers and acquisitions — Organize documents, consider timelines, and plan for audits.
- Investment vehicles — Understand differences between mutual funds and CITs, and how these distinctions may relate to fees, flexibility, and oversight.
How CLA can help with employee benefit plans
By implementing robust policies and diligently monitoring legislative changes, employers can help protect their employees’ assets and operate a more successful benefit plan.
CLA has provided employee benefit plan audit, tax compliance, wealth advisory, and consulting services for more than 60 years. Our team is available to provide guidance and insights to help prepare your organization for evolving benefit plan legislation.