Plan Sponsor News

Following the terms of the plan document

Our annual plan review process can help you make sure you are following the terms of your plan document.

According to the EBSA booklet, “Following the terms of the plan document is … an important responsibility. The document serves as the foundation for plan operations. Employers will want to be familiar with their plan document, especially when it is drawn up by a third-party service provider, and periodically review the document to make sure it remains current.”

Your CRM is happy to conduct regular plan reviews with you, during which the following items are discussed:

Plan provision reviews (to help you make sure you are following your plan documents and to discuss required or desired amendments)
Fee benchmarking
Investment reviews
Operational and compliance reviews
Pertinent legislative and regulatory updates
Plan health and participant analysis

Paying only reasonable plan expenses—a closer look at the Benchmark Fee Report

Our Benchmark Fee Report covers total plan cost, investments and recordkeeping compared to plans of similar size.

According to the EBSA booklet, “While the law does not specify a permissible level of fees, it does require that fees charged to a plan be ‘reasonable.’ After careful evaluation during the initial selection, the plan’s fees and expenses should be monitored to determine whether they continue to be reasonable.”

When considering plan fees, EBSA makes clear that sponsors are not obligated to choose the lowest-cost provider, but rather to determine whether the fees are reasonable and offer good value compared to the services being received. In comparing estimates from service providers, it’s important to understand which services are covered for the estimated fees and which are not. Some providers, such as Mutual of America, offer a “bundled approach.”

Selecting and monitoring the investment alternatives that are made available under the plan—a closer look at the Quarterly Investment Fund Benchmarking Report

We make available to you a quarterly benchmarking report to assist you in fulfilling your fiduciary duties regarding monitoring the investment options offered through your plan.

Your CRM can provide you with an investment benchmarking report prepared by the investment professionals at 320 Park Analytics LLC.¹ The report provides an overview of investments, benchmark performance comparisons, peer group comparisons and fees and expenses.

Of course, these are only some of the fiduciary duties that come with operating a plan. In the December 2024 Plan Sponsor News article “Plan Sponsors: How to Set Yourself Up for Success in the New Year,” we discussed some common mistakes that plan sponsors make and how we can help you to avoid them.

If you have any questions regarding your fiduciary duties, we are knowledgeable and here to help. Reach out to your CRM with any questions.

With 2026 around the corner, plan sponsors should be aware of and prepared for the implementation of several SECURE 2.0 Act-related provisions.

As you may know, the SECURE 2.0 Act was signed into law in December 2022 and expanded upon the SECURE Act of 2019 by continuing to pursue the objective of broadening the appeal of workplace retirement plans. Many of the provisions of the act needed to wait for regulatory guidance from both the IRS and the Department of Labor (DOL).

Here’s a visual overview of the SECURE Act provision timeline highlights that we’ll be discussing.

Plan amendment deadline—December 31, 2026

As you may recall from our “SECURE 2.0 Act: What’s coming in 2025” webinar, in what is referred to as the “grab bag guidance,” the IRS and DOL provided guidance in December 2023 on many different provisions in the SECURE 2.0 Act. The key takeaway from that grab bag guidance was the plan amendment deadline.

Under the original SECURE 2.0 Act, plans would have had to adopt amendments to come into compliance with the mandatory provisions of the legislation by the end of 2024. The IRS pushed that out even further for most plans (with the exception of governmental plans and plans that are subject to collective bargaining agreements) until the end of 2026.

Catch-up contributions as Roth for certain high earners¹

Starting in 2026, those aged 50 or older who earned over $145,000 in FICA wages² (indexed annually for inflation) in the previous year from the same employer, are required to make any catch-up contributions on an after-tax Roth basis.

Starting with plan year 2026, any catch-up contributions for certain high earners must be made on a Roth basis.
By the end of calendar year 2026, plan sponsors will need to review and amend their plan documents to reflect the Roth catch-up requirements and any related changes. They will also need to update their Summary Plan Descriptions (SPDs).
Note: By the 2026 deadline, Mutual of America will amend plan documents and subsequently provide SPDs to plan sponsor clients to whom we provide document services.

Related to this provision, the SECURE 2.0 Act also eliminated the requirement for required minimum distributions (RMDs) from Roth accounts within employer-sponsored plans beginning in 2024.

If your plan doesn’t currently allow for Roth contributions, employees eligible for catch-ups (i.e., those age 50 and up) will not be permitted to make catch-up contributions if they made more than $145,000 in wages in the prior year. If you’d like to add a Roth feature to your plan so that they can continue to make catch-up contributions, contact your CRM now to amend your plan to allow for Roth contributions.

LTPT worker eligibility

Broadly speaking, the LTPT worker provision ensures that part-time employees can have access to retirement plans. Prior to the enactment of the SECURE Act of 2019, 401(k) plans were required to offer coverage to all employees age 21 and older who worked at least 1,000 hours in one year. Beginning with the first plan year on or after January 1, 2024, the act changed that rule for 401(k) plans to require that all employees who worked at least 500 hours for three consecutive years be given the opportunity to make elective deferrals to the plan.

The SECURE 2.0 Act broadened the LTPT provision by lowering the number of years for part-time workers to be eligible from three years to two years and expanding coverage to 403(b) plans subject to ERISA. As discussed above, for most plans, the amendment date for this provision has been extended to the end of the 2026 plan year.

For specific questions about the LTPT provision, read our Frequently Asked Questions.

Next steps

We will continue to keep you informed of the implementation of these provisions and related amendments. Please reach out to your CRM with questions.

Plan sponsors can support employees’ financial futures by helping them understand the contribution options available within their workplace retirement plans. This breakdown may help participants make more informed decisions about diversifying pre-tax and Roth contributions.

What’s the difference between traditional and Roth contributions?

Many 401(k) and 403(b) plans offer two ways to contribute: traditional (or pre-tax) and Roth (or after-tax). The best option depends on an employee’s current financial situation, expected future income and tax bracket.

Traditional contributions (pre-tax)

Deducted from a participant’s paycheck before income taxes are applied
Lowers a participant’s current taxable income, which can mean a smaller tax bill today
Contributions and earnings grow tax-deferred until distribution
Taxed as income in retirement when a participant withdraws the money
Required minimum distributions begin later at the age of 73

Roth contributions (after-tax)

Deducted from a participant’s paycheck after income taxes have been taken out
Do not reduce a participant’s current taxable income
Withdrawals of both contributions and earnings are tax-free in retirement if certain conditions are met (e.g., if a participant is age 59½ and has held the account for 5 years)
No required minimum distributions

Roth in workplace retirement plans

If the plan allows, participants can choose to split their elective deferrals between pre-tax and Roth contributions. Opting for the Roth provision could help participants build future tax-free income.

Tax strategies can be complex, so we recommend participants consult an adviser. In very general terms, below are reasons why high earners and young workers may want to choose to diversify with a percentage of Roth contributions, as well as reasons why some employees may want to stay with traditional contributions.

What are some reasons why employees may want to diversify with Roth contributions?

Tax-free retirement income: The core advantage is that participants and their beneficiaries can withdraw their savings entirely free of federal income tax during retirement, provided certain conditions are met. This eliminates uncertainty about future tax rates.
Tax diversification: By having both traditional (pre-tax) and Roth (after-tax) retirement accounts, participants gain flexibility in retirement. They can strategically withdraw from different accounts to manage taxable income.
No RMDs: As of 2024, Roth contributions within plans no longer have RMDs for the original account owner. This allows money to continue growing tax-free for life, and it can be used as an estate planning tool for leaving tax-free assets to heirs.
No income thresholds: High earners (modified adjusted gross income of more than $165,000) generally cannot make current contributions to a Roth IRA. However, there are no income limits on eligibility for in-plan Roth contributions.

Why might workers early in their careers consider Roth contributions?

Young people early in their careers: Entry-level salaries likely place employees in a low tax bracket. By paying taxes now, they can watch their savings grow tax-free over many decades, likely withdrawing funds tax-free when they are in a higher tax bracket.

What are some reasons to stay with traditional (pre-tax) contributions only?

High earners expecting a lower tax bracket in retirement: If a participant is currently in a high tax bracket and expects a lower income after working, the upfront tax deduction from a traditional contribution may provide more value.
Savers who need the immediate tax break: Some employees may prefer to lower their current tax bill by taking the upfront deduction, which can increase their current take-home pay.
Older workers closer to retirement: For those with a shorter time horizon, the tax-free growth of a Roth amount may not have as much time to compound and outweigh the benefit of an immediate tax deduction.

Ask your Participant Account Specialist about our Traditional vs. Roth Contributions Workshop.