What Do ESOP Sponsors Need to Know About 2026 Plan Amendments Under SECURE 2.0?

In Brief:

• December 31, 2026, is the key IRS deadline for ESOP and other qualified retirement plan sponsors to formally adopt plan amendments reflecting changes under the SECURE Act and SECURE 2.0 Act.
• Most 2026 amendments focus on documentation, not new law, as many required changes were already implemented operationally under IRS good-faith compliance rules.
• ESOPs without a 401(k) feature must review distribution provisions, including updated required minimum distribution (RMD) starting ages and timing based on participants’ dates of birth.
• Plan sponsors may elect to increase involuntary cash-out limits from $5,000 to $7,000, a discretionary SECURE 2.0 change that affects ESOP distribution processing and participant communications.

For retirement plan sponsors, 2026 serves primarily as a documentation milestone, not a new legislative development. Congress rolled out the SECURE Act and SECURE 2.0 Act changes over several years, and many provisions took effect before regulators issued final guidance. In response, sponsors implemented required changes operationally and deferred formal plan amendments.

IRS guidance now directs many qualified plans to December 31, 2026, as the general deadline to adopt amendments reflecting those changes. For sponsors with ESOPs, this deadline provides an opportunity to review current plan operations and confirm that the written document aligns with current law. To help clients, prospects, and others, JLK Rosenberger has summarized the key details below.

Background

SECURE 2.0 Act introduced more than 90 separate changes affecting retirement plans. Those changes span a wide range of topics, including eligibility, contribution limits, distributions, and plan design features. Some provisions were mandatory, others optional, and many apply only to plans with certain features, such as a 401(k) component. Effective dates also varied significantly, with some changes applying immediately and others delayed for several years.

The IRS permitted plan sponsors to rely on good faith during the transition period. Generally speaking, good faith means administering the plan in accordance with a reasonable interpretation of the statute and available IRS guidance as provisions became effective, even if the plan document had not yet been formally amended. Then, the amendment period allows sponsors to update any related documentation as guidance becomes available.

That explains why many provisions in the 2026 amendment package are already familiar. In many cases, sponsors have already incorporated changes. The focus now is largely on ensuring the plan document reflects reality.

ESOP Amendments for 2026

For ESOPs that do not include a 401(k) feature, the list of 2026 amendments is focused on distribution-related provisions. Compliance is expected by December 31, 2026, in both practice and documentation.

RMD Rules — As qualified retirement plans, ESOPs remain subject to required minimum distribution (RMD) rules. Sponsors should use the 2026 amendment cycle to confirm that plan language reflects the current RMD starting ages and distribution timing, which vary based on a participant’s date of birth.

Under current law, the RMD starting age is:

• Age 70 ½ for account owners born on or before June 30, 1949
• Age 72 for those born July 1, 1949, through December 31, 1950
• Age 73 for those born January 1, 1951, through December 31, 1959
• Age 75 for those born on or after January 1, 1960

The first RMD is generally due by April 1st of the year following the year the participant reaches the starting age. From there, RMDs are generally due by December 31st each year.

If the plan permits, participants who are not 5% owners may delay RMDs until retirement. However, any 5% owners must begin RMDs based on age, regardless of employment status. Plan sponsors will need to document and apply these changes carefully.

Cash-Out Limits — Some plans allow involuntary cash-outs, meaning small, vested account balances can be distributed automatically when a participant terminates employment. SECURE 2.0 permits plans that use this feature to increase the cash-out threshold from $5,000 to $7,000.

This change is discretionary rather than mandatory, but it is commonly addressed during the amendment cycle because it affects distribution processing and participant communications.

Additional Considerations for 2026

When an ESOP also includes a 401(k), the plan must comply with both ESOP requirements and the 401(k) plan requirements. As a result, there may be additional amendments to consider this year, including:

Roth Catch-Up Contributions — Catch-up contributions allow employees age 50 or older to defer amounts above the regular annual limit. Under SECURE 2.0 and final regulations issued in September 2025, employees whose prior-year FICA wages exceed $145,000 may make catch-up contributions only as Roth contributions, not on a pre-tax basis.

The rules apply to catch-up contributions made in taxable years beginning after December 31, 2025, with full compliance required beginning January 1, 2027. Sponsors are using 2026 to align plan language, payroll processes, and recordkeeping with these requirements.

Enhanced Catch-Up Limits for Ages 60–63 — SECURE 2.0 allows a higher catch-up contribution for employees ages 60 to 63 under 401(k) plans. For 2026, the standard age-50 catch-up limit is $8,000, and the “super” catch-up limit for ages 60–63 is $11,250. This feature is optional, but if offered, it needs to be formally documented in 2026, even if it has already been applied operationally.

LTPT Employee Eligibility — SECURE 2.0 reduced the service requirement for long-term, part-time (LTPT) employees to two consecutive years with at least 500 hours of service per year, beginning with the 2025 plan year. (Previously, three years of service was required.) These employees must be permitted to make salary-deferral contributions to the 401(k) portion of the plan, though employer contributions are not required. Plan sponsors will want to check that the plan documents are up-to-date and that eligibility is communicated to affected employees.

We’re Here to Help

As sponsors prepare for the year ahead, they will want to identify which provisions have already been implemented, which changes are optional, and which updates simply need to be documented. Communication between internal teams, payroll providers, and any third-party administrators will be important going forward. If you have questions about the information outlined above or need assistance with your next plan audit, JLK Rosenberger can help. For additional information, call 949-860-9902 or click here to contact us. We look forward to speaking with you soon.