SECURE 2.0: Top Compliance Pitfalls for Plan Sponsors
In Brief:
- SECURE 2.0 introduces major retirement plan compliance changes that employers cannot afford to overlook, especially with the December 31, 2026, amendment deadline quickly approaching.
- Plan sponsors should prepare now for the new Roth catch-up contribution rules taking effect in 2026, which allows higher-income employees age 50 and older to make catch-up contributions on a Roth-only basis.
- Automatic enrollment and long-term part-time employee eligibility rules under SECURE 2.0 are creating new payroll, onboarding, and recordkeeping challenges for 401(k) and 403(b) plan sponsors.
- Employers that shifted to electronic retirement plan communications should review their processes now, as SECURE 2.0 will require annual paper benefit statements beginning in 2026 unless employees consent to electronic-only delivery.
- A proactive SECURE 2.0 compliance review can help plan sponsors identify gaps between payroll systems, plan operations, and governing documents before regulatory issues or costly corrections arise.
SECURE 2.0 made broad changes to employer retirement plans when it was enacted at the end of 2022. The law builds on the earlier SECURE Act and includes dozens of provisions affecting contributions, eligibility, enrollment, and plan administration. The changes have phased in over the past several years, with new additions and requirements each year. With the December 31, 2026, plan amendment deadline approaching, plan sponsors will want to review high-risk areas and confirm that plan operations, payroll systems, and plan documents are aligned. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key details below.
Key Compliance Risks
Roth Catch-Up Contributions (Section 603) — Starting in 2026, higher-earning employees age 50 and older are set to make catch-up retirement contributions on a Roth-only basis. The rule applies if the employee earned more than $150,000 (indexed) in wages from the same employer in the prior year. For 2026, employers look at 2025 FICA wages to determine who is affected.
If the plan allows catch-up contributions and offers Roth contributions, affected employees must use Roth for catch-ups. Once the rule applies to any participant, the plan must allow all eligible catch-up participants to elect either pre-tax or Roth treatment.
A separate provision increased “super” catch-up limits beginning in 2025 for certain participants ages 60 to 63. As a result, plans may be managing higher catch-up limits at the same time the Roth requirement applies to high earners.
Payroll must correctly identify affected participants and apply the proper tax treatment. Contribution elections must match how amounts are processed and reported. Errors can affect W-2 reporting, contribution limits, and participant tax treatment.
Note: Final regulations issued in September 2025 confirm the rule applies in 2026, but plans may rely on a reasonable, good faith interpretation for that year. Full enforcement under the final regulations begins for taxable years starting after December 31, 2026.
Automatic Enrollment (Section 101) — Beginning in 2025, most new 401(k) and 403(b) plans must include automatic enrollment. Employees must be enrolled once they become eligible under the plan’s terms unless they opt out. The default contribution rate must be at least 3% and no more than 10%, with automatic increases of 1% each year until reaching at least 10%.
Employees must also be allowed to withdraw automatic contributions within 90 days. Small employers with fewer than 10 employees are generally exempt.
Most errors happen in payroll and onboarding. Employees may not be enrolled on time, default percentages may be entered incorrectly, or escalation may not be applied. If errors are made, they are usually discovered during nondiscrimination testing or annual reviews.
Long-Term Part-Time Employees (Section 125) — Starting in 2024, long-term part-time (LTPT) employees became eligible to participate in a 401(k) plan. However, starting in 2025, the threshold was reduced from 3 years to 2 years. An employee qualifies by working at least 1,000 hours in a single year, or at least 500 hours in each of two consecutive years.
Plan sponsors may decide whether to make employer contributions for these employees and whether to include them in nondiscrimination testing, but hours must be tracked carefully. If records are incomplete, eligible employees could be inadvertently excluded.
Administrative Updates
Annual Paper Statements (Section 338) — A recent survey cited by the DOL found that 57% of adults prefer to receive at least one paper retirement statement each year. In response, there is now a paper delivery requirement under SECURE 2.0.
Starting in 2026, defined contribution plans, including 401(k) and 403(b) plans, must provide at least one paper benefit statement each year unless the participant has actively agreed to electronic-only delivery.
Plans that moved to fully electronic statements in earlier years will want to review records. If there is no documented participant consent, electronic delivery alone will not satisfy the rule. Plan sponsors should confirm their delivery procedures and keep records showing that paper statements are issued when required by law.
Plan Document Amendments — Plan documents must be updated by December 31, 2026, to reflect SECURE 2.0 and other recent law changes, regardless of plan year.
Many plan sponsors have already implemented operational changes to comply with the law. However, plan documentation may still need to be updated to reflect current operations. A mismatch between plan operations and the governing document can create compliance concerns during audit or regulatory review, even if day-to-day administration is otherwise correct.
The amendment process typically involves coordinating with internal teams, third-party administrators, and advisors. Beginning the process early reduces the risk of delays as the year-end deadline approaches.
Next Steps for Plan Sponsors
- Review plan operations against SECURE 2.0 requirements
- Identify gaps between payroll, operations, and plan documents
- Confirm systems support new rules, starting with high-risk areas
- Coordinate with TPAs, recordkeepers, and advisors
- Begin the process of amending plan documents, with a deadline of December 31, 2026
We’re Here to Help
Plan sponsors may benefit from a formal review ahead of the deadline. A proactive check now can help avoid corrections later and keep the plan aligned with current requirements. If you have questions about the information outlined above or need assistance with your next benefit 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.
