As employers, payroll providers, recordkeepers, and plan administrators prepare for the 2026 Roth Catch-up Rule deadline, an important decision is whether to adopt the optional "deemed Roth election" provision. This provision allows employers to automatically classify catch-up contributions from high earners as Roth contributions once they reach the annual elective deferral limit. These FAQs explain the scope and application of the deemed Roth election provision, outlining its potential benefits and drawbacks for plan design.
Unresponsive or uncooperative participants pose serious challenges for tax-qualified retirement plans, creating administrative burdens, fiduciary risks, and potential compliance failures. This article examines these issues, reviews relevant regulatory guidance, and offers practical strategies for mitigating risk when participants scheduled to begin distributions fail to respond or cooperate -- commonly referred to as "recalcitrant participants."
Plan sponsors are increasingly using AI-powered, mobile-first, and highly personalized digital communication strategies to engage participants and improve retirement outcomes. Digital channels -- such as microsites, emails, podcasts, and videos -- are now the preferred method, with 75% of Bank of America's communications delivered digitally this year. A growing trend is short, targeted video content timed around key events like open enrollment or salary increases.
Personalized communication is seen as key to helping employees engage with retirement savings and financial literacy resources. A Human-Interest survey found that employees trust these tools, and 87% are more likely to stay with employers who provide them. The level of personalization depends on company size, understanding of participant needs, and collaboration with advisers and recordkeepers.
Pooled employer plans have grown rapidly over the past four years as large employers seek lower governance, fiduciary responsibilities, and administrative costs. The SECURE 2.0 Act of 2022 expanded PEPs to include 403b plans, increasing access for nonprofits and educational institutions. It also extended startup tax credits, enabling small employers joining PEPs to receive a three-year credit to offset costs for new defined contribution plans.
In the 401k space, it's not just about managing plans; it's about managing perceptions of risk. When a plan is large enough to warrant institutional pricing but doesn't secure it, that omission can look like negligence in court. Whether you're an advisor, TPA, recordkeeper, or ERISA counsel, the key question remains: Can you demonstrate prudence if someone scrutinizes your process? This $1.8 million settlement isn't about scandal; it's about process. It underscores a simple truth: documentation outlasts memory, prudence outperforms guesswork, and time always wins.
Plan sponsors using pre-approved 401k documents with discretionary matching contributions must comply with a new IRS requirement introduced in the 2022 Cycle 3 Restatement. This applies in any year a discretionary match is made. Despite the flexibility of discretionary matches, plans must meet the "definitely determinable benefits" standard by including a clear formula for contribution allocation. To comply, pre-approved plan documents must include specific language and satisfy two notice requirements.
From 2025 to 2028, tipped workers can deduct up to $25,000 from federal income taxes, but this may negatively impact their 401k participation. Tips reported on Form W-2 remain subject to withholding and count as compensation for 401k deferrals. While pre-tax deferrals usually offer tax benefits, for tipped employees, they may create a disadvantage by turning otherwise tax-free income into taxable income.
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Collected Wisdom™
Our researchers look for what they think are some of the better resources available to assist you in administering your plan or helping your clients. We group these resources in our COLLECTED WISDOM™ topics to make it easy for you to locate the information you need. Each item in a category contains a summary and date of when it was placed in the group.
We also maintain some older material in these collections for perspective and context.
