Every employer maintaining a pre-approved defined contribution retirement plan—including 401(k) and 403(b) Plans will need to update their documents by December 31, 2026 to maintain reliance on IRS approval.
401(k) Plans will need to adopt amendments reflecting SECURE 2.0, the most significant retirement plan legislation enacted in many years.
403(b) Plans will need to be restated for what is called Cycle 2, the IRS requirement that 403(b) Plan documents be restated updated to reflect regulatory and legislative changes over the last several years.
While the immediate objective is compliance, the amendment process also provides an opportunity to review the effectiveness of your retirement plan.
Too often, Plan Sponsors view required plan amendments and restatements as simply an administrative exercise — review the documents, sign the required paperwork, distribute participant communications, and move on.
While that approach satisfies the technical requirement, it may overlook an opportunity to review and improve important aspects of your retirement plan, including:
- Governance and fiduciary oversight
- Service providers and service delivery
- Fees and expenses
- Participant outcomes
- Plan design
- Administration and operations
The following six questions can help you determine whether your retirement plan continues to meet the needs of your organization and employees.
1. Are We Meeting Our Fiduciary Responsibilities?
Fiduciary responsibility begins with having a prudent process for making decisions and monitoring a 403(b) Plan. The amendment process provides an excellent opportunity to review governance procedures, committee structures, and the responsibilities assigned to internal personnel and service providers.
2. Are We Receiving the Type of Service We Need?
The needs of an organization change over time. Employee demographics change. Regulations change. Service providers change.
The amendment process provides an opportunity to determine whether the current service model for your 403(b) Plan continues to meet the organization’s needs and objectives.
3. Are We Receiving Value for the Fees Being Paid?
Plan Sponsors should understand what services they receive and what those services cost. Reviewing and benchmarking the expenses of a retirement plan can help determine whether fees remain reasonable and whether participants are receiving appropriate value for those costs.
4. Are We Helping Participants Prepare for Retirement?
A successful retirement plan is measured by more than compliance. Participation rates, deferral rates, employee education, and participant communications all affect retirement readiness.
The amendment process provides an opportunity to evaluate whether your retirement plan is helping participants achieve their long-term retirement goals.
5. Are We Taking Advantage of Available Plan Design Opportunities?
SECURE 2.0 provides Plan Sponsors with additional design options. While not every provision is appropriate for every organization, the amendment process provides a natural opportunity to evaluate whether changes to your retirement plan could improve participant outcomes.
It is also an opportunity to determine whether your retirement plan continues to support the organization’s objectives and workforce demographics.
6. Is Your Retirement Plan Being Operated in Accordance with the Plan Document?
Many compliance issues result not from defective documents, but from operational practices that differ from the written terms of the plan.
Eligibility, contributions, loans, hardship distributions, and administrative procedures should all be reviewed periodically to confirm that the operation of the plan remains consistent with its governing documents.
The Opportunity
401(k) and 403(b) Plan Sponsors will need to adopt amendments and restatements respectively by December 31, 2026.
This is an opportunity to use these compliance requirements as a catalyst for a review of your retirement Plan.
The question is whether you will use the process to improve your retirement plan.
Details to follow.
Photo by Zulian Firmansyah on Unsplash