What Plan Sponsors Need to Know About Year-End Plan Amendments

As the calendar year winds down, it’s a natural time for retirement employers and plan sponsors to evaluate their 401(k) and similar plans, both to ensure regulatory compliance and to consider enhancements that strengthen the benefit for participants. For many, year-end is also the window to adopt plan amendments that position both the company and its employees for success in the year ahead.

As is so often the case, we recommend that plan sponsors take a holistic approach to making such evaluations, and that they do proactively and strategically. Typically, the third-quarter check in meeting is the logical kickoff for such discussions, with action being taken in the current timeframe this time of year. If you do not have a meeting on the calendar to have these conversations with your retirement plan consultant, now is the time to do so.

Start with Regulatory Requirements

The first step in any year-end review is to confirm that your plan is compliant with current legislation. While the SECURE Act 2.0, enacted at the end of 2022, doesn’t require immediate amendments, all plans will need to be restated by the end of 2026 to incorporate its provisions—as in, next year! Most recordkeepers are already operationally compliant with the law’s required features, but plan sponsors should still verify this during their annual review.

👉 Recommended Action: Conduct a review with your consultant to evaluate your plan relative to SECURE Act 2.0’s recommendations, as well as requirements that will need to be made by the end of next year.

Evaluate Discretionary and Design-Driven Amendments

Once regulatory requirements are addressed, sponsors should turn their attention to plan design, looking for ways to elevate what’s being offered to participants and/or considering the optional provisions that became available under SECURE Act 2.0. This may include discretionary or optional amendments—discussed in some detail here—such as:

• Adding a Roth option for employee contributions
• Allowing student loan repayments to be treated as employer contributions
• Establishing an emergency savings account linked to the plan
• Revisiting eligibility and entry dates to ease administrative burdens or enhance participation
• Implementing or updating auto-enrollment and auto-escalation features
• Offering in-plan Roth conversions to give participants greater tax flexibility

Each of these enhancements can be made through an amendment process, which typically takes 45–60 days to complete.

👉 Recommended Action: Work with your consultant to ensure a thorough accounting of all required and discretionary plan amendments to be considered, so that they can all be made at one time, thereby limiting plan amendment costs incurred with record keepers.

Should You Move to a Safe Harbor Plan?

One of the most common design changes sponsors consider at year-end is adopting a Safe Harbor plan, which allows employers to avoid annual non-discrimination testing by committing to a specific employer contribution formula. Safe Harbor designs can also improve participation and retention while reducing administrative headaches.

If you’re considering a Safe Harbor amendment, timing is critical. These changes must be adopted before the start of the plan year, and employees must receive a 30-day advance notice before the amendment takes effect. For that reason, sponsors should be having these discussions early—ideally during Q3 committee meetings, as noted above—to ensure ample lead time for approval and notice requirements.

👉 Recommended Action: For a deeper look at Safe Harbor provisions and how they can simplify compliance while boosting participation, read our related article: Three Strategies to Boost Participation, Protect Fiduciaries, and Support Employee Retirement Success.

Timing and Cost Considerations

Plan amendments do come with administrative costs, but it’s often more cost-effective to bundle multiple amendments together rather than processing them one at a time. Most recordkeepers and third-party administrators charge a single amendment fee regardless of the number of changes being made, so, again, tackling several updates simultaneously can help sponsors manage expenses efficiently.

Certain amendments—such as Safe Harbor, auto-enrollment, and auto-escalation—require a 30-day advance notice to participants. Most other discretionary changes require what’s known as a Summary of Material Modification (SMM), which must be distributed within 210 days after the start of the plan year in which the amendment takes effect. This ensures employees are properly informed about how the plan operates and any changes that affect them.

Act Now to Stay Ahead

Given that the amendment process takes time—and that certain notices must go out well in advance—timing is everything. If you haven’t already begun your year-end plan review, now is the moment to get started. For those who have already scheduled their annual committee meetings, this is an ideal agenda item. The sooner you evaluate and act, the more options you’ll have before year-end deadlines approach.

Year-end plan amendments aren’t just about compliance; they’re an opportunity to strengthen your plan’s design, enhance the participant experience, and reinforce your organization’s commitment to helping employees retire successfully. Take those opportunities whenever they present themselves!

Have questions or want to make sure that nothing falls through the cracks this year-end? I’m always available to chat and consult. Find my contact information here, and don’t hesitate to reach out if I can help.