What Retirement Plan Sponsors Should Prioritize Going Into 2026

The turn of a calendar year is always a meaningful checkpoint for retirement plan sponsors, but 2026 brings a unique combination of regulatory updates and strategic opportunities. While many core plan responsibilities remain the same from year to year, new rules from SECURE Act 2.0 (along with evolving workforce dynamics) make this an especially important time to ensure your plan is set up for a smooth, compliant, and productive year ahead.

Based on the conversations we’re having right now with plan sponsors, there are two major areas to focus on:

1. What you, as a sponsor, must or should do heading into 2026, and
2. What your participants should consider as they reset their financial lives for the new year.

Below are the key themes that should be on every employer’s radar as we embark on another new year.

1. Stay Ahead of 2026 Regulatory Updates (Especially the Roth Catch-Up Requirement)

One of the most important regulatory changes impacting plan sponsors in 2026 is the Roth required catch-up contribution rule under SECURE Act 2.0.

Beginning in 2026, any participant who:

• Is age 50 or older and
• Earned more than $145,000 in wages in the previous year

must make all catch-up contributions on a Roth (after-tax) basis.

Here’s what that means in practical terms:

• The standard employee contribution limit for 2026 is $24,500.
• Eligible participants over age 50 can contribute an additional $8,000 in catch-up contributions.
• All of that $8,000 must go in as Roth if the participant crosses the $145,000 income threshold.

For sponsors, the most important next step is operational—not philosophical. This requirement will fail without the correct payroll and recordkeeping processes in place.

Your payroll system must be able to identify these individuals and either automatically push their catch-up dollars to the Roth source or notify the plan sponsor to do so.

This is the time to meet with your payroll provider to confirm:

• How the system flags eligible employees
• How it classifies income for the $145,000 threshold
• Whether it automatically redirects catch-up dollars
• What notifications (if any) your team must deliver manually

Because this is a forced change, not an elective one, it’s critical to confirm these processes well in advance to avoid compliance issues. It is also important to note that, if the plan does not currently allow for Roth contributions, sponsors must amend their plan to add it, or individuals making over $145,000 per year will not be able to make catch-up contributions.

2. Review Your Business and Workforce Changes With a Plan Lens

While the regulatory changes are important, many of the most impactful plan decisions have nothing to do with legislation—they’re driven by changes inside your business.

Every year, sponsors should step back and ask:

• Have our workforce demographics changed?
  For example, if you hired a significant number of part-time or seasonal employees, you may want to revisit eligibility definitions to ensure the plan remains aligned with your intent. ‍
• Did we experience meaningful growth, restructuring, or turnover?
  These changes often affect participation rates, testing results, and financial wellness needs. ‍
• Have our talent goals shifted?
  A business focused on retention or employee financial wellbeing may need different plan features than a business focused on cost control or simplifying administration.

Some examples of actions that may flow from this review:

• Adjusting eligibility rules for part-time employees
• Adding automatic enrollment or automatic escalation
• Implementing employer-match redesigns
• Preparing for safe harbor adoption if you experienced failed testing
• Evaluating whether your plan’s design still drives the right participant behavior

If you haven’t revisited your plan design in several years, these conversations can surface meaningful opportunities to improve both participant outcomes and administrative efficiency.

3. Use Retirement Readiness Data to Guide Your Education Strategy

Many sponsors feel that after they’ve reviewed the plan document, updated payroll, and checked the compliance boxes, they’re “done” for the year. But the reality is that plan design and investment structure are only part of the story.

Retirement readiness—and ultimately productivity—improves the most when employees understand how to use the plan effectively.

Every plan offers valuable data points that can help you craft a smarter education strategy, including:

• Average account balance by age
• Participation rate
• Average employee deferral rate
• Average deferral rate among participants
• Roth vs. pre-tax contribution mix
• Loan activity
• Hardship withdrawal frequency

These statistics paint a picture of how well your workforce is preparing for retirement and where they may need additional support.

Why does this matter? Because nearly 59% of Americans identify financial concerns as their number-one source of stress, according to PwC research. And as we’ve discussed before, employees who are financially stressed tend to be less productive at work because they’re distracted by money worries.

Helping employees become more financially fit is not just a feel-good initiative—it’s a workforce performance strategy.

If you’d like a deeper dive into this topic, you can read our earlier article on retirement readiness and its link to productivity.

What Participants Should Focus on for 2026

While plan sponsors are the primary audience for this guidance, the start of a new year is also an ideal time for employees to reevaluate their personal savings approach. And because LoVasco works directly with participants through education sessions and one-on-one conversations, we see firsthand the themes that come up most often.

Here are three participant-level recommendations we encourage sponsors to share with their workforce.

1. Review Your Deferral Amount—Are You on Track?

Most recordkeeping platforms today offer a gap analysis or retirement income projection tool. It calculates the monthly income a participant is expected to have in retirement based on:

• Current account balance
• Current deferral rate
• Investment mix
• Age and expected retirement date
• Future wage growth assumptions
• Inflation projections
• Expected Social Security benefits

Generally speaking, most people need to replace about 80% of their pre-retirement income through a combination of savings and Social Security.

Encouraging employees to review their projections annually helps them understand whether they’re on track—and what small adjustments could make a large difference over time. Even a 1% deferral increase every year or two can help someone reach that 10–15% long-term savings target without overwhelming their take-home pay.

2. Revisit Investment Allocation

Participants frequently “set it and forget it” when it comes to their investments.

We often see individuals who:

• Started their career with a very aggressive allocation and never adjusted it, or
• Took a conservative approach early on, became more comfortable with investing later, but never updated their strategy

An annual review of investment allocation ensures the portfolio still matches their age, risk tolerance, and retirement timeline.

When employees need help, LoVasco—and our financial wellness team—can guide them through the process and provide personalized recommendations.

3. Make Financial New Year’s Resolutions Beyond the 401(k)

Employees can’t save adequately for retirement if they’re financially unstable today. A strong foundation of financial wellness is often the prerequisite for meaningful retirement savings.

Encourage employees to set resolutions such as:

• Building (or rebuilding) an emergency savings account
• Creating or updating a household budget
• Developing a debt repayment strategy
• Consolidating or reorganizing student loans
• Reducing high-interest consumer debt

When employees reduce financial stress in their everyday lives, they’re more likely to increase contributions—and be more engaged and productive at work.

Setting Your Plan Up for a Strong 2026

The start of a new year is a natural inflection point for your retirement plan. For 2026, that means evaluating plan design, preparing for regulatory shifts, and using data to better support your workforce’s financial wellbeing.

If you’d like help reviewing your plan’s readiness for 2026—or creating a participant education strategy tailored to your workforce—our team at LoVasco is here to help.