Retirement Plans Archives - Spotlight on Benefits

The Roth Catch-Up Contribution Requirement and a Statutory Merger

As the Roth catch-up contributions become effective this month, issues not addressed in the final regulations are coming to light.

Question: Our company completed a statutory merger — how does that impact the Roth catch-up contributions requirement?

Answer: Based on past IRS guidance, it is more than likely that an employee of either company in a statutory merger that was subject to the Roth catch-up contribution requirements of SECURE 2.0 Act prior to the statutory merger will continue to be subject to the Roth catch-up contribution requirements after the merger. Similarly, if the statutory merger occurs midyear, the employee’s compensation for the year of the merger will include compensation paid by either entity.

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Updated Guidance: Minnesota Paid Family Leave and Defined Contribution Plan Compensation

In IRS Notice 2026-6, the IRS issued a one-year extension of the tax treatment of medical benefits received by an employee through a paid family leave program (PFL). Minnesota has implemented the one-year extension and will not be treating PFL medical benefits as W-2 compensation that must be reported by the employee’s employer for 2026. Accordingly, employers sponsoring a qualified retirement plan that covers Minnesota employees will have an additional year to consider the impact of the PFL medical benefit taxation on their retirement plan’s administration.

Previously we reviewed how medical benefits received by an employee pursuant to Minnesota’s PFL would impact an employee’s W-2 compensation for purposes of a qualified retirement plan. With the one-year extension from the IRS and the Minnesota Department of Employment and Economic Development, employers in Minnesota will not have to include PFL medical benefits on the employee’s W-2 for 2026 and therefore will not have an impact on the definition of compensation in the employer’s retirement plan.

Unless additional guidance is issued, beginning in 2027 the state of Minnesota will be requiring employers participating in the state’s program to report PFL medical leave benefits (not family benefits) on the employer’s Form W-2 and this may implicate the definition of compensation in the employer’s defined contribution retirement plans. Employers should review the definition of compensation in their retirement plan documents to determine whether any action is needed prior to 2027.

We will continue to monitor and provide updates. If you have any questions, please reach out to your Faegre Drinker benefits counsel.

Minnesota Paid Family Leave and Defined Contribution Plan Compensation

Beginning in 2026, Minnesota will implement a paid family leave program (PFL) that provides family leave and medical leave benefits. The State of Minnesota will be requiring employers participating in the State’s program to report PFL medical leave benefits (not family benefits) on the employer’s Form W-2 — and this may implicate the definition of compensation in the employer’s defined contribution retirement plans. Employers should review the definition of compensation in their retirement plan documents to determine whether any action is needed prior to 2026.

Background on Minnesota PFL Taxation

On October 1, 2025, the Minnesota Department of Employment and Economic Development issued guidance on the taxation of contributions to the Minnesota PFL program and distributions from the program. This guidance only applies to employers participating in the PFL program administered by the State of Minnesota and will not apply to a fully insured or self-funded PFL program.

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IRS Issues Final Roth Catch-up Rules and What You Need to Know

On September 16, 2025, the Internal Revenue Service (IRS) published final rules on the Roth catch-up contribution requirements of SECURE 2.0 Act (Final Rules). Many of the requirements from the proposed rules are retained, although there have been some changes to try and ease plan administrative issues.

Background on Roth Catch-Up Contribution Changes

Section 603 of the SECURE 2.0 Act requires catch-up contributions to be made as after-tax Roth contributions if the contributing employee received wages in the prior calendar year that exceed $145,000 (and as adjusted for inflation). The definition of wages is defined as FICA wages. All eligible participants must have the opportunity to elect Roth catch-up contributions (and Roth cannot be limited to just those employees earning above the $145,000 wage limit as adjusted).

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In Case You Missed It: Spotlight on Benefits — Spring 2025

Written by members of Faegre Drinker’s benefits and executive compensation team, this blog features analysis and information on matters related to retirement plans, health and welfare plans, ESOPs, fiduciary governance, and other benefits issues. This quarterly digest provides links to our most popular posts during the past few months so that you can catch up on what you missed or re-read them.

Stop the Presses — Annual Funding Notice Guidance Issued

By Inés Sosa & Mark Rosenfeld
On April 3, 2025, the U.S. Department of Labor issued guidance on the Annual Funding Notice changes made by the SECURE Act 2.0 and provided model notices. Pension plan administrators should review and revise their annual funding notices in light of the new guidance.

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Navigating Cryptocurrency Investments in Employer-Sponsored Retirement Plans

By Mona Ghude & Kristina Ferris Salamoun
As cryptocurrency’s popularity as a high-risk, high-reward investment option grows, the question of incorporating cryptocurrency into employer-sponsored retirement plans has sparked debate among regulators, employers and investors alike.

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DOL and Other Agencies Announce Non-enforcement of 2024 Regulation Regarding the Mental Health Parity and Addiction Equity Act

By Karen Gelula & Allison S. Egan
The DOL, the HHS and the IRS announced they will not enforce the 2024 Final Rule regulations for the Mental Health Parity and Addiction Equity Act. The agencies noted they will reconsider or modify the 2024 Final Rule, and each department will review its enforcement approach.

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Navigating Cryptocurrency Investments in Employer-Sponsored Retirement Plans

Cryptocurrency has revolutionized the financial landscape, emerging as a high-risk, high-reward investment option. As its popularity grows, the question of incorporating cryptocurrency into employer-sponsored retirement plans has sparked debate among regulators, employers and investors alike.

Prior Guidance and Current Change

Over the past few years, federal guidance on cryptocurrency in retirement plans has fluctuated. In 2022, the Department of Labor (DOL) under the Biden administration issued guidance encouraging plan fiduciaries to “exercise extreme care” in considering whether to include cryptocurrency in employer-sponsored retirement plans, citing concerns over volatility and fiduciary risks. However, the Trump administration rescinded this guidance in May, taking a more neutral stance on cryptocurrency in retirement plans and potentially opening the door for broader exploration of crypto investments. These shifts reflect the evolving regulatory approach to cryptocurrency as an investment class.

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Stop the Presses – Annual Funding Notice Guidance Issued

On April 3, 2025, the Department of Labor (DOL) issued guidance on the Annual Funding Notice changes made by the SECURE Act 2.0 and provided model notices. Pension plan administrators should review and revise their annual funding notices in light of the new guidance.

Background

Section 343 of SECURE Act 2.0, passed December 29, 2022, implemented changes to the annual funding notice provided to defined benefit pension plan participants. The changes became effective for plan years beginning after December 31, 2023. For calendar year pension plans, the 2024 Annual Funding Notice (due no later than April 30, 2025) would be the first notice implementing the new rules. The DOL had not issued guidance or provided a model notice until the afternoon of April 3, 2025.

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(Auto) Enroll With It: Understanding the New Automatic Enrollment Requirements

On January 10, 2025, the Treasury Department and the Internal Revenue Service issued Proposed Regulations on the automatic enrollment requirements introduced by SECURE 2.0. The Proposed Regulations incorporate and expand upon previously issued interim guidance under IRS Notice 2024-2 and address various open issues.

SECURE 2.0

SECURE 2.0 generally requires that new 401(k) and 403(b) plans that are established on or after December 29, 2022 (the “enactment date”), automatically enroll employees at a uniform contribution rate of 3% (but not more than 10%) and also automatically increase the contribution rate by 1% annually, up to at least 10% (with a cap at 15%).

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New Self-Correction Component under the DOL’s Voluntary Fiduciary Correction Program

The Voluntary Fiduciary Correction Program (VFCP) has long been a source of reprieve to plan sponsors and fiduciaries from enforcement actions by the Department of Labor (DOL), by allowing the voluntary correction of a number of Employee Retirement Income Security Act (ERISA) violations before potential agency intervention. In coming forward and voluntarily correcting certain errors, the DOL continues to encourage plan sponsors and fiduciaries to engage in such behavior by issuing letters to those who have accepted VFCP submissions stating that the agency will not take any further action and will not pursue civil penalties on those matters. However, VFCP submissions require detailed applications which can be time-consuming and costly to prepare in comparison to the potentially minor correction that they are intended to rectify.

On January 15, 2025, the DOL’s Employee Benefits Security Administration (EBSA) amended and restated the VFCP, including finalized amendments to Prohibited Transaction Exception (PTE) 2002-51, to be effective March 17, 2025.

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DOL Lost & Found Database for Retirement Savings Goes Live

If you have ever found $10 in the pocket of a coat that you have not worn for some time, you are familiar with the delight of finding lost money that belongs to you. The Department of Labor’s new Retirement Savings Lost & Found Database (Database) seeks to recreate that feeling in the employee benefits realm by reuniting missing participants and beneficiaries with benefits they may have accrued under job-based retirement plans.

The importance of locating missing participants

Taking steps to find participants and beneficiaries who may be owed a benefit is important to companies that sponsor retirement plans for several reasons.

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