Benefits BRIEFING | ERISA Newsletter | Q1 2026

Practical Guidance for Navigating Benefits with Confidence

Welcome to our first quarterly newsletter, Benefits BRIEFING, where we highlight topics of interest, recent agency guidance, and practical insights into areas of employee benefit law and compliance. If you have questions, a suggestion for a topic you’d like to see us cover, or would like to further discuss anything we cover here, we would love to connect.

In this edition:

• Roth Catch-up Contribution Required for Highly Paid Employees
• Lifetime Income Investments Can Be a QDIA
• Alternatives for Offering Fertility Treatment Coverage
• What We Are Watching in 2026

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Roth Catch-up Contribution Required for Highly Paid Employees

Welcome to 2026 — the year of the Roth catch-up contribution mandate. The SECURE 2.0 Act of 2022 requires catch-up-eligible highly paid employees (HPEs) (those who made more than $150,000 in 2025, adjusted for inflation) to make catch-up contributions as Roth contributions, beginning January 1, 2026. The Department of the Treasury issued final regulations implementing this requirement in September of 2025, providing clarity and giving plan sponsors more guidance as to how to implement this complex requirement.

Highlights of the regulations include:

• Deemed elections permitted. Plans may provide that all HPEs are deemed to elect to make catch-up contributions as Roth contributions as long as the participant is given an “effective opportunity” to revoke this election and, therefore, cease making elective deferrals rather than make catch-up contributions. The Treasury declined to provide additional guidance on what facts and circumstances are to be considered when offering an effective opportunity, which may open the door to future guidance. However, in our opinion, an annual notice to eligible employees may meet this requirement.
  • If your plan applies a deemed Roth catch-up election to participants, the plan document must be amended to provide for this rule by December 31.
  • Note: This method is administratively simpler than soliciting actions from participants during the year to classify catch-up contributions as Roth contributions or cease making contributions to the plan and also allows the plan to rely on additional correction methods when failures occur (described below).

• Who is subject to this requirement? Participants subject to this requirement for the current plan year are determined based on prior year FICA wages, paid by the participant’s common-law employer contributing to the plan, reported in Box 3 of Form W-2. If this amount exceeds $150,000 in 2025 (adjusted for inflation in future years), the individual is determined to be subject to this rule for 2026 contributions.
  • The plan sponsor can elect to aggregate FICA wages among related employers if the employee provides services to affiliated employers.
  • This rule does not apply to self-employed individuals, including partners and S corporation owners, which may cause a difference in treatment among individuals in the same plan.
  • Note: This is a different determination than the determination of highly compensated employees for purposes of nondiscrimination testing.

• Correction methods clarified. Before this rule, if a participant contributed more pretax contributions to the plan than permitted by statute and excess contributions were not considered catch-up contributions, such excess contributions would be distributed to the participant and subject to income tax. The regulations provide for two additional correction methods:
  • The Form W-2 correction method: A plan may correct pretax catch-up contributions that should be treated as Roth contributions on the participant’s Form W-2 for the year of deferral. This method is unavailable if the participant’s Form W-2 has already been filed or furnished to the participant.
  • The in-plan Roth rollover method: A plan may correct pretax catch-up contributions that should be treated as Roth contributions through an in-plan Roth rollover. The plan would roll over the deferral amount to the participant’s Roth account within the plan and report that amount on Form 1099-R for the year of the rollover. This correction method is available even if the plan does not permit participants to voluntarily make an in-plan Roth rollover within their account.

In order to use the two new correction methods, the plan must have practices and procedures in place to ensure that elective deferrals are made in compliance with the law and also must provide for deemed Roth catch-up elections (discussed above). The IRS also indicates that correction is not required if (1) the participant was excluded from the Roth catch-up requirement because FICA wages were incorrectly reported and the error is discovered after the deadline for correction, and (2) the amount of the elective deferral required to be a Roth contribution does not exceed $250 (excluding earnings).

If a plan does not provide for deemed Roth catch-up contributions and an HPE contributes excess pretax contributions than permitted by statute without an affirmative election to treat excess contributions as Roth catch-up contributions, the excess pretax contributions must be distributed from the plan.

These rules are complicated and the regulations provide more detail and guidance than we can go into here. If you have questions about how these rules should be administered, please contact the authors.

Lifetime Income Investments Can Be a QDIA

In late September 2025, the Department of Labor (DOL) issued Advisory Opinion 2025-04A (the Advisory Opinion), confirming that lifetime income investment options can serve as a qualified default investment alternative (QDIA) in defined contribution qualified retirement plans.

Most defined contribution plans (e.g., a 401(k) plan or 403(b) plan) permit participants to direct the investment of their plan accounts from among a variety of investment options selected by a plan fiduciary. In the absence of participant direction, DOL regulations permit the plan to invest the participant’s account in a QDIA, as long as certain notice and liquidity requirements are met, which are outlined in 29 CFR §2550.404c-5 (the QDIA Regulation). AllianceBernstein L.P. asked the DOL whether its Lifetime Income Strategy (LIS) program could serve as a QDIA for the defined contribution plans of its clients. The LIS program invests participant accounts into a fund that includes a guaranteed lifetime withdrawal benefit insured by an insurance company. The DOL said yes, it can qualify as a QDIA, as long as it complies with the transferability requirement and other provisions of the QDIA Regulation.

The Advisory Opinion notes that the QDIA Regulation specifically contemplates investment alternatives that are offered through variable annuities or similar contracts and cites various Information Letters issued by the DOL over the past decade analyzing different types of investment alternatives that include an annuity or a lifetime income component. However, the DOL notes that practitioners continued to seek additional guidance. The Advisory Opinion explicitly acknowledges that a lifetime income investment product is not forbidden by the QDIA Regulation.

Plan sponsors should note that the Advisory Opinion does not change the fiduciary’s responsibility to prudently select and monitor investment options offered to participants, which remains a facts-and-circumstances analysis. Further, the DOL did not opine on how plan fiduciaries should evaluate the reasonableness of fees associated with these types of programs. And the Advisory Opinion applies only to the specific facts presented, so it would not necessarily have a dispositive impact on any potential legal challenge. Therefore, a fiduciary’s decision to include a lifetime income option as a QDIA must be part of a prudent and well-documented process by plan fiduciaries.

Announcing the issuance of the Advisory Opinion, the DOL indicated that the guidance is in response to President Donald Trump’s Executive Order 14330, which directs the DOL to facilitate access to alternative asset investments for retirement plan participants. We will be watching to see how this Advisory Opinion fits into the broader guidance initiative by the DOL to implement this directive.

Alternatives for Offering Fertility Treatment Coverage

In October 2025, the Departments of Labor, Health and Human Services, and Treasury jointly issued FAQ Part 72 (FAQs), which addresses how employers can offer a full range of fertility benefits (such as IVF and treatments to restore fertility by addressing root causes) as “excepted benefits.” Excepted benefits are separate from core health plan benefits and are exempt from various requirements under HIPAA and the Affordable Care Act, such as preexisting condition exclusions and lifetime/annual limits.

The statute provides four different classifications of excepted benefits:

1.  benefits not generally considered health coverage, such as automobile insurance or workers’ compensation
2.  limited excepted benefits, such as limited-scope vision or dental benefits
3.  independent, non-coordinated excepted benefits, which cover only a specified disease or illness, such as cancer-only policies
4.  supplemental excepted benefits, such as Medicare supplemental health insurance or Tricare

The FAQs clarify that fertility benefits can be offered as independent, non-coordinated excepted benefits. Because these types of excepted benefits are separate from an employer’s group health plan, participants should not be required to enroll in the employer’s group health plan to be eligible for these benefits, increasing accessibility for employees. As an independent, non-coordinated excepted benefit, the fertility benefits must meet a few requirements: (1) they must be offered under a separate policy, certificate, or contract of insurance; (2) there must be no coordination between the excepted benefit coverage and any exclusion of benefits under the group health plan; and (3) benefits must be paid without regard to whether benefits with respect to the same event or condition are offered under the employer’s group health plan.

• Note that as an independent, non-coordinated excepted benefit, these benefits must be insured and cannot be self-insured by the employer.
• The FAQs also clarify that an individual who enrolls in the fertility benefit provided as an independent, non-coordinated excepted benefit remains eligible to contribute to an HSA.

Alternatively, the FAQs indicate that out-of-pocket fertility benefits can be reimbursed through an excepted benefit health reimbursement arrangement (HRA), which allows a self-funded option to offer these benefits. Among other requirements, these types of HRAs can reimburse employees for medical care expenses of up to $2,200 (for the 2026 plan year, as adjusted for inflation) if (1) the employer maintains another group health plan that is not limited to excepted benefits; (2) the HRA does not reimburse premiums for individual health insurance coverage, group health plan coverage, or Medicare; and (3) the HRA is made available under the same terms to all similarly situated individuals.

Finally, the FAQs clarify that employers can offer coaching or navigator services to employees to help them understand their fertility options through the employer’s Employee Assistance Program (EAP), without jeopardizing the EAP’s classification as an excepted benefit.

Why do these FAQs matter? These FAQs make it easier for employers to expand access to fertility coverage for employees, making coverage easier and cheaper to provide and addressing growing demand for fertility benefits and family-building support. Further, the departments indicate that they intend to propose notice and comment rulemaking to provide more guidance and additional ways that employers can expand coverage options to include fertility benefits as excepted benefits.

What We Are Watching in 2026

It will be a busy 2026 for the Employee Benefits Security Administration as it works to implement various executive orders issued in 2025 and provisions of the 2022 SECURE 2.0 Act. We expect to see guidance on a variety of topics, including:

• Alternative investments in 401(k) plans — Trump’s Executive Order 14330 directed the Department of Labor (DOL) to reevaluate its guidance on access to alternative assets in qualified retirement plans. The DOL has until February 3 to respond.
• The fiduciary rule still lives — Although the Trump DOL ended its defense of the Biden-era fiduciary rule (which would have expanded ERISA’s fiduciary requirements to cover one-time rollovers out of 401(k) plans), a rewrite of the rule is included in the DOL’s 2026 rulemaking priorities.
• The ESOP adequate consideration rule — The term “adequate consideration” is a central condition of a statutory prohibited transaction exemption that allows employee stock ownership plans (ESOPs) to acquire shares of the plan sponsor. The SECURE 2.0 Act directed the secretary of labor (and the Treasury secretary) to issue formal guidance on the acceptable standards and procedures to determine adequate consideration for securities transactions by ESOPs. Trump revoked a pending draft of an adequate consideration rule proffered by the Biden administration and a rewrite of the rule is included in the DOL’s 2026 rulemaking priorities.
• Missing participant database — The SECURE 2.0 Act requires the DOL to create an online searchable database to allow participants who may have lost track of their 401(k) plan information to search for the contact information of the plan administrator of their 401(k) so they can file a claim for benefits. This database is currently live, but the DOL intends to issue regulations for the collection of information for the database to continue improving the project.

Reminder!

Plan amendments to your qualified retirement plans to comply with the SECURE Act, CARES Act, and SECURE 2.0 Act must be adopted by December 31, 2026. Notwithstanding the foregoing, if you intend to terminate your qualified retirement plan prior to such date, these amendments must be adopted before the termination date.