By Greta E. Cowart

The first few months of 2025 brought the potential for many changes. On January 20, 2025, one of the Executive Orders pulled back all proposed regulations that had been issued in the last 60 days, including proposed regulations on retirement plan changes in the law known as SECURE 2.0. The proposed regulations pulled back are starting to emerge from the 60-day delay.

It is important to remember that Executive Orders are not the law, but an indication of the direction the current president would like to see the agencies take. Watching the actions by the agencies and Congress in response to those orders will be important to identify future legal changes. Some proposed regulations caught in this standard new administration move are discussed below.

Catch-up Contributions: The proposed regulations pulled back include those on the new requirement that catch-up contributions for persons with a FICA compensation exceeding $145,000 may only make those catch-up contributions in Roth (post-tax) funds. This will impact your payroll system and the feed from payroll to your 401(k) plan’s record keeper. This requirement is not effective until January 1, 2026. Some administrative relief is included in the proposed regulations as it permits the Roth catch-up to be contributed during the plan year and before the individual limit on employee deferral contributions is hit, triggering eligibility to make the catch-up contribution. If a plan does not allow all participants to make Roth contributions, then such a plan cannot permit catch-up contributions.

401(k) plans that were designed with in-plan Roth rollover features will be able to self-correct for catch-up contributions processed as pre-tax when they should have been processed as Roth contributions. If a 401(k) plan wants to use a correction for failing to make designated Roth contributions for persons required to make catch-up contributions as Roth contributions, the plan must use the same correction method for all persons with a violation of the same limit in the same plan year. There is one correction method if the Form W-2 for the tax year has not yet been filed when this is discovered and another method not limited by the filing of a Form W-2 for the year. 401(k) plans may want to consider adding in-plan Roth rollovers before the Roth catch-up contribution is first required in 2026 to facilitate corrections. In-plan Roth rollovers are not limited to corrections before the Form W-2 is filed on January 31 of the next tax year. Correction deadlines vary based upon the tax law contribution limit involved, and use of the correction programs requires that the plan sponsor maintain and use compliance practices and procedures.

The additional catch-up contributions for persons attaining the ages of 60, 61, 62, and 63 are also required to be Roth contributions if the employee received compensation subject to FICA taxes in the preceding calendar year from the employer sponsoring the plan in excess of $145,000 (the conversion of the employee salary reduction amounts to Roth contributions shall be referred to herein as “Rothification”).

Plan sponsors should carefully review their 401(k) plan’s provisions regarding catch-up contributions, as plan documents may have added the original catch-up provision by incorporating by reference the statutory provisions for catch-up contributions when originally enacted. If the catch-up contributions were drafted by incorporating the Internal Revenue Code (“Code”) provision by reference, that may automatically pick up the age 60 through 63 additional catch-up contribution, which will require different payroll programming than just the change for automatic Rothification of the catch-up contribution. Plan sponsors who did not want to pick up the additional age 60 through 63 catch-up contributions may need to amend their plans to exclude such amounts if their plan document used incorporation by reference in a way that is not limited.

Other provisions in the proposed regulations will require additional plan document changes. The proposed regulations did not address the complexities from adding the increased catch-up for persons aged 60, 61, 62, and 63, but they should be considered to be part of the Rothification.

Correction program deadlines for correcting mistakes due to the Rothification of some catch-up contributions vary based upon the limit involved by which the individual became eligible to make a catch-up contribution. A condition for use of the correction programs requires that the plan sponsor maintain and use compliance practices and procedures related to the errors arising out of the Rothification of catch-up contributions.

The statutory provisions are effective for plan years after December 31, 2023, but that date was delayed in a prior notice until taxable years beginning after December 31, 2024, for the age 60, 61,62, and 63-year increase. The Rothification of catch-up contributions is in an administrative transition period for 2024 and 2025, so those changes will be in effect fully in 2026. The proposed regulations adding more definition on the Rothification of catch-up contributions and providing the new correction alternatives are not effective until six months after the final regulations are published. Given the complexity of these proposed regulations and the communication and payroll changes necessary, employers should commence analyzing the changes necessary for next January.

New 401(k) Plan Mandated Automatic Enrollment: A second proposed regulation pulled back required “new” 401(k) plans to have an automatic contribution requirement included. This new automatic contribution requirement can impact how retirement plans are combined following a transaction if the acquired entity’s plan was not terminated prior to closing. Before combining plans after a corporate transaction, it is best to stop and analyze the facts under this proposed regulation and the preceding guidance in a Notice to be sure that the combination will not cause the mandate to apply to the acquiring company’s plan solely because of the plan combination. The required automatic contribution for 401(k) plans is effective for plans established after December 31, 2024.

Next steps: Careful consideration of the proposed regulations mentioned above is necessary, as to date there has been no further delay of such proposed regulations.

Other Executive Orders Potentially Eventually Impacting HR and Benefits

Regulatory Reduction Mandate and Process Changes to Slow New Regulatory Developments: The Executive Orders have also required that for each new regulation to be issued, 10 regulations must be eliminated for each new regulation, and all regulations must go through White House review. Such requirements will likely slow the issuance of new regulations mandated by the SECURE 2.0 Act of 2022. Waiting for additional guidance may be a long wait.

Order Compelling Issuance of Regulations to Cause Certain Investments to be a Fiduciary Breach: An Executive Order directed the U.S. Department of Labor to issue regulations that retirement plan contributions invested in businesses in the Republic of China be considered a breach of fiduciary duty under ERISA. The regulatory process requires time for notice and comment before a regulation becomes law. The required regulatory process should help to provide plan fiduciaries and plan sponsors with time to act and determine what changes in investment lineups, blackout periods and notices, and new agreements for brokerage windows might be necessary, if such a proposal becomes a federal law.

While there is much uncertainty, what should an employer do now?

MHPAEA Regulation Requirements Partially Delayed: It is important to note that the final guidance on the required comparative analysis for your group health plan under the Mental Health Parity and Addiction Equity Act (“MHPAEA”) was NOT pulled back to be redrafted by the memo on recent regulation review. Such final regulations are in effect in part; however, parts are delayed (including the “meaningful benefits” standard, prohibition on discriminatory factors and evidentiary standards, data evaluation, and related requirements for the comparative analysis) until January 1, 2026. The nominee to lead the portion of the U.S. Department of Labor’s Employee Benefit Security Administration, which enforces MHPAEA, is someone who blogged about the challenges of obtaining mental health care for a child. The ERISA Industry Committee filed a letter requesting the effective date of such regulations be further delayed, pending judicial review. It will take time to determine how much of and whether this regulation will be effective as of January 1, 2026, for calendar year plans.

In the interim, in selecting and contracting with health plan vendors for 2026 coverage, be sure that the vendor’s contract considers compliance with applicable legal standards. For now, health plan sponsors should continue to document their review of the disclosure of compensation and indirect compensation related to their health and welfare plans as well as vendor performance.

Document Your Prudent Actions, Be Calm, and Carry On

New federal statutes and regulations take time to change the law, so continue compliance with the current laws and be watchful for changes in laws enacted in the U.S. Congress or in final regulations issued by the agencies.

Retirement Plans: Follow general ERISA procedural prudence steps, and documenting those steps remains important. For example, a retirement committee should be documenting its review of expenses, investments, and vendor performance.

Review the process for taking payroll deductions and depositing such amounts in a 401(k) plan in a timely manner because the U.S. Department of Labor is collecting information on this process, and the program for correcting delays in the deposit of employee contributions was issued in the period of regulatory review.

Start work on communications for the Rothification of catch-up contributions and the payroll processing changes that will be required. Review your 401(k) plan document to determine if it incorporates by reference the catch-up contribution governing Code section, and determine whether your organization wants to add the aged 60 through 63 increased catch-up contributions automatically or if an amendment is necessary. The transition period ends for the catch-up contribution changes on December 31, 2025.

Pension Plans: For defined benefit pension plans, review the plan’s funded status and the new Pension Benefit Guaranty Corporation (“PBGC”) premium filing due dates (available on the PBGC website). Plan fiduciaries should review the investment policy considering the volatile financial markets. Plan administrators should review the annual funding notice for the plan to ensure it complies with the new form notice issued with Field Assistance Bulletin 2025-02. The requirements start with funding notices due to be distributed by April 30, 2025.

Executive Benefits: For executive compensation tools, watch for compliance and handling of benefits post-corporate transactions. Reviewing compliance procedures and vendor performance is always a good practice to work to catch missteps quickly so such items may qualify to be corrected and at a lower cost.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For additional assistance please contact Greta E. Cowart or a member of the Employee Benefits & Executive Compensation (EBEC) practice.

Meet Greta

Greta E. Cowart has counseled employers for more than 30 years on best practices in human resources and employee relations related to benefits and executive compensation. In her practice, Greta routinely develops strategies for effective administration of claims and other disputes, including defense of grievances, and in ERISA claim litigation, while also considering applicable labor and employment laws. Greta also provides fiduciary training and review of fiduciary operations to improve the documentation of the fiduciary process.