Compliance Corner: Q2 2026
Upcoming Deadlines
Even though it is World Cup there is still work to do. The H&S Plan Consultants are diligently completing the necessary compliance tasks for our 2025 calendar year plans. If you have received a request for additional information from your H&S Plan Consultants, or if you have not yet completed our annual census task, please respond as soon as possible.
Upcoming deadlines in 2026 for calendar year plans (including deadlines for plans in operation during 2025):
July 31st – Deadline to file Forms 5500 and 5330 without extension for calendar year plans.
September 15th – Deadline for money purchase and defined benefit plans to make required contributions. Deadline for deductible employer contributions for partnership and S-Corp 401(k) plans on extension.
SECURE 2.0 Interim Amendments
As a condition to utilize the IRS preapproved document program, Plan Sponsors must adopt certain changes to the plan document as required by the IRS. The IRS mandates an interim amendment when there are significant legal updates to the qualified plan rules that will require operational changes before the next full cycle restatement. Due to the significant changes ushered in with the SECURE 2.0 legislation the IRS has set a deadline of December 31, 2026, for most Plan Sponsors to adopt an interim amendment to reflect the various changes in SECURE 2.0 before the next cycle restatement.
To keep the plans we administer compliant, H&S will begin sending out interim amendments later this year. The interim amendment will include default elections to update the plan document with the SECURE 2.0 changes but will not adopt many of the optional features unless specifically requested by the Plan Sponsor. A required summary of material modification will go out along with each amendment. Where possible, Plan Sponsors will have the option to include the SMM in the annual notice package that is distributed to participants after October 1st and before December 1st for calendar year plans. Once you receive these documents, we ask that you carefully review the changes. If you are considering implementing an optional provision authorized by SECURE 2.0 please contact your H&S Plan Consultant.
New H&S Service Ignition Billing System
As part of our ongoing effort to serve our clients more efficiently, H&S has transitioned to a new contract management and billing platform called Ignition. This change allows us to manage service agreements and invoicing in one streamlined system, reducing administrative delays and making it easier to review and track billing history. As a result, you may begin receiving invoices and related communications from Ignition rather than through our previous billing process. Please rest assured that these communications are legitimate and not spam and we encourage you to add Ignition to your approved senders list (From: Hunnex & Shoemaker <no-reply@ignitionapp.com>). If you have any questions about an invoice or notice received through this new platform, please do not hesitate to contact our office.
SECURE 2.0 Options—Roth Employer Contributions, Self-certification, and Force-outs
Over the next several Compliance Quarter articles we will provide an overview of some significant provisions made available to Plan Sponsors with the SECURE 2.0 legislation. Plan Sponsors that want to adopt these features in a preapproved document will need to implement the change both operationally and using the SECURE 2.0 Interim Amendment (discussed above).
A word of caution regarding the many options now made available to Plan Sponsors with SECURE 2.0. The internet is filled with descriptions of the SECURE 2.0 provisions that Plan Sponsors may choose to adopt. Though additional options for plan administration, distributions, and other provisions are generally welcome Plan Sponsors need to confirm the feature is available on the plan’s recordkeeping platform and that the provision is something the Plan Sponsor can effectively administer. In addition, IRC 411(d) guarantees participants the right to maintain certain benefits or plan features, such as in-service distribution options, available to them at the time money is contributed to the plan trust. For this reason, Plan Sponsors should carefully consider if they are willing and able to administer a new distribution right before adding it to the plan because it may not be possible to remove such option at a later date.
Roth Treatment for Employer Contributions
SECURE 2.0 allows plans to permit participants to elect to receive employer matching or nonelective contributions on a Roth (after-tax) basis, rather than the traditional pre-tax basis. We have received a number of inquiries about implementing this a Roth employer option due to the popularity of Roth contributions for younger participants. For employees, the appeal is straightforward: Roth contributions grow tax-free and are not taxed again upon a qualified distribution, which can be especially attractive to younger employees or those who expect to be in a higher tax bracket in retirement. The tradeoff is that the contribution amount is includible in the employee's taxable income in the year it's made, meaning the employee owes income tax up front on money they didn't directly receive as cash, which can create an unexpected tax liability if employees aren't prepared for it. From the employer's perspective, offering this feature can be a valuable recruiting and retention tool, but it does add administrative complexity, since payroll and recordkeeping systems must be able to separately track, report, and tax these contributions correctly at the time they're made. The election is also irrevocable and only applies if the employee is fully vested in the source.
Plan Sponsors interested in implementing this new SECURE 2.0 option should consider waiting until the 2027 plan year at the earliest. Most payroll and recordkeeping platforms are not yet updated to allow for Roth treatment of employer contributions and without recordkeeper availability it is not functionally possible for many plans to adopt this feature.
Self-Certification of Hardship Distributions
Another optional feature allows plans to permit participants to self-certify that they have an immediate and heavy financial need that qualifies for a hardship distribution, rather than requiring the participant to submit supporting documentation (such as bills, eviction notices, or medical statements) to support the distribution. The advantage to allowing for self-certification is that it typically speeds up the distribution process for those in need of funds to cover a qualifying hardship and the Plan Sponsors avoids the administrative burden (and liability) of collecting and reviewing sensitive financial documentation. The downside is reduced oversight. Self-certification relies on the participant's representation being accurate, and while the plan can rely on that certification in good faith, it does shift some risk away from a documented review process. Employers adopting this feature should make sure participants understand that they are certifying their need is genuine and that they aren't aware of other resources to meet such need. The IRS still requires that the underlying hardship qualify even though the responsibility for verifying the need is no longer on the Plan Sponsor.
H&S typically recommends that Plan Sponsors consider adopting self-certification to reduce administrative burden, processing times, and to reduce liability in the event the participant improperly requests a hardship distribution. H&S will also send participants a self-certification hardship form to sign off on before processing, if this is not being done by your recordkeeper.
Increased Force-Out Limit for Small Account Balances
A welcome change in SECURE 2.0 is an increase in the involuntary cash-out (force-out) limit from $5,000 to $7,000 that plans may use to automatically distribute a terminated participant's small account balance without their consent. The benefit to Plan Sponsors is largely administrative: force-outs help reduce the number of small, inactive accounts a plan must track, which can lower recordkeeping costs and simplify plan administration over time. Removing small balances can also avoid the independent audit requirement if a plan is close to the 100 balance threshold. Finally, removing small balances from the plan reduces ongoing fiduciary liability for participant funds for those that are no longer employed by the Plan Sponsor and the heightened risk of lost participants. The consideration for participants is that any cashed-out balance must be rolled into an IRA automatically on the participant's behalf if they don't make an affirmative election, so participants should be aware that leaving an account behind doesn't necessarily mean it stays in the plan, though they retain the ability to redirect that rollover IRA at any time.
The increased force-out limit is a welcome change for most plans, especially if the plan is close to the independent audit threshold. The H&S SECURE 2.0 Interim Amendment will automatically adopt the higher $7,000 force-out limit unless the Plan Sponsor specifically requests a lower limit.
Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice.
Written by: Sam Dart, on behalf of Hunnex & Shoemaker