401(k) plan administrators and sponsors should take stock of proposed changes that may impact 401(k) planning for 2026 and beyond. While many of these provisions are not yet effective, they have the potential to create significant operational, fiduciary, and audit implications in future plan years.

Taking the time to plan for or accommodate these changes now will give you time to prepare and update relevant plan documents, creating a clearer and more complete audit trail for your 401(k) auditor. Early preparation and audit readiness can help reduce the time it takes to audit a 401(k) plan, potentially providing cost savings.

Congressional Provisions for 401(k) Plans

There are several noteworthy legislative proposals currently making their way through Congress. Some of these provisions are still in committee, but they promise to have a substantial effect on 401(k) administration.

ERISA Litigation Reform Act

Recently introduced in the House, this bill aims to curb the lawsuits against 401(k) plans. It would clarify the pleading standards for prohibited transaction claims and shift more burden of proof to plaintiffs.

Under the proposal, plaintiffs would need to prove not only that a prohibited transaction occurred, but also that it’s not exempt under ERISA Section 408(a). If enacted, this could reduce frivolous lawsuits while maintaining core participant protections.

For plan sponsors, this signals a continued focus on fiduciary responsibility and documentation. Even with higher legal thresholds, weak governance and poor documentation remain litigation risks.

Federal Benefits Agency “Minibus” Bill

This funding bill would provide more stable, multi-year funding for agencies like the Employee Benefits Security Administration (EBSA), which is the part of the Department of Labor that oversees federal benefits laws and 401(k) plans. The bill would largely maintain funding levels consistent with prior years. EBSA administers delinquent filer programs, voluntary correction programs and other administrative issue programs, which support both plan sponsors and participants.

Codifying Executive Order on Alternative Investments

Congress is expected to consider legislation codifying President Donald Trump’s executive order adding alternative 401(k) investments, such as cryptocurrency and real estate, as investment options for 401(k) plans. Although details remain fluid, plan sponsors evaluating alternative investments should consider the long-term fiduciary implications and risk to participants before making changes to their 401(k) plan.

SECURE 2.0: Required Plan Document Updates by End of 2026

Many SECURE 2.0 provisions require formal plan amendments by the end of 2026. Service providers are expected to notify sponsors and explain the update process no later than the first half of 2026 and some may have already done so.

Required Items:

• Roth catch-up mandate requires participants age 50 and over earning over $150,000 to make catch up contributions as Roth beginning January 1, 2026
• Involuntary force-out threshold increased to $7,000
• Self-certification for optional and hardship withdrawals
• Changes to top heavy calculations
• Auto-enrollment with escalation for new plans
• Increased super catch-up contributions for participants aged 60–63
• Penalty-free emergency withdrawals

Many of these provisions hinge on participant age and compensation thresholds, making payroll accuracy critical. Misapplied rules can affect participant taxation and contribute to testing failures during an audit. If there have been issues with these areas in the past, it’s wise to double-check calculations to ensure accuracy.

Optional Provisions:

• Employer-match Roth or nonelective contributions
• Student loan matching
• Emergency, disaster, domestic abuse and terminal illness distributions
• Emergency savings accounts
• Automatic portability of small balances when participants change employers
• Expanded long-term, part-time coverage beyond what is already required

Optional SECURE Act 2.0 features should be evaluated based on workforce demographics, administrative complexity, and fiduciary oversight capacity.

For more information on SECURE Act 2.0 and 401(k) planning, watch this episode of the 401(k) Audit CPA Success Show: Auto Enrollment, Catch-Up Contributions and More: All the SECURE Act 2.0 Changes for 2025 and Beyond.

Executive Actions to Watch

“Trump Accounts” for Minors

“Trump Accounts” are a proposed savings vehicle for minors, funded by government and private contributions, that has been discussed for tax years after 2025. Rules haven’t been fully established yet and there are still operational questions that have yet to be answered.

The pilot program is expected to begin in July and is designed to operate in conjunction with 519/509 accounts, which aren’t connected to retirement accounts or 401(k) audits at all. Without intervention, this provision may sunset in 2028.

Use of 401(k) Assets for Home Purchases

President Trump has verbally suggested enabling 401(k) plans to allow participants to make penalty-free withdrawals for a home. This is part of the Trump administration’s push to make homeownership more affordable for young people. Previously, participants could take out a loan for home purchases.

If personal residences ever became plan assets, audit scope and valuation challenges could increase dramatically. Because personal residences cannot be readily valued or certified by the plan sponsor or administrator, auditors may decline to accept the engagement, making it more difficult to fulfill audit requirements or making it extremely expensive.  

For now, sponsors should watch developments but proceed cautiously.

Department of Labor (DOL) Areas of Emphasis for 2026

The DOL has announced a shift in enforcement priorities toward higher-risk areas, reinforcing the importance of internal controls and participant data security:

• Cybersecurity
• Protection of benefit distributions
• Retirement asset management
• Criminal abuse of benefit plans

Litigation Trends to Watch

Forfeiture Use

Lawsuits continue to challenge how plans use forfeitures. Participants have filed suits alleging that it’s a misuse of forfeiture funds if they’re used as additional employer contributions rather than using them toward fees that would reduce costs for participants. While some cases have been dismissed, some have resulted in settlements ranging from approximately $1 million to $9.5 million. Supreme Court involvement is expected.

Stable Value Fund Scrutiny

This is more relevant for those in the Defined Benefit plan space or when the plan sponsor manages the investments. Participants have filed lawsuits against employers who placed them in stable value funds, particularly when the equity market is on the up.

Participants argue that allocating assets to stable value funds, particularly during strong equity markets, may constitute a breach of fiduciary duty. If your plan has a stable value fund, be aware of the litigation these funds have recently faced.

Practical Steps Plan Sponsors Can Take Now

Early action reduces surprises and supports smoother audits. Sponsors can prepare by:

• Reviewing plan documents and amendment timelines
• Coordinating with payroll providers to verify age and compensation
• Revisiting cybersecurity and internal controls
• Evaluating forfeiture and investment governance practices
• Documenting fiduciary decisions and benchmarking processes
• Scheduling compliance reviews before audit season

How Anders Can Help

Regulatory change, litigation risk and operational complexity are converging in the 401(k) space. Sponsors who take a proactive approach to compliance and audit readiness are better positioned to protect participants and manage fiduciary exposure.

For more information on how our 401(k) audit team can help, request a free consultation below.