New Defined Contribution Retirement Plan Rules for 2025-2026: What Employers Need to Know

The retirement plan environment continues to evolve, and 2025 brings several important changes that directly affect employers sponsoring 401(k) and other defined contribution retirement plans. While these updates stem primarily from the SECURE 2.0 Act, a recent executive order from President Trump may also expand the scope of investment options for plan participants. Additional guidance or proposed regulations from the Department of Labor and Securities and Exchange Commission are needed to implement the executive order and are anticipated in early 2026.

For employers, the impact of these changes is twofold. First, the employer must keep their plan in compliance—failure to do so could result in regulatory scrutiny, penalties, and fiduciary exposure. Second, the employer has the opportunity to enhance the competitiveness of their retirement benefits program, positioning its business as an employer of choice.

Key Changes for 2025-2026

1. Mandatory Automatic Enrollment for New Plans

Starting in 2025, most newly established 401(k) and 403(b) plans must include automatic enrollment. Unless an employee opts out, a plan must enroll the employee at an initial default rate of between 3% and 10%, with automatic annual increases of 1% until reaching at least 10% of compensation (maximum of 15%).

Employer Considerations:

• Payroll systems must support auto-enrollment and automatic escalation.
• Plan documents must be drafted to comply with the new requirements.
• Annual participant notices are required and distributed to all eligible employees no fewer than 30 days and not more than 90 days before the start of the plan year.

2. Enhanced Catch-Up Contributions (Ages 60-63)

Employees between the ages of 60 and 63 can now make “super catch-up” contributions—up to $11,250 or 150% of the standard catch-up limit of $7,500 for 2025.

Employer Considerations:

• Plans must be amended by December 31, 2026 to incorporate the new limits.
• Payroll and recordkeeping providers must be prepared to accept and properly allocate these contributions.
• Testing procedures should be reviewed to account for increased deferrals by older participants.

3. Expanded Eligibility for Part-Time Workers

Beginning in 2025, long-term part-time employees—those working at least 500 hours annually for two consecutive years and reaching age 21 by the end of the second plan year—must be permitted to participate in the employer’s 401(k) plan or 403(b) plan.

Employer Considerations:

• Employers must track part-time employee hours more precisely.
• Eligibility systems should be updated to flag when employees become eligible.
• Employers should evaluate the financial and administrative impact of increased participation, including potential financial statement audit and compliance costs.

4. Roth Catch-Up contributions

Beginning in 2026, aged 50 or older highly paid employees earning more than $150,000 in FICA wage in the preceding calendar year (2025) with the same employer will be required to make catch-up contributions on a Roth (post-tax) basis. This compensation threshold may be adjusted annually for inflation.

Employer Considerations:

• Employers should confirm that the plan permits Roth contributions.  If not, an amendment will be necessary to enable affected employees to continue making catch-up contributions.
• Payroll and recordkeeping providers must be prepared to accept and properly allocate Roth contributions.
• Employers should notify affected employees well in advance of the change. Clear communication will help affected employees understand the change and adjust their elections if needed.

5. Alternative Investments in 401(k) and other defined-contribution Plans

On August 7, 2025, the White House issued an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” While the headline is geared toward retirement savers, the real impact falls squarely on employers and plan sponsors who shoulder the fiduciary responsibility for their retirement plans.

The Order directs the DOL and the SEC to re-evaluate longstanding regulatory barriers around incorporating alternative investments—such as private equity, private credit, real estate, and even digital assets—into defined contribution plans. In particular, it asks regulators to revisit fiduciary guidance under ERISA and to reassess “accredited investor” rules that have historically limited access to these markets.

For plan sponsors, this development is both an opportunity and a challenge. On one hand, the Executive Order underscores a policy shift toward expanding the potential types of investments within 401(k) lineups—an objective many participants have long sought. On the other hand, it raises new governance questions around liquidity, fees, valuation transparency, and risk management—areas that fall directly under the fiduciary oversight of employers and their advisors.

In practice, nothing changes immediately. The DOL and SEC now begin a rulemaking and guidance process that may take months—or longer. However, the direction is clear: Federal policy is potentially opening the door for alternative assets to become a more routine feature in retirement plan investment lineups.

The Executive Order signals a potential re-shaping of the 401(k) landscape. For employers, the question is not simply whether these assets will be allowed, but how to prudently determine if they belong in their plan.

Employer Considerations:

• While it is not certain that these options will eventually become available, sponsors will carry additional fiduciary responsibility if they are included.
• Committees should begin discussing governance frameworks for evaluating alternative assets with their trusted advisors. Navigating these changes will require expertise in ERISA and investment governance to maintain compliance and mitigate litigation risk.
• Employers must document decision-making carefully to reduce fiduciary exposure.
• If alternative investments become permissible, sponsors will need to revisit their investment policy statements, due diligence practices, and participant education strategies.

Conclusion

The new rules taking effect for 2025-2026 demand careful attention from employers. By addressing these changes proactively, you can make it easier to avoid compliance pitfalls, strengthen fiduciary practices, and enhance the overall effectiveness of your retirement plan.