Roth Compliance Tops Advisers’ Q4 To-Do List

There is plenty for plan advisers to accomplish each year, but the actions required in 2025 might be a little more important than usual, according to Mike Webb, a senior manager in the retirement plan consulting group at CAPTRUST.

With the fourth quarter of 2025 in full swing, industry experts shared key considerations for plan advisers, administrators and participants striving for plan health and compliance before the end of the year.

The ‘Biggest’ Consideration

This year, the “biggest” action item is deciding how to handle the mandatory Roth catch-up provision of the SECURE 2.0 Act of 2022, Webb says.

When SECURE 2.0 first passed, 401(k) catch-up contributions for participants whose wages subject to federal income tax in the prior year exceeded $145,000 (indexed annually) were required to be made on an after-tax Roth basis beginning in 2024. However, in August 2023, the IRS granted a two-year delay in the effective date to facilitate an orderly transition for compliance with the requirement.

“The IRS could have extended the deadline [further],” says Webb. “They chose not to. They’d already extended it from 2024, so plan sponsors have had some time to prepare.”

But plan sponsors who have delayed their preparations may be rushing now for another reason. They will not know the actual FICA wage threshold until the IRS releases its tax inflation adjustments in the coming weeks, Webb explains.

Elizabeth Goldberg, a partner in and the deputy leader of the fiduciary duty task force at law firm Morgan, Lewis & Bockius LLP, says “Rothification” is the No. 1 plan administration item she has heard industry insiders say “keeps them up at night.”

Goldberg says companies are wrestling with the decision to either automatically change the contributions of impacted participants to Roth when they become eligible for catch-ups or cancel the catch-up election if the participant contributes to a pre-tax account.

Webb suggests consultants and advisers might want to check in with their clients’ recordkeepers to see what their action plan is.

“Without a good adviser, plan sponsors might miss an email from a recordkeeper that says plan sponsors have to act by [a specific date] in order to make sure they’re able to administer the mandatory catch-up,” Webb says.

Plan sponsors that do not currently offer Roth in their plans are not required to start doing so. However, they must amend their plans if they would like to allow their employees over age 50 whose wages exceed the threshold to make catch-up contributions next year, Webb explains.

Plan Forfeitures

The second biggest consideration for plan advisers to keep in mind is 401(k) plan forfeitures.

The IRS issued guidance in 2023 to clarify in what period of time plan sponsors can retain plan forfeitures. The guidance came in response to regulators learning that plan sponsors had been leaving their forfeiture accounts unused, essentially “rolling them over from year to year.” As a result, plan sponsors had some “very old forfeitures,” Webb says.

The 2023 guidance stated plan sponsors must use forfeitures by the end of the plan year after the plan year in which they were incurred. The proposed regulations included a transition rule that deemed all pre-2024 plan year forfeitures to have been incurred in the 2024 plan year, essentially allowing plans with several years of forfeitures accrued to use them all by the end of the 2025 plan year.

The IRS gave plan sponsors until December 31, 2025, to spend the accrued forfeitures. After that, the rules are “going back to normal,” Webb says, with plan sponsors required to use plan forfeitures by the end of the following plan year.

Some plan sponsors are “scrambling,” according to Webb, because they have significant amounts built up in forfeiture accounts, but their plan document only allows for certain ways to use those amounts.

Other SECURE Considerations

Aside from Webb’s “big two,” experts suggested some additional considerations.

Section 338 of SECURE 2.0 requires retirement plans to provide at least one paper benefit statement per year for defined contribution plans and one every three years for defined benefit plans, starting with plan years that begin on or after January 1, 2026. Participants can still opt out of paper delivery in favor of electronic.

The IRS moved away from issuing paper checks in August, but Webb says this requirement should not be a “heavy lift” for plan sponsors. Unlike implementing the mandatory Roth provision and using plan forfeitures, this action item is entirely on the recordkeepers. In fact, plan sponsors “might not even notice that it’s going on.”

Rachel Mann, an associate at Morgan Lewis, says another key deadline for employers applies to sponsors of 457(b) deferred compensation plans, which must amend their plans to bring them into compliance with SECURE 2.0 changes that took effect in prior years.

Initially, qualified and governmental retirement plans had until the end of this year to adopt amendments required by the Setting Every Community Up for Retirement Enhancement Act of 2019 and SECURE 2.0. The IRS extended the deadline for most plans until December 31, 2026, when it issued Notice 2024-02 in late 2023, but tax-exempt 457(b) plans were excluded from the extension.

Mann says, as an additional year-end action item, plan sponsors should inventory any non-SECURE 2.0-related mid-year operational changes and confirm with recordkeepers and legal counsel that the corresponding amendments are formally executed by year-end. They should maintain documentation supporting that those changes were “participant-friendly” and “properly communicated.”

Trusted Contacts, Beneficiaries

Tamiko Toland, the founder and CEO of the 401(k) Annuity Hub, says people often see the turn of the year as an opportunity for a fresh start. Many participants think about financial planning at year-end, but it may also be a good time for them to think about their trusted contacts and beneficiaries, she suggests.

Toland says that after a significant life change, such as a divorce, it is important for participants to update their beneficiaries to reflect who they designate to inherit their assets upon their death.

She also emphasizes the importance of setting a trusted contact. If a participant suffers from cognitive decline, for instance, it can be important for financial institutions to have someone else to speak with in the event of suspicious activity on a retirement or investment account.

However, there is an “education element” to ensure participants understand what a trusted contact is and the importance of assigning one, Toland says. She believes a lot of people do not entirely understand the terminology.

“You’re not … handing over the keys to the kingdom; this isn’t permission to manage your assets or make withdrawals,” Toland says. “It’s just that extra layer of protection.”