Considerations for Administrators of Non-ERISA Governmental & Church Plans

Administrators of governmental plans and church plans that are not subject to the Employee Retirement Income Security Act of 1974 (ERISA) should review the following actions to be taken before the end of 2026 and address what to expect for 2027. 

The following checklist addresses plan amendments and other considerations for qualified plans, welfare plans, and executive compensation.

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Amendments and Considerations for All Qualified Retirement Plans

SECURE, SECURE 2.0 and CARES Act Amendments: 

• Amendments to conform to the SECURE Act of 2019 (SECURE Act), the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act), and the SECURE 2.0 Act of 2022 (SECURE 2.0) must be adopted by December 31, 2026, for qualified plans or by December 31, 2029, for governmental plans. Plan administrators of qualified plans should carefully review any administrative changes implemented under the SECURE Act, CARES Act, and SECURE 2.0 to ensure that amendments adopted in 2026 accurately reflect administration for all prior years. Plan administrators of governmental plans should carefully document changes implemented under the SECURE Act, CARES Act, and SECURE 2.0 so that amendments adopted later will accurately reflect administration. Qualified plans that have not yet adopted required amendments should prioritize completion before the year-end deadline.

SECURE 2.0 Act Change Effective in 2026: 

• Effective for plan years beginning after December 31, 2025, participants whose prior year FICA wages from the plan sponsor exceeded $150,000 (as indexed for inflation) may make catch-up contributions only on a Roth basis. Plan sponsors should coordinate with recordkeepers and review payroll systems to ensure compliance with this new requirement for 2026 and future years. Plan sponsors may wish to consider adding a Roth feature to their plan if one does not currently exist.  

Discretionary Plan Amendments: 

• Plan amendments reflecting discretionary changes that became effective in the current plan year (other than the SECURE Act, CARES Act, and SECURE 2.0 changes discussed above) must be adopted by the last day of the plan year (e.g., December 31, 2026, for a calendar year plan). Examples of discretionary changes include an increase in benefits, the addition of a new participating employer, and the addition of a new type of contribution.  For defined benefit plans, advance participant notice may be required if an amendment significantly reduces the rate of future benefit accruals, such as a pension plan freeze. 

Determination Letter Procedures: 

• The Internal Revenue Service (IRS) determination letter program permits determination letter requests for individually designed plans (i.e., plans not using pre-approved documents such as prototype or volume submitter documents) only for initial plan qualification, plan termination, or in the case of certain merged plans. An eligible plan merger is one that occurs in connection with a corporate merger, acquisition, or similar business transaction among unrelated entities, no later than the end of the plan year after the plan year that includes the date of the corporate transaction. If eligible, the application for determination on a merged plan must generally be submitted before the end of the plan year following the year of the plan merger.  For instance, if a merger occurred in 2025, the determination letter request must be submitted no later than December 31, 2026, for a calendar year plan.

Determination Letter Procedures for 403(b) Plans: 

• The IRS expanded its determination letter program and will now issue determination letters for initial qualification and termination of individually designed 403(b) plans. The IRS is currently accepting determination letter applications for initial qualification review for plans that have not previously received an initial qualification letter.

Fiduciary Procedures: 

• Any entity sponsoring a retirement plan is a fiduciary of the plan. Best practice for investment fiduciaries responsible for selecting and monitoring plan investments is to meet on a regular basis (preferably quarterly) to review the performance of the plan’s investments and the reasonableness of investment-related fees that are paid directly from plan assets. Minutes of such meetings recording the fiduciaries’ decisions should be maintained and approved by the committee.

Forfeiture Accounts: 

• The IRS issued proposed regulations in February 2023 to address the timing and use of forfeitures that accumulate in a retirement plan, as follows:
  • Forfeitures arising in a defined contribution plan may be used to pay plan administrative expenses, reduce employer contributions, or increase benefits to other participants’ accounts. The regulations generally require that plan administrators use forfeitures no later than 12 months after the close of the plan year in which the forfeitures are incurred. The plan document must describe the treatment of forfeitures. Plan administrators should ensure that administrative practices with respect to forfeitures align with the plan’s written terms.   
  • Forfeitures arising in a defined benefit plan cannot be used to increase the benefits of any employees. However, the anticipated amount of forfeitures can be used in determining funding under the defined benefit plan. 
  • The proposed regulations will be effective after the IRS issues final regulations but can be relied on now.

Cybersecurity and Data Privacy: 

• Plan sponsors should review (or adopt, if necessary) cybersecurity policies and procedures, confirm that plan service providers maintain adequate data security protocols, conduct periodic risk assessments, and provide timely breach notification. Department of Labor (DOL) cybersecurity guidance provides best practices for protecting participant data.

Service Provider Benchmarking: 

• Plan fiduciaries should periodically benchmark plan recordkeeper, investment management, and other service provider fees and services against the market. It is a best practice to engage in a formal request for proposal (RFP) process every three to five years.

Notices for Defined Contribution Plans

Default Investment Notice – Best Practice: 

• Many defined contribution plans that permit participant-directed investments also have a default investment alternative for participants who do not affirmatively elect how their account will be invested. For such plans, best practice is to provide a notice to participants and beneficiaries identifying the default investment alternative and informing them that their contributions will be allocated to such investment if they do not make an investment election in accordance with the plan’s investment procedures. Generally, a notice should be provided before a participant’s first investment into the default investment alternative. Plan administrators should also provide an annual notice prior to each subsequent plan year. For plans subject to ERISA, such notices must be provided at least 30 days before the initial investment and the start of each subsequent year. We recommend that administrators of non-ERISA plans also adopt such practice. 

EACA Notice – Action Required 30 Days Before Plan Year: 

• An Eligible Automatic Contribution Arrangement (EACA) is an automatic enrollment feature that specifically permits a participant to withdraw automatic contributions made within 90 days after the first automatic contribution. Plan administrators must issue an EACA notice to participants at least 30 days before the beginning of the plan year.

Considerations for Health and Welfare Benefit Plans

Gag Clause Prohibition Compliance Attestation Due December 31, 2026: 

• Group health plans may not enter into an agreement with a third-party administrator, a provider, a network of providers, or an entity offering access to a network of providers that includes a “gag clause.” A “gag clause” is a contractual term that restricts a health plan from sharing specific information with another party. Generally, plans may not enter into agreements that would prevent the disclosure of data or cost, quality of care, or certain other information to active or eligible participants, beneficiaries, enrollees, plan sponsors, or referring providers, or would restrict the plan from sharing such information with a business associate. Plans must submit an annual attestation of compliance through the Center for Medicare and Medicaid Services (CMS) web portal. The attestation is due by December 31 of every year. The attestation is made online here.

Cafeteria Plan Amendments: 

• Amendments to Code section 125 cafeteria plans must be prospective. Any changes to a calendar year plan for the 2027 plan year, such as benefit options, must be adopted by December 31, 2026.

Nondiscrimination Testing: 

• Nondiscrimination testing should be performed. Such testing includes:
  • Code section 125 testing for cafeteria plans;
  • Code section 79 testing for group term life insurance;
  • Code section 129 testing for dependent care assistance flexible spending
    arrangements; and
  • Code section 105(h) testing for self-insured health plans.

Mental Health and Substance Use Disorder Benefit Parity: 

• Enforcement of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) regulations issued in 2024 has been paused due to ongoing litigation. Plans still must comply with the MHPAEA requirements in effect prior to the final regulations. These requirements include having a “comparative analysis” demonstrating parity with respect to nonquantitative treatment limitations (NQTL). Plan sponsors should confirm that they have an NQTL comparative analysis in case a participant or the DOL requests it.

Prescription Drug Data Collection (RxDC) and Health Care Cost Reporting: 

• Pharmacy Benefit and Drug Costs Reporting (RxDC Reporting) is a reporting requirement implemented under the Consolidated Appropriations Act, 2021 (CAA). Group health plans and health insurance issuers offering group, individual, and self-funded health insurance coverage, as well as student health plans, must report information about prescription drugs and healthcare spending through the CMS web portal. Reporting instructions are found here. 

Reporting Health Plan Coverage to the IRS and Employees:

• Code section 6056 requires Applicable Large Employers to report information about employer-sponsored health coverage to the IRS and employees. An Applicable Large Employer is an employer that employs at least 50 full-time employees, including full-time equivalent employees. In addition, sponsors of self-insured health plans that provide minimum essential coverage must file an annual return with the IRS and provide statements to employees. Returns are due to the IRS by March 31, 2027, and must be filed electronically. Statements to employees are generally due January 31, 2027 (no later than March 1, 2027). Legislation enacted at the end of 2024 established an alternative method of providing the employee statements. A Form 1095-C is deemed to be timely provided if the employer:
  • Provides notice to employees that they may request a copy of the Form 1095-C.
  • Provides the requested Form 1095-C by the later of:
    • January 31 of the year following the calendar year for which the information return was required to be filed; or
    • 30 days following the date of the individual’s request.

Patient-Centered Outcomes Research Institute (PCORI): 

• The PCORI fee applicable to health insurers and self-insured health plan sponsors is paid using IRS Form 720 and is due by July 31 of the calendar year following the last day of the plan year. The PCORI fee is based on the average number of covered lives during the plan year. The current fee for plans with plan years ending before October 1, 2026, is $3.84 per covered life.

Transparency in Coverage: 

• Group health plans and issuers must disclose (i) cost-sharing information for a covered item or service from specific providers to participants and beneficiaries through an internet self-service tool, and (ii) pricing information to the public through three machine-readable files. Disclosure must include payment rates between plans or issuers and providers, the unique allowed amounts a plan or issuer used and associated billed charges for out-of-network providers, and pricing information for prescription drugs. Sponsors of self-insured plans should coordinate compliance with their third-party administrators.

Notice for No Surprises Act: 

• Group health plans and insurers were required to provide the initial notice regarding patient rights under the No Surprises Act by January 1, 2022. The annual notice must be made publicly available, posted on the plan’s website, and included in explanations of benefits. The government provided a model notice to meet the disclosure requirements that can be used to ensure good-faith compliance with the disclosure requirement. The model notice can be found here.

ACA Affordability Requirements: 

• The IRS increased the ACA affordability percentage for 2027 to 10.22%. To meet the ACA affordability requirement in 2027 and avoid associated employer assessments, Applicable Large Employers must offer at least one health plan option where employee-only coverage is less than 10.22% of the employee’s household income. Certain safe harbors apply for determining an employee’s household income for this purpose.

Medicare Part D Notices: 

• Employers offering group health plans providing prescription drug coverage to individuals who are eligible for Medicare must provide a notice of creditable or non-creditable coverage to such individuals before October 15 of each year. Such employers are also required to disclose to CMS whether their prescription drug coverage is creditable within 60 days after the beginning of the plan year.  Disclosure to CMS is made through the CMS creditable coverage disclosure webpage.

Student Loan Repayment Plans: 

• The One Big Beautiful Bill Act made permanent the ability of employers to offer up to $5,250 in tax-free student loan assistance under a Code section 127 education assistance program. The student loan repayment plan must be operated pursuant to a written plan document.

Summary of Benefits and Coverage: 

• Insurers and group health plans must provide a Summary of Benefits and Coverage (SBC) for each coverage option offered by the insurer or plan. Participants who enroll mid-year must be provided an SBC within 90 days of enrollment.  The SBC should be provided at the beginning of open enrollment each year if renewal is not automatic or at least 30 days before the beginning of each plan year if renewal is automatic. Plans also must provide 60 days’ notice of changes to the content of an SBC.

HIPAA Notice of Privacy Practices: 

• The deadline to update self-insured group health plan notices of privacy practices to conform to new regulations regarding the treatment of substance abuse disorder treatment information was February 16, 2026. Employers who have not yet updated their notices should do so as soon as possible and verify that web postings and participants notices were updated and distributed as required. Health plans must remind enrollees of the availability of HIPAA Notice of Privacy Practices at least once every three years.

Wellness Program Compliance: 

• Plan sponsors should review wellness programs for compliance with ADA, GINA, HIPAA nondiscrimination, and ACA wellness program rules and confirm that any incentive-based program complies with applicable requirements regarding voluntary participation, reasonable alternatives, and notice.

State and Local Leave/Benefits: 

• Employers should confirm compliance with applicable state and local paid leave, state continuation coverage (mini-COBRA), and other state-mandated benefit requirements in all jurisdictions where the employer has employees.

Annual Notices for Group Health Plans: 

• In addition to the notices described above, employers must continue to provide participants with the following annual group health plan notices:
  • Children’s Health Insurance Program Reauthorization Act Notice
  • Women’s Health and Cancer Rights Act Notice
  • Newborns’ and Mothers’ Health Protection Act Notice
  • Primary Care Provider Patient Protection Notice
  • ADA Wellness Program Notice
  • HIPAA Special Enrollment Notice

Executive and Director Compensation

For Tax-Exempt* and Governmental Entities That Have Code section 457(f) Arrangements: 

• Such employers should review all employment agreements and Code section 457(f) arrangements for deferrals of compensation that vest in 2026 to confirm timing of income inclusion and applicable FICA and income tax withholding. Action should be taken by December 31, 2026, in consultation with legal counsel.

For Churches* Offering Deferred Compensation That Vests in 2027 or Later Years, Review and Correct any Code section 409A Violations: 

• Employers should review all nonqualified deferred compensation plans or agreements, under which compensation vests in 2027 or later years, to ensure that there are no Code section 409A violations. If employers identify the violation before the end of 2026, then documentary violations with respect to unvested amounts generally can be corrected by December 31, 2026, without penalties. Code section 409A corrections should correspond to methods described in formal guidance and should be reviewed by legal counsel.

*Churches, conventions or associations of churches, and elementary and secondary schools that are controlled, operated, or principally supported by a church, or convention or association of churches, are not eligible to maintain Code section 457(f) arrangements. 

This checklist contains general, condensed summaries of actual legal matters, statutes, and opinions for information purposes. It is not meant to be and should not be construed as legal advice. Individuals with particular needs on specific issues should retain our services or the services of other competent counsel.