Author: Kristi Hill

Kristi Hill advises employers on a wide range of employee benefit matters and enjoys applying her legal expertise to help employers attract and retain valuable employees. She works with employers to find practical and workable solutions to problems they face that comply with applicable legal requirements.

Five-Part Fiduciary Test Is Back: Update Financial Advisory Agreements Now

On March 20, 2026, the Department of Labor published a vacatur notice (FR Doc. 2026-05492, 91 FR 13503–13510) officially removing the 2024 Retirement Security Rule from the Code of Federal Regulations. The DOL’s Employee Benefits Security Administration has restored the longstanding 1975 five-part test for determining investment advice fiduciary status under ERISA and IRC § 4975, and has stated it has no plans to pursue new rulemaking on this topic. If you updated your advisory or service agreements to acknowledge an expanded fiduciary standard under the 2024 rule, those provisions now reference a legal standard that no longer exists. Agreements should be updated accordingly.

What Changed

The 2024 Retirement Security Rule would have significantly broadened the definition of an investment advice fiduciary. Under that rule, a single rollover recommendation—or any recommendation made in a position of trust—could have established ERISA fiduciary status, even without a continuing advisory relationship. Many advisers updated their service agreements, fiduciary acknowledgment letters, and client-facing disclosures to reflect this broader standard.

That rule was vacated by federal courts in Texas (Eastern District, March 12, 2026; Northern District, March 17, 2026). The DOL’s March 20 Federal Register notice formally removed the rule from the CFR. The operative standard is now, once again, the 1975 five-part test. This conclusion rests on the published vacatur notice (Final Rule) and EBSA’s confirmation that no replacement rulemaking is planned.

The Restored Five-Part Test

Under the reinstated 1975 regulation (29 CFR § 2510.3-21, as restored), a person is an investment advice fiduciary only if all five elements are met: (1) the person renders advice on the value of securities or other property, or makes investment recommendations; (2) on a regular basis; (3) pursuant to a mutual agreement, arrangement, or understanding; (4) that the advice will serve as a primary basis for investment decisions; and (5) that the advice will be individualized to the plan’s particular needs.

The practical significance for advisers: one-time rollover recommendations and isolated investment guidance generally do not satisfy the “regular basis” and “mutual agreement” prongs. Activities that the 2024 rule would have swept into fiduciary status—such as a single IRA rollover recommendation—may now fall outside fiduciary status under the restored test.

Why Your Agreements Need Attention

If your current service or advisory agreements contain language acknowledging fiduciary status for activities that only triggered fiduciary duties under the now-vacated 2024 rule, those contractual provisions may be creating obligations that the law no longer imposes. A contractual fiduciary acknowledgment can establish fiduciary status even when the underlying regulation does not require it. In other words, your agreement—not the regulation—becomes the source of your fiduciary duty, along with all the liability exposure that entails.

This is particularly relevant for advisers who provide rollover guidance, make one-time investment recommendations, or offer plan-level services that do not involve ongoing individualized advice to participants.

Recommended Action Items

  1. Review all current advisory and service agreements. Identify any language added in 2024 or 2025 to comply with the Retirement Security Rule—particularly provisions acknowledging fiduciary status for rollover recommendations, one-time advice, or “positions of trust.”
  2. Update fiduciary acknowledgment letters. If you revised acknowledgment letters to reflect the broader 2024 standard, revert to language consistent with the five-part test. Ensure fiduciary acknowledgments are limited to relationships that actually satisfy all five elements.
  3. Revisit rollover documentation and disclosures. Rollover recommendation processes that were expanded to satisfy the 2024 rule’s requirements (including PTE 2020-02 compliance steps tied to the vacated rule) should be reassessed. Advisers may choose to retain best-practice documentation voluntarily, but should not contractually bind themselves to a standard the law no longer requires.
  4. Coordinate with plan sponsor clients. Plan sponsors who engaged you under agreements reflecting the 2024 fiduciary standard should be informed of the reversion. Committee charters and investment policy statements referencing the vacated rule should also be updated.

Is Your 401(k) Plan Ready for Roth Catch-Ups in 2026?

Beginning January 1, 2026, “high earners” must make catch-up contributions on a Roth (after-tax) basis. The Treasury Department issued final regulations on this SECURE 2.0 change last month. Although the regulations are technically effective in 2027, plans must operate in good-faith compliance in 2026. Plan sponsors that permit catch-up contributions should understand these requirements to ensure smooth implementation in January.

Key Requirements

Participants age 50 or older in 2026 may make up to $8,000 in “catch-up contributions” (contributions above the general 401(k) limit, $24,500 in 2026) if permitted by the plan. Plans may increase the catch-up limit to $11,250 for participants turning 60 to 63 in 2026.

For 2026, employees whose 2025 FICA (W-2 Box 3) wages exceed $150,000 are considered “high earners.” Generally, only wages from a common law employer are considered for this purpose, but employers under common control or using a common paymaster may elect to aggregate wages. Notably, partners with only self-employment income and certain state/local government employees without FICA wages are thus not subject to the Roth-only rule.

Plan Document Requirements

Plans without a Roth feature must add one to continue offering catch-ups to high earners. If the plan allows Roth catch-ups for high-earners, it must make them available to all catch-up eligible participants. It may not require all catch-up contributions to be Roth, however.

Plan sponsors who are under common control or using a common paymaster should consider whether to elect the optional wage aggregation rule. If no election in made, wages are not aggregated.

Plans may adopt a “deemed Roth” rule under which catch-up contributions become Roth once statutory or plan limits are reached, provided high earners are given an “effective opportunity” to opt out—for example, by opting out of catch-up contributions or electing to have any deferrals that would otherwise be deemed Roth distributed to them. The regulations do define “effective opportunity,” but clear advance notice to high earners with a meaningful opportunity to opt out, possibly in an annual notice before the start of the year, would likely suffice.

Correction Options

The regulations provide three methods to correct pre-tax catch-up contributions that should have been Roth. A plan must apply the same method to all similarly situated participants for the year. The Form W-2 and in-plan Roth rollover correction methods are available only to plans that (a) include a deemed Roth election and (b) maintain written practices and procedures for Roth catch-ups.

  1. Form W-2 Correction. If identified before the Form W-2 for the year of deferral is issued, transfer amounts to the participant’s Roth account and report the contributions as Roth on the Form W-2.
  2. In-Plan Roth Rollover. Roll over the contributions to the participant’s Roth account and report the rollover on a Form 1099-R for the year of the rollover. A plan is not required to otherwise allow in-plan Roth rollovers to use this method.
  3. Distribution. Distribute the excess pre-tax contributions and report the distribution on Form 1099-R.

The correction deadline generally extends to the last day of the year following the year of contribution to avoid a plan qualification failure, although earlier correction deadlines (for example, 402(g) or ADP) continue to apply. Earlier correction is therefore recommended.

No correction is required if the incorrect pre-tax amount is $250 or less or if FICA wages are determined to exceed the high earner threshold only after the correction deadline.

Action Items for Plan Sponsors

  1. Review Plan Design. Plans that do not permit Roth contributions should consider adding them. High earners in plans that to not permit Roth contributions will not be able to make catch-up contributions beginning in 2026.
  2. Consider Aggregation. Decide whether to adopt the optional wage aggregation rule for identifying high earners (for example, to simplify administration).
  3. Evaluate a Deemed Roth Provision. A deemed Roth provision is required to use the Form W-2 or in-plan Roth rollover correction methods and reduces the need for affirmative elections, but requires clear communication and strong payroll and recordkeeping systems.
  4. Communicate with Employees. Inform catch-up eligible participants who are high earners of the new Roth-only rule and their options, including opt-out rights under a deemed Roth provision.
  5. Adopt Correction Procedures. To apply the W-2 or in-plan Roth rollover correction methods, the plan must (a) include a deemed Roth election (subject to opt out and with appropriate notice), and (b) establish policies and procedures relating to Roth catch-ups. Otherwise, the distribution correction method is required.
  6. Implementation and Monitoring. Establish procedures to identify high earners using prior-year Form W-2 Box 3 wages and coordinate with services providers to ensure proper Roth designation.
  7. Plan Amendments. Most plans will require amendments, but the deadline for SECURE 2.0 changes is generally December 31, 2026, even though operational compliance is required sooner.

Please reach out if you have questions or need help with these changes, including preparing Roth catch-up procedures or participant notices.

This alert is necessarily general. Consult with one of our attorneys or another qualified advisor if you have questions about your specific situation.

IRS Announces COLA Adjusted Retirement Plan Limitations for 2026

The Internal Revenue Service released Notice 2025-67 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2026.

Highlights Affecting Plan Sponsors of Qualified Plans for 2026

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $23,500 to $24,500.
  • The catch-up contribution limit for individuals aged 50 or over is increased from $7,500 to $8,000.
  • The new special catch-up contribution limit for individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250.
  • The Roth catch-up wage threshold for 2024, which is used to determine whether an individual’s catch-up contributions for 2025 must be designated Roth contributions, is increased from $145,000 to $150,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $350,000 to $360,000.
  • The limitation on annual additions to defined contribution plans under Section 415(c)(1)(A) is increased from $70,000 to $72,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $280,000 to $290,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains at $160,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $230,000 to $235,000.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $16,500 to $17,000.
  • The limit on annual contributions to an IRA increased from $7,000 to $7,500. The additional catch-up contribution limit for individuals aged 50 and over increased from $1,000 to $1,100.

The IRS previously updated Health Savings Account limits for 2026. The following chart summarizes various significant benefit Plan limits for 2024 through 2026:

Type of Limitation202620252024
415 Defined Benefit Plans$290,000$280,000$275,000
415 Defined Contribution Plans$72,000$70,000$69,000
Defined Contribution Elective Deferrals$24,500$23,500$23,000
Defined Contribution Catch-Up Deferrals$8,000 ($11,250 for age 60-63)$7,500
($11,250 for age 60-63)		$7,500
SIMPLE Employee Deferrals$17,000$16,500$16,000
SIMPLE Catch-Up Deferrals$3,850 ($5,250 for age 60-63)$3,850
($5,250 for age 60-63)		$3,500
Annual Compensation Limit$360,000$350,000$345,000
SEP Minimum Compensation$800$750$750
SEP Annual Compensation Limit$360,000$350,000$345,000
Highly Compensated$160,000$160,000$155,000
Key Employee (Officer)$235,000$230,000$220,000
Income Subject To Social Security Tax  (FICA)$184,500$176,100$168,600
Social Security (FICA) Tax For ER & EE (each pays)6.20%6.20%6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)1.45%1.45%1.45%
SECA (FICA Portion) for Self-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.90%2.90%2.90%
IRA Contribution$7,500$7,000$7,000
IRA Catch-Up Contribution$1,100$1,000$1,000
HSA Max. Contributions Single/Family Coverage$4,400/$8,750$4,300/ $8,550$4,150/ $8,300
HSA Catchup Contributions (age 55)$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,700/$3,400$1,650/
$3,300		$1,500/ $3,200
HSA Max. Out Of Pocket Single/Family$8,500/$17,000$8,300/
$16,600		$8,050/ $15,000

IRS Announces 2026 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2026 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2026, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $4,400 (up from $4,300 in 2025), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $8,750 (up from $8,550 in 2025).

High deductible health plans. For calendar year 2026, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,700 for self-only coverage or $3,400 for family coverage (up from $1,650 and $3,300 in 2025), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,500 for self-only coverage or $17,000 for family coverage (up from $8,300 and $16,600 in 2025).

Rev. Proc 2025-19

Supreme Court Raises Bar for Dismissing ERISA Prohibited Transaction Claims

The Supreme Court made it easier for plaintiffs to bring ERISA prohibited transaction claims last month when it unanimously adopted a lower pleading threshold for plaintiffs making such claims. Effectively, the Court’s decision in Cunningham v. Cornell University allows participant plaintiffs to more easily withstand a plan sponsor’s motion to dismiss, potentially opening the door to increased litigation targeting ERISA plans for common transactions with service providers. This is expected to result in more costly and time-consuming litigation, even in cases that do not ultimately have merit.

Key Holdings

The Court’s central holding establishes that plaintiffs alleging prohibited transactions under ERISA are not required to address statutory exemptions to such transactions in their complaints. Instead, the responsibility to invoke and ultimately prove these exemptions now rests squarely with plan sponsors and fiduciaries as affirmative defenses.

For example, under ERISA a plan sponsor who engages and pays service providers (such as recordkeepers and investment managers) engages in a prohibited transaction. Congress understandably also created an exemption to the prohibited transaction rules for payment of reasonable compensation to necessary service providers. The Court held that the structure of the statute, which places the prohibitions in one section and the exemptions in another, suggests that Congress intended for the exemptions to function as limitations on the prohibitions, rather than as integral elements of the prohibited transactions themselves. Thus, plaintiffs do not have an obligation to address the exemptions—rather, it is the defendant’s obligation to raise and demonstrate that an exemption applies.

Implications for Future Prohibited Transaction Litigation

This ruling may lead to an increase in ERISA litigation, as more claims survive initial dismissal motions, resulting in costly discovery and ongoing litigation, even in cases that appear to fall squarely under the ERISA prohibited transaction exemptions. As a result, more defendants may consider settling even meritless claims. The Court recognized these concerns but ultimately concluded that they could not override the clear statutory text and the established framework of ERISA. The Court suggested that trial courts utilize several existing procedural tools to mitigate the risk of meritless claims, but it remains to be seen how trial courts will approach the issue.

Practical Considerations for Plan Sponsors

Given the heightened litigation risk, there are several actions plan sponsors should take to anticipate potential challenges and ensure robust fiduciary practices are in place to withstand scrutiny.

1. Review Service Provider Agreements: Ensure that compensation paid to plan service providers from plan assets is reasonable. It is also advisable to maintain documentation demonstrating the necessity of the services provided and the reasonableness of the compensation paid for those services.

2. Document Fiduciary Processes: Maintain thorough records of decision-making processes related to plan management to provide evidence of prudent fiduciary conduct, particularly with respect to the selection, retention, and ongoing monitoring of service providers.

3. Stay Informed on Legal Developments: Keep abreast of evolving ERISA litigation trends and consider consulting legal counsel to assess and mitigate potential risks.

This decision underscores the importance of proactive fiduciary oversight and may signal increased judicial scrutiny of retirement plan management practices. If you would like to improve your fiduciary governance or assess how to better protect yourself from ERISA litigation, please do not hesitate to reach out to one of our experienced attorneys.

ERISA Corrections Beyond EPCRS – Recording Now Available

We recently hosted a Lunch & Learn webinar on a topic that is both nuanced and crucial for retirement plan professionals: ERISA corrections outside the guidance of the IRS’s Employee Plans Compliance Resolution System (EPCRS).

The session brought together financial advisers, recordkeepers, TPAs, plan auditors, and other industry professionals for a practical discussion on how to address plan issues that fall into the “gray areas” of compliance—those not directly addressed by EPCRS.

🔍 What We Covered:

  • Real-life examples of errors that didn’t qualify for EPCRS treatment
  • Creative but compliant strategies for resolution
  • Legal considerations and risk mitigation techniques
  • Best practices for documenting and communicating corrections

Whether you’re responsible for plan administration, auditing, or advising plan sponsors, this webinar provided actionable insights to help you handle unusual or complex correction scenarios with confidence.

🎥 Missed the Webinar?

No problem! The full recording is available here:
👉 Watch the webinar

We’re grateful to everyone who attended and engaged with thoughtful questions and comments. If you’d like to discuss a specific correction scenario or need help navigating an issue outside EPCRS, feel free to reach out to our team.

Stay tuned for upcoming events and resources focused on practical ERISA compliance!

Attorney Lisa Dursey Returns to ERISA Benefits Law as Partner

ERISA Benefits Law Group, PLLC is delighted to welcome back ERISA attorney Lisa Dursey as Partner to the firm.

Lisa D. Dursey
(602) 661-7785
LDursey@ERISABenefitsLaw.com
Bio: https://erisabenefitslaw.com/lisa-dursey/

Lisa’s ERISA practice focuses on advising employers on the design, implementation, and administration of all types of employee benefits plans. She is passionate about providing comprehensive, easily digestible, and pragmatic advice for her clients. Clients seek her guidance to help them realize the maximum value from their employee benefit programs.

Lisa assists clients with a wide range of benefits matters, including qualified and nonqualified retirement plans, executive compensation programs, health and welfare programs, and other fringe benefit programs. She regularly advises employers on design changes to their benefit plans to address regulatory updates and to optimize the company’s benefit offerings. Lisa is also experienced in helping plan sponsors correct operational failures, including through corrective filings with the IRS and Department of Labor when necessary.

Lisa’s return provides ERISA Benefits Law further depth to meet our clients’ needs. Lisa, Kristi and Erwin bring a team approach to each client and each matter, allowing us to apply the necessary expertise to continue solving your ERISA and employee benefits-related legal issues as efficiently and effectively as possible.

Learn More – Lisa’s Full Bio

ERISA Benefits Law Recognized in 2025 Best Law Firms List

We are pleased to announce that ERISA Benefits Law has been recognized as a Tier 1 law firm for both Employee Benefits (ERISA) Law and Employment Law – Management in the 2025 edition of Best Law Firms®. We have received this honor for Employee Benefits (ERISA) Law every year since 2016 when we first opened, and for Employment Law – Management every year since 2021.

We are honored to be recognized for our service and appreciate the confidence our colleagues and peers have in us. We look forward to continuing to provide outstanding service and practical solutions to our clients’ complex questions.

Erwin Kratz and Kristi Hill Recognized in 2025 Best Lawyers and Ones to Watch in America Lists

We are delighted to share that Erwin Kratz and Kristi Hill have once again been recognized in the 2025 editions of The Best Lawyers in America® and the Best Lawyers: Ones to Watch® in America. They are grateful to their peers for selecting them to receive this honor. Please join us in congratulating them on this achievement!

Erwin Kratz and Kristi Hill Named to 2024 Southwest Super Lawyers and Rising Stars Lists

We are pleased to announce that Erwin Kratz and Kristi Hill have been selected to the 2024 Southwest Super Lawyers and Rising Stars lists for Employee Benefits. This is Erwin’s fourth consecutive year on the Super Lawyers list and Kristi’s third year on the Rising Stars list.

The Super Lawyers list is an exclusive list, recognizing no more than five percent of attorneys in the Southwest. The Rising Stars list recognizes no more than 2.5 percent of attorneys in the Southwest. Super Lawyers, part of Thomson Reuters, is a research-driven, peer-influenced rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement. Attorneys are selected from more than 70 practice areas and all firm sizes.

Please join us in congratulating Erwin and Kristi on their selections.