Qualified Retirement and Health & Welfare Plan 2025 Year-End Review

2025 was a busy year for the Internal Revenue Service (IRS) and Department of Labor (DOL), Treasury and Department of Health and Human Services (HHS). With a slew of legislative changes that either recently became effective or are set to take effect in 2026 and beyond, qualified retirement and health and welfare plan sponsor have a lot to consider when it comes to their plans’ design and administration.

Most notably, several new laws¹ will have significant implications for qualified retirement plans, including amendments that must be made by the 2026 plan year. Please see Section 1 of this Alert for a summary of these changes.

The recently enacted One Big Beautiful Bill Act (OBBBA)² also contains provisions impacting health and welfare plans, many of which are effective beginning January 1, 2026. Please see Section 2 of this Alert for a summary of these changes.

Last, many cost-of-living adjustments that are mandated by law will impact retirement plans and health and welfare plans in 2026. Please see Section 3 of this Alert for a summary of these changes.

In this year-end review, we provide plan sponsors with summaries of the key action items they should be considering, now and in the future, when it comes to keeping their qualified retirement and health and welfare plans compliant with recent legislative changes.

Section 1. Qualified Retirement Plan Considerations and Amendments

a. Extended Deadlines for 2025–2026 Discretionary Plan Amendments

Plan sponsors have extended timeframes to formally amend their plans for both discretionary and mandatory changes.³ The details of key plan amendments are summarized in the following chart.

New Requirement	Description	Optional or Mandatory	Previous Required Effective Date*	Practical Implications
Higher catch-up limit for participants ages 60–63 (for 401(k), 403(b), govt 457(b) plans)	For plan years beginning in 2025, this new law increases the catch-up contribution limit under a retirement plan in excess of the otherwise applicable salary deferral limit for participating employees who are 60, 62, or 63 years old.	Optional if the plan offers catch-up contributions	Taxable years beginning after December 31, 2024*	If an employer adopts this change, participants ages 50 or older have the option to contribute up to $10,000 or 50% more than the standard catch-up amount ($7,500 for 2025 & $8,000 for 2026). Thus, for 2025 and 2026, $11,250 is the maximum amount. These dollar limits are adjusted annually for inflation.
Age 50 catch-up contributions must be made on a Roth basis for certain participants (for 401(k), 403(b), govt 457(b) plans)	If age 50 catch-up contributions are permitted under the plan and the plan offers Roth, then employees whose wages from the same employer (as defined for Social Security Federal Insurance Contributions Act [FICA] tax purposes) were greater than $145,000 in 2025 and $150,000 in 2026 (indexed) in the prior calendar year must make contributions on a Roth basis. Recently, the IRS issued final regulations that further clarify how to implement these requirements, including clarifying that FICA wages may be aggregated between employers who are part of the same controlled group or share a common paymaster. The final regulations are effective November 17, 2025, and apply to contributions in taxable years beginning after December 31, 2026. Plans must administer the Roth catch-up requirements starting January 1, 2026.	Mandatory if catch-up and Roth contributions are offered	Taxable years beginning after December 31, 2025*	Plan sponsors that include the catch-up feature in their plans must treat catch-up contributions for participants with earnings above the income threshold as Roth contributions. Plans should also allow these participants to opt not to make catch-up contributions if they are subject to a deemed Roth catch-up election.
Annual paper statement (for DB, 401(a) profit sharing (PS), 401(k), money purchase, 403(b) plans)	Plan sponsors are required to provide a paper benefit statement at least once annually for a defined contribution plan and at least once every three years for a defined benefit (DB) plan, unless the participant is covered by the 2002 e-delivery safe harbor or otherwise affirmatively opts out.	Mandatory	Taxable years beginning after December 31, 2025*	Plan sponsors should promptly coordinate with their plans’ administrators to ensure compliance with this requirement for the 2026 plan year.
10% penalty relief for plan distributions for long-term care contracts (for 401(a) PS, 401(k), 403(b), govt 457(b) plans)	Plans can allow distributions for the purchase of “certified long-term care insurance” premiums for the employee, the employee’s spouse, and the employee’s other qualifying family members. The distributions will not be subject to the 10% early withdrawal penalty. The amount paid or assessed to the participant for the long-term care premium is limited to the lesser of: (i) the amount paid by (or assessed to) the participant during the year for the long-term care insurance contract; (ii) 10% of the participant’s vested accrued benefit (in the plan) or account balance (as applicable); or (iii) $2,500 as adjusted for inflation.	Optional	Taxable years beginning after December 30, 2025*	Plan sponsors that opt to implement this provision should monitor IRS notices for guidance on what constitutes “certified long-term care insurance.”
Improving coverage for long-term, part-time workers (for 401(k), 403(b) plans)	Previously, part-time employees needed to work at least 500 hours per year for three consecutive years to be eligible to participate in 401(k) plans. SECURE 2.0 reduced this requirement to two consecutive years of at least 500 hours of service per year. This change also applies to ERISA–covered 403(b) plans, which previously were not subject to this requirement.	Mandatory	401(k) plans: Beginning in 2024* 403(b) plans: Beginning in 2025*	Plan sponsors should update their administrative systems to track their employees’ hours to ensure their plans comply with this requirement, as well as inform eligible part-time employees of this change.
Automatic enrollment requirement for new plans (for 401(k), 403(b) plans)	New 401(k) and 403(b) plans established after December 29, 2022, are required to automatically enroll eligible employees in the plan at a minimum contribution rate of at least 3%, but not more than 10%, and automatically increase salary deferral rates by 1% annually up to at least 10% — or up to a maximum of 15% if chosen by the plan — unless employees affirmatively elect not to participate. All plans established prior to December 29, 2022, are exempt from this requirement.	Mandatory	Taxable years beginning after December 31, 2024*	Plan sponsors that established a new plan after December 29, 2022, must include automatic enrollment starting in the 2025 plan year. To the extent not already done, plan sponsors with new plans established after December 29, 2022, should proceed in good faith to include the automatic enrollment provision in their plans.

*The new deadlines by which plan sponsors are required to amend their plan documents are as follows: December 31, 2026, for qualified plans other than governmental (govt) plans or collectively bargained plans, and 403(b) plans not sponsored by public education institutions; December 31, 2028, for collectively bargained (union) plans; and December 31, 2029, for govt plans (state or local) and 403(b) plans sponsored by public education institutions.

We note that while the formal plan amendments are not required before the extended deadlines, qualified retirement plans must be operated in accordance with the provisions of the Acts from their effective dates. Additionally, if a qualified retirement plan is terminated for its sponsor’s failure to maintain its compliance with contemporaneous law, to avoid IRS disqualification and to remain compliant with the Acts, the plan must be amended effective prior to its termination date.

Employers should generally consider implementing these operational and plan amendment changes in sufficient time before the deadlines to allow for the changes that need to be made to administrative systems and to factor in the timing needed to get such amendments through internal approval processes.

b. Use of Pre-2024 Plan Year Forfeitures

In 2023, the IRS issued proposed regulations clarifying that plan sponsors must use forfeitures by the end of the plan year after the plan year in which they were incurred. Because of the transition rule that treats pre-2024 plan year forfeitures as incurred in the 2024 plan year, plan sponsors should confirm that any forfeitures incurred prior to 2025 are allocated by the end of the current plan year.

These forfeitures may only be used to pay plan administrative expenses, reduce employer contributions under the plan, or increase benefits in other participants’ accounts.

c. Updates to the DOL’s Voluntary Fiduciary Correction Program

In 2025, the DOL updated its Voluntary Fiduciary Correction Program (VFCP) by issuing a final rule by adding a self-correction component (SCC). SCC allows the following errors to be corrected without submitting an application through the VFCP:

1. Delinquent participant contributions and loan repayments to employer-sponsored retirement plans remitted to the plan within 180 days of the date the delinquent contributions were withheld from payroll or received by the employer, provided the corresponding lost earnings totaled $1,000 or less per payroll period (calculated using the DOL’s online calculator).
2. Eligible inadvertent participant loan failures (i.e., loans exceeding statutory limits, improper repayment schedules, or missed repayments due to administrative error), provided they are also eligible for self-correction under the IRS Employee Plans Compliance Resolution System (EPCRS).

As with the self-correction option under the IRS’s EPCRS program (SCP), the VFCP SCC option now allows for a more efficient resolution of the most common fiduciary and operational failures.

The DOL’s VFCP update also amended the Prohibited Transaction Exemption 2002–51, which enables plan officials to avoid excise taxes for certain properly made corrections.

d. Executive Order Seeks to Expand Access to Alternative Investments in 401(k) Plans

Earlier this year, the Trump administration issued an executive order encouraging 401(k) plan sponsors to consider offering alternative investments (e.g., private equity, private credit, real estate funds investing in digital assets, commodities, project financing and lifetime income investments) as options in their plans’ investment lineups. Goodwin lawyers analyzed the potential impact of this executive order in an insight published on September 22, 2025.

Section 2. Health and Welfare Plan Considerations and Amendments

a. Permanent Extension Permitting High-Deductible Health Plans to Cover Telehealth Benefits

The OBBBA made permanent the ability of a high-deductible health plan (HDHP) to cover telehealth and other remote care services on a pre-deductible basis while preserving an individual’s eligibility to make contributions to a health savings account (HSA) effective for plan years beginning on or after January 1, 2025. Prior to the OBBBA’s enactment, HDHPs generally could not cover telehealth services before the deductible was met, and individuals were disqualified from HSA contributions if they participated in a separate telehealth arrangement outside their HDHP until the COVID-19 pandemic, at which point such coverage was permitted on a temporary basis.

While the permanent extension was effective at the beginning of the 2025 plan year, from a plan administration perspective, it may be difficult to implement this change retroactively. Plan sponsors with HDHPs that seek to waive the deductible for any telehealth or other remote care services that were incurred earlier in the year should review their participant bases’ utilization and their health plans to determine if the plans can be amended to ensure any changes are properly made in accordance with governing regulations. Any changes to telehealth coverage should be communicated to plan participants.

b. The OBBBA’s Effects on Direct Primary Care Service Arrangements

Under the OBBBA, effective January 1, 2026, a direct primary care (DPC) service arrangement will no longer be considered a disqualifying health plan for purposes of the HSA rules in Internal Revenue Code (IRC) section 223, meaning that individuals may contribute to an HSA even when participating in a DPC arrangement. Individuals will also be allowed to use HSA funds for DPC fixed periodic fees, even though HSA accounts are generally not permitted to be used to pay for insurance (with certain limited exceptions). 

For background, a “DPC service arrangement” is an arrangement in which an individual receives IRC section 213(d) medical care consisting only of (i) “primary care services,” which do not include procedures requiring general anesthesia, prescription drugs (other than vaccines), or lab services not typically provided in an ambulatory setting, from (ii) “primary care practitioners” (i.e., physicians specializing in family, internal, geriatric, or pediatric medicine, as well as nurse practitioners, clinical nurse specialists, or physician assistants), with (iii) payment in a fixed periodic fee. As of 2025, the total monthly fees for all DPC arrangements must not exceed $150 for individual coverage or $300 for arrangements covering more than one person (subject to inflation adjustments).

As a result of the OBBBA’s changes to DPC arrangements, employers have the option to offer a DPC arrangement to employees alongside their HDHP coverage in 2026 while still maintaining their employees’ HSA eligibility.

c. HSA-Compatible Individual Coverage HDHPs

Effective January 1, 2026, all bronze and catastrophic plan coverage obtained on the Affordable Care Act (ACA) healthcare exchanges will be treated as HDHP coverage, even if they do not meet the minimum deductible or maximum out-of-pocket limit that otherwise applies to HSA-compatible HDHPs. This change will allow individuals who are enrolled in bronze or catastrophic plan coverage through the healthcare marketplace to be eligible to contribute to HSAs beginning in plan year 2026.

d. Dependent Care Assistance Plan Annual Limit Increased

For the 2026 taxable year, the dependent care assistance program annual contribution limit will increase from $5,000 ($2,500 if the employee is married and files a separate tax return) to $7,500 ($3,750 if the employee is married and files a separate tax return).

To the extent an employer wishes to adopt this change, they should consider how it may impact the nondiscrimination testing for such plans for highly compensated employees. Employers should work with their plan administrators, nondiscrimination testing vendors, and legal counsel to ensure their plans comply with continued testing.

Other changes to annual limits, for both retirement and health and welfare plans, can be found in Section 3 of this newsletter.

e. Educational Assistance Programs Expanded

The OBBBA expanded certain rules for educational assistance programs (EAPs), including indexing the $5,250 dollar limit for such reimbursements for inflation and permanently extending the ability of employers to reimburse or pay for an employee’s student loans through such a program. These changes apply to payments made after 2025.

Employers may wish to revisit their EAP documents to see if they incorporate these mandatory and discretionary changes and, if not, amend their documents accordingly (and communicate such changes to their employees).

f. DOL Guidance Expanding Fertility Care

On October 16, 2025, the DOL released “FAQs about Affordable Care Act Implementation Part 72,” regarding the ACA’s attempt to expand access to fertility care consistent with the president’s Executive Order 14216, “Expanding Access to In Vitro Fertilization.” The guidance clarifies existing categories of excepted benefits that employers can use to offer fertility benefits. Generally, excepted benefits are certain types of coverage under group health plans or individual health insurance coverage that are not subject to many of the ACA’s requirements.

According to the FAQs, an employer may offer fertility treatment benefits outside of their group health plan, such as in vitro fertilization, as an “independent, noncoordinated excepted benefit” as long as such arrangement meets the following conditions: (i) the benefits are provided under a separate policy; (ii) there is no coordination between the fertility benefits and the group health plan’s benefit exclusions; and (iii) the benefits are paid without regard to whether benefits are provided under the group health plan.

In the event an employer offers both a group health plan and a specified disease or illness policy that covers fertility benefits, participants are not required to enroll in the group health plan for the specified disease or illness policy to qualify as an excepted benefit. In addition, this excepted benefit cannot be provided under a self-funded arrangement.

If the fertility benefit is offered as an independent, noncoordinated excepted benefit, enrolled participants may still contribute to an HSA but only if such participants are otherwise covered by a qualified HDHP and have no other disqualifying coverage (i.e., enrolled in Medicare or claimed as an eligible dependent under someone else’s coverage).

Finally, fertility-related benefits may be offered as excepted benefits under the “limited excepted benefit” category. Methods of offering fertility-related benefits as limited excepted benefits may include payment for or reimbursement of out-of-pocket fertility costs through an excepted benefit health reimbursement account (HRA), provided the specific rules for such an HRA and limited excepted benefits are met.

The DOL also indicated that it plans to issue proposed rules that will provide additional ways that certain fertility benefits may be offered as limited excepted benefits or other types of supplemental benefits.

g. Updated HIPAA Notice of Privacy Practices

In 2024, HHS finalized the HIPAA Privacy Rule to Support Reproductive Health Care Privacy. While a Texas court vacated the part of the Privacy Rule governing disclosures related to reproductive care, the remaining portion of the updated Privacy Rule requires covered entities to make certain other updates to their Notice of Privacy Practices, including, for some covered entities, adding provisions covering the confidentiality and treatment of certain substance abuse treatment records. These Notices of Privacy Practices must be updated by February 16, 2026. Goodwin lawyers analyzed the provisions of the 2024 Privacy Rule, and the impact of the Texas ruling, in insights published on June 17, 2024 and June 26, 2025.

Section 3. Cost-of-Living Adjustments to Dollar Limits for Retirement Plans and Health and Welfare Plans

On November 13, 2025, the IRS released Notice 2025-67, which contains the cost-of-living adjustments for the 2026 dollar limits for qualified retirements plans that are as follows:

Provision	2026	2025
Defined Contribution, 401(k), and 403(b) Plans
Annual Limit on Elective Deferrals	$24,500	$23,500
Annual Catch-Up Limit, 50 Years or Older	$8,000	$7,500
Annual Catch-Up Limit, Ages 60–63	$11,250	$11,250
Annual Limit on Contributions to Defined Contribution Plans	$72,000	$70,000
Income Limit for Pre-Tax Catch-Up Contributions	$150,000	$145,000
Defined Benefit Plans
Annual Benefit Limit	$290,000	$280,000
General Limits and Thresholds
Annual Compensation Limit	$360,000	$350,000
Highly Compensated Employee Prior-Year Compensation Threshold	$160,000	$160,000
Key Employee Compensation Threshold	$235,000	$230,000
Maximum Withdrawal Amounts
Domestic Abuse Distribution	$10,500	$10,300
Withdrawal for Emergency Expenses	$1,000	$1,000
Pension Benefit Guaranty Corporation (PBGC) Premiums for Single Employer Plans
Per Participant Rate for Flat-Rate Premium	$111	$106
Variable-Rate Premium Rate per $1,000 Unfunded Vested Benefits	$52	$52
Variable-Rate Premium Participant Cap	$751	$717
PBGC Premiums for Multiemployer Plans
Per Participant Rate for Flat-Rate Premium	$40	$39

On October 9, 2025, the IRS released Rev. Proc. 2025-32, which contains the 2026 inflation adjustments for health and welfare plans. The following table summarizes plan limits.

Provision	2026	2025
HDHP
HDHP Annual Minimum Deductible	$1,700 (self-only)/$3,400 (family)	$1,650 (self-only)/$3,300 (family)
HDHP Minimum Embedded Individual Deductible (which only applies to family-tier coverage if used)	$3,400	$3,300
HDHP Out-of-Pocket Maximum	$8,500 (self-only)/$17,000 (family)	$8,300 (self-only)/$16,600 (family)
HDHP Embedded Individual Self-Only Out-of-Pocket Maximum	$10,600	$9,200
HSA
HSA Annual Contribution Limit	$4,400 (self-only)/$8,750 (family)	$4,300 (self-only)/$8,550 (family)
HSA Catch-Up Contribution Limit	$1,000	$1,000
Flexible Spending Account (FSA)
Health FSA Salary Reduction Limit	$3,400	$3,300
Health FSA Carryover Limit	$680	$660
Dependent Care Annual Contribution Limit	$7,500 (married filing jointly or single)/$3,750 (married filing separately)	$5,000 (married filing jointly or single)/$2,500 (married filing separately)
Qualified Transportation Benefits
The monthly limit for employee contributions for parking expenses, transit passes, and vanpooling expenses	$340	$325
Adoption Credit/Adoption Assistance Program
The maximum adoption credit allowed	$17,670	$17,280
The modified adjusted gross income thresholds at which the credit and income exclusion for employer provided benefits phases out	Begins to phase out at $265,080 and is completely phased out at $305,080 or more	Begins to phase out at $259,190 and is completely phased out at $299,190 or more

In light of these adjustments to the dollar limits applicable to health and welfare plans sponsored by employers that are subject to these limitations, employers are required to implement such changes for the upcoming plan year, make the adjustments necessary to their administrative systems, and provide participants with communications of these changes.

*  *  *

As employers navigate the evolving legislative and regulatory landscape impacting qualified retirement and welfare plans for 2025 and 2026, we offer expert guidance in interpreting and applying these new requirements, updating plan documentation, and ensuring adherence to amendment deadlines and effective dates. Leveraging our specialized expertise, we support employers in implementing these changes efficiently while minimizing compliance risks. Please contact the authors of this year-end review, or your Goodwin lawyer, for more information on how to best implement these changes.

*The authors wish to thank David Simonetti for his assistance with putting this newsletter together.

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1. ^[1] The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (Public Law 116–94, Division O); the Bipartisan American Miners Act of 2019 (Public Law 116–94, Division M); the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136); and the SECURE 2.0 Act of 2022 (Public Law 117–328, Division T) (collectively, the “Acts”). ↩

2. ^[2] Public Law 119–21. ↩

3. ^[3] SECURE 2.0 and IRS Notice 2024-2. ↩

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.