Employee Benefits Compliance Challenges for Manufacturers

A key component of retaining workers for Connecticut’s manufacturers is employee benefits.

In addition to focusing on the business, manufacturers sponsoring benefit plans for their workers need to stay up-to-date of the latest changes required by the U.S. Department of Labor and the U.S. Internal Revenue Service.

As more provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE 1.0 Act) as amended by the Further Consolidated Appropriations Act of 2023 (SECURE 2.0 Act) come into effect, plan sponsors are being tasked with changing both retirement plan documents and retirement plan operation to comply with the new guidance issued by DOL and the IRS.

For Connecticut manufacturers sponsoring defined benefit plans, 2025 brought new annual funding notice requirements.

For manufacturers sponsoring defined contribution plans, 2025 is the last year before the new mandatory Roth catch-up contributions rules go into effect.

Plan sponsors should be mindful of the changes that are needed.

Defined Benefit Plans: New Annual Funding Notice Requirements

Annual funding notices are typically required to be issued to plan participants by April 30 for calendar year plans.

On April 3, 2025, DOL’s Employee Benefits Security Administration published new guidance which contained an updated model AFN for plan sponsors of single employer and multiemployer defined benefit plans.

Plan sponsors were expected to make a good faith effort to comply with the new AFN requirements.

Although the guidance was issued on short notice, plan sponsors were expected to make a good faith effort to comply with the new AFN requirements.

Plan sponsors should check with their service providers to confirm that their AFNs going forward meet the new standards.

Defined Contribution Plans: New Roth Catch-Up Contribution Requirements

Beginning in 2024, new rules requiring catch-up contributions to be made on an after-tax basis—Roth—for qualifying participants were set to go into effect.

The new rule applies to plan participants who are at least fifty years old, whose FICA wages (Social Security wages reported in Box 3 of IRS Form W-2) for the prior year exceed $145,000 (as such amount may be adjusted annually by the IRS), and can make catch-up contributions under the terms of the plan.

For plan participants meeting these requirements, the new rule requires that all catch-up contributions are made only on a Roth basis instead of a pre-tax basis.

The IRS still expects plan sponsors to substantially comply in good faith with the new Roth catch-up contribution requirements.

In 2023, the IRS extended the time to implement the new Roth catch-up contribution rules through IRS Notice 2023-62 to require plans to comply with the new Roth catch-up requirements beginning in 2026.

Last month, the IRS issued its final regulations for the Roth catch-up contribution requirements. Those IRS regulations have a delayed effective date of 2027, however for 2026, the IRS still expects plan sponsors to substantially comply in good faith with the new Roth catch-up contribution requirements.

Plan sponsors should make sure that their service providers, including their payroll companies, are prepared to operate their plans in accordance with the new rules and that their plan documents are amended before 2027.

With the year-end rapidly approaching, Connecticut manufacturers should be sure to touch base with their advisors now in order to comply with the AFN and mandatory Roth catch-up changes.

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