As employers work toward the year-end deadline for adopting SECURE 2.0 amendments, most of the attention has been focused on what provisions should be included in the amendment. Should the plan add a new optional feature? How should mandatory changes be incorporated? Is the amendment language accurate? These are all important questions. However, one of the most common compliance issues that we see has nothing to do with the amendment's substance. Instead, it concerns whether the amendment was properly approved in the first place.
Many plan sponsors are surprised to learn that adopting a retirement plan amendment is not simply an administrative exercise. A retirement plan is a corporate benefit program, and changing the terms of that program is a corporate act. Just as a company cannot enter into a significant contract or approve another major corporate action without the appropriate authority, it cannot amend its retirement plan unless the individual or group approving the amendment has the authority to act on behalf of the company.
This often leads to the question of whether the board of directors must approve every retirement plan amendment. The answer is not necessarily. The real question is who has amendment authority under the company's governing documents and prior delegations of authority. If your Board has not officially delegated the authority to adopt amendments to another party, it is only the Board that can authorize the adoption of the amendment. Sometimes Boards do delegate amendment authority for all amendments to a benefits committee or designated corporate officer. Other Boards only delegate authority to those parties where the amendment is ministerial in nature or required by law. The important point is who actually possesses amendment authority for your company.
This distinction becomes particularly important if your plan is the unlucky recipient of an IRS or DOL audit. Regulators frequently focus not only on the language of a plan amendment but also on whether the amendment was validly and timely adopted. A plan amendment or restatement (because the same is true for restatements) can create unnecessary issues if you cannot produce appropriate resolutions, committee minutes, or other documentation demonstrating that the amendment was approved by an authorized decision-maker. In other words, getting the amendment language right is only part of the process. The approval process matters as well.
The ongoing SECURE 2.0 amendment cycle provides an excellent opportunity for you to review your plan governance practices. If you are not sure whether your Board has delegated amendment authority, before signing your SECURE 2.0 amendment (due by December 31, 2026), you should confirm who currently has authority to amend the plan, whether any delegation of authority remains valid, and whether board or committee action is required. Making sure the right person approves the amendment can be just as important as making sure the amendment contains the right language.
If you have any questions on adoption of Plan amendments, please reach out to any member of our Employee Benefits Team.
