Employers operating in New York face several new employee benefits requirements that require attention. Also, recent developments and litigation trends are increasing compliance and fiduciary risk.
Required for 2026—New York State Law
On October 8, 2025, New York State launched the New York State Secure Choice Savings Program (the “Program”). The Program is designed to expand access to tax-advantaged retirement savings for private sector employees. It covers employers that have operated for at least two years and that had 10 or more employees in New York throughout 2025 (“Covered Employers”). It requires Covered Employers who do not offer a qualified retirement plan to facilitate employee pre-tax contributions to a Roth IRA by registering for the Program. Covered Employers who do offer a qualified retirement plan (such as a 401(k) plan or a 403(b) plan) are exempt but must obtain an exemption certification from the Program by providing information about their plan to the Program.
Covered Employers should take immediate action to either register or certify their exemption with Program. The deadline for registering or certifying varies, depending on the employer’s size during 2025:
- Covered Employers with 30 or more employees were required to register for the Program or certify their exempt status by March 18, 2026
- Covered Employers with 15 to 29 employees must register or certify by May 15, 2026
- Covered Employers with 10 to 14 employees must register or certify by July 15, 2026
Although the statute governing the Program does not impose a specific penalty for failure to register or certify an exemption, the Program will soon issue regulations that might include retroactive penalties for noncompliance. Additionally, a penalty for noncompliance with the Program could be imposed in connection with another state enforcement action, such as a New York State Department of Labor audit. Accordingly, Covered Employers should register or certify by the applicable deadline.
Required for 2026—Federal Law
Effective January 1, 2026, under the SECURE 2.0 Act of 2022, qualified retirement plans must designate any catch-up contribution as a Roth contribution for employees with more than $150,000 in FICA wages in the prior year. If the plan does not provide a Roth option, employees above the compensation threshold cannot make catch-up contributions to the plan.
Other Employee Benefits Developments Impacting New York Employers
Trump Accounts. The One, Big Beautiful Bill (OBBB) established a special brand of individual retirement account for individuals under the age of 18, known as Trump Accounts. Employers may make non-taxable contributions to the Trump Accounts of their employees’ dependents and may facilitate pre-tax employee salary reduction contributions to such accounts, provided that (i) the employer adopts a written plan to implement a Trump Account Contribution Program, (ii) the contributions made through the plan, for 2026 and 2027, do not exceed $2,500 per employee per year, and (iii) the Trump Account Contribution Program does not discriminate in favor of highly compensated employees. The OBBB also directs the Treasury Department to contribute $1,000 to the Trump Accounts of children born during the 2025, 2026, 2027, or 2028 calendar year, who are U.S. citizens and have received a social security number. Contributions to the Trump Accounts may begin on July 4, 2026.
Executive Compensation. For tax years beginning on or after January 1, 2027, the American Rescue Plan Act of 2021 (ARPA) expands the applicability of Section 162(m) of the Internal Revenue Code. Before January 1, 2027, this law limits a public company’s tax deduction to $1 million per year for compensation paid to the CEO, CFO, and the next three highest-paid executive officers. On or after January 1, 2027, this limit applies to compensation to CEO, CFO, and the next five highest-paid employees, not limited to executive officers. This change means that more employees’ compensation will be subject to the cap—the change reduces the amount of compensation that public companies can deduct.
Prohibited Transaction Litigation. On April 17, 2025, the Supreme Court issued a decision that exposes employers to significantly higher litigation risk. In Cunningham v. Cornell University, 604 U.S. 693 (2025), the Supreme Court held that, to successfully plead that a plan engaged in a transaction prohibited by the Employee Retirement Income Security Act of 1974 (ERISA), plaintiffs need only assert that a transaction occurred between the plan and a “party in interest,” which includes all plan service providers, such as recordkeepers, third-party administrators, consultants, attorneys, and investment managers. This holding overturned decisions from the Second, Third, Seventh, and Tenth Circuit Courts of Appeal, all of which had previously required plaintiffs to allege more than the mere occurrence of a transaction between a plan and a party in interest, such as the existence of unreasonable compensation or self-dealing. As a result of Cunningham, it is likely that plans will be sued more often and that plaintiffs will survive the pleading stage more often, all of which will increase the litigation costs plans to bear.
Forfeiture Funds in Qualified Retirement Plans. Employer contributions to 401(k) and 403(b) plans are often subject to a vesting schedule. When an employee separates from the company before being fully vested in the employer contributions, the non-vested portion is forfeited. Traditionally, the IRS has allowed employers to use forfeiture funds to reduce their employer contribution obligations. Recently, however, that traditional view has been challenged in litigation. Most courts have upheld the traditional view, and the U.S. Department of Labor (DOL) has filed briefs in support of the traditional view. Nevertheless, several courts have held that using forfeitures to reduce future employer contributions, as opposed to paying the plan’s administrative costs or increasing participant benefits, is a violation of the plan sponsor’s fiduciary duties. To decrease their litigation exposure, employers should consider amending their plans’ provisions concerning the use of forfeitures.
Alternative Investment Options. The DOL has issued proposed regulations articulating a safe harbor procedure for plans considering alternative investments, such as private equity, real estate, and cryptocurrency. Complying with the safe harbor would insulate plan fiduciaries from allegations that they breached their fiduciary duties by including these alternative investment options in the plan. If a plan sponsor is discussing the possibility of offering such alternative investments to plan participants, the plan sponsor should consider incorporating this safe-harbor procedure.
Overall, this year imposes New York employers new employee benefits obligations arising from New York State law and federal law. Given the volume and complexity of these developments, New York employers should contact counsel to ensure that they are fulfilling all required obligations.
Andrew Shapiro is a partner and John M. Harras is counsel in Venable LLP’s Employee Benefits and Executive Compensation practice group. Both are based in the firm’s New York City office.