S-Corporation 401(k): Are You Compliant Under SECURE 2.0?
2026 is the year SECURE 2.0 stops being a future compliance project and starts being an operational one for your S-corporation 401(k). The automatic enrollment mandate took effect for 2025 plan years. The mandatory Roth catch-up rule for higher earners — which hits S-corp owner-employees more directly than almost anyone else — became enforceable on January 1, 2026. And most plans have until December 31, 2026 to formally amend their documents for all of it. Here is what each requirement actually says, who is exempt, and the 2026 numbers you should be running payroll against.
The Auto-Enrollment Mandate: Plans Established After December 29, 2022
If your S-corporation 401(k) plan was established after December 29, 2022, new IRC Section 414A generally requires it to operate as an eligible automatic contribution arrangement (EACA) for plan years beginning after December 31, 2024. The default rate must automatically enroll eligible employees at between 3% and 10% of compensation. The escalator must then increase that rate by at least 1 percentage point each year until it reaches at least 10%, with a ceiling of 15%. Employee choice is preserved — anyone can opt out or elect a different rate at any time; the mandate only controls what happens when an employee does nothing.
Running a covered plan without these features is an operational failure, and the fix generally runs through the IRS correction programs — which can mean corrective employer contributions for missed deferrals. If your plan document was set up in 2023 or later and your payroll system has never auto-enrolled anyone, that mismatch is worth resolving now rather than in an audit.
Who Is Exempt from Automatic Enrollment
Section 414A carves out several categories. Grandfathered plans: plans established before December 29, 2022 are not subject to the mandate at all. Small employers: a business that normally employs 10 or fewer employees is exempt; once it goes above that threshold, the mandate applies starting one year later. New businesses: an employer that has been in existence for less than three years is exempt until it crosses the three-year mark. SIMPLE 401(k) plans and church and governmental plans are excluded as well. For a solo 401(k) covering only an owner (or owner and spouse), the small-employer and new-business exceptions mean the auto-enrollment mandate is effectively a non-issue — but the contribution and catch-up rules below still apply in full.
The exemptions have edges — employee counts, aggregation across related entities, and the one-year phase-in after crossing 10 employees — so confirm which side of the line you are on before assuming the mandate does not apply.
Mandatory Roth Catch-Up: The 2026 Rule S-Corp Owners Can’t Ignore
SECURE 2.0 requires that catch-up contributions by higher earners be made as after-tax Roth contributions. The IRS gave everyone an administrative transition period through the end of 2025, so 2026 is the first year the rule actually bites. Treasury and the IRS issued final regulations on September 15, 2025 (T.D. 10033); the regulations formally apply to contributions in taxable years beginning after December 31, 2026, and for 2026 plans must follow a reasonable, good-faith interpretation of the statute.
Whether you are caught depends on prior-year wages: under IRS Notice 2025-67, if your Social Security (FICA) wages for 2025 from the employer sponsoring the plan exceeded $150,000, your 2026 catch-up contributions must be designated Roth. This lands squarely on S-corp owners because your reasonable salary is paid as W-2 FICA wages — unlike a sole proprietor’s self-employment income, which is not FICA wages for this test. If your S-corp salary runs above the threshold and your plan has no Roth feature, you cannot make catch-up contributions at all until one is added. That is a plan-design conversation to have before year-end, not at tax time.
2026 Contribution Limits for Your S-Corporation 401(k)
The IRS set the 2026 numbers in Notice 2025-67. Elective deferrals: $24,500, up from $23,500 in 2025. Catch-up (age 50 and over): $8,000, up from $7,500. Super catch-up (ages 60 through 63): $11,250 in place of the regular catch-up, unchanged from 2025. Total annual additions — employee deferrals plus employer contributions — are capped at $72,000 under Section 415(c), before catch-ups, and the compensation that can be counted for plan purposes is capped at $360,000. For a solo 401(k), the same limits govern: the S-corp can add an employer profit-sharing contribution on top of your deferral, up to the $72,000 combined ceiling (plus your catch-up if eligible), with every dollar keyed to the tax year 2026 figures above.
Note the interaction with the Roth rule: a 62-year-old S-corp owner who took $160,000 of W-2 wages in 2025 can defer $24,500 plus an $11,250 super catch-up in 2026 — but that $11,250 must go in as Roth.
Long-Term Part-Time Employees Get In Faster
SECURE 2.0 also accelerated eligibility for long-term part-time workers. For plan years beginning after 2024, an employee who completes at least 500 hours of service in two consecutive 12-month periods (down from three under the original SECURE Act) generally must be allowed to make elective deferrals, per IRS Publication 560. If your S-corp uses part-time or seasonal staff you have historically kept out of the plan on hours grounds, 2025-2026 is when that population starts qualifying — and missing their entry dates is another correctable-but-expensive operational failure.
The December 31, 2026 Amendment Deadline
Plans have been allowed to operate under SECURE 2.0 without formally amending their documents, but that grace runs out soon. Under IRS Notice 2024-2, as restated in Notice 2024-82, the amendment deadline for a qualified plan that is not governmental or collectively bargained is December 31, 2026 — and the relief depends on the plan having been operated in compliance with the law in the meantime. If your document provider has not already sent SECURE 2.0 amendments for signature, ask where they are.
No Plan Yet? 2026 Startup Credits Are Substantial
If your S-corp does not yet sponsor a plan, SECURE 2.0 sweetened Section 45E considerably. An employer with 50 or fewer employees can claim a credit for 100% of qualified startup costs, up to $5,000 per year for three years (50% for employers with 51 to 100 employees). A separate credit covers employer contributions — up to $1,000 per employee (excluding employees earning over $100,000), phasing down over five years. Between the credits and the deferral capacity above, a retirement plan is one of the highest-leverage moves available for an S-corp owner’s small business taxes.
The Compliance Checklist Is Really a Payroll Conversation
Every item above — auto-enrollment defaults, the Roth catch-up wage test, the 2026 limits, part-time eligibility tracking — ultimately runs through payroll. Your S-corporation 401(k) stays compliant when your plan document, your payroll provider’s settings, and your own W-2 wage decisions all say the same thing. If you want a second set of eyes on whether they do, contact us and we’ll walk through your plan before the December 31, 2026 amendment deadline makes the conversation urgent.