Your ESOP Has a December 31, 2026 Amendment Deadline
If your company sponsors an employee stock ownership plan (ESOP), its SECURE Act and SECURE 2.0 amendments are generally due by December 31, 2026. That is two months away, and because of the plan's ESOP-specific features, off-the-shelf amendments written for 401(k) plans usually won't work. Tailored amendments take time, so start now.
Where the Deadline Comes From
Under IRS Notice 2024-2, a private-sector ESOP that is not an applicable collectively bargained plan must be amended by December 31, 2026; collectively bargained plans have until December 31, 2028. The date covers both required and discretionary amendments, unless an applicable Required Amendments List sets a different deadline. For the individually designed documents many ESOPs use, it is also the end of the remedial amendment period.
Why This Matters for ESOPs
ESOPs are qualified defined contribution plans, so they get the same amendment relief as other plans, and they carry the same risk. A plan that does not adopt the required amendments on time can face a plan document failure. That failure may have to be fixed through the IRS's correction program instead of a simple amendment. The IRS recently updated its correction procedures (EPCRS) in Revenue Procedure 2026-34, which includes provisions on certain ESOP failures and on plan document failures.
Timing is especially important for ESOPs. Many ESOPs are individually designed documents with features you won't find in a standard 401(k) plan: distribution and diversification provisions, put options, and, for S corporation ESOPs, anti-abuse rules under Code Section 409(p). Your amendments have to fit with those provisions. Drafting them correctly takes more time than adopting a prototype amendment.
Not Every Deadline Is December 31, 2026
Since issuing Notice 2024-2, the IRS has extended the deadline for some specific provisions:
- Qualified long-term care distributions. In Notice 2026-33, the IRS extended the deadline for a non-governmental defined contribution plan to add qualified long-term care distributions under SECURE 2.0 Section 334, moving it from December 31, 2026 to December 31, 2027.
- IRAs, SEPs, and SIMPLE IRA plans. Notice 2026-9 extended certain SECURE 2.0 amendment deadlines for these arrangements to December 31, 2027. ESOPs are not affected.
- Roth catch-up contributions. The final regulations under SECURE 2.0 Section 603 do not set a separate amendment deadline. Under Notice 2024-2, the deadline for those amendments is generally December 31, 2026.
Remember that these extensions apply only to plan documents. The underlying rules generally have to be followed in operation from their effective dates. For example, SECURE 2.0's change to the long-term, part-time employee rule (from three years to two) took effect for plan years beginning after December 31, 2024.
What ESOP Sponsors Should Do Now
- Inventory operational changes. Make a list of every SECURE, SECURE 2.0, and CARES Act change the plan has followed in operation since 2020, including optional features the company chose to add.
- Confirm your document type. Find out whether the ESOP is individually designed or on a pre-approved document, and confirm which deadline applies to each provision.
- Coordinate with ESOP-specific terms. Check that the amendments work alongside the plan's distribution, diversification, valuation, and (if applicable) Section 409(p) provisions.
- Involve the trustee and administrator. Make sure the recordkeeper, third-party administrator, and ESOP trustee are administering the plan consistently with the amended terms.
- Adopt before year-end. Get board or committee approval and sign the amendments by December 31, 2026. Keep the signed resolutions with the plan records.
How We Can Help
If your ESOP has not been amended for SECURE 2.0 yet, contact us so the plan is updated before the deadline.