If you sponsor or run a 401(k) retirement plan, there’s some new stuff to deal with following the June 1, 2026 release of Internal Revenue (IRS) Bulletin 2026-23. Most of it comes from the SECURE 2.0 Act, and it touches things like distribution rules and day-to-day plan operations. Both employers and employees will feel the effects.
The main theme here is making it easier to handle small account balances, plus cleaning up RMD rules to match recent law changes. For plan sponsors, a lot of this reduces busywork, but you still need to go over your plan documents carefully to stay compliant.
IRS Raises Involuntary Cashout Limit to $7,000
The biggest immediate change comes from SECURE 2.0 Section 304 (now part of the 2026 Cumulative List). Plans can raise the involuntary cashout threshold from $5,000 to $7,000. Translation: when someone leaves the company, you can automatically cut them a check for balances of $7,000 or less without asking for their permission.
It cuts down on the hassle and cost of keeping tons of tiny accounts on your books. The IRS has pointed out that small balances often eat up way more administrative time than they’re worth. A lot of plan folks say accounts under $7,000 end up costing a disproportionate amount to track and keep compliant.
If you want to use the higher limit, you’ll need to amend your plan document. It’s not mandatory, so you can look at your own participant base and decide whether it makes sense.
Tax Rule Reminder: New RDM rules
The 2026 Cumulative List also reinforces RMD changes under section 401(a)(9). For participants born between 1951 and 1959, the age to start required minimum distributions is now 73. Just to recap: it used to be 70½, then 72, and then 73 (thanks to SECURE Act and SECURE 2.0).
Final regs from 2024 gave clearer guidance on how to calculate RMDs for 401(k)s and other defined contribution plans. Those rules apply to distributions starting in calendar years after January 1, 2025. So make sure your distribution procedures reflect the new ages and beneficiary rules.
One nice thing that hasn’t changed: Roth 401(k) accounts are still exempt from lifetime RMDs for the owner. That’s a solid perk for people wanting tax-free growth in retirement.
IRS Issues Clearer Guidance on Forfeiture Handling in 401(k) Plans
There are proposed regs on forfeitures (mentioned in the cumulative list) that give clearer direction for what to do when someone leaves before they’re fully vested. Sponsors can now use forfeited amounts more systematically – either to reduce future employer contributions or to pay plan expenses.
The proposed rules suggest applying them to plan years starting on or after January 1, 2024, but plenty of plans have already started doing this while waiting for finalization. It helps with consistency and avoids compliance headaches around how and when you use forfeited money.
IRS Allows Electronic Spousal Consent
Another nice modernization: proposed regs now allow alternative ways to witness spousal consent, instead of forcing in-person notarization or a plan rep. This actually acknowledges that people use electronic tools now. For plans with remote workers or weird schedules, this cuts down on logistical nightmares while still keeping proper protections in place.
What you should actually do is to review your current plan documents against that 2026 Cumulative List to see what needs amending. The remedial amendment period for Cycle 4 defined contribution plans gives you some time, but don’t wait until the last minute.
If you’re a participant getting close to retirement, pay attention to the updated RMD ages. And if you’ve got a small balance and leave your job, the higher cashout limit might apply to you.
The IRS keeps saying operational compliance is still key. All these admin improvements don’t mean you can skip following the rules – both on paper and in practice.
These 2026 updates try to balance protecting participants with making plans easier to run. Between the higher cashout limit, clearer RMD rules, and more sensible forfeiture/spousal consent processes, 401(k) plans should run a little smoother – while still being the backbone of retirement savings in the U.S.
