2026 Changes Are Here — Is Your System Ready?

Most companies assume their payroll and benefits systems will automatically adapt to regulatory changes.

In reality, what we’re seeing across platforms like ADP, UKG, Paylocity, Paycor, and Rippling is this: Many systems aren’t just misconfigured—they’re not set up at all.

And that problem rarely shows up right away.

It surfaces later:

• During audits

• At year-end reporting

• Or when employees start asking questions you can’t easily answer

This Isn’t Just a System Update — It’s an Operational Gap

The 2026 changes tied to Secure Act 2.0 and evolving payroll requirements aren’t just about turning on new features.

They require alignment across:

• payroll systems

• benefit plan configurations

• recordkeepers

• employee elections

• reporting logic

Because when those pieces don’t connect, the issue usually isn’t the software.

It’s how the system is set up, aligned, and managed over time.

Retirement Plans: Setup Is Step One — Management Is Everything

The 2026 retirement-related changes tied to Secure Act 2.0 put a sharper focus on Highly Compensated Employees (HCEs), Roth catch-up handling, and the operational decisions that sit behind both.

Turning on a feature in the system is only the beginning.

What matters next is whether the right employees are identified, the right elections are captured, and payroll and recordkeeper logic stay aligned once contributions begin to move.

Where Most Companies Fall Short

1. No Clear Process for Identifying HCEs

• HCE status is based on prior-year earnings

• Many teams do not have a consistent process to review and track this annually

• The result: employees can be handled incorrectly without anyone realizing it

  
  

2. Employee Elections Are Not Aligned Across Systems

Not every employee will want Roth catch-up contributions.

But where are those elections managed?

• Payroll system?

• Record-keeper?

• Both?

  
  

If these systems aren’t aligned:

• payroll may allow a deduction

• the recordkeeper may reject or reclassify it

• reconciliation and reporting issues follow

  
  

3. Payroll and Record-Keeper Disconnect Most environments rely on integrations—but integrations don’t fix configuration issues.

Common gaps include:

• pre-tax and Roth contributions not aligned

• catch-up rules handled differently across systems

• file feeds not updated to reflect new requirements

  
  

4. Contribution Rates Are Out of Balance

One of the most overlooked risks is that contribution rates do not match between:

• Payroll

• Record-keeper

  
  

That can lead to:

• incorrect deductions

• failed uploads

• compliance exposure

• employee trust issues

Overtime Classification: Small Setup Gaps, Big Risk

At the same time, payroll teams are navigating changes in how overtime is classified and reported.

This is especially important in states like California, where overtime rules go beyond the standard 40-hour workweek and require more precise setup, coding, and review.

What Needs to Be Considered

• daily overtime

• weekly overtime

• double-time scenarios

• proper classification for W-2 reporting

Where Things Break Down

Overtime Wages Aren’t Properly Classified

• earnings codes do not always reflect the correct type of overtime

• reporting becomes less reliable

• compliance exposure increases

  
  

New Earning Codes Aren’t Fully Configured

• vendors may introduce new codes, including Qualified Overtime or FQOT-related logic

• those codes are not always enabled, mapped, or reviewed correctly

  
  

Rule Application Is Inconsistent

• Federal vs state rules not aligned

• Multi-state organizations applying inconsistent logic

If You Are Not Sure It Is Set Up Correctly

This is where most organizations are today.

If there’s uncertainty:

• review historical payroll data for classification gaps

• validate earning codes and their intended use

• confirm W-2 mappings

• reconcile calculations against state-specific rules

This isn’t just cleanup—it’s risk mitigation.

Why Most Teams Miss This

Vendors are updating their systems to support these changes.

What they are not responsible for is whether your environment is configured correctly, your processes are aligned, or your downstream reporting still holds up once the rules start affecting live payroll.

That responsibility typically falls on internal teams that are already managing day-to-day operations, year-end demands, employee questions, and vendor coordination at the same time.

And that is where issues tend to slip through:

• plan features are available, but not enabled

• payroll and recordkeeper logic drift out of sync

• HCE handling is inconsistent from year to year

• overtime rules are applied differently across states, systems, or earnings codes

The result is not usually one big visible failure.

It is a series of smaller gaps that compound over time—until they show up in reporting, reconciliation, compliance review, or employee trust.

Where ClearPath Fits

Vendors update features. ClearPath helps ensure the system, the process, and the reporting actually work together.

That means looking beyond whether a feature exists and focusing on whether it is:

• configured correctly

• aligned across systems

• producing the right outcome in live payroll

We typically work across:

• payroll

• benefits

• integrations

• reporting

to identify gaps, validate setup, and help teams prioritize what actually needs attention.

Because the difference between a system that technically works and one that actually protects the business usually comes down to how it is set up, connected, and maintained over time.

Not Sure Where You Stand? Start Here

If you have not reviewed your environment for 2026 updates, the first step is not a full overhaul. It is a validation check.

Start with a focused review of:

• retirement plan setup, including Catch-Up, Roth, and HCE handling

• payroll-to-recordkeeper alignment

• contribution tracking and reporting

• overtime classification and earnings setup

From there, identify the gaps, confirm what is working, and prioritize what needs attention first.

If you’d like a second set of eyes, or you’re short on time and need a clear path forward, let's connect.

Most companies will not catch these issues until they become visible. The ones that do? They are already ahead.