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Why the IRS’s 2026 Retirement Plan Adjustments Are a Wake-Up Call for Cannabis Employers

Preparing for 2026: How Annual IRS Adjustments Force a Reckoning in Cannabis Employee Benefits

Published: February 27, 2026 | Updated: March 22, 2026 | By Trust Integritas

Tax forms, calculator, and financial documents on a desk representing IRS retirement plan compliance for cannabis employers — Annual IRS cost-of-living adjustments set a firm January 1 deadline for plan updates – one the cannabis industry can’t afford to miss.

Key Takeaways

IRS Notice 2025-67 raises the 2026 employee 401(k) deferral limit to$24,500, up from $23,500 – payroll systems must reflect this by January 1, 2026 (IRS, 2025).
Only7% of cannabis workersare enrolled in a retirement plan, versus 52% nationally – a gap that widens with every plan that goes unupdated (The Marijuana Herald, 2026).
As of early 2026,17 states have active retirement plan mandates– meaning for many cannabis operators, offering a qualified plan is now a legal requirement, not a benefit option (Betterment for Work, 2026).

The IRS doesn’t wait for the cannabis industry to catch up. Every fall, it issues cost-of-living adjustments through official notices that reset the ceilings on retirement plan contributions, compensation caps, and tax-deferred savings vehicles. For most businesses, this is a software update. For cannabis operators, it’s something more complicated – and the stakes are rising.

IRS Notice 2025-67, published in November 2025, sets the 2026 plan limits under Section 415 of the Internal Revenue Code. The numbers are firm. The deadlines are real. And the competitive consequences for operators who ignore them are growing harder to dismiss.

This guide breaks down what changed, why it matters specifically to cannabis businesses, and what you need to do before January 1, 2026.

Are You Leaving Tax Savings on the Table for Your Employees?

Cannabis employer 401(k) plan adoption grew 800% between 2021 and 2025, yet only 7% of cannabis workers are currently enrolled in a retirement plan – compared to 52% in other industries (The Marijuana Herald, 2026). That gap doesn’t just reflect low participation. It reflects a structural failure that new IRS limits are making more visible every year.

The IRS adjusts contribution limits annually using a cost-of-living methodology tied to the Consumer Price Index, similar to adjustments made under the Social Security Act. For traditional businesses, updating payroll software is routine. For cannabis companies, it’s a test of operational maturity in a sector where every federal compliance decision carries disproportionate risk.

When limits go up, the value proposition of an employer-sponsored plan increases automatically. If you haven’t updated your administration system to reflect the higher ceilings, you’re blocking employees from accessing legal tax savings – and sending a signal to the talent market that your HR infrastructure isn’t keeping pace. Neither problem fixes itself.

The SECURE 2.0 Act is also part of this picture. Startup tax credits for new qualified plans were raised from 50% to 100% of administrative costs for employers with 50 or fewer employees (GreenPath 401(k), 2024). Many cannabis operators can now launch a plan with minimal cost. The question is whether they keep it current once it’s running.

Cannabis industry 401(k) assets surpassed $71 million in early 2026 – a figure reflecting 800% plan growth since 2021 – yet employee participation sits at just 7%, versus the 52% national average, according to the first-ever cannabis retirement industry report (The Marijuana Herald, 2026). The industry is building the infrastructure; the participation gap is the next problem to solve.

What Are the Actual 2026 IRS Limits Cannabis Operators Need to Know?

IRS Notice 2025-67 was published in November 2025 and takes effect January 1, 2026 (IRS.gov). Here are the figures that directly affect most cannabis 401(k) plans – and the practical consequences of getting them wrong.

Limit Type	2025 Amount	2026 Amount	Change
Employee elective deferral (§402(g)(1))	$23,500	$24,500	+$1,000
Total DC contribution ceiling (§415(c)(1)(A))	$70,000	$72,000	+$2,000
Catch-up contribution, age 50+ (§414(v)(2)(B)(i))	$7,500	$8,000	+$500
Annual compensation cap (§401(a)(17))	$350,000	$360,000	+$10,000
SEP minimum compensation (§408(k)(2)(C))	$750	$800	+$50

Employee Elective-Deferral Limit – Section 402(g)(1)

The most immediate change: employees can now defer up to $24,500 into a 401(k) per year, up from $23,500. That’s a $1,000-per-person increase that must be in your payroll system by the first pay period of 2026. Miss that deadline and employees literally cannot contribute at the legal maximum. You’re offering a plan that looks compliant but falls short in practice.401(k) Elective Deferral Limits: 2022–2026$20k$21k$22k$23k$24k$20,5002022$22,5002023$23,0002024$23,5002025$24,5002026Source: IRS Notice 2025-67 | IRS.gov | trust-integritas.comThe 2026 deferral limit of $24,500 represents the steepest single-year increase in the last four years. Source: IRS.gov, 2025.

Total Defined Contribution Ceiling – Section 415(c)(1)(A)

The ceiling on combined employer and employee contributions rises from $70,000 to $72,000. This is the number that governs the total annual scope of your plan. If your plan includes profit-sharing or employer match components, this is the figure your plan documents need to reference. It’s not optional language – it’s a hard statutory limit.

Catch-Up Contributions for Employees 50 and Older – Section 414(v)(2)(B)(i))

The catch-up limit rises from $7,500 to $8,000. A $500 increase sounds modest. But think about who benefits most: experienced compliance managers, operations directors, and lab scientists in their 50s. These are exactly the hires cannabis companies struggle to attract and keep. They’ve worked inside federal regulatory environments before. They read benefits packages carefully. Getting this limit right matters more for senior talent than the elective-deferral increase does.

Annual Compensation Cap – Sections 401(a)(17) and 404(i)

This one surprises people. The cap on eligible compensation for plan-calculation purposes rises from $350,000 to $360,000. If your plan uses a percentage-match formula based on compensation, an outdated cap creates two distinct problems. You may under-contribute for high earners, and you may produce inaccurate nondiscrimination test results – both of which carry correction costs and audit exposure. A $10,000 change to the compensation cap can have five-figure consequences for larger operations.

For 2026, IRS Notice 2025-67 sets the employee 401(k) deferral limit at $24,500, the total defined-contribution ceiling at $72,000, and the annual compensation cap at $360,000 – all figures that must be encoded in plan documents and payroll systems before January 1, 2026 (IRS, 2025). The 2026 deferral increase is the largest single-year jump since SECURE 2.0 took effect (ASPPA, 2025).

Why Does Federal Schedule I Status Make These Routine Updates More Complicated?

In most industries, IRS limit updates are purely administrative. In cannabis, they expose a structural tension that good intentions alone can’t resolve.

Plan administrators and recordkeepers operate under ERISA – a federal statute. The IRS issues these adjustments through the Treasury Department. But the funds being deferred come from revenue generated by activity that, at the federal level, still involves a Schedule I controlled substance. That conflict doesn’t make a compliant 401(k) impossible, but it narrows your options considerably.

Cannabis business professional reviewing compliance documents in an office setting — Cannabis plan sponsors face a compliance layer that generic administrators aren’t set up to navigate.

A generic plan administrator may clear routine anti-money-laundering due diligence in year one without issue. But as plan assets grow, scrutiny increases. The cannabis industry’s collective 401(k) assets have already surpassed $71 million (The Marijuana Herald, 2026). At that scale, a compliance review that flags the source of funds can freeze contribution processing mid-year. The plan doesn’t fail, but access is disrupted – and employees notice. That’s a genuine operational crisis, not a paperwork problem.

A 2022 National Cannabis Industry Association survey found that 60% of cannabis businesses face challenges accessing standard banking services (GreenPath 401(k), 2024). The same friction extends to ERISA plan administration. The practical argument for cannabis-specialized administrators isn’t that they offer different numbers from IRS Notice 2025-67 – those numbers apply equally to everyone. The difference is that they’ve already cleared the legal and compliance hurdles that generic providers hit unexpectedly, sometimes years into a relationship.

A 2022 NCIA survey found 60% of cannabis businesses face challenges accessing standard banking services (GreenPath 401(k)/NCIA, 2022). That same friction extends to ERISA plan administration, where anti-money-laundering compliance requirements can disrupt contribution processing for cannabis plan sponsors that rely on administrators without cannabis-specific experience.

Can a Fully Updated Benefits Package Actually Reduce Cannabis’s 55% Turnover Rate?

Cannabis industry turnover has reached as high as 55% – well above the national average for most service sectors (Enjoy Würk, 2025). At the same time, average salaries dropped 4-7% across key roles in 2025, with budtender median pay falling from $42,000 to $36,600 in a single year (Enjoy Würk, 2025). Wages are down. Turnover is up. A fully updated, professionally administered retirement plan isn’t a nice-to-have in that environment – it’s one of the few stabilizing tools still available.

Here’s the competitive reality worth sitting with for a moment. Cannabis businesses compete for compliance managers, lab scientists, and operations staff against pharmaceutical companies, agricultural firms, and consumer goods brands – all federally legal, all offering benefits that clear standard due diligence without a second look. A candidate comparing offers will notice whether your plan reflects the 2026 deferral limit or is still set at 2025 figures. It sounds minor. But it signals whether your HR infrastructure is genuinely professional or performing compliance theater.

The average cannabis plan participant is just 33 years old, with an average account balance of $6,547 (The Marijuana Herald, 2026). These are early-career workers. They’re more financially aware than any previous generation. Showing them a plan with current limits – and communicating it clearly – builds the kind of institutional trust that raises retention among exactly the segment of the workforce most likely to walk out the door otherwise.

Cannabis industry turnover has hit 55%, while average salaries fell 4-7% in 2025 alone (Enjoy Würk, 2025). For operators competing against federally legal employers for experienced talent, a fully updated 401(k) plan reflecting 2026 IRS limits functions as a retention signal – one that payroll increases alone can’t replicate in a margin-compressed market.

What Else in IRS Notice 2025-67 Affects Cannabis Benefits Strategy?

The 401(k) deferral limit tends to dominate this conversation. But Notice 2025-67 adjusts more than a dozen separate figures, several of which affect how cannabis operators communicate benefits value to employees at every income level.

The Saver’s Credit – Section 25B

The adjusted gross income thresholds for the Retirement Savings Contributions Credit shift upward in 2026. For married taxpayers filing jointly, the lowest income tier for eligibility increases – meaning more lower- and middle-income cannabis employees qualify for this federal credit when they contribute to the company plan. This isn’t just a tax benefit. It’s a communication opportunity. When your benefits team can show employees a concrete dollar value for participating, enrollment rates go up. The industry’s 7% participation rate is partly a communication gap. These adjusted thresholds give you better material to work with.401(k) Participation: Cannabis vs. National AverageNational Average52%Cannabis Industry7%0%25%50%+Source: The Marijuana Herald, First Cannabis Retirement Industry Report (2026) | trust-integritas.comCannabis 401(k) participation sits at just 7% – a fraction of the 52% national average. Updated plan limits and clearer employee communication are key levers for closing this gap. Source: The Marijuana Herald, 2026.

IRA Phase-Out Ranges – Sections 219(g) and 408A

The income thresholds for deducting Traditional IRA contributions and contributing to Roth IRAs are adjusted upward. Single filers who are active plan participants can now deduct IRA contributions through $81,000-$91,000 in adjusted gross income (up from $79,000-$89,000). For married couples filing jointly, the range shifts to $129,000-$149,000. What this means practically: more of your employees can contribute to both the company 401(k) and a personal IRA simultaneously. Coordinating that story is a hallmark of a mature benefits program – and it costs nothing to communicate.

SEP Contributions – Section 408(k)(2)(C)

The minimum compensation threshold for Simplified Employee Pensions rises from $750 to $800. Small cannabis operators using SEPs instead of a full 401(k) need this reflected in plan documents. It’s a minor adjustment. But every unaddressed item in Notice 2025-67 has a paperwork trail – and every unresolved trail is a potential compliance gap when an audit examiner is working their way through your files.

IRS Notice 2025-67 adjusts over a dozen retirement-related limits for 2026 – including IRA phase-out thresholds, Saver’s Credit income tiers, and SEP minimums – all requiring coordinated updates across plan documents, Summary Plan Descriptions, and administrative software by January 1, 2026 (IRS Notice 2025-67, 2025).

Is Your State Now Requiring You to Offer a Retirement Plan?

This is the question most cannabis operators aren’t asking – but should be. As of early 2026, 17 states have active retirement plan mandate programs, and 20 states have passed the legislation required to launch them (Betterment for Work, 2026). For a large and growing share of cannabis businesses, a qualified retirement plan isn’t a competitive differentiator. It’s a legal requirement.

California requires compliance from businesses with even a single employee, with December 31, 2025 as the deadline for the final implementation tier. New York’s mandate covers businesses with 10 or more employees, with rolling deadlines running through mid-2026. Vermont phases in through July 2026. Minnesota launched its voluntary period in January 2026, with mandatory enrollment to follow. Non-compliance penalties start at $20 per eligible employee per year – and escalate.

Cannabis businesses in these states face the same mandate deadlines as any other employer. State programs generally don’t carve out exemptions based on industry. If your operation is in a mandate state and you’re not offering a qualified plan or auto-enrolling employees in the state-run IRA, you’re already out of compliance.

As of early 2026, 17 states have active retirement mandate programs requiring private employers – including cannabis businesses – to sponsor a qualified plan or enroll employees in a state-facilitated IRA, with non-compliance penalties starting at $20 per eligible employee per year (Betterment for Work, 2026). The number of active programs has more than doubled since 2022.

Frequently Asked Questions

Does IRS Notice 2025-67 apply to cannabis businesses the same way it applies to other employers?

Yes. The adjustments in Notice 2025-67 apply to all qualified retirement plans under ERISA, including those sponsored by cannabis businesses. The numbers are identical. The difference for cannabis operators is the compliance complexity around plan administration – specifically, the fact that cannabis revenue derives from activity that federal law still classifies as a Schedule I substance.

What happens if we don’t update our 401(k) limits by January 1, 2026?

Employees can’t contribute above the prior year’s ceiling, which reduces the value of your plan in concrete dollars. More seriously, if the compensation cap isn’t updated and your plan uses it in a nondiscrimination testing formula, the test results will be wrong. A failed nondiscrimination test can require corrective contributions, refunds to highly compensated employees, or both – and it generates a compliance record that invites further scrutiny.

Can cannabis businesses take advantage of the SECURE 2.0 startup tax credits?

Yes. SECURE 2.0 raised startup tax credits for new qualified plans from 50% to 100% of administrative costs for employers with 50 or fewer employees. Cannabis businesses are eligible on the same basis as other employers – the credit attaches to the plan structure, not the industry. For many small operators, this means a first-year plan cost close to zero.

What is the 2026 employee 401(k) deferral limit?

For 2026, employees can defer up to $24,500 of their compensation into a 401(k), 403(b), or most 457(b) plans – up from $23,500 in 2025, per IRS guidance. Employees aged 50 or older can add a catch-up contribution of up to $8,000, for a total of $32,500.

Do state retirement plan mandates apply to cannabis employers?

Yes, in states with active mandates. As of early 2026, 17 states have active programs requiring most private employers to either sponsor a qualified plan or auto-enroll employees in a state-run IRA. Cannabis businesses operating in California, New York, Vermont, Illinois, Oregon, and several others must comply or face per-employee penalties. These mandates don’t include industry carve-outs for cannabis.

Moving from Compliance Minimum to Strategic Advantage

The 2026 cost-of-living adjustments from IRS Notice 2025-67 are a clear reminder that the rules of established finance apply fully to cannabis – whether the industry’s revenue moves cleanly through federal banking or not. Rising deferral limits create real opportunities to improve employee financial wellness and retention. But those opportunities only materialize if the underlying plan architecture is solid enough to hold up under federal scrutiny.

The cannabis industry has built real momentum. 401(k) plan assets passed $71 million. Plan adoption grew 800% in four years. The infrastructure is forming. What’s lagging is the operational discipline to keep it current – and the specialized oversight to keep it defensible. Those two gaps are exactly what the annual IRS notice cycle is designed to close, for the operators who take it seriously.

Trust Integritas specializes in structuring ERISA-compliant retirement plans for cannabis industry employers. For guidance on updating your plan for the 2026 IRS limits, visit Trust-Integritas.com.

IRC 280E Still Applies to Cannabis Businesses: A Compliance Reality Check

What is IRC 280E?
The Legal Challenges to IRC 280E
Emerging Advisor Positions on IRC 280E
What Regulators and Policymakers Are Saying
Our Compliance Recommendation

The Current Landscape

We’re observing a concerning trend in the cannabis industry: a growing number of operators have begun taking the position that IRC 280E no longer applies to their operations. Some are making this decision based on advice from legal and tax professionals. This strategic shift started before President Trump’s December 18, 2025 Executive Order on marijuana rescheduling under the federal Controlled Substances Act (CSA).

Our position at Trust Integritas is unequivocal: This represents a misinterpretation of current law and exposes businesses to significant compliance risk.

What is IRC 280E?

IRC 280E is the federal tax provision that prohibits businesses trafficking in Schedule I or Schedule II controlled substances from deducting ordinary and necessary business expenses on federal tax returns. For state-licensed cannabis operators, this means paying federal income tax on gross income (revenue minus cost of goods sold) rather than net income.

The financial impact varies by business model, but IRC 280E creates substantial tax burdens across the industry. While we’ve consistently advocated for reform, our compliance obligation is to acknowledge current legal reality.

The Legal Challenges to IRC 280E

The Track Record

Cannabis businesses have repeatedly challenged IRC 280E over the past decade on constitutional and “as applied” grounds. Trust Integritas has supported these efforts, including litigation involving industry stakeholders. However, the results speak clearly:

With the narrow exception of Champ v. Commissioner, no cannabis taxpayer has prevailed in an IRC 280E case
Courts have uniformly upheld IRC 280E’s validity when applied to marijuana businesses
Every constitutional challenge has been rejected
Limited victories have come only through COGS adjustments and specific refund requests

The Case to Watch: New Mexico Top Organics

New Mexico Top Organics, Inc. d/b/a Ultra Health v. Commissioner (“NMTO”), filed in October, presents the latest challenge. The central argument: marijuana is no longer “within the meaning” of Schedule I, despite its formal listing.

The case relies on:

HHS’s 2023 determination recommending Schedule III placement
Congressional spending bill provisions
Proposed rescheduling initiated under the Biden administration

Critical limitations of this case:

The plaintiff operates as a medical marijuana business, not adult-use
No arguments claim IRC 280E is inapplicable to general adult-use sales (the majority of the market)
Any Tax Court decision could face appellate review in the Tenth Circuit
Relief, if granted, would not immediately extend to non-litigants

From a compliance perspective, pending litigation does not constitute legal change.

Emerging Advisor Positions on IRC 280E

The Responsible Majority

Most attorneys and CPAs continue providing sound counsel: marijuana remains Schedule I, and IRC 280E remains applicable. This represents the majority professional view and aligns with regulatory guidance.

Aggressive Outlier Positions

We’ve observed some professionals advancing positions that marijuana businesses are no longer subject to IRC 280E, or even claiming marijuana has been rescheduled (it has not). These positions often mirror NMTO’s arguments, sometimes extending them to claim applicability to adult-use sales.

Trust Integritas’s assessment: These positions, however creatively argued, constitute aggressive tax positions that expose clients to material compliance risk.

What Regulators and Policymakers Are Saying

IRS Position: Clear and Consistent

June 2024: Following HHS’s Schedule III recommendation, the IRS issued a memo titled “Marijuana remains a Schedule I controlled substance; IRC 280E still applies.” The Service specified this would remain true “until a final federal rule is published.”

Status: No final rule was published under the Biden administration’s rescheduling process. No final rule has been published following President Trump’s executive order.

December 2024: The IRS reinforced its position, noting that “some taxpayers have taken the position of disregarding the section 280E limitation using a variety of rationales that do not constitute reasonable basis.”

The term “reasonable basis” carries specific meaning in tax compliance (26 CFR 1.6662-3(b)(3)). Failing to meet this standard triggers penalties. The IRS communication is deliberate and direct.

Congressional Activity

Congress has not enacted legislation to:

Nullify IRC 280E’s effects
De-schedule or reschedule marijuana

All bills proposing such changes have failed.

February 6, 2025: The Congressional Research Service published “The Application of Internal Revenue Code Section 280E: Selected Legal Issues.” Despite IRS guidance, the report acknowledges “little tax guidance concerning the application of Section 280E.” It discusses several proposals that, if enacted, would eliminate IRC 280E’s prohibition on deductions and credits for marijuana businesses.

Key word: IF. Without enactment, IRC 280E remains operative law.

Our Compliance Recommendation

The Risk We’re Observing

The desire to claim deductions available to other U.S. businesses is understandable. Combined with aggressive professional advice in an atmosphere of potential rescheduling, we’re seeing:

More cannabis businesses filing returns that disregard IRC 280E
Amended returns seeking refunds for taxes paid under IRC 280E, contrary to IRS warnings
Some refunds being processed (with uncertain long-term outcomes)

Our guidance for any processed refunds: Set those funds aside through the full audit window.

Our Position on Current Compliance

At Trust Integritas, our advice is grounded in legal reality, not optimistic interpretation:

IRC 280E currently applies to marijuana businesses.

This position is based on:

✓ Marijuana’s continued Schedule I status
✓ Absence of a final rescheduling rule
✓ Clear IRS guidance
✓ Consistent judicial precedent
✓ Congressional inaction on reform

Looking Forward

We remain hopeful that rules will change for tax year 2026. We’re monitoring the Department of Justice’s next steps on President Trump’s rescheduling order, hoping for a final rule or better.

But hope is not a compliance strategy.

Until substantive legal change occurs, businesses that disregard IRC 280E are accepting:

Audit risk
Penalty exposure
Potential accuracy-related penalties
Interest on underpaid taxes
Professional credibility concerns

Trust Integritas’s Commitment

We understand the frustration IRC 280E creates. We support reform efforts. We advocate for fair tax treatment of state-legal cannabis businesses.

We also understand that integrity means providing honest counsel, even when the law is unfavorable. Our role is to help you navigate compliance while positioning your business for success when reform arrives.

For guidance on IRC 280E compliance, COGS optimization, and risk management strategies, contact Trust Integritas www.Trust-Integritas.com. We help cannabis businesses maintain integrity while managing the complex regulatory landscape.

Trust Integritas Takes Center Stage at MJBizCon 2025: HR Innovation and Strategic Leadership in Focus

Las Vegas, NV — What a week it’s been! Trust Integritas just wrapped an incredible four days at MJBizCon 2025, and we’re energized by the conversations, connections, and forward momentum happening across the cannabis industry.

Day 2 Highlight: Leading the Cannabis HR Revolution

The standout moment of the conference came on Wednesday, December 3, when our own Jewell Esposito, Managing Member of Trust Integritas, took the stage at the FlowerHire HR Leadership Summit at the ARIA Resort & Casino.

In her session, “Elevating HR to a Strategic Power Center,” Jewell addressed the industry’s top HR minds on how cannabis companies can transform their human resources function from transactional to truly strategic. Her presentation covered game-changing topics including:

Why fiduciary governance matters in a post-280E world
Executive compensation & retirement strategies that attract and retain top talent
How HR leaders can influence culture, stability, and profitability in 2026
Moving HR beyond compliance to become a business-driving force

The energy in the room was electric, and it’s clear: the cannabis industry is ready to embrace HR as the strategic powerhouse it needs to be.

Industry-First Whitepaper: Strategic HR Has Arrived

In partnership with Gemini Twin Consulting and other industry HR leaders, Trust Integritas is proud to have released the industry’s first whitepaper focused on the evolving role of Human Resources in cannabis.

“Elevating HR in Cannabis: From Transactional to Strategic Partner”

This groundbreaking report explores how HR leaders can drive measurable business impact by partnering closely with Finance and Operations on:

Cost containment without sacrificing morale
Workforce planning that scales with growth
Organizational development that attracts investors and talent
Metrics that speak the language of the C-suite

The whitepaper includes real-world case studies, practical strategies, and self-assessment tools to help cannabis HR professionals determine where they stand—and where they need to go.

The message is clear: as operators strive for sustainable growth, HR’s ability to influence financial and operational outcomes isn’t just nice to have—it’s essential.

Four Days of Impact: Trust Integritas at MJBizCon

Throughout the week, our team at Booth #C25929 engaged with founders, CFOs, HR leaders, and operators on the issues that matter most right now:

Day 1: Cannabis Capital in a Changing Landscape

We kicked off the conference discussing how evolving capital markets, fundraising trends, and investor sentiment are reshaping what operators need in a post-280E environment.

Day 2: HR as a Strategic Partner

Jewell’s presentation set the tone for conversations around leadership, strategy, and people—the backbone of every successful cannabis company.

Day 3: Regulatory Compliance is Non-Negotiable

As more states mandate retirement programs and fiduciary oversight tightens, we helped operators understand:

State-mandated retirement rules
Cannabis-compatible 401(k), PEP, and ESOP structures
How to avoid compliance traps and audits
Designing plans that attract talent and work under 280E

Day 4: The Final Push

On our final day, we doubled down on the conference’s biggest themes: regulatory momentum, capital conversations, and HR transformation. Companies that stay ahead of compliance win with better retention, reduced risk, and cleaner books for investors.

What We’re Bringing Home from Vegas

The conversations we had this week reinforced what we’ve been saying for years: cannabis companies need stronger fiduciary governance and future-ready retirement strategies.

The regulatory landscape is shifting—fast. Operators who act now will:

Stay ahead of mandatory retirement plan requirements
Build 280E-smart compensation and benefit structures
Create ESOP pathways that align employee and company growth
Implement multi-state compliance solutions that scale

Ready to Build What’s Next?

Whether you’re:

Raising capital or restructuring your organization
Exploring ESOP/PESOP strategies
Implementing ROBS for startup funding
Building 280E-smart executive compensation plans
Designing cannabis-ready fiduciary oversight frameworks

Trust Integritas is here to help.

Thank You, MJBizCon!

To everyone who stopped by Booth #C25929, attended Jewell’s session, or connected with us throughout the week—thank you. Your questions, insights, and energy reminded us why we do this work.

Vegas is awake.
The industry is shifting.
And Trust Integritas is ready.

Let’s keep the momentum going. The future of cannabis HR—and cannabis business—is strategic, compliant, and poised for sustainable growth.
Missed us at MJBizCon? Let’s connect.
Contact Trust Integritas, www.trust-integritas.com , to learn how we’re helping cannabis companies build stronger, smarter, more sustainable organizations.

Cannabis Legalization and State-Mandated Retirement: How Does it Affect Your Company?

Operating a cannabis business is inherently complex: navigating compliance with IRC Section 280E, securing banking partners willing to work with you, managing high employee turnover, and keeping day-to-day operations running in an industry that evolves rapidly.

So, when you receive a notice from your state about a “mandatory retirement plan,” it’s understandable if you’re confused or even frustrated.

However, this is not mere bureaucratic noise, it is a legal obligation. Failure to comply can result in substantial financial penalties.

This post aims to clarify why cannabis businesses are subject to these mandates, outline the consequences of non-compliance, and detail viable options for safeguarding your license, finances, and workforce.

Cannabis Legal Status and State-Mandated Retirement Plans

Understanding where cannabis is legal and which states require retirement plans helps cannabis businesses navigate compliance.

State	Cannabis Legal Status	State-Mandated Retirement Plan?
Alabama	Medicinal only	No
Alaska	Fully legal	Considering Mandate
Arizona	Fully legal	Considering Mandate
Arkansas	Medicinal only	Considering Mandate
California	Fully legal	Yes
Colorado	Fully legal	Yes
Connecticut	Fully legal	Yes
Delaware	Fully legal	Yes
Florida	Medicinal only	No
Georgia	Medicinal only	No
Hawaii	Medicinal only	In Development
Idaho	Illegal	Considering Mandate
Illinois	Fully legal	Yes
Indiana	Illegal	Considering Mandate
Iowa	Medicinal only	Considering Mandate
Kansas	Illegal	Considering Mandate
Kentucky	Medicinal only	Considering Mandate
Louisiana	Medicinal only	Considering Mandate
Maine	Fully legal	Yes
Maryland	Fully legal	Yes
Massachusetts	Fully legal	No
Michigan	Fully legal	Considering Mandate
Minnesota	Fully legal	In Development
Mississippi	Medicinal only	Considering Mandate
Missouri	Medicinal only	No
Montana	Fully legal	Considering Mandate
Nebraska	Illegal	Considering Mandate
Nevada	Fully legal	In Development
New Hampshire	Medicinal only	Considering Mandate
New Jersey	Fully legal	Yes
New Mexico	Fully legal	No
New York	Fully legal	In Development
North Carolina	Illegal	Considering Mandate
North Dakota	Medicinal only	Considering Mandate
Ohio	Fully legal	In Development
Oklahoma	Medicinal only	Considering Mandate
Oregon	Fully legal	Yes
Pennsylvania	Medicinal only	In Development
Rhode Island	Fully legal	In Development
South Carolina	Illegal	Considering Mandate
South Dakota	Medicinal only	No
Tennessee	Illegal	Considering Mandate
Texas	Medicinal only	Considering Mandate
Utah	Medicinal only	Considering Mandate
Vermont	Fully legal	Yes
Virginia	Fully legal	Yes
Washington	Fully legal	In Development
West Virginia	Medicinal only	Considering Mandate
Wisconsin	Illegal	Considering Mandate
Wyoming	Illegal	Considering Mandate

State-Mandated Retirement Plans: What Are They?

Increasingly, states are requiring employers to either establish qualified retirement plans (such as 401(k) plans) or register with state-run retirement savings programs—often Roth IRAs administered via state portals. These programs typically feature automatic payroll deductions for employees, unless they opt out.

The intent is to promote retirement savings among workers, especially in sectors like cannabis where employer-sponsored retirement benefits have historically been scarce.

The rules are relatively clear: if your business meets the employee threshold and does not offer a private plan, registration with the state program is mandatory. Employers must process payroll deductions and maintain opt-out records.

This might sound straightforward, unless you operate in cannabis.

Cannabis Businesses Are Not Exempt

Despite the industry’s federal legal ambiguities and often “off the grid” perception, state retirement mandates apply uniformly across industries.

Whether you run a dispensary with five or more employees, operate a cultivation facility, manage a manufacturing site, or provide ancillary cannabis services, compliance is required.

No carve-outs. No grace periods. No exceptions.

State regulators in California, Illinois, and Oregon have already begun issuing notices to cannabis businesses. Colorado is anticipated to follow suit shortly.

Penalties Are Real and Escalate Quickly

Many operators underestimate financial exposure. Non-compliance is far costlier than delayed deadlines or minor fines.

Take California’s CalSavers program as a case study: failure to register within 90 days of the deadline results in a $250 fine per eligible employee. After 180 days, that fine increases by an additional $500 per employee.

For a business with ten employees, that equates to $5,000 in penalties.

Other states enforce similar regimes:

Colorado: $100 per employee annually, up to $5,000
Connecticut: TBD
Delaware: $250 per employee annually; capped at $5,000
Illinois: $250 per employee annually
Maryland: No direct fines; forfeiture of $300 annual state fee waiver
Maine: $20 per employee from July 1, 2025, to July 30, 2026; $50 per employee from July 1, 2026, to July 30, 2027; $100 per employee on or after July 1, 2027
New Jersey: Year 1: written warning; Year 2: $100 per employee; Years 3-4: $250 per employee; Years 5+: $500 per employee
Oregon: $100 per employee annually; capped at $5,000
Vermont: Up to $10 per employee before October 1, 2025; Up to $20 per employee from October 1, 2025 to September 30, 2026; Up to $75 per employee after October 1, 2026
Virginia: Up to $200 per eligible employee

These are not theoretical figures; cannabis operators have incurred fines exceeding $20,000 due to non-compliance or assumptions of exemption.

Why Cannabis Businesses Are Particularly Vulnerable

In 2024, the cannabis industry faced a significant disruption as several major custodial providers unexpectedly exited the market, triggering a wave of 401(k) plan terminations. This sudden shift left many cannabis employers racing against the clock to secure new providers and protect their employees’ retirement savings.

Even with a growing workforce of over 440,000, cannabis businesses still struggle to access basic financial services, including 401(k) plans. Currently, only about 7% of cannabis employees participate in retirement savings programs, compared to 52% across other sectors. This stark disparity underscores both the challenges and the untapped potential for cannabis employers in 2025 to strengthen their benefits and workforce stability.

Operating in the cannabis industry already entails heightened scrutiny from state regulators, financial institutions, and tax authorities. Failure to comply with retirement plan mandates risks being interpreted as negligence by banks or licensing boards. Moreover, non-compliance can jeopardize license renewals, particularly as states increasingly incorporate labor and payroll compliance into their audit frameworks. Additionally, neglecting retirement benefits sends a discouraging message to employees about the company’s commitment to their long-term welfare.

Your Two Main Compliance Options

Option 1: Register for Your State’s Retirement Program

This is the fastest path to compliance, designed for small businesses without dedicated HR or payroll teams.

The process involves business registration, automatic employee enrollment, and payroll deduction facilitation without employer matching.

Advantages:

Low or no direct cost to the employer.
Simple to register.
No employer contribution obligations.
Quick compliance.

Drawbacks:

Roth IRA contribution limits are lower than those for 401(k)s.
No employer matching is allowed.
Not all state programs are cannabis-friendly; some may reject cannabis payroll funds.

Option 2: Establish a Private, Cannabis-Compliant 401(k) Plan

This option provides greater control and benefits, including employer matching, customized plan design, and enhanced employee retention and recruitment.

It also signals to regulators and financial institutions a commitment to robust compliance and operational seriousness.

Advantages:

Employer matching permitted.
Higher contribution limits.
Flexible plan structures.
Positive impact on workplace culture and retention.

Drawbacks:

Higher initial and ongoing costs (approximately $1,200–$3,500 annually).
Requires a provider willing to accept cannabis-related payroll funds.
Longer setup timeframe.

What About IRC Section 280E?

Many cannabis businesses encounter complications due to IRC Section 280E, which disallows federal tax deductions for employer retirement contributions in cannabis-related businesses.

While employer matching is not tax-deductible federally, its retention value often outweighs this drawback. Several clients report that modest employer matches reduce rehiring and training expenses by tens of thousands annually.

Ancillary businesses not directly handling cannabis plants may still deduct retirement contributions.

MJ Biz Conference 2024

Find us at MJBiz 2024, Booth #7442. We are EXPERTS in this field, recruited to speak before the federal government, lawyers, accountants, financial institutions. We have published guidance on all this (just Google the names of Managers Jewell Lim Esposito and Robert Ellerbrock).

Canna company: Various states will penalize you if you don’t offer a retirement plan. Wondering how to get a 401k plan, with a team who has collaborated together for decades?

HR or payroll company: Consider offering a 401k plan to your current canna clients and future prospects?

Financial advisors: It’s a $5B possibility for retirement assets alone in 2024. We show you how to be a part of it.

We’ve got what has to now be dog years of experience with the intersection of the law/IRS/DOL and the canna industry. In fact, we pioneered perhaps the very first canna 401k plan for the industry way back in 2018, still in existence today — and producing clean audits for several years straight.

Trust those of us who have been stewards to the cannabis industry for the very necessary duration to have navigated all the nuances. Trust Integritas.

Navigating KYC, AML, and OFAC Compliance for 401(k) Plans: What You Need to Know

As a financial service provider, ensuring compliance with regulations like Know Your Customer (KYC), Anti-Money Laundering (AML), and the Office of Foreign Assets Control (OFAC) is critical when managing financial products and services, especially if you touch even a scintilla of money in the cannabis business. Whether you’re advising on retirement plans, managing banking transactions, or providing financial guidance, your role involves more than just administering these services—it also means ensuring compliance with federal standards to protect both your business and your clients from legal and financial risks arising from the cannabis industry’s strict regulations.

The Patriot Act and Bank Secrecy Act: How They Apply to 401(k)s & Cannabis

The Patriot Act and the Bank Secrecy Act (BSA) require financial institutions, including banks and advisors, to verify the identities of all customers and monitor financial transactions for suspicious activity. This practice is crucial when working with clients in or around the cannabis industry, as legal complexities between state legality and federal scrutiny can cause government agents to flag transactions as suspicious – potentially leading to penalties, asset freezes, or leaving you and your clients vulnerable to compliance risks.

Recently, the Financial Crimes Enforcement Network (FinCEN) expanded its rules under the BSA that has significant implications for financial service providers that deal with any money from the cannabis industry. Although financial service providers already face hefty regulatory challenges, these new rules make the cannabis sector ripe for FinCEN to continue to scrutinize financial practices.

The new rule, codified as 31 CFR 1010.100(t), expanded the definition of “financial institution” to include SEC-registered investment advisors (RIAs), which must now implement robust regulatory programs to detect and mitigate risks tied to money laundering and illicit activities and report suspicious activity to FinCEN directly – particularly when transactions suggest attempts to bypass regulatory scrutiny.

The cannabis sector remains high-risk due to federal prohibitions, cash-heavy operations, and limited access to banking. Investment advisers must now ensure they scrutinize any funds tied to the cannabis industry.

With FinCEN increasing oversight, advisers must proactively address these risks associated with the BSA.

KYC: Are You Sure You Know Your Employees?

For banks and financial advisors, KYC goes beyond knowing a client’s name and address – it means thoroughly verifying the legitimacy of their financial activities. Any misstep in this process could expose both you and your clients to significant legal risk. Ensuring that every dollar in a 401(k) plan is compliant with federal law is especially crucial. Failure to do so could result in your institution being held liable for not performing adequate due diligence – even if you aren’t directly involved in 401(k) offerings.

AML and OFAC: Are You Monitoring Every Contribution?

Under AML and OFAC regulations, financial service providers must monitor all financial transactions for suspicious or illicit activity. If you’re providing services to businesses operating in high-risk or heavily regulated sectors, such as cannabis or international trade, these monitoring efforts become even more complex. The ownership structure of businesses and the sources of their financial contributions must be carefully scrutinized to avoid violations. Non-compliance with OFAC can lead to civil penalties, asset forfeitures, or even criminal prosecution.

How Trust Integritas Can Help

As part of Trust Integritas’s review process, we ensure that financial service providers are relieved of the increasing pressure to comply with KYC, AML, and OFAC regulations – especially when working in the cannabis industry. These rules can be difficult to navigate, but non-compliance could threaten your reputation, clients’ trust, and your business’s long-term stability. Trust Integritas can help by providing expert guidance and compliance solutions tailored to your specific needs, ensuring that your services and your clients are fully protected from regulatory risks.

Updated: November 2024.

Come hear Jewell Lim Esposito explain what solutions Trust Integritas offers at the PBC Conference in Washington, D.C.

Come hear Jewell Lim Esposito explain how Trust Integritas and its staff have put together teams that include national, household retirement plan service provider names (investment advisors, mutual funds, custodians) who openly support the Cannabis Industry and 401(k) plans for the industry’s employees. She’ll be speaking at the PBC Conference September 4-5, 2024, in Washington, DC. Stay tuned for more information!

A Move in the Right Direction

Potential Good News for Canna Companies.

Managing Member Robert Ellerbrock takes a look at the recent news coming from the U.S. Drug Enforcement Administration (“DEA”).

The DEA has stated that it will move to reclassify cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act. The DEA will take public comments prior to publishing a final rule but only after the Office of Management and Budget (“OMB”) reviews the proposal and approves reclassification. The proposal would recognize the medical uses of cannabis, but it wouldn’t legalize it for recreational use. Specifically, the proposal aims to move marijuana from the “Schedule I” group to the less tightly regulated “Schedule III”. Here is what this reclassification means and its implications:

Schedule I substances are considered to have no accepted medical use and a high potential for abuse. The proposal seeks to reclassify marijuana to Schedule III. This would mark a historic shift in federal policy. Schedule III drugs include substances like ketamine, anabolic steroids, and certain acetaminophen-codeine combinations. Unlike Schedule I, Schedule III drugs have some medical uses and are subject to various rules. However, they are still controlled substances.

The reclassification to Schedule III would be a monumental shift for the cannabis industry. The move to Schedule III would relieve companies in the industry from Section 280E of the Internal Revenue Code, which forbids cannabis businesses from deducting otherwise ordinary expenses (rent, payroll, etc.) from gross income associated with the “trafficking” of Schedule I or II substances. In addition, the change to Schedule III may allow cannabis companies list their stock from the OTC markets to the U.S. stock exchanges. Additionally, credit card processors, banks, and financial institutions will be less averse to doing business with cannabis companies, which could result in easier and more commercially reasonable access to credit and capital.

In regard to Cannabis 401(k) plans, the shift to cannabis being classified as a Schedule III may allow companies to take advantage of potential tax credits of up to $5,500 per year for the first 3 years.The reclassification may also allow for potential employer contribution credit of $1,000 (maximum) per employee. Nonetheless, not having access to credits doesn’t prevent a cannabis company from participating in a 401(k) plan right now.

While the DEA’s proposal is exciting for the cannabis industry, it is still a long way of implementation, as it must still go through OMB review, the public comment period, and the rule making, which will need to make its way through the never quick bureaucratic process.

Even though it may be a while, the DEA’s decision to reclassify cannabis from Schedule I to Schedule III is undoubtedly a watershed moment for the cannabis industry.

The Saga Continues… Cannabis Companies and 401(k) Plans

Managing Member Jewell Lim Esposito discusses the state of affairs for cannabis 401(k) plans.

Background re: the Tension Between Cannabis and 401(k) Access

About 8-9 years ago, the leadership of Trust Integritas, LLC, started structuring retirement plans (401(k) plans among them) for cannabis companies in the United States for a couple of reasons:

Cannabis employees (of cannabis producers/distributers, hemp producers/sellers) should have similar access to retirement savings as their non-cannabis employee counterparts; and
States were starting to mandate that businesses with as few as one employee had to have a retirement plan or else participate in the state-run plan (whose trustees or custodians would not always take cannabis retirement plan money, despite the state mandate and even when those who did not have a retirement plan or who did not participate in the state-run plan could be subject to costly penalties).

Importantly, the Internal Revenue Code and ERISA permit cannabis companies to sponsor a 401(k).

Further and interestingly, under the Code and ERISA, typically (and just generally) a controlled group member who provides 401(k) perks to its non-cannabis employees must also extend similar 401(k) perks to cannabis employees, yet advisors to the non-cannabis employees refused to (and did not know how to) help with what really is a Code or ERISA fiduciary breach for not giving the same 401(k) benefits to cannabis employees.

Thus, we needed to come up with acceptable solutions for cannabis companies to offer retirement plan benefits to their employees. In so doing, we structured some 75+ plans, for about 8000-9000 401(k) participants.

Certain Financial Institutions Have Expelled Cannabis 401(k) Plans Off Their Platforms

Last year, we heard murmurings that various financial institutions were going to eject cannabis 401(k) plans from their platforms. We had our suspicions that the ejections would start sometime in 2024. Consequently, in late summer 2023, we chose to be proactive once again and to pivot to prepare these 401(k) plans for transfer onto other financial institutions’ platforms. We wanted to step in where we could assist with transfers of what we know is above $75 million (at least with the plans we had structured).

Conservatively speaking, we believe there are some 600,000 cannabis and hemp full- and part-time employees eligible to receive a retirement benefit. That market translates to a possible $5 billion in 401(k) assets for 2024 alone.

As we expected, the ejections started coming, often with just a few months’ notice. These cannabis companies and their 401(k) plans are under a time crunch. Right now. Some were told that they had to exit by June 30th; many others, by July 31^st. Anecdotally, we hear some companies are being handed a check that equals the total dollar amount in their 401(k) plans (forcing those companies to consider the impact of what may be a forced termination of a plan).

As we said, though, we had started exploring solutions in 2023. Because we had engineered retirement solutions previously, we knew we could and should tap our wherewithal and to leverage the retirement plan service providers out there to address both the ejection and state mandate issues.

Much of the time from 2023 to now has been each of us, retirement plan service providers, apprising one another regarding very drilled-down technicalities: the intersection of ERISA/Tax/Cannabis retirement, operations, payroll movement, reconciliation of funds, investment options, custodying of mutual fund shares and dollars, and the thoroughness of vetting to prevent financial crimes/money laundering (“AML” or “anti-money laundering” reviews) and ensuring that those working with 401(k) funds know with whom they are transacting (“KYC” and “KYB” – “know your customer” and “know your business” reviews that include delving into social security numbers, the “OFAC” (Office of Foreign Asset Control) and “SDN” (specially designated national and blocked person) lists).

We had been doing this very intensive and ongoing (online) AML, etc. review since our very first cannabis 401(k) plan. In identifying options for those cannabis 401(k) plans that were being ejected, we had to assure those retirement plan service providers with whom we were structuring solutions regarding the transfer issue that our AML, etc. procedures were comprehensive.

We then solved for issues regarding who would serve as fiduciaries of these plans. Many of the financial institutions we interviewed regarding any possible acceptance of a transfer of cannabis 401(k) assets wanted to ensure that those overseeing a cannabis retirement plan had the requisite and substantive experience. The leadership of Trust Integritas had that, and we were taken to task, probed, and thoroughly scrutinized by various providers (and their executives and in-house counsel).

Finally, Approved Solutions for Cannabis 401(k) Plans

Subsequently, because of our long-standing presence in the ERISA/Tax/Cannabis space, we knew we had to weave together teams (a representative 3(38) who had confirmed that any investment option the 3(38) was putting into a plan would indeed accept cannabis money into that mutual fund, collective investment trust, etc.; a third party administrator; a record keeper; an auditor; a custodian; a bank; a knowledgeable corporate trustee; and investment fund managers and their trustees) whom we knew were top quality and who had already made the business decision to be in the cannabis space.