Cannabis employer guide · Schedule III and 401(k) access

Following Acting Attorney General Todd Blanche’s April 23, 2026, final order reclassifying state-licensed medical marijuana and FDA-approved marijuana products from Schedule I to Schedule III of the Controlled Substances Act, Leading Retirement Solutions (LRS) has been closely evaluating what this long-anticipated shift actually means for retirement plan access in the cannabis industry.

With decades of combined experience navigating ERISA compliance and cannabis-specific complexities, the LRS team continues to guide employers through what remains a highly nuanced landscape.

The Question Cannabis Employers Are Asking

To separate expectation from operational reality, Kirsten sat down with Jewell Lim Esposito of Trust Integritas to ask a practical question many cannabis employers are now facing:

Jewell’s answer was direct and grounded in employer reality.

The Schedule III reclassification is meaningful, but its impact is being overstated. The reclassification does not materially improve retirement plan access for adult-use or recreational cannabis businesses.

Why Reclassification Does Not Open Plan Access for Adult-Use Operators

The scope of the reclassification is narrow

The first issue is scope. The reclassification applies to only state-licensed medical marijuana and FDA-approved marijuana products. Adult-use cannabis remains illegal at the federal level. That distinction is not academic. It drives how financial institutions, retirement plan providers, and regulators continue to regard and treat these companies. What the Department of Justice order and the accompanying Federal Register notice covered, and what they left in Schedule I, is covered further in our analysis of Schedule III and cannabis 401(k) plans.

State mandates leave adult-use employers in a bind

At the same time, many states continue to require employers, regardless of industry, to offer a retirement plan. Adult-use cannabis companies are therefore caught in a bind. They are legally required at the state level to provide a plan while still facing limited access to compliant 401(k) providers because of ongoing federal illegality. The Schedule III change does not meaningfully reduce provider risk or expand provider participation for adult-use employers. Which states impose that requirement, and on what timeline, is set out in our state retirement mandates guide and the interactive 50-state mandate map.

Section 280E compounds the problem

Internal Revenue Code Section 280E compounds the problem. While Schedule III status may offer tax relief to qualifying medical marijuana operators, 280E remains fully in force for adult-use businesses. Section 280E still limits these companies from deducting ordinary and necessary business expenses, including many forms of retirement plan contributions. The result is higher effective costs for funding a traditional 401(k) compared to employers in other industries. The IRS sets out its position on how these rules apply to the industry in its marijuana industry guidance.

Not All Plans, and Not All Providers, Are the Same

This is where it becomes important to recognize that not all retirement plans, and not all providers, are the same. A standard, off-the-shelf 401(k) is not always workable for cannabis businesses operating under federal constraints. Treating it as a default solution often ignores both tax exposure and provider reluctance.

Where an ESOP can serve as an alternative

In some cases, an ESOP (employee stock ownership plan where the plan holds employer securities, and not a stock option plan that allows employees to buy shares of company stock) can serve as a viable alternative. A properly structured ESOP can satisfy state-mandated retirement plan requirements while materially mitigating the impact of Section 280E’s effects on not only employer contributions but other operating expenses of the adult-use operator.

It is not a universal solution, and it is not appropriate for every company, but for certain adult-use operators, it can significantly enhance cash flow (as there are no longer state or federal income taxes to the adult-use operator) and improve the economics of providing a state-mandated retirement benefit to the operator’s employees.

Provider Compliance Risk Has Not Gone Away

Custodians, recordkeepers, and trustees remain subject to federal anti-money-laundering laws. As long as adult-use cannabis remains illegal federally, many providers will continue to require enhanced due diligence, ongoing monitoring, and regular certifications related to diversion, trafficking, and sales to minors. For some providers, that burden is still too high, regardless of the Schedule III announcement. The diligence framework behind those decisions is FinCEN’s 2014 guidance on marijuana-related businesses, and what each layer of the provider stack does day to day is covered in our guide to cannabis retirement plan administration.

Companies Operating Both Medical and Adult-Use Divisions

The complexity increases further for companies operating both medical and adult-use divisions. The Internal Revenue Code’s aggregation rules typically require employees of related entities to be covered under a single retirement plan. If adult-use operations are included, relief tied to medical marijuana companies does not automatically extend to the plan as a whole.

Employers must be intentional about entity structure, plan design, and permissible investments to avoid creating a plan that providers will not support or contributions that cannot be accepted. The compliance side of running these plans is covered in Navigating Cannabis 401(k) Plan Compliance.

The Bottom Line

As advocates for the cannabis industry, both Kirsten Curry of Leading Retirement Solutions and Jewell Lim Esposito of Trust Integritas emphasize that employers, policymakers, and the public should not mistake regulatory movement for a complete solution. Until federal legality is addressed more broadly, cannabis retirement planning will continue to require thoughtful, customized strategies rather than default 401(k) solutions.

Employers weighing their options can review The Leading Cannabis 401(k)®, the Cannabis Industry Retirement Report, or speak with our team about how these questions apply to their own structure.

About the Contributors

Sources

• U.S. Department of Justice

  Order Placing FDA-Approved and State Medical-Licensed Marijuana in Schedule III

  The 2026 action that created the current medical and adult-use split.

• Federal Register

  Schedules of Controlled Substances: Rescheduling of Marijuana

  The formal notice governing the rescheduling process.

• Internal Revenue Service

  Marijuana Industry Tax Guidance

  Income reporting, Section 280E, and cost of goods sold for cannabis businesses.

• Internal Revenue Service

  Employee Stock Ownership Plans (ESOPs)

  What an ESOP is under IRC section 401(a), and the requirement that it invest primarily in qualifying employer securities.

• Internal Revenue Service

  Internal Revenue Manual 7.11.7, related employers

  When employers related under IRC 414(b), (c), or (m) are treated as a single employer for plan purposes.

• Financial Crimes Enforcement Network

  BSA Expectations Regarding Marijuana-Related Businesses

  The diligence and reporting obligations that shape provider decisions.