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Also to confirm, it is a lookback calculation? So an employee hired with a salary of $250,000 on 7/1/2025 made FICA wages of $125,000 in 2025. They are not subject to the Mandatory Roth in 2026 because they did not make the limit? regardless they will make $250,000 in 2026. They will be subject to the mandatory roth in 2027.

It's actually based on the employer, determined without regard to controlled groups or affiliated service groups. So if you have a plan sponsored by two companies, A and B, which are members of a controlled group, and employee X earns $100,000 from each A and B, then even though their plan comp is $200,000, they are not subject to Roth catch-up from either employer since their comp from any employer was not greater than the limit. Meanwhile if you have employee Y in the same plan who earns $180,000 from A and $20,000 from B, then their deferrals from A would be subject to Roth catch-up while their deferrals from B would not.

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Thank you, Peter. Those are excellent points to consider in dealing with this issue. And thank you, Frank (fmsinc) for the helpful case references.

So, the documents governing the plan set provisions for determining the beneficiary. Including what to do when there is no claim. And perhaps providing for the insurer to do it. --------- The plan sponsor might be reluctant to amend the plan for at least two reasons: The insurance contract might provide that plan provisions accepted by the insurer is a condition to the insurer’s obligation. A custom provision might call the employer/administrator to do work that otherwise the insurer is willing to do if the insurer has no obligation beyond following its own procedure. The plan sponsor might prefer that the insurer do the work of applying its procedure for difficult claims. If, however, the plan sponsor considers a plan amendment, the plan sponsor and each plan fiduciary might want each’s lawyer’s advice about whether a new provision ought to apply to a claim that arose before the amendment is made, and, if it applies, how it applies. Further, what would the written plan describe as the set of facts that result in a beneficiary being deemed to have predeceased the participant or otherwise treated as not a beneficiary? How might a reader of the summary plan description perceive that description? This is not advice to anyone.

Hello T haley did you ever receive an answer to this? I have an exact on point situation, but am looking at the compensation issue for statutory compensation thank you

I just want to clarify that almost no TPA or compliance provider every aggressively pursues cumbersome and complex provisions. However, beggers cannot be choosers. I really really want that new business, so I don't get choose their plan design for them 👍. It's always the biggest clients, who by the way have had those provisions for decades at times, that are at issue. Now Congress did us all a favor with SECURE Act (if you want to take a glass half full view of the world). Now when we go to clients and tell them your "plan document sucks" there is some real meat on the bone, since the LTPT stuff in my view is technically, figuratively and literally impossible to comply with.

Thank you for the perspective. Since you are receiving the small pension from the other company, it may have never been reported, or it might have been removed once you went into payment status. Either way, glad to know you are receiving all of your earned benefits.

We work with a large financial institution that has sent us a sample correspondence that they plan to send to their 401(k) clients. It states that if a plan does not permit Roth deferrals, participants whose FICA wages were $150k of less in the prior year can continue to make catch-up contributions on a pre-tax basis, but those whose wages exceed this limt are not permitted to make any catch-ups. The research we have done on this topic seems to suggest that though it's possible to have a plan operate in this manner, it's not recommended, as such an arrangement can create discrimination issues. If this is true, we are surprised that an investment firm, which has a popular recordkeeping platform, would push this method without at least caveating the downside. Do we have a correct understanding of the new rules in this regard?

Peter, To answer your questions: the death benefit is provided by a life insurance contract under an ERISA governed plan. The SPD is the plan document. The SPD provides that the designated beneficiary needs to file a claim for life insurance within one year from the employee's date of death. If no claim is timely filed and the whereabouts of the beneficiary are unknown, the disposition of the benefit will be determined by the provisions of the claim policy of the life insurance carrier indicated in the summary of benefits insert. If the plan were to be amended to adopt a missing participant policy, which should require that the whereabouts of the beneficiary be attempted in spite of his or her deportation and such attempt is unsuccessful, even though it is after the fact, since we are not talking about a qualified retirement plan and there is no vesting for welfare benefits (absent a plan provision to the contrary), could the plan treat the beneficiary as having predeceased the participant? I could see that such a provision could apply prospectively, but I am concerned that the amendment would not be valid retroactively.

Even if an interpleader otherwise would be something an employee-benefit plan’s administrator might consider (and evaluate according to one’s fiduciary duties, including not incurring an imprudent expense if it would be paid or reimbursed from plan assets), an interpleader might not fit the Federal statute—28 U.S.C. § 1335. Among many possible reasons: There might not be competing claims, whether now or even potentially. (For example, if the participant named no contingent beneficiary and the default beneficiary under the plan’s governing documents—for example, the participant’s estate—is administered by the same person as the not-yet-located primary beneficiary.) If no one has submitted a claim for the death benefit and the documents governing the plan do not compel an immediate payment or delivery, there might not be competing claims. Absent competing claims, there might be no controversy until a plan provision compels an immediate payment or delivery. If none of the competing claimants resides in the United States, there might be no U.S. district that is a proper venue for a § 1335 interpleader. See 28 U.S.C. § 1397. There might not be “[t]wo or more adverse claimants, of diverse citizenship as defined in [28 U.S.C. § 1332](a) or (d) [who] are claiming or may claim to be entitled to [the death benefit][.]” 28 U.S.C. § 1335(a)(1). The required diversity of citizenship might not exist if none of the competing claimants is a citizen or resident of any U.S. State or territory. If the facts a complaint alleges do not show adversity of claims to the judge’s satisfaction, a court might dismiss the interpleader for not fitting the statute or not stating a controversy under the U.S. Constitution’s Article III. Despite 28 U.S.C. § 2361’s provision for nationwide service of process, the plan’s administrator, trustee, or other stakeholder might be unable to serve process on one or more of the potential claimants. (rocknrolls2’s originating post says the plan fiduciaries have not located the primary beneficiary.) An ERISA § 502(a)(1)(B) claim “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan” won’t work because only “a participant or beneficiary” may bring such a claim. An action for a declaratory judgment might be inapt because there might be no Article III controversy. If no claim is submitted, more likely a fiduciary might hold the death benefit until applicable law treats the right to that benefit as abandoned property. This is not advice to anyone.

Why wouldn't the post sale contributions be allowed? if that business entity is still operating, people are still on payroll, the plan is not terminated(or frozen), then the post sale contributions have to be allowed. The change in ownership in and of itself doesn't change those participant's rights or ability to defer. A plan termination date prior to to the stock sale date does preserve a variety of other things, so often is preferred. But is not required. Also - what do you mean "scheduled for termination"? When the plan is terminated (benefit accruals stop), when it stops accepting deposits (trailing deferrals and employer contributions), and when it actually pays everything out and the trust is $0, are all different things. Absent a company resolution to terminate the plan(and subsequent amendment to the plan document to conform) the plan continues as is. It just might face additional compliance requirements. Since the sale already occurred - you should check with the business entities and see if their buy/sale agreement addresses the plan. I've seen cases where a termination resolution was drafted by the business attorneys and executed just prior to the sale, and then a copy included in the stock sale agreements. Maybe the plan is terminated already.

I was looking at the rules for when you can switch from the full 5500 to a 5500-SF. It seems like, under the new rules, if the number of account balances is under 100 as of the first day of the plan year, the client can file a 5500-SF for that plan year. Any input would be greatly appreciated.

Who do you think has the burden of proof that the benefidciary is dead? I am guessing that it falls on the contingent beneficiary (and mabe the plan as well). Here are a few quickly located cases that may be helpful. https://scholar.google.com/scholar?hl=en&as_sdt=20000006&q="burden+of+proof+of+death"&btnG= Here are a few more: https://scholar.google.com/scholar?hl=en&as_sdt=20000006&q="burden+of+proof+of+the+death"&btnG= Who is at risk of having to pay twice when the deported beneficiary is found alive and well on a beach in Thatiti. How can RocknRolls2 protect his plan and his job. File an interpleader naming the contingent beneficiary and whoever represents the deported one, and have the court make a dead or alive decision. Deposit the proceeds into the Registry of the Court. David

There is nothing stopping them from using the 12/31/2024 stock price as long as it all happens on or before 12/30/2025. (Edit date from 12/20/2025 to 12/30/2025) There is nothing you can do. This is common and done all the time in this industry. The plan is on very solid ground. If you hire a lawyer you will be spending money to only lose. I would add it seems hard to know the value will 3x. But this is the reason ESOPs do what is happening. Management doesn't want to compensate former employees but want the increase to go to current employees who they see as being the primary contributors to the increase at this point.

If the plan was not terminated by corporate action (resolution, amendment, etc.) prior to the sale closing then it came over to the buyer as a result of the transaction and the buyer can maintain for however long it desires and contributions can continue. If the plan was officially terminated pre-sale then the only contributions that should have been withheld and subsequently remitted were those attributable to pre-sale payroll and receivable as of the sale closing date. If the buyer now has the plan, a termination thereof would mean a one year wait to establish another 401(k) if subsequently desired.

Hi, One of the plans is scheduled for termination due to the stock sale, but it has come to our attention that the acquiring company does not offer a 401(k) plan. Typically, under such circumstances, the plan should terminate prior to the sale date, with all contributions ceasing accordingly. However, in this case, while the stock sale date is set for September 30, 2025, employee contributions are expected to continue until December 29, 2025. Could you please confirm whether these post-sale contributions can be accepted? Additionally, if there are any specific compliance considerations or steps we need to take in this scenario.

BG5150, I see a responsibility as you do. If someone recommended a safe-harbor provision, that person ought to have provided information to explain not only the reasons supporting the recommendation but also the conditions and consequences of the provision and the advantages and disadvantages of using the provision. Further, some might say an explanation ought to be no less clear, conspicuous, or understandable than the recommendation was. And here’s a point for many service providers to consider: If a person not licensed to practice law provides tax or other legal advice, the standard of care is no less than what a professionally behaving lawyer would have done. This is not advice to anyone.

I guess in a narrow view, nobody HAD to explain it to the ER. It's up to them to understand the plan document they are signing, and they are the ones (usually) tasked with operating the plan. However, I'm guessing someone approached the ER about setting up the plan and steering them to a SH arrangement. Whoever did that should have at least explained it to the ER the mandatory contribs and the conditions under which they would be made. It's certainly possible that the ER just tuned out and/or only heard the PS part of the funding. Or maybe thought the SH and PS were the same... I guess they can remove the SH for '26 and just do ADP testing. And tehy doen' even have to give refunds! They can do a QNEC. And guess what? Those don't even have to go to those employed on the last day of the year either!

Since I lost my job in mid-January but had an active FSA at that time, were my wife’s HSA contributions still allowed for the rest of the year? Yes, your spouse (assuming a) health FSA coverage ended in January, b) you didn't elect COBRA for the health FSA, and c) she no other disqualifying coverage from 2/1 forward) became HSA eligible as of February. If partial-year eligibility applies, is the maximum HSA contribution prorated to 11 months, meaning 11/12 of $8,550 ($7,837.50)? Yes, I agree. Although you could take advantage of the last-month rule if you wanted to increase that to the full $8,550. I've copied the details below. I haven’t used any of the $1,100 in the FSA. The FSA provider shows the account as active and says I can still use the funds. Is that correct? Probably not. It's possible they have a very long run-out period. But a run-out period doesn't affect HSA eligibility regardless. https://www.newfront.com/blog/the-hsa-contribution-rules-part-ii Contribution Limit for Partial Year of HSA-Eligibility: The Last-Month Rule Employees who enroll in the HDHP mid-year are generally subject to the proportional contribution limit above. However, a special rule known as the “last-month rule” (alternatively referred to as the “full contribution rule”) may apply to permit the mid-year enrollee to contribute up to the full statutory limit—even though the employee was not HSA-eligible for the full calendar year. In order to qualify for the last-month rule, the employee must satisfy both of the following two conditions: The employee is HSA-eligible on December 1 of the year at issue; and The employee remains HSA-eligible for the entire following calendar year. This creates a 13-month “testing period” that applies to determine whether the individual has met the last-month rule requirements. The mid-year HDHP enrollee must be eligible on December 1 through the entire subsequent calendar year to contribute up to the full statutory limit—as opposed to the standard proportional limit—for the year in which the employee enrolled in the HDHP mid-year. Example 2: Kris enrolls in HDHP coverage on October 1, 2025 and is HSA-eligible continuously through the end of 2026. Result 2: Kris can contribute up to the full statutory limit (as opposed to the standard proportional limit) in 2025 by taking advantage of the last-month rule. Kris qualifies for the last-month rule in 2025 because he was HSA-eligible in the 13-month testing period from December 1, 2025 through December 2026. If Kris had not qualified for the last-month rule (e.g., enrolled in a standard HMO in 2026), his 2025 contribution limit would have been 3/12 (1/4) of the contribution limit. The IRS provides a useful summary of the last-month rule in Publication 969 and in the Form 8889 Instructions. Mid-year HDHP enrollees who contribute to the statutory limit but do not satisfy the 13-month testing period by failing to remain HSA-eligible will be subject to income taxes and a 10% additional tax on the amounts contributed in excess of the statutory limit. 2025 Newfront Go All the Way with HSA Guide

Or, differently asked, did anyone have a duty or obligation to explain this to the plan sponsor? (And, was it explained, but the plan sponsor was inattentive?)

BG5150, thank you for the reminder to look into already published administrative law. If all is adjusted before a W-2 wage report is filed or furnished, might one say there is no failure that calls for even a self-correction?

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Is this benefit provided under an employment-based employee-benefit plan? If so, is the plan ERISA-governed? If so, one presumes the plan’s trustee or administrator must administer one’s responsibility “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this title [I] and title IV.” ERISA § 404(a)(1)(D). Is the death benefit provided by a life insurance contract, from the plan’s trust, or from an employer’s assets? Is there a written plan? If there is a life insurance contract, does the written plan make the life insurance contract a part of the plan such that the life insurance contract also is in the writings “governing the plan”? Of “the documents and instruments governing the plan”, do they state a provision about an unlocated beneficiary? Do the documents state or omit a provision for giving up a beneficiary’s death benefit? If there is a forfeiture provision, in what circumstances does it apply? Without a supporting plan-document provision, I would be reluctant to deprive a participant-named beneficiary of a death benefit merely because the plan’s administrator has not located the beneficiary. Does the plan set a time limit on a beneficiary’s claim for the benefit? Does the plan set a time by which a death benefit must be paid, even as an involuntary payment? This is not advice to anyone.