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I'm looking for perspective on the issue of the Top-25 restricted payment rule in DB plans, or specifically in this Cash Balance Plan. We have a participant who is among the Top-25 highest paid employees and would be restricted from taking a lump sum under these rules under normal circumstances. The relevant facts are as follows: Individually designed DB Plan effective July 1, 2009, restated July 1, 2021. Plan has only ever covered HCEs (NHCEs have never been covered; professional medical group). There are approximately 60 participants, but about 70 employees total. Currently less than 100% funded, but still above 80% threshold. Benefits include interest credits tied to actual market returns, subject to anti-cutback rules (participants effectively "fund" their own benefit). Plan Document includes legacy restricted payment language referencing: Top-25 highest paid HCEs Current liabilities Escrow arrangements An explicit exception stating the restriction does not apply if the plan never benefited any NHCEs. Here are my two specific questions: 1. From a technical standpoint, is it correct that the legacy top-25 restricted payment rule does not apply in an HCE-only plan, consistent with the "never benefited NHCEs" carve-out found in older individually designed documents? 2. Setting aside funding level thresholds which are not currently triggered, how would you view the risk of allowing distributions in a less than fully funded HCE only DB plan, where early distributions could materially shift funding risk to remaining participants due to anti-cutback provisions? Particularly when the participant seeking the distribution is among the Top-25 highest paid? More generally, is this just a known but acceptable feature? Is it still legally required to not allow a top 25 paid employee to take his full lump sum? Is this a fiduciary concern requiring discretionary limits? Or if this is not a legal issue, is this something that should be voluntarily adopted to prevent funding issues? I appreciate any insight you can provide.

Hi all, it's been over a year or more since I've in. I'm retired but trying to help someone out... a 403(b) participant passed away and TIAA/CREF is saying that he named his widow for a portion of his account/certificate, but did not name a bene for another portion, and that portion is to go to his spouse 50% and his estate 50%. If in fact there was no bene des that checks out with the SPD (confirming my long-held belief that 403(b)s are a different world). I'm familiar with the idea of a see-through trust, but is there any such thing as a see-through estate? She is the only beneficiary of his estate so she is ultimately entitled to all of the benefits, and of course would prefer to roll them over rather than open an estate and have the estate treated as the direct beneficiary. I don't think so but thought I would take a shot.

An employer wants to amend their plan to adopt QACA. Can they have QACA apply to just employees hired after a certain date or does QACA have to apply to everyone? They currently have a basic safe harbor match plan. The QACA match differs from the SHM and having 2 different SHM formulas in the plan is not permitted (I think). The employer would prefer not to have existing employees have to go through any enrollment process or have anyone currently employed defaulted into the plan. But if everyone currently employed has an affirmative election to participate or not in the plan, would those employees really need to complete anything for the QACA? I would think not. Thank you for replies

Re followups - we were late to the party for implementing electronic signature software. I'm not sure what the technical name is (that's for the systems wizards - I'm just a user). It is an Adobe system, and OMG, the time it saves! When you send the document to be signed and dated, you input the need=by date, and the follow-up frequency - once every week, for example. System does it for you, and sends you the signed and dated document once the client does it. I love it!

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My note above mistakenly suggests one might undo a before-the-month provision. I apologize; § 457(b)(4)(B) continues the before-the-month provision for a plan of a nongovernmental employer. About minimum-distribution provisions, all or some changes might be unnecessary to the extent that the written plan states a provision by reference to Internal Revenue Code sections. If that doesn’t obviate a need to consider a plan amendment about a required beginning date’s applicable age, whoever drafts a plan’s amendment or restatement might ask an employer whether it prefers to allow a delay up to age 73/75 or to compel a distribution based on some earlier age (for example, age 70½, or even the first day of “the calendar year in which the participant attains age 70½” [I.R.C. § 457(d)(1)(A)(i)]) or an earlier occurrence (for example, severance from employment). Likewise, a plan sponsor might prefer to restrict a distribution to a period shorter than ten years. Internal Revenue Code § 457(b)(5) refers to § 457(d)(2), which refers to § 401(a)(9). Accord 26 C.F.R. § 1.457-6(d) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(d). I see nothing there that precludes delaying a required beginning date until what follows from “[t]he calendar year in which the employee retires from employment with the employer maintaining the plan.” 26 C.F.R. § 1.401(a)(9)-2(b)(1)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(1)(ii).

Right, it can be funded as after tax only up to the lesser of 100% of compensation or the $70,000 dollar limit. The extra $7,500 catch-up is only available as a deferral.

It’s now 20 years since I last had an inside-the-service-provider responsibility about scheduling plan amendments. So, other BenefitsLink neighbors might help you with current thinking about business interests in organizing the work. Consider plan sponsors’ preferences. Although some might like delay, some might prefer to avoid being time-pressured or feeling burdened in a cycle or season of the plan sponsor’s business. If some of your clients use a lawyer’s review to supplement yours, consider a courtesy of allowing time before the last months of a year. Many lawyers, including employee-benefits lawyers, face increasing work compressions as a year’s close nears. If a December 31 is a relevant due date, time in November and December can be heavily pressured, or even no longer available. If some of your clients neglect to respond promptly to what you send, consider how many reminders and warnings you want to build into your work process.

Hello, My employer has done quite a few layoffs this year and has offered those former employees COBRA subsidies as part of their severance agreement. My question is: if an employee is offered a COBRA Subsidy for a certain number of months, but does not actually elect COBRA, does that amount still need to be reported on their w2 for informational purposes? Or does it only need to be included if they elect COBRA?

Agreed. It seems to be 12/31/2025, so you should at least include the later RBD ages. If you offer installments to beneficiaries, you need the to be sure that installments are limited to 10 years for non-spouse adults and annual withdrawals are required. If anyone is still interested in RBDs for non-governmental 457(b)s can someone tell me why the RBD is not the later of the age or termination of service. I have read in various places that the RBD must be the April 1 following the applicable age, with no exception. I just can't find that in the Code or the regs.

I wanted to follow up on the comments regarding whether Schedule C, line 5 needs to be completed when there are not multiple disqualified persons involved. What's odd is that Line 4 states that if "you" have corrected all prohibited transactions reported on this return, then "complete Schedule C, line 5 on the next page." If you answer "yes" to Line 4 and do not complete anything on Line 5 will the IRS be content that you have contemplated/completed Schedule C, line 5? I didn't know whether a N/A would be appropriate for 5(b) and 5(c). Appreciate additional insight to this question!

Curious? Why the reimbursement process? That's strikes me as violation of the VEBA trust - assets reverting to employer? Why not pay claims directly from the trust? What's the purpose?

From DOL website https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing

I have had it where it was an NHCE who wanted to do it. It was a married couple, and the NHCE was married to someone who made a gazillion dollars so they were looking to contribute the full 415 limit. And the plan sponsor was willing to accommodate (small employer).

Unless you’re also in the business of providing tax or legal advice we only provide a recommendation to seek such professional counsel.

QDROphile, thank you. My question presumes an adviser has advised her advisee to do the right thing. And that the adviser is not a preparer of, or otherwise associated with, a tax return or other act that supports an incorrect thing. Others’ observations?

Not to aid and abet the actions that the client chooses to pursue that the advisor has declared unlawful? It depends. Inter alia, see “zugzwang” and, for fun, the definition of “lawyer” in The Devil’s Dictionary.

We just received the 2025 SECURE 2.0 Amendment from ftWilliam. Most, if not all, of our clients will be going with the default selections in the amendment. Out of curiosity, are firms having their clients formally adopt the amendment now, or are most waiting until the required deadline of December 31, 2026? Thank you!

The underlining is not mine.

Q1 Beyond whatever tax law might provide about remedial-amendment periods: Nothing in SECURE 2019 or SECURE 2022 (or the IRS’s guidance about law other than ERISA’s title I) provides relief from ERISA’s commands that an employee-benefit plan “shall be established and maintained pursuant to a written instrument” and “specify the basis on which payments are made to and from the plan.” ERISA § 402(a)(1), 402(b)(4), 29 U.S.C. § 1102(a)(1), 1102(b)(4). Nothing in SECURE 2019 or SECURE 2022 excuses a fiduciary from her responsibility to administer an employee-benefit plan “in accordance with the documents and instruments governing the plan[.]” ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). One way some plan sponsors and plan administrators hope to follow those commands is to keep records of writings (including emails and other computer systems’ messages) by which the plan sponsor told its recordkeeper, third-party administrator, or other service provider which provisions to implement, or a service provider told its service recipient which provisions it treats as deemed adopted if the service recipient does not instruct otherwise. Some might argue that those writings, even if informal, are “written” and are “documents . . . governing the plan[.]” I’m unaware of a court decision that supports or rejects such an interpretation. About whether a deemed Roth-contribution election must be in “the” plan documents now or need not be until December 31, 2026, some might read the Treasury department’s recent rule to interpret § 401(k) and § 414(v)(7) as allowing a delay until December 31, 2026. Even if that’s a fitting interpretation for tax law, the Secretary of the Treasury lacks authority regarding ERISA §§ 402-404. Some might argue that service instructions, if written, are “documents . . . governing the plan[.]” Q2 About something that might be an ERISA command but that neither ERISA nor the Internal Revenue Code commands or expects as a plan provision, a plan sponsor might prefer to omit a plan-document provision (unless something is needed to negate or revise a plan-document provision that’s inconsistent with the ERISA command). But consider whether the plan’s administrator wants a revision of a recordkeeper’s, third-party administrator’s, or other service provider’s agreement. My observation about either question is not advice to anyone.

How confident are you that W was or became the beneficiary of H’s IRA? How confident are you that W did not take § 401(a)(9)-required distributions from other IRAs? (For IRAs, a minimum may be taken from any of the holder’s or beneficiary’s IRAs; it need not be taken from a particular IRA.) If W failed to take one or more years’ § 401(a)(9)-required distributions, does W’s personal representative want to file Form 5329 [https://www.irs.gov/pub/irs-pdf/f5329.pdf] and pay each additional tax? For which years, if any, does W’s personal representative have authority to file that tax return? Might “moved into an ‘estate account’” be a colloquial description of something that happened in the IRA custodian’s records but without creating a non-IRA account?

A few questions questions regarding SECURE Act amendments: 1. My understanding is that 401(k) plan documents have until December 31, 2026 to be amended for any secured act provisions, even if operationally implemented earlier (e,g, Roth catch-up elections implemented in 2025). Is this correct? 2. Are plan amendments required for: a. The annual paper statement requirement of Secure 2.0 Sec 338 - my inclination is that you wouldn't have to unless there were something in the plan document that suggested something to the contrary. b. The disclosures for eligible unenrolled participants requirements of Secure 2.0 Sec. 320 - again, my inclination is that you wouldn't have to unless there were something in the plan document that suggested something to the contrary. Thanks!

I have a similar question but a slight twist on the question. Plan is terminating 12/31/2025, distributions are expected to be paid and plan liquidated April/May of 2026. The participant turns 73 during 2026, in fact August 2026. RBD would be 4/1/2027 if the plan was still ongoing and the ppt has not retired (he is an HCE). At the time of plan distributions he is not yet 73. He is planning to elect a lump sum rollover. I am thinking because he has not reached his Age 73 birthday he is not subject to an RMD. Any thoughts?

"Bueller? Bueller? Bueller?"

Our firm might be able to help. I will send you a PM.