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Like Andy H., I am retiring tomorrow, January 31. These message boards have been a great source of knowledge and information, and I thank the folks who make this possible! Best wishes and good luck to everyone!

The obvious problem is or will be required amendments and restatements. With SECURE 2.0, many of these amendments are required and/ or necessary now. I would also check and see what the prior document provider says about document maintenance. Most will not maintain a document in this situation. It is very difficult to find a TPA who will do document only. It is not generally profitable for them. I/we have a relationship with an LA ERISA attorney who will do this. She uses ASC documents and her pricing is very reasonable. Please send me a note at Patricia.Jensen@FuturePlan.com and I will send you her contact information.

Yes and the interpretation is first the duty of the plan fiduciary, especially if the plan has a decent description of fiduciary authority and responsibilities. I agree with david rigby that the fiduciary should take it as far as possible. Resorting to the courts is not what ERISA intended. A colleague of mine used to give a speech called “The Fearless Fiduciary” as a way of reassuring that ERISA was not out to get them, and offers plenty of protection for a fiduciary who acts diligently and reasonably. Anyone who is aggrieved to can then go to court.

As QDROphile observes, even if the plan grants the administrator the widest discretionary authority, that fiduciary must consider (at least) all instruments and documents governing the plan, the plan administrator’s written procedures, including forms, and other relevant documents. None of us sees the writing the participant signed. But following Dougsbpc’s description, some fiduciaries might find that the participant named two primary beneficiaries, 50% each. Some fiduciaries find reasons to excuse some failures in completing a form; others, not so much. Fact-finding is sensitive to all the facts and circumstances. If the plan granted the administrator discretionary authority, an advantage of using it is that a court defers to the fiduciary’s exercise of discretion unless it is so unreasoned that the law treats it as “arbitrary and capricious”.

I think your point is valid, but it depends on an entire reading of the plan document and written procedures, which include the forms. I can imagine that the fiduciary could interpret plan terms and written procedure terms to apply default provisions to “fill up” the difference between the sum of designated percentages in the form and 100%. The scope of imagination must be based on a an intelligent and complete reading of the documents, and a reasonable interpretation. Then, as noted in my prior message, anyone who is aggrieved can appeal, first through the plan’s claims procedures, and then to court if it needs to go that far. If you throw things first into court, you might be losing an easier and cheaper solution that is acceptable and most beneficial to all involved, the errant plan participant be damned.

I don't read those attribution rules applying in any context other than a more than 2% owner of an S Corp. The cross reference to §1372/§318 attribution only explicitly applies in the S Corp shareholder definition section. So I would interpret those rules to permit cafeteria plan eligibility for family members of a partner or other type of (non-S Corp) self-employed individual.

Interesting theoretical question, but I have not seen anyone intentionally take that position--and for good reason. I would consider it very aggressive to follow a different interpretation than the proposed cafeteria plan regs here. These regs have notoriously been in proposed form for an eternity now (since '07), and since then they've taken root as the primary basis for Section 125 guidance in many areas. Without them it's a sea of gray interpretations of the statute, which really would just be a guessing game. Even the IRS constantly points to the proposed cafeteria plan regs as controlling in other forms of guidance like Chief Counsel Memoranda (example: https://www.irs.gov/pub/irs-wd/202317020.pdf) and Information Letters (example: https://www.irs.gov/pub/irs-wd/16-0048.pdf). Plus the IRS itself has told us we can rely on the proposed regs in the preamble-- https://www.govinfo.gov/content/pkg/FR-2007-08-06/pdf/E7-14827.pdf As noted in this preamble, taxpayers may rely on the new proposed regulations for guidance pending the issuance of final regulations. ... Proposed Effective Date With the exceptions noted in the ‘‘Effect on other documents’’ section of this preamble and under the ‘‘Debit cards’’ section of the preamble, it is proposed that these regulations apply for plan years beginning on or after January 1, 2009. Taxpayers may rely on these regulations for guidance pending the issuance of final regulations.

Not sure I fully understand the corporate structure you're describing, but regardless the Section 125 cafeteria plan rules prohibit more than 2% owners from participating. That prohibition includes family attribution for both parents and children. I think that gets you to your answer here. Here's a quick summary overview: https://www.newfront.com/blog/compliance-fast-s-corporation-owners-2-shareholders-2 Here's the family attribution rules: IRC §1372: (b) 2-percent shareholder defined. For purposes of this section , the term “2-percent shareholder” means any person who owns (or is considered as owning within the meaning of section 318 ) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation. IRC §318: (a) General rule. For purposes of those provisions of this subchapter to which the rules contained in this section are expressly made applicable— (1) Members of family. (A) In general. An individual shall be considered as owning the stock owned, directly or indirectly, by or for— (i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and (ii) his children, grandchildren, and parents. (B) Effect of adoption. For purposes of subparagraph (A)(ii) , a legally adopted child of an individual shall be treated as a child of such individual by blood. Here's the 125 regs: Prop. Treas. Reg. §1.125-1(g)(2): (2) Self-employed individual not an employee. (i) In general. The term employee does not include a self-employed individual or a 2-percent shareholder of an S corporation, as defined in paragraph (g)(2)(ii) of this subsection. For example, a sole proprietor, a partner in a partnership, or a director solely serving on a corporation’s board of directors (and not otherwise providing services to the corporation as an employee) is not an employee for purposes of section 125, and thus is not permitted to participate in a cafeteria plan. However, a sole proprietor may sponsor a cafeteria plan covering the sole proprietor’s employees (but not the sole proprietor). Similarly, a partnership or S corporation may sponsor a cafeteria plan covering employees (but not a partner or 2-percent shareholder of an S corporation). (ii) Two percent shareholder of an S corporation. A 2-percent shareholder of an S corporation has the meaning set forth in section 1372(b). ... Example (1). Two-percent shareholders of an S corporation. (i) Employer K, an S corporation, maintains a cafeteria plan for its employees (other than 2-percent shareholders of an S corporation). Employer K's taxable year and the plan year are the calendar year. On January 1, 2009, individual Z owns 5 percent of the outstanding stock in Employer K. Y, who owns no stock in Employer K, is married to Z. Y and Z are employees of Employer K. Z is a 2-percent shareholder in Employer K (as defined in section 1372(b)). Y is also a 2-percent shareholder in Employer K by operation of the attribution rules in section 318(a)(1)(A)(i).

IMHO (non-lawyer), this is not the correct course of action. The Plan must follow its own document and procedures first (in that order). Eventually, it's possible a court might be involved, but that should not be the default action. Comments from the two attorneys above are spot on.

The question is whether the plan satisfies coverage and nondiscrimination by permissive aggregation. If there was no aggregation, the answer is no. From the instructions:

I would suggest finding a TPA or service provider that has a document service only (no recordkeeping or administration or reporting) tier. I think ones that cater to the smaller market are more likely to offer this. Will the new recordkeeper also be doing all the annual work? The form 5500? compliance testing? If not, a traditional TPA that does that work in addition to the document is needed. Sounds like they went from a bundled service provider - to an unbundled. If the new recordkeeper really is doing everything except the document, my document services only suggestion is the best I can think of. Then they would not need to hire an attorney, at least not if they can be accommodated on a volume submitter document at a more affordable cost.