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I wonder if divying up the horse when time comes for a distribution is where the term "quarter horse" comes from.

And as we often say is this forum, just because you CAN do something doesn't mean you SHOULD.

401(a)(26) is good assuming prior structure was compliant. If no one benefits in 2024 then no 410(b) or 401(a)(4) concerns. If the plan was "soft" frozen (just participation) then you would need to include this person in your testing population as (s)he would not be a statutory exclusion.

How is it that basic plan records from only 5 years ago have not been retained in any fashion by either the client or TPA (or a third-party RK)? Isn't that gross negligence?

Also, you seem to be asking about two different issues combined into one mashed question. One has to do with contribution allocation entitlement for the year of retirement - do they get or not get a match for that year? The other is a matter of ownership (vesting) with respect to their employer contribution account balances, are they entitled to 100% or only some lesser percentage? As Bill noted, each of these should (must) be spelled out by the terms of the plan document.

Always do the right thing. In addition, be willing to help the client (or the accountant) solve their problem but never let their problem become your problem.

This all must mean SOMETHING because of everyone agrees it has to. Less clear is what actually changes. Perhaps in reality we will just continue to blindly follow all IRS pronouncements as gospel until we hear otherwise--and for 99.99% of the rules we will never hear otherwise. I think the DOL's fiduciary rule is in the most trouble from the sounds of it. Seems to check off all the "right" boxes for trouble under the Supreme Court opinion. The LTPT rules and the new auto enrollment guidance are safe (in my opinion) if for no other reason than any litigation in that area just seems really remote. My speculations above were more theoretical than actually thinking actual litigation was likely. We shall see!

Hopefully this means we won't be obligated to follow things like "the Paul Shultz memo" (sounds ridiculous, but we are all doing it) and Congress will actually clarify what the law requires instead of IRS imposing what they think Congress intended.

If an ERISA-governed plan’s trustee even considers holding the shares of the limited-liability company that owns a horse, pays the expenses of keeping the horse, and collects prizes and fees of the horse’s work: The plan’s administrator might warn the participant that incremental expenses the plan would not have incurred but for the nonqualifying asset—for example, premiums for extra fidelity-bond insurance or fees for an independent qualified public accountant’s audits, and lawyers’ fees (see next paragraph) are charged to the individual account of the participant who directs investment in the nonqualifying asset. The participant must engage her lawyer at her personal expense. And at least for the initial sets of transactions—forming the company and its LLC operating agreement, the company’s purchase of the horse, and the plan trustee’s purchase of its member interest in the LLC, the participant’s individual account is charged the fees and expenses of the plan’s trustee’s and administrator’s lawyers. (Other individuals should not bear expenses made necessary because of one participant’s directed investment.) Likewise, the plan trustee’s extra fees and expenses for reading the LLC’s financial statements and otherwise monitoring the plan’s investment are charged to the directing participant’s individual account. The plan’s administrator might require that the participant’s account always hold enough daily-redeemable investments so the administrator perpetually can pay all incremental plan-administration expenses without invading any other account. In my experience, a person who thinks about using her retirement plan account to buy an unusual investment considers that way because she lacks money. But many of those also lack an account balance that’s enough to both buy the nonqualifying asset and reserve for the plan’s incremental expenses. This is not advice to anyone.

As long as Company C is not in the A/B controlled group before buying the stock of Company B, and no assets/liabilities/sponsorship are transferred to Companies B or C at or after closing, employees of Company B will have a severance from employment for Company A 401(k) distribution purposes once Company B leaves the A/B controlled group (the pre-closing "employer") and joins the new C/B controlled group (the post-closing "employer"). I think 1.401(k)-1(d)(6)(ii) is on point.

If a federal district court rendered such a decision, would that be binding precedent that other plan administrators could reply upon? Would it be applicable nationwide, or only within the same federal circuit? Could we end up with different precedents, and therefore different standards for the same issues, in different parts of the country?

Verily, and with great haste, thou shalt consulteth thy plan's governing documents and discover therein the answers thou seekest. Should fortune smile upon thee, thou may findest that thy plan be graced with a determination letter, be it sealed by the hand of the wise ones who dwell within the halls of the Internal Revenue Service, granting reliance upon the terms found therein. In that happy moment, thou shalt knowest that thy plan's allowances of in-service distribution of rollover accounts shall never be said to fail to satisfy the requirements of section 401.

austin3515, thank you for helping me with your thinking. Let’s remark on some of your several smart observations (and some I add). “[A]t least you knew what the answers were[.]” For interpretations of the Internal Revenue Code, a plan sponsor, an employer, a plan administrator, and a participant, beneficiary, or alternate payee or alternate recipient still gets at least practical protection in following agency rules. For example, if a retirement plan’s administration follows Treasury interpretations about a tax-qualification condition, the IRS is unlikely to tax-disqualify the plan for failing to meet that condition. It might be capricious if it did so. And in filing tax returns and information returns, a taxpayer or reporter would have “reasonable cause” support for filing a return grounded on an employee-benefit plan’s having followed Treasury interpretations, even those that are not the correct reading of the statute. For Federal taxes, the agency is the enforcer. About ERISA, the Secretary of Labor should not pursue enforcement if the plan’s administrator followed the Labor department’s rule. Although a court does not defer to an agency’s interpretation, for an agency not to follow its own rule-made interpretation might be capricious. How independent interpretations of a statute might help Imagine the Treasury department publishes its final LTPT rule in 2024. Remember, the 1978 Reorganization Plan allocates to the Treasury department some interpretive authority for ERISA’s part 2. Imagine in 2025 a § 401(k) plan’s administrator denies an employee entry for elective deferrals. The plan’s governing document excludes the employee under a classification other than age or service, which the administrator finds is not contrary to ERISA § 202. The employee sues under ERISA § 502(a)(1)(B), asking a Federal court to declare she is eligible. (Or, as you suggest, a big employer/administrator faces an alleged class action for all similarly excluded employees.) The plaintiff asserts ERISA § 202 commands she is eligible as a long-term part-time employee. She argues the Treasury rule, including its interpretation about whether a classification is a subterfuge against the LTPT command, is the persuasive interpretation of ERISA § 202. Yet with no more Chevron deference, the plan’s administrator may argue a different interpretation of the statute. A final decision in a particular case protects the plan’s administrator for whatever was litigated in that case. “Forfeitures cannot be used to fund QNECs[.]” That’s an example of a situation in which being free to argue the interpretation of the statute might have helped some employers—those with the resolve and resources to fight the IRS. Congress’s express direction to make a rule. The Supreme Court’s decision yesterday leaves undisturbed other precedents that allow an agency’s rulemaking to ‘fill-in the details’ if Congress’s Act states a delegation and enacted “an intelligible principle to which the [agency] authorized to take action is directed to conform.” Yesterday’s opinion states: “When the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court . . . is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits. The court fulfills that role by recognizing constitutional delegations, ‘fix[ing] the boundaries of [the] delegated authority,’ and ensuring the agency has engaged in ‘reasoned decisionmaking’ within those boundaries[.]” For example, Internal Revenue Code § 401(a)(9) includes six express delegations to rulemaking. For those fill-in-the-details points, a court might recognize that Congress intended a later-made Treasury rule as a part of the statute. “I really think EPCRS is reviewable now.” The IRS’s corrections programs are grounded from Congress’s grant of authority to make closing agreements: “The Secretary is authorized to enter into an agreement in writing with any person relating to the liability of such person (or of the person or estate for whom he acts) in respect of any internal revenue tax for any taxable period.” I.R.C. (26 U.S.C.) § 7121(a). Even if the IRS oversteps that authority, who would challenge an EPCRS closing agreement? One presumes not the employer/administrator that obtained the correction satisfaction. And who else would have standing to dispute the IRS’s compromise of the taxes the IRS otherwise could assert? No ERISA right to an automatic-contribution arrangement For the reasons mentioned above, it might not matter if the IRS too generously interprets Internal Revenue Code § 414A about whether an automatic-contribution arrangement is a tax-qualification condition. The consequence of a plan’s failure to meet IRC § 414A(b)’s conditions is that the plan’s arrangement that otherwise might be a qualified cash-or-deferred arrangement is not a § 401(k) arrangement. But it’s the IRS, not a private litigant, that applies Federal tax law. ERISA does not generally command that an individual-account retirement plan provide an automatic-contribution arrangement. If a plan’s governing documents omit an automatic-contribution arrangement, there is none. “It seems to me that the risk of administering 401k plans has gone up (as employers).” Many employers and plan administrators might follow an executive agency’s interpretations. When they do, they shouldn’t fear enforcement by the agency. A participant’s, beneficiary’s, or alternate payee’s or alternate recipient’s civil action on an ERISA claim is likely only when the situation calls the litigation resources. For example, almost none of the excessive-fee lawsuits against an individual-account retirement plan’s named fiduciary was about a plan with less than $500 million. Likewise, civil actions asserting that an employer/administrator excluded people the plan or ERISA made participants were mostly against big employers, think Microsoft. “I doubt the result of this will be Congress writing better laws that perhaps need less interpretation.” I think that’s so, at least until the United States returns to having a functioning legislature. And even when a legislature does quality lawmaking, there will be gaps and other ambiguities. “[W]e’re going to need more courts and judges and lawyers. A lot more.” Yes! I tell my current and former students there will be plenty of demand for one’s skills. Yet, for many plans, the practical interpretations might not change much. Many plan administrators do not regularly engage an employee-benefits lawyer. Many tend to administer plans using frameworks set with recordkeepers, third-party administrators, and other service providers. And those frameworks tend to follow (or attempt or purport to follow) the agencies’ interpretations. An employer/administrator needs lawyering when it seeks an interpretation to allow doing something an agency’s interpretation doesn’t allow (or about which there is no agency interpretation), or to get better protection than the agency’s interpretation affords. Others, especially small plans’ administrators, fall in with a mainstream good-enough. Further, many questions of law might never get a court’s decision. For some, that’s a feature, not a bug.

And what does the statute, and for that matter, the regulation, say about this minimum meaningful benefit of 0.50% as a life annuity at Normal Retirement that all these pre-approved documents now require? Anyway, if a plan wants reliance on its written language, I am not seeing how this Chevron change would undo the power that the treasury holds there. Sponsors are still bound to the terms of their written plans.

Forfeitures cannot be used to fund QNECs (i know they fixed that one but man that one got under my skin!) And maybe the courts would not agree that a zero QNEC is appropriate to correct 15 months of not implementing an auto enrollment. I really think EPCRS is reviewable now. There are often statutes that say “the irs shall write regulations no later than” so I am not convinced the statute you referenced will protect it. Maybe it makes them more protected, but who knows. How about some challenge to the conclusion that employee class exclusions are permitted under the LTPT statute. I can imagine some sort of a class action thing where a large group of employees was improperly excluded from the ability to participate based on the IRS position. And doesn’t this sort of thing require the IRS to be far more conservative on these types of decisions? Imagine if this was reversed in 5 years by the Supreme Court in favor of excluded participants. and along the same lines, the IRS concluded that a new spin off plan is not subject to auto enrollment. I can see a class action here too over the meaning of “established.” Regulations are a pain. But at least you knew what the answers were and could more or less take them to the bank. Now we have to consider the level of consistency between the reg and the statute (especially important questions where the statute is silent, like LTPTs and excluded classes). It seems to me that the risk of administering 401k plans has gone up (as employers). And it also seems to me we’re going to need more courts and judges and lawyers. A lot more. Somehow, I doubt the result of this will be Congress writing better laws that perhaps need less interpretation.

I have not given this a great deal of thought, but as Peter notes, won't the impact be limited to agency interpretations/guidance that the agency feels complies with the statute but that a federal court does not (and previously may have been compelled to defer despite its disagreement)? Eliminating Chevron does not mean the agency no longer has authority to write rules; it just means (in my understanding) that a federal court is no longer required to defer to the agency's interpretation if the court thinks a better interpretation is available under the statute. In other words, you would have to find a regulation not only that you dislike, but one that also is so at odds with the underlying statute that a federal judge would change the rule. The judge might still be persuaded that the agency's rule is correct. That said, I would be interested to hear of good examples where this could change the outcome. Also, EPCRS is authorized by statute (29 USC 1202a): (a) In general The Secretary of the Treasury shall have full authority to establish and implement the Employee Plans Compliance Resolution System (or any successor program) and any other employee plans correction policies, including the authority to waive income, excise, or other taxes to ensure that any tax, penalty, or sanction is not excessive and bears a reasonable relationship to the nature, extent, and severity of the failure.