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No, the 6% and 31% are limits, not offsets. Suppose you have a plan that defined the benefit as $X minus the value of a benefit provided to the participant under another employer’s plan. That’s an offset.

If the cash balance plan is not subject to PBGC coverage and if there is at least one employee who is in both plans, then the deduction limit for both plans combined is 25% of eligible compensation, ignoring the first 6% of pay contributed to the defined contribution plan (count all employer contribution types but not salary deferrals). This combined plan deduction limit is avoided if the sum of all employer contributions to the DC plan (all employer contributions, but not salary deferrals) is not more than 6% of the sum of all eligible compensation.

Good article - https://www.mayerbrown.com/en/insights/publications/2025/08/revisiting-the-state-of-the-law-in-erisa-forfeitures-cases

Right. We always strike any language like that and always explicitly provide that the governing law is a specified State usually the State in which the Plan Administrator, in our documents invariably a committee of the sponsoring employer, is physically located. This State usually is the State where the Plan, from the Sponsor's perspective, is administered and all documents related to its administration are kept, and usually where most (or at least a not insignificant portion) of the participants are also physically employed. The governing law could of course be set as any State, however, we find that since we also advise specifically providing in the plan where jurisdiction and venue will lie (e.g., the United States District Court for the Southern District of Texas in Houston, Texas), which again will coincide with where the plan administration, from the sponsor's perspective, actually occurs, we believe that the sponsor would want the State law in which that court is located to apply because it is the law most familiar to the plan sponsor (and the specified court) and the plan sponsor usually has attorneys with boots on the ground in that State. (FWIW we also advise that the plan specifically provide that all parties will waive any jurisdictional issues or forum of non convieniens arguments regarding the specified venue.) Note that it is likely that the recordkeeper's service agreement is governed by the law of the State in which the recordkeeper is located, which I would not necessarily disagree with because their services are being provided in that State. The recordkeeper will often utilize this in the prototype language to ensure that they are "covered" on all bases. However, this is a contractual issue between the Plan sponsor and a vendor. The choice under the service agreement should have nothing to do with the State law that will apply to the Plan's governance and interpretation. There of course are some issues that will apply State law other than the State law as provided under the plan, for instance if there is QDRO at issue and the divorce took place in another State so that the law of the State in which the divorce occurred would apply to the QDRO, but those issues, if any, would be on an individual by individual basis. The State law that applies to the plan's governance and interpretation could affect a lawsuit on a class action basis.... which is something that a plan sponsor likely will be extremely unhappy with.

I think a document that specifies the order of usage (or a single usage) would/should survive any challenge. The recent Home Depot dismissal basically said following the plan document is required by ERISA (duh). Anyone else remember the simpler "olden days" when forfeitures either reduced employer contributions OR were allocated in addition to employer contributions and the sole method (no discretion/choice) had to be stated in the plan document?

Slight alteration to what John said, the combined deduction limit for both plans is the greater of 1) 25% of eligible compensation, or 2) the greater of a) the minimum required contribution (determined under IRC Section 430) with respect to the DB plan or b) the excess of the funding target over the plan's assets. For both 1 & 2 you can ignore the first 6% of pay contributed to the defined contribution plan (count all employer contribution types but not salary deferrals). I just wanted to clarify that if the DB contribution exceeded 25% of pay it was still deductible and the sponsor could contribute and deduct an additional 6% into the DC plan. Also, the OP asked about "testing both a 401(k) and Cash Balance" together, which I don't think it actually impacted by the 6% rule. The 6% limit comes in for deductions, not testing.

Not that I have seen. FWIW, I draft my documents using forfeitures to pay fees first, then offset contributions, then any other permissible use. I do have some docs that first offset contributions, then pay fees, but those are getting phased out. This is not necessarily in response to these forfeiture lawsuits Taking your hypo a step further, wouldn't there still be discretion in how the document was drafted? *edited for clarity

This is a great question. @EBECatty I agree with your analysis here. Normally we're looking at this issue from the Section 125 cafeteria plan perspective as to whether the individual can make pre-tax contributions. In that case, the cafeteria plan rules are clear that the the attribution rules do apply to also block eligibility for the spouse/children of the more-than-2% shareholder of an S Corp. This is done by specifically pointing to §1372(b), which in turn points to §318. In other words, even though the spouse and children may be employees of the S Corp, they are treated as self-insured for cafeteria plan eligibility rule purposes via attribution. They even have an example on the regs directly on point. In this case, the §4980H regs do nothing of the sort. Neither does the preamble or any other guidance I can find. It simply refers to a "2-percent S Corporation shareholder" with no section reference to §1372(b), §318, or anywhere else. Given that it's all we have to work with, I would read it to not include attribution--consistent with your original approach @Morgan. If the IRS wanted attribution to apply, they could have explicitly done so as they did with the cafeteria plan regs. If this vendor is firmly stating that they believe the spouse and children can be excluded from the ALE calculation based on attribution, I'd ask them for what guidance they are relying on. My guess is it's just the standard attribution rules that aren't incorporated by reference in the §4980H regs. I'd consider that an aggressive interpretation that could expose them to quite large §4980H and §6056 liability if the IRS disagreed. Prop. Treas. Reg. §1.125-1: (g) Employee for purposes of section 125. ... (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). ... (iv) Examples. The following examples illustrate the rules in paragraphs (g)(2)(ii) and (g)(2)(iii) of this section: 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). Treas. Reg. §54.4980H-1(a): (15) Employee. The term employee means an individual who is an employee under the common-law standard. See § 31.3401(c)-1(b). For purposes of this paragraph (a)(15), a leased employee (as defined in section 414(n)(2)), a sole proprietor, a partner in a partnership, a 2-percent S corporation shareholder, or a worker described in section 3508 is not an employee.

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/settlor-expense-guidance