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The Plan defines W-2 compensation to exclude reimbursements and fringe benefits, which is fairly straightforward. However, do some plans treat a taxable pay advance issued under a signed agreement and repaid over multiple payrolls, as eligible Plan compensation?

While it technically aligns with the definition of eligible compensation, complications may arise if an employee reduces their contribution election after deferring into the Plan using the advance. Additionally, if a team member leaves early, the company may initiate a clawback, withholding the remaining balance from their final paycheck but possibly no reduction of 401(k) contributions. Does that mean we have to remove the previous 401(k) contribution from the Plan? 

It sounds to me the easiest way to move forward is this pay advance not be considered eligible compensation due to the downstream impacts and operational headache of the clawback or advance payment. 

Thanks. 

Has anyone updated vesting information in the Voya recordkeeping system?

This is my first time handling a vesting update for a plan on Voya. I’ve just completed the compliance testing and vesting calculations for one of the plans.

The plan includes an employer match with a 6-year graded vesting schedule. Since this is a calendar year plan, I’m unsure whether I should update vesting as of the current date or through 12/31/2024, which is the end of the plan year and the period used for the calculation.

When I attempted to upload the file using an "as of date" in seperate column by updating 12/31/2024, I received an email from Voya stating that the update failed.

Has anyone else encountered this issue? What might be causing the error, and what’s the correct process to ensure the vesting update is accepted by Voya?

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Where a see-through trust is named as an IRA beneficiary, may IRA distributions be reported on the 1099R directly to the trust beneficiary? This is particularly key where the beneficiary is younger at a low income tax bracket, the trust grantor intends to control the IRA fund flows to the trust beneficiary, and to avoid the trust's higher income tax rates while retaining IRA distributions in the trust. Reporting 1099R directly to individual beneficiary seemed to be the practice when see-through trusts first came out in early 2000s, but that reporting has changed over time?

If a new 403b is subject to mandatory auto enrollment, can that plan still qualify as ERISA exempt?  I know the question has been asked -- has it been answered?

I get it, if a "Highly Paid Individual" goes over the 415 limit but NOT the 402g limit, their catch-ups need to be coded as Roth. 

1) What happens if the discretionary profit sharing that puts them over is deposited after the end of the year? Is the only option the Roth conversion correction?

2) Does anyone have any ideas for how to handle a plan that is contributing 15% of pay throughout the year, where they will hit the 415 limit during the year well before they hit 402(g)?

I almost wonder if we should tell these Highly Paid Individuals to contribute $7,500 of Roth first to avoid any issues.  These seems like it's going to be a real challenge for some plans.  Obviously it is few and far between, but when it applies I think its going to be a pain. Curious if others have any grand ideas.

For years, John Feldt has generously given us inflation updates using Tom Poje’s spreadsheet.

But that spreadsheet might not do everything we now use. That’s for at least a few reasons:

The spreadsheet likely was designed for to-be-adjusted items then known, not for laws Congress enacted later.

Not all adjustments, even those for points a retirement-plans practitioner cares about, fall in with § 415(d)’s regime; many refer to an adjustment regime under Internal Revenue Code § 1 or something else.

Even beyond those points, the spreadsheet might have been designed based on expected users’ business interests.

Some BenefitsLink neighbors already have asked about adjustments not in the spreadsheet.

Let’s crowdsource some recent measures. I’ll start:

(Organized by Internal Revenue Code section; original amount; rounding increment, and rounding down or nearest; and text of the adjustment provision, with highlighting on the base-period year.)

I.R.C. § 45E(f)(2)(C)(iii)(II) [Small employer pension plan startup costs]; $100,000; $5,000, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.”

But in November 2024 the IRS stated: “Pursuant to section 45E(f)(2)(C)(iii), for a taxable year beginning in a calendar year after 2023, this limitation is equal to the initial limitation of $100,000, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in section 1(f)(3)(A)(ii). Because the specification of a 2007 base period to be used for computing an adjustment that is first made for 2024 appears to be an error that has been identified as the subject of future legislative correction, the IRS will calculate and apply the limitation in section 45E(f)(2)(C) by substituting ‘calendar year 2022’ for ‘calendar year 2007’ in section 45E(f)(2)(C)(iii). Using that substitution, the limitation for 2024 was [and for 2025 is] $105,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added).

(Some practitioners, especially those proposing services for a startup plan, want to know this adjustment now because it affects an employer’s tax credit, which might affect whether the employer sees service providers’ fees as affordable.) I guess the amount remains $105,000 for 2026.

I.R.C. § 72(t)(2)(K)(vii)(I) [eligible distribution to a domestic abuse victim]; $10,000; $100, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” {So, $10,500 or $10,600?}

I.R.C. § 219(b)(5)(C)(i)(II) [IRA contribution]; $5,000; $500, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.”

I.R.C. § 219(b)(5)(C)(iii)(II) [age 50 extension for IRA]; $1,000; $100, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2022’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.”

401(a)(39)(B)(ii)(II) [qualified long-term care distribution]; $2,500; $100, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.”

I.R.C. § 408(d)(8)(G)(i)(II) [qualified charitable distribution]; $100,000 / $50,000; $1,000, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2022’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.”

I.R.C. § 457(e)(11)(B)(ii) [length-of-service award]; $6,000; $500, rounded down; “In the case of taxable years beginning after December 31, 2017, the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016, and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”

Instead of § 415(d)’s July-August-September measures, Internal Revenue Code § 1(f)(4) provides: “For purposes of [I.R.C. § 1(f)](3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.”

On October 9, the Internal Revenue Service released 2025 amended amounts (following the July 4, 2025 budget-reconciliation Act) and tax-year 2026 inflation adjustments for 63 tax provisions. Rev. Proc. 2025-32 (not yet published in the Internal Revenue Bulletin), available at https://www.irs.gov/pub/irs-drop/rp-25-32.pdf.

Among others, 2026’s § 125(i) limit on salary reductions to a health flexible spending arrangement is $3,400, with a $680 maximum carryover.

In the Bureau of Labor Statistics website, a search on [“Consumer Price Index” AND August] calls up many earlier years September releases of August-close measures. https://data.bls.gov/search/query/results?q=%22Consumer%20Price%20Index%22%20AND%20August

BenefitsLink neighbors, with a little work we can figure any not-yet-released inflation adjustment.

Inflation.docx

Does $145,000 inflation-adjust to $150,000?

For the tax law that a higher-wage participant’s age-based catch-up deferrals must be Roth contributions, the unadjusted § 414(v)(7)(A) amount was $145,000.

For 2024, the first tax year § 414(v)(7) applied (even if not enforced), a participant was § 414(v)(7)-affected if her 2023 wages was more than $145,000.

Despite the IRS’s nonenforcement relief, the IRS published the § 414(v)(7)(A) amount for 2025: “The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan . . . for 2025 must be designated Roth contributions, remains $145,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added).

In that 2024 Notice, the IRS said “remains” sixteen times. Four of those uses were for amounts the IRS identified as “not subject to an annual cost-of-living adjustment[.]” I infer the other twelve uses were about measures for which the CPI-U changes were not wide enough to reach a rounding increment. Because the § 414(v)(7)(A) amount was among those twelve, I presume CPI-U changes from 2023Q3 to 2024Q3 were not enough to reach § 414(v)(7)(E)’s $5,000 rounding increment. Yet, with no adjustment and despite the nonenforcement relief, the IRS explained how to apply § 414(v)(7) for 2025, looking to the preceding year’s wages.

To adjust the § 414(v)(7)(A) amount to be used to apply § 414(v)(7) for 2026 deferrals:

The base period is July-August-September 2023. The adjustment period is July-August-September 2025. [For the statute and Treasury regulations, see https://benefitslink.com/boards/topic/80061-is-150000-the-limit-on-2025-fica-wages-before-a-participant-must-make-2026-age-based-catch-up-elective-deferrals-as-roth-contributions/.]

Consumer Price Index for All Urban Consumers (CPI-U)

2023 July-August-September: 305.691 + 307.026 + 307.789

2025 July-August-September: 323.048 + 323.976 + 324.800

Applying those changes, John Feldt’s math (generously given to us) puts the unrounded amount at $153,077, and the to-be-published amount as $150,000. https://benefitslink.com/boards/topic/80106-2026-cola-projection-of-dollar-limits/

An ambiguity (if any) results not from that math, but from interpreting Congress’s text.

The tax statute reads: “[I]n the case of an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000, [I.R.C. § 414(v)](1) shall apply only if any additional elective deferrals are designated Roth contributions (as defined in section 402A(c)(1)) made pursuant to an employee election.”

I read § 414(v)(7)(E)’s (the adjustment provision’s) reference to “the $145,000 amount in subparagraph (A)” as referring to § 414(v)(7)(A)’s reference to “wages . . . for the preceding calendar year[.]”

So, a participant will be § 414(v)(7)-affected for 2026 if her 2025 wages was more than $150,000.

BenefitsLink neighbors, do you read the law the way I read it?

Without waiting for an IRS release (which might be shutdown-delayed), many employers, plan administrators, and service providers want now the estimate—even if one explains it’s not yet official—to communicate with might-be affected participants and to help payroll managers prepare to identify 2026’s affected participants.

The CPI-U for July, August, September of 2025 are all published with values of 323.048, 323.976, and 324.800 respectively. Based on Tom Poje's spreadsheet, the dollar limits for 2026 will be:

NOT Official via any IRS pronouncement yet, of course:

Deferral limit: $24,500 (up from $23,500)

Catchup: $8,000 (up from $7,500) (Super-Catchup, age 60-63 = $11,250, (unchanged)

Compensation Limit: $360,000 (up from $350,000)

Annual Addition Limit: $72,000 (up from $70,000)

DB Limit: $290,000 (up from $280,000)

HCE: $160,000 (unchanged)

Key Employee: $235,000 (up from $230,000)

the 2026 HPI comp number should be $150,000 (up from $145,000) It's unclear but my guess is that means in 2027 we look at comp over $150,000 paid in 2026 for determining HPI's in 2027.

The official taxable wage base for 2026, announced by SSA, is $184,500 (up from $176,100).

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If a company paid a qualified plan expense directly (i.e., audit fees), are they able to be reimbursed from the plan's forfeiture money? I have had some clients that have done this with no problem, but one recordkeeper is telling a client it is not allowable. Thoughts?

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We have a 401k plan that started in 2023 and is large enough that it uses the automatic enrollment procedures.  Now this smaller company is considering purchasing a larger business that has their own 401k plan, that was created at least 20 years ago.

If the 2023 plan is merged into the larger plan, does the automatic enrollment feature have to carry over?  Is that considered a protected benefit?  

Or, if the smaller plan is terminated and the smaller plan's employees become eligible for the larger plan, and that larger plan does not have auto enroll?  Is that a problem?

Thank you

The forms for an employee-benefit plan’s annual report ask questions designed to check some points about whether the plan’s fiduciaries meet their responsibility.

Imagine a recordkeeper, third-party administrator, auditor, or other service provider now is thinking about a value-add for next year’s 5500 services.

The idea: List all Form 5500, including Schedules, queries that ask something for which a report’s reader could use the response to detect or suspect a possible breach of a fiduciary’s responsibility. (Not a tax-qualification failure, unless it also involves some other breach of an ERISA fiduciary responsibility.)

https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500

Isolating those Form 5500 queries in one list would aid a service provider’s review to spot responses that could lead to government or private enforcement.

Let’s crowd-source the list, with each BenefitsLink neighbor noting one query. Don’t repeat a query already noted. Quicker responders might note the obvious queries; later responders are challenged to find more subtle queries. If enough of us add one item, we’ll collect a complete list.

I volunteer to assemble the whole list, in a table format—with Form or Schedule, part, and line numbers; the query; and an explanation.