I have a non-profit that has moved to an HSA plan for the first time.  They have about 8 employees, but only 3 are full-time and receive benefits.  Two of those 3 are a married couple that founded the organization, and the husband is an officer.  Now, the company is going to make employer contributions to the HSA.  So, the one employee is going to get an amount based on her single coverage.  The wife is getting a family plan contribution AND the husband is getting an individual amount.  This didn’t pass the smell test for me…doesn’t this violate comparability rules?  Or could the company allow employee pre-tax contributions through a cafeteria plan, and avoid the comparability rules?  I read you can only differentiate contributions in one of three ways 1. Full-time vs. part-time. 2. HDHP coverage class 3. HSA-eligible vs. noneligible.

The husband makes ~$115k and the wife makes ~$72k.

I know officers/owners of a company can receive different benefits than the employees, but does that work only when there are employee contributions offered/required through a cafeteria plan?  If they offered family contributions + a single contribution to any current (none) or future married employees, would that be OK?

Thanks!

a small independent pharmacy.  Is it a subject to Title IV or not?

Calendar year 401k plan has a discretionary annual match with a last day allocation condition and DDR waivers, does not have 1000 hour allocation. Client would like to change mid-year to a payroll based match - when we amend the plan to remove the last day and add payroll period (not sure if it is retroactive or prospective) but do we need to protect the DDR waiver group? Technically since last day has not been met nothing has accrued. Thanks!

We have a number of clients in FL that were affected this past summer by the hurricanes.  Following Hurricane Milton the IRS released a notice that extended prior relief to ALL of FL until May 1, 2025.

Recently, we filed 2 of our plans using the information from the notices as a special extension.  Both plans were penalized for late filing.

Since we have more to file, I am curious if anyone else has experienced this and what you have done to avoid those erroneous penalties?

This COLA chart was designed with smaller business owners in mind.

In addition to the indexed limits in Notice 2024-80, certain enhanced and additional limits are also shown for smaller businesses (under 26 employees) and larger employers (26 to 100 employees).  The footnotes are important and provide additional clarification. Please let me know if you have any suggestions for next year's chart! 

A rollover chart is contained on page 2.

Uploaded new file on February 26 to include the new bankruptcy exemption amount ($1,711,975) for IRAs (excluding most rollovers).

Hope this helps. Enjoy, ``Gary

COLA_RO_2025-ENHANCED.pdf

ahhhh..the ever complex compensation determination.

Plan Comp is W-2 Comp.

W-2 Pay includes the following:

Box 1:

• Regular Pay of $70,000 (excludes 401(k)
• Health Insurance Expense of $20,000
• Total Box 1 = $90,000

Box 3, 5:

• Regular Pay of $70,000
• 401(k) of $30,000
• Total Box 3,5 = $100,000

I believe then for Plan purposes, pay is $100,000, but was hoping to confirm that the $20,000 is not added back into that.

I enjoy reading posts on this terrific blog,, however, I find that I cannot get answers to questions that are of vital concern to me and many of my lawyer colleagues, and that are destined to result in issues for Plan Administrators as well.  The topic - the allocation of pension and retirement plans between divorcing couples via a QDRO or similar Court Order. In 2022 there were 673,989 divorces in the United States.  There are about 163,000 ERISA qualified pension and retirement plans in the US plus another 12,000 plans governed by other sections of Federal law (FERS, CSRS, Military, to name a few), plus State, County, Municipal plans that operate pursuant to local laws and regulations, and International plans. 

I have been trying since Secure 1.0 to determine how Secure 1.0 and now 2.0 will interface with defined contribution plans where historically the Alternate Payee's share has paid in the form of an immediate lump sum either: (i) tax free to the Alternate Payee's IRA or other qualified retirement plan, or, (ii) in the form of a taxable distribution directly to the Alternate Payee, but no 10% early withdrawal penalty.

The main question is whether or not the election by a Participant in a defined contribution plan of an annuitized payout pursuant to Secure 2.0 during the marriage can be superseded by a subsequent QDRO entered by a Court pursuant to State law directing a lump sum payout, and how will that payment be computed and paid?    

It is not clear to me whether or not a Participant can make such an election prior to retirement.  And if it is possible for the Participant to purchase an annuity during prior to retirement and during the marriage without notice to or consent by the spouse.  Timing of events is critical to the rights and responsibilities of the parties. Federal preemption is an every present sword of Damocles.  Plan documents and options vary and usually rule.  

I participate in quite a few other QDRO oriented blogs and nobody seems to have any answers.  Am I the only one that is worried about this?  Or is it just the OCD required to afflict all members of the Bar.    

Since pension and retirement benefits represent one of the two highest value assets owned by the parties (the equity in their home being the other), that is an important matter. In my world the tide is rapidly receding exposing the ocean floor, reefs and fish, and the birds and animals are heading for high ground.  Watch the 2012 movie "The Impossible".  Spoiler alert - DO NOT watch the trailer. It is a great movie.     

David Goldberg  

Has anyone heard what's going on with the opinion letters? There was an announcement in November that they'd be going out 'soon' but as far as I'm aware, no providers have received letters yet. There seems to have been no updates at all since then.

We are trying to firm up our restatement timeline for our clients, but we have no idea when our doc provider might have their system ready. The restatement 'window' supposedly opened 1/1, but with no document in sight, we're stuck.

Thanks!

Sue

Well, it's fair to say I haven't used entry age normal for quite some time (since PPA became effective).  However, I've been asked to assist with a governmental plan and have run into the following question.  I'm looking through my old William Aitken funding methods book.  However, in all the examples, it's showing service back to hire (including examples where hire/entry date precedes the plan inception date).  I'm trying to figure out the EAN funding span for the following example:

Age at hire: 25
Age at plan inception: 35
Participants can buyback 5 years of service: so back to age 30 for this example

So, would the EAN funding span go from:
a) age 25 (hire to retirement)
b) age 30 (benefit service date to retirement)
c) age 35 (plan inception to retirement)

The controlled group is made up of 3 partnerships.  One of the partnerships reports K1 loss.  Is the combined compensation of the other 2 entities reduced by the loss or is that entity ignored?   

What are the consequences if a Gov. 401(a) plan has only partial lump sum and installments as distribution options for terminated employees? I assume no ability to roll their account balance out of the plan? Thanks! 

Looking at a combo proposal.

DC has age 65 for NRA which I do not like as it should always have "and 5 YOP", my personal opinion.

Is it a BRF issue adding "and 5YOP" now?

According to the census provided, none of the employees would be affected by this change especially related vesting.

Thanks

I’m looking for opinions on using prototype documents versus pre-approved individually designed documents (IDPs). We recently switched from Relius to ftwilliam, and I’m considering proposing prototype documents for the next restatement.

Previously, we avoided prototype documents due to the approval letters and per-document fees. However, ftwilliam doesn’t require the letters in our name for their prototypes.

The higher ups here have preferred pre-approved IDPs to justify the restatement fee and formality of how they look, but I find prototypes easier for clients to understand.

I’d appreciate any feedback.

If an employer is a part of a control group, which benefit plans and test are pooled together for testing? I know 401(k) plans would be tested as one...what other benefit plans?

Our firm has used Relius for a very long time and we're... Unhappy, to say the least. I've heard a lot of good things here about Datair. Does anyone have any experience with both programs with any notable differences in your experience? Also, I really have no scale of how outdated and clunky Datair is, and Relius is incredibly outdated and hard to use. Would someone mind sending me just a screenshot or two of the general Datair interface (with any firm-specific details blanked out, obviously)? It'd be greatly appreciated. Thanks!

From § 411(a)(8)

For purposes of this section, the term "normal retirement age" means the earlier of-

(A) the time a plan participant attains normal retirement age under the plan, or

(B) the later of-

(i) the time a plan participant attains age 65, or

(ii) the 5th anniversary of the time a plan participant commenced participation in the plan.

____________________________________________________________________________________________________________________________________________________________________

The reference to the "5th anniversary" might seem ambiguous as to whether the accumulation or providing of five (5) years of vesting service/service otherwise might affect the situation. Guidance would seem to suggest the anniversary applies unaffected by the providing of a particular metric of years of service, vesting or otherwise.

To consult extensive guidance on this situation: 

URL: https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-7#p-1.411(a)-7(b)(1)(ii)

Citation: 26 CFR § 1.411(a)-7(b)(1)(ii)

For purposes of paragraph (b)(1)(ii)(B) of this section, participation commences on the first day of the first year in which the participant commenced his participation in the plan, except that years which may be disregarded under section 410(a)(5)(D) may be disregarded in determining when participation commenced.

https://uscode.house.gov/view.xhtml?req=(title:26 section:410 edition:prelim) OR (granuleid:USC-prelim-title26-section410)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_a_5_D

[T]he number of consecutive 1-year breaks in service within such period equals or exceeds the greater of-

(I) 5, or

(II) the aggregate number of years of service before such period.

(ii) Years of service not taken into account
If any years of service are not required to be taken into account by reason of a period of breaks in service to which clause (i) applies, such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service.

_______________________________________________________________________________________________________________________________________________________________________

Revenue Ruling 84-69

Internal Revenue Service

1984-1 C.B. 125

26 CFR 1.411(a)-1: Minimum vesting stand­ards; general rules.

 
Qualification; effect of plan lan­guage on the vested accrued benefit at normal retirement age. A plan that limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule does not satisfy the requirements of section 411 (a) of the Code.

Rev. Rul. 84-69

ISSUE

Does the retirement plan described below satisfy the minimum vesting provisions of section 411 of the Inter­nal Revenue Code?

FACTS

An employer maintains a noncon­tributory retirement plan which in­cludes a vesting schedule under which an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit. The vesting schedule satisfies the re­quirements of the section 411 (a)(2)(A) of the Code. In addition, the plan provides that an employee's right to the normal retirement benefit under the plan is nonforfeitable upon attainment of the normal retirement age (which the plan defines as age 65). Other plan language defines the term normal retirement benefit as the por­tion of the employee's accrued bene­fit determined under the plan's vest­ing schedule to be nonforfeitable. As a result, employees hired after age 55 who retire at normal retirement age are not entitled to any retirement benefit.

LAW AND ANALYSIS

Section 401(a)(7) of the Code pro­vides that a plan shall not be a quali­fied plan under section 401(a) unless it satisfies the requirements of section 411.

Section 411(a)(2)(A), (B), and (C) of the Code provide vesting sched­ules, one of which must be satisfied in order to satisfy the requirements of section 411. In addition, the introduc­tory language of section 411(a) re­quires that an employee's right to a normal retirement benefit be nonfor­feitable upon attainment of normal retirement age.

Section 411(a)(9) of the Code de­fines the term normal retirement benefit as the greater of the early re­tirement benefit or the benefit under the plan commencing at normal re­tirement age.

Section 411(a)(7) of the Code de­fines accrued benefit in general as (1) in the case of a defined benefit plan, the benefit determined under the plan expressed as an annual benefit com­mencing at normal retirement age or (2) in the case of any other plan, the balance of the employee's account.

For purposes of section 411 of the Code, the term normal retirement benefit means the individual's ac­crued benefit, determined without re­gard to whether such benefit is vested. Thus, for a plan to satisfy the requirements of section 411, an em­ployee participating in the plan at normal retirement age must have a nonforfeitable right to 100 percent of the employee's accrued benefit ir­respective of whether some portion of such accrued benefit would otherwise be forfeitable under the plan's vesting schedule. See Caterpillar Tractor Co. v. Commissioner , 72 T.C. 1088 (1979).

HOLDING

Because the plan in this case limits an employee's right to nonforfeitable benefits to amounts in which the em­ployee already has a nonforfeitable interest pursuant to the plan's vesting schedule, the plan does not satisfy the requirements of section 411 (a) of the Code.

_____________________________________________________________________________________________________________________________________________________________________________________

The Tax Court has reached the same conclusion in interpreting a substantially identical counterpart provision in the Internal Revenue Code, 26 U.S.C. § 411(a) (1976). See Trustees of the Taxicab Industry Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 651; Board of Trustees of New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 597; Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088 (1979)

https://www.courtlistener.com/opinion/409644/clara-duchow-individually-and-as-administratrix-of-the-estate-of-herman/authorities/

https://www.upi.com/Archives/1983/05/02/The-Supreme-Court-refused-Monday-to-take-up-a/6200420696000/

This is a stupid situation so a stupid question.

One lifer, always had under 250k so never filed 5500. DC plan.

Terminated the plan, all assets distributed by 12/15/2024. On 12/31/24, 6 cents hit the account and then rolled out on 1/2/2025.

So, what to do here, any suggestions? Is there a deminimis for ignoring the 6 cents i.e. just do a first and final return for 2024?

or

Do a first and final return for 2025?

or

something else?

Cannot get my head around this as this is the first time ever happened.

A participant terminates employment and is automatically cashed out into an IRA by the recordkeeper.    The individual was less than 100% vested, so forfeited his unvested funds.    The individual is then re-employed and wants to repay the rollover in order to have his forfeited funds reinstated.    He rolls over most (but not all) of the distributed balance back into the Plan, but there is a catch.  Some of funds which were automatically distributed from the plan were Roth, but the plan does not accept rollovers from Roth IRAs.    So while the participant did not fully repay the distribution, he did repay all that was technically allowed to be repaid back into the plan.   

I'm leaning towards the position of reinstating the participant's forfeited amount since they did transfer back all that was allowed by the plan.   Any other thoughts?

Thanks.

https://www.cnn.com/2025/02/18/tech/internet-archives-deleted-websites-wayback-machine/index.html?utm_source=business_ribbon

I had never heard of the wayback machine until Lois Baker mentioned it in a response to someone back on 1/29 and this morning I see this article. Nothing earth-shattering, just found it interesting (eerie?) that something that has been around for a while, but which I never heard of before, now pops up to me twice in three weeks. Odd coincidence or message from the universe LOL?