Tom Veal

A client whose plan is terminating needs to locate the beneficiaries of two deceased participants. One participant has a beneficiary designation on file; the other does not. The employer is located in Pennsylvania. Any recommendations for a commercial locator service?

While I agree with Artie M., let me note that a favorable IRS determination letter would not prevent participants from bringing an action under ERISA. The IRS has no authority over Title IV of ERISA, which includes rules governing reversions.

While I don't deal to any great extent with Davis-Bacon plans, the answer to this question is pretty clear. The prevailing wage requirement has two parts: cash wages and fringe benefits. The minimum for each is calculated separately. An employer may reduce the fringe benefit component by paying cash wages in excess of the minimum, but not vice versa. In HrdWrkr's case, the cash wage component is $30 an hour, and he receives $30 an hour in cash. Since there are no wages in excess of the minimum, the employer must provide fringe benefits with a cost of at least $14 an hour. Elective deferrals don't count toward the fringe benefit minimum. If they did, the cash wage would be less than $30. The same payment can't count toward both prevailing wage components. (Aside from that, three percent of $30 is quite a bit short of $14.) Hence, the fringe benefit component must be satisfied by matching or nonelective contributions. It's also true, as Artie M. points out, that paying workers at a higher rate when they don't make elective deferrals (what HrdWrkr believes is happening at his work place) would violate the contingent benefit rule and disqualify the cash or deferred arrangement.

The purpose of opt-out money is to encourage married employees to sign up for coverage under the plan of a different company where the employee's spouse can obtain family coverage. That purpose isn't served if both spouses work for the same company.

Eris was the Greek goddess of discord who inspired the Trojan War. Cornell Law School's Legal Information Institute has the complete U.S. Code, including ERISA. The only drawback is that it uses the Code section numbers rather than ERISA's.

Absolutely. The estate is the worst possible beneficiary, particularly of an account as large as this one. The heirs will have to wait until probate, which can be slow and expensive, is finished before getting their money and, as already noted, will not be able to defer taxation through rollovers.

Since the participant died before her required beginning date and assuming that the estate is the beneficiary (as is almost certain based on what you say), the account balance must be distributed by the end of the fifth calendar year following the year of the participant's death. If my understanding of TSP is correct, that requirement will definitely be satisfied, because distributions to non-spouse beneficiaries are made within 90 days after the participant's death; there is no option to postpone the distribution.

The IRS's historical position was that, with a few exceptions that wouldn't be pertinent here, discretionary plan amendments could not be effective for plan years before the year in which they were adopted. SECURE Act 2.0 partially reversed that policy. New IRC §401(b)(3) provides that an amendment that increases benefits may be effective as of any day in the preceding plan year, so long as adoption is no later than the extended due date, including extensions, of the employer's income tax return for the taxable year within which ends the plan year that contains the effective date. Since adding tips to the plan's definition of "compensation" can only increase benefits, it is unobjectionable. I agree with the previous comments about the practical difficulties of taking tips into account, except for tips that are reported on employees' W-2's.

The mandatory Roth catch-up provision is part of section 414(v). Failure to comply negates section 414(v)(1), which allows plans to include "regular" catch-up contributions. The special 403(b) catch-up is provided by section 402(g)(7)(A), an entirely separate rule. Therefore, the Roth requirement doesn't affect it.

An in-plan rollover to a Roth account is the simplest solution.

Agreed. What's more, a final return showing only the 2025 activity would be utterly uninformative. Opening balance: $0.00, Income received: $0.06, Distribution: $0.06, Ending balance: $0.00.

The prohibition against unfunded plans for rank-and-file employees comes from ERISA. A church plan that hasn't elected ERISA coverage is exempt from it.

Yes, that is correct. Assuming that the participant is past his required beginning date, a Roth RMD was required for 2023 but never again until after the participant's death.

That was the motive for the IRS's original restrictions on early NRA's, which it dropped, because it decided that the section 415 limitations were restrictive enough. It restored the restrictions, so far as I can discern, to thwart avoidance of whipsaw distributions in cash balance plans. Then Congress repealed the whipsaw, but the new regulations weren't dropped. They don't serve any real purpose now.

A cash balance plan is a defined benefit plan. Contributions to defined contribution plans don't affect DB plan contribution limits. I wonder, though, whether the description of the proposal is accurate; "reclassify the excess as after-tax contributions for this year so I can start my cash balance plan this year" doesn't in fact make sense.