Peter Gulia

And Denise Appleby has tireless experience in helping people get the most that can be gotten from the recordkeepers, insurers, and custodians.

How about the amount that the State’s law counts as income? Or the amount that results from following the State’s law, regulations, guidance, or withholding instructions? Either of those might differ from either of the amounts you describe. And could vary for each State’s law. Under (at least) Alabama’s, New Jersey’s, and Pennsylvania’s law, withholding might vary regarding the portion of a distribution that (if not excluded as old-age retirement income) is treated as a return of previously taxed income. Under Pennsylvania’s law, old-age retirement income is excluded from income. Under New York’s law, some kinds of retirement income might be excluded from income, up to a limited amount. This is not advice to anyone. If my response is a winner, please send my cookie to the Bakers.

A firm’s mix of capital-interest partners, income partners, retired partners, counsel, senior associates, beginner associates, and assistants might affect: which workers seem likely to desire an opportunity to make employee (after-tax) contributions; how student debt affects a worker’s capacity to make contributions; how the expenses of QMACs are spread—for example: to capital-interest partners only? or to an income partner to the extent, wholly or partly, an associate or assistant in her income-measured practice gets a QMAC?; how much or how little leverage affects partners’ capital and profits interests; how the firm’s obligations to retired partners affects the firm’s financial capabilities; how a retirement plan’s design and features affects workers’ perceptions about the firm.

Now that service providers use electronic-signature regimes, have plan sponsors invented new explanations about why a signature was not received before year-turn?

What amount is the law firm’s line between the lower 80% and the top-paid 20%. Might the lower 80% include many or some with seven-figure compensation? Might the lower 80% include many more with compensation between $360,000 and $1 million? What is the firm’s mix of capital-interest partners, income partners, counsel, senior associates, beginner associates, and assistants?

Might everyone with a tie to R, A, or A’s broker-dealer or investment-adviser firm have recused and an experienced fiduciary independent of R, A, and the platform have decided, with no influence from anyone, to continue A’s services and approve the compensation arrangement? See 29 C.F.R. § 2550.408b-2(e)(2) https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-2#p-2550.408b-2(e)(2). Had the independent fiduciary confirmed that A’s broker-dealer or investment-adviser firm received full and fair disclosure of all of A’s outside business activities, including A’s indirect stake in R and that R’s retirement plan is a customer or client? Had the independent fiduciary confirmed that A’s broker-dealer or investment-adviser firm approved all dealings? Had the independent fiduciary confirmed that the platform received full and fair disclosure of A’s indirect stake in R, recognizing that R’s retirement plan is the platform’s service recipient and a source of A’s indirect compensation? Had the independent fiduciary confirmed that the platform approved all dealings? Have the plan’s administrator, its third-party administrator or other Form 5500 preparer, and the administrator’s independent qualified public accountant resolved how the Form 5500 report and the plan’s financial statements will report the transactions, including, even if exempt, related-party transactions? Does every fiduciary, including those who recused, have an absence of knowledge that the independent fiduciary breached its responsibility? This is not advice to anyone.

mjbais1489, thank you for your helpful observations. I see how they could be worries with many employers. For the particular employer I’m thinking about, the only worker who submits information to the payroll service provider or to the retirement plan’s recordkeeper is the same human-resources worker who manages the retirement plan’s design and administration. And she is adept at catching both service providers’ errors. I’d explain that the time of the human-resources worker in correcting the service providers’ errors might be a meaningful burden. For the particular workforce, uses of an after-tax contribution, even restricted to nonhighly-compensated employees, would not be few. For this plan, eligibility begins when the employment begins. Participation for elective deferrals hovers between 99 and 100%, even for new hires. There is no meeting to explain the retirement plan. The plan has no adviser. (I advise the plan sponsor on nonfiduciary points, and advise the sponsor/administrator by writing the SPD.) austin3515, your point is something I’d usually advise, but is not a worry for the workforce that caused me to think about whether it could be feasible to allow employee contributions. But John Feldt’s note ends my thinking about reconsidering a plan-design choice made many years ago. Even one unnecessary weak number in the ACP test could attract terrible trouble.

Is there another reason why a plan’s sponsor might prefer not to allow nonhighly-compensated employees to make an employee (after-tax) contribution?

If a plan provides that only nonhighly-compensated employees may make an employee (after-tax) contribution, does that meet coverage and nondiscrimination conditions? (Of the employer I’m thinking about, many nonhighly-compensated employees have modified adjusted gross income, or even one’s compensation alone, that precludes the individual from Roth IRA contributions.) Am I right that qualified-plan conditions don’t restrain discrimination against highly-compensated employees? If my guess is right, is there another reason (beyond § 401(a)(17)’s constraint and § 415(c) limits) why a plan’s sponsor might prefer not to allow employee contributions?

It’s not necessarily Internal Revenue Code § 403(b) that sets up unusual provisions; sometimes, it’s a TIAA, CREF, or other contract that sets up provisions many other insurance, investment, or service providers don’t typically use. Or an interaction between an employer’s plan and one or more TIAA-CREF contracts. Don’t rely on the summary plan description; there are many reasons an SPD might not accurately describe the plan. Don’t rely on what TIAA’s service people say about beneficiary defaults; there are many ways they might be mistaken (usually, innocently). But circumstances might it make it impractical for you to read the plan and contracts. If a beneficiary is the participant’s estate, some providers might help an estate’s personal representative arrange to treat that estate’s ultimate taker as if she were the plan’s beneficiary or at least a distributee. To do so, the plan’s administrator, each insurer or custodian, the recordkeeper, the paying agent, and other service providers get releases, satisfactions, and indemnities. To arrange this requires that the personal representative’s advocate have a practical ability to get the attention of the service providers’ lawyer who has enough legal knowledge, time and willingness to listen, and discretionary authority to commit the service providers, and to ask for the plan’s administrator’s approval (or make the service providers’ risk decision to proceed without the administrator’s approval). Also, the indemnitees might want their indemnities from people with enough money and other property to pay at least the indemnitees’ defense expenses. Do you have an in with TIAA? Is the difference between a rollover and receiving money from the decedent’s estate enough to support an effort? This is not advice to anyone.

My note above mistakenly suggests one might undo a before-the-month provision. I apologize; § 457(b)(4)(B) continues the before-the-month provision for a plan of a nongovernmental employer. About minimum-distribution provisions, all or some changes might be unnecessary to the extent that the written plan states a provision by reference to Internal Revenue Code sections. If that doesn’t obviate a need to consider a plan amendment about a required beginning date’s applicable age, whoever drafts a plan’s amendment or restatement might ask an employer whether it prefers to allow a delay up to age 73/75 or to compel a distribution based on some earlier age (for example, age 70½, or even the first day of “the calendar year in which the participant attains age 70½” [I.R.C. § 457(d)(1)(A)(i)]) or an earlier occurrence (for example, severance from employment). Likewise, a plan sponsor might prefer to restrict a distribution to a period shorter than ten years. Internal Revenue Code § 457(b)(5) refers to § 457(d)(2), which refers to § 401(a)(9). Accord 26 C.F.R. § 1.457-6(d) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(d). I see nothing there that precludes delaying a required beginning date until what follows from “[t]he calendar year in which the employee retires from employment with the employer maintaining the plan.” 26 C.F.R. § 1.401(a)(9)-2(b)(1)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(1)(ii).

It’s now 20 years since I last had an inside-the-service-provider responsibility about scheduling plan amendments. So, other BenefitsLink neighbors might help you with current thinking about business interests in organizing the work. Consider plan sponsors’ preferences. Although some might like delay, some might prefer to avoid being time-pressured or feeling burdened in a cycle or season of the plan sponsor’s business. If some of your clients use a lawyer’s review to supplement yours, consider a courtesy of allowing time before the last months of a year. Many lawyers, including employee-benefits lawyers, face increasing work compressions as a year’s close nears. If a December 31 is a relevant due date, time in November and December can be heavily pressured, or even no longer available. If some of your clients neglect to respond promptly to what you send, consider how many reminders and warnings you want to build into your work process.

QDROphile, thank you. My question presumes an adviser has advised her advisee to do the right thing. And that the adviser is not a preparer of, or otherwise associated with, a tax return or other act that supports an incorrect thing. Others’ observations?

The underlining is not mine.

Q1 Beyond whatever tax law might provide about remedial-amendment periods: Nothing in SECURE 2019 or SECURE 2022 (or the IRS’s guidance about law other than ERISA’s title I) provides relief from ERISA’s commands that an employee-benefit plan “shall be established and maintained pursuant to a written instrument” and “specify the basis on which payments are made to and from the plan.” ERISA § 402(a)(1), 402(b)(4), 29 U.S.C. § 1102(a)(1), 1102(b)(4). Nothing in SECURE 2019 or SECURE 2022 excuses a fiduciary from her responsibility to administer an employee-benefit plan “in accordance with the documents and instruments governing the plan[.]” ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). One way some plan sponsors and plan administrators hope to follow those commands is to keep records of writings (including emails and other computer systems’ messages) by which the plan sponsor told its recordkeeper, third-party administrator, or other service provider which provisions to implement, or a service provider told its service recipient which provisions it treats as deemed adopted if the service recipient does not instruct otherwise. Some might argue that those writings, even if informal, are “written” and are “documents . . . governing the plan[.]” I’m unaware of a court decision that supports or rejects such an interpretation. About whether a deemed Roth-contribution election must be in “the” plan documents now or need not be until December 31, 2026, some might read the Treasury department’s recent rule to interpret § 401(k) and § 414(v)(7) as allowing a delay until December 31, 2026. Even if that’s a fitting interpretation for tax law, the Secretary of the Treasury lacks authority regarding ERISA §§ 402-404. Some might argue that service instructions, if written, are “documents . . . governing the plan[.]” Q2 About something that might be an ERISA command but that neither ERISA nor the Internal Revenue Code commands or expects as a plan provision, a plan sponsor might prefer to omit a plan-document provision (unless something is needed to negate or revise a plan-document provision that’s inconsistent with the ERISA command). But consider whether the plan’s administrator wants a revision of a recordkeeper’s, third-party administrator’s, or other service provider’s agreement. My observation about either question is not advice to anyone.

How confident are you that W was or became the beneficiary of H’s IRA? How confident are you that W did not take § 401(a)(9)-required distributions from other IRAs? (For IRAs, a minimum may be taken from any of the holder’s or beneficiary’s IRAs; it need not be taken from a particular IRA.) If W failed to take one or more years’ § 401(a)(9)-required distributions, does W’s personal representative want to file Form 5329 [https://www.irs.gov/pub/irs-pdf/f5329.pdf] and pay each additional tax? For which years, if any, does W’s personal representative have authority to file that tax return? Might “moved into an ‘estate account’” be a colloquial description of something that happened in the IRA custodian’s records but without creating a non-IRA account?

Lou S., thank you for mentioning professional-conduct standards. About the “alphabet soup” associations’ codes, does any call a member to do something beyond a duty to provide correct advice? If a client receives and considers the professional’s advice but decides to do what the professional believes is contrary to law, does the professional have any further responsibility?

Even if there is no doubt that the signature on the plan documents is true, was a plan ever established? If one assumes a plan was established, and if the plan sponsor’s written act provides the plan’s discontinuation, termination, and final distribution, would anything preclude delivering to the one participant a certificate of the distributee’s rights under the plan? Might the plan’s administrator or trustee in good faith find that the value of that distribution is $0.00? Might a Form 1099-R tax-information report state the amount distributed as $0.00? If a plan was established, always was a one-participant plan, and always had plan assets no more than $250,000, might a Form 5500 report and return have been excused for all years other than the plan-termination year? Might the plan’s administrator file a zeroes Form 5500-EZ return for the year that includes the distribution of the participant’s rights? After considering the expense of those or other steps, might the plan’s sponsor or administrator reconsider one’s analysis about whether a plan was established? If a third-party administrator believes the plan sponsor’s analysis is incorrect, might that not matter because the TPA might not be associated with any tax return that includes an incorrect position? (And the TPA won’t have provided incorrect advice.) This is not advice to anyone.

Consider: Did the corporation decide some of its employee’s compensation to be paid in the last four months of 2025 based on the now-employee’s before-incorporation work as an organizer? When does the employer pay its employee? If a corporation’s only employee also is the corporation’s shareholder, might the employer pay wages as infrequently as once a year? “No proration required for participation for less than a full plan year. Notwithstanding paragraph (b)(3)(iii)(A) of this section, a plan is not treated as using compensation for less than 12 months for a plan year merely because the plan formula provides that the allocation or accrual for each employee is based on compensation for the portion of the plan year during which the employee is a participant in the plan. In addition, no proration is required merely because an employee is covered under a plan for less than a full plan year, provided that allocations or benefit accruals are otherwise determined using compensation for a period of at least 12 months. Finally, notwithstanding paragraph (b)(3)(iii)(A) of this section, no proration is required merely because the amount of elective contributions (within the meaning of § 1.401(k)-6, matching contributions (within the meaning of § 1.401(m)-5, or employee contributions (within the meaning of § 1.401(m)-5 that is contributed for each pay period during a plan year is determined separately using compensation for that pay period.” 26 C.F.R. § 1.401(a)(17)-1(b)(3)(iii)(B) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(17)-1#p-1.401(a)(17)-1(b)(3)(iii)(B). This is not advice to anyone.

26 C.F.R. § 1.411(a)-8 https://www.ecfr.gov/current/title-26/section-1.411(a)-8 26 C.F.R. § 1.411(a)-8T https://www.ecfr.gov/current/title-26/section-1.411(a)-8T

Now that Brenda Wren resolved an inquiry, just an aside: Even when ERISA’s title I required a plan’s administrator to file a summary plan description and a summary of material modifications with the Labor department, many administrators did not. Congress ended those filing requirements, effective August 5, 1997. Yet: “If a plan participant or beneficiary wishes a more recent copy of the SPD or SMM, the [U.S. Labor department] will request a copy from the plan administrator.” That would return a request to the plan’s administrator, and it might no longer have (or might never have had) a requested summary plan description.

With a “self-funded” (really, unfunded) health plan, a period’s expenses can be less than or more than the employer budgeted. When there is an amount that looks like a “surplus”, it’s tempting to think an employer might use it to provide employees an increased benefit. But remember, when expenses for already promised benefits are more than budgeted, the employer is obligated to meet those expenses.

A reminder that a service provider might have purposes and interests not perfectly aligned with a plan’s sponsor’s or administrator’s purposes and interests.

Is it feasible for austin3515 to write the self-certification form? Could you do that task in an hour or less? Would your client pay your fee? For an IRS explanation of what a certification must state, see Q&A B-2 in Notice 2024-63. https://www.irs.gov/pub/irs-drop/n-24-63.pdf This is not advice to anyone.

Is the § 129(d)(8) condition measured on the whole of employees of all business organizations that together are one § 414(b)-(c)-(m)-(n)-(o) employer. In counting who is a highly-compensated employee (for § 129 or § 128), does one count a worker who is not an employee (because she is a partner or other self-employed individual)? In counting “employees who are not highly compensated”, does one count a worker who is not an employee (because she is a partner or other self-employed individual)?