Peter Gulia

If the plan covered a nonowner employee or former employee during some part of the to-be-reported-on year, was the plan ERISA-governed (for at least that part of the year)? ERISA § 3(1)-(3), 29 U.S.C. § 1002(1)-(3); 29 C.F.R. § 2510.3-3 https://www.ecfr.gov/current/title-29/section-2510.3-3 If so, wouldn’t the plan’s administrator continue reporting on Form 5500-SF, at least until reporting the first year that has no coverage of any nonowner (at any time during the to-be-reported-on year)?

About the originating question—May an employer’s group health plan require an examination as an eligibility condition for covering an employee’s spouse?: Is ambiguous law a bad thing, or a good thing? BenefitsLink neighbors, what are your observations?

In my experience, an independent qualified public accountant might close the work-papers file and release the IQPA's report on the plan's financial statements after the IQPA has received a comfort letter from a recognized practitioner who confirms that she has been engaged to see through the correction of the errors and is confident that the corrections will be sufficient to preserve tax-qualified status and restore ERISA breaches.

Artie M, I do concur with your observation that there is a tax issue; and I cite sources so the inquirer can help the plan's administrator look up enough information to describe the issue to the plan's administrator.

A State's wage-payment law isn't preempted if it includes criminal provisions, as some do.

A foreign trust is a trust other than a United States person trust. I.R.C. § 7701(a)(31)(B); 26 C.F.R. § 301.7701-7(a)(2). A United States person trust is “any trust if a court within the United States is able to exercise primary supervision over the administration of the trust, AND one or more United States persons [has or] have the authority to control all substantial decisions of the trust.” I.R.C. § 7701(a)(30)(E); 26 C.F.R. § 301.7701-7(a)(1). Even when the trustee is a United States person, a retirement plan’s trust is a foreign trust if the trustee is a directed trustee and a non-U.S. administrator or other directing person decides plan distributions or other “substantial decisions.” 26 C.F.R. § 301.7701-7(d)(1)(ii). In addition, if a non-U.S. person has the power to remove, add, or replace the trustee, that power means the non-U.S. person controls substantial decisions of the trust. 26 C.F.R. § 301.7701-7(d)(1)(ii)(H). If a nongrantor trust becomes a foreign trust, that “conversion” is treated as a sale of the trust’s assets from a U.S. person to a foreign trust. This deemed sale means that the difference between the fair market value of the trust’s property and the property’s adjusted basis is income subject to federal income tax. I.R.C. § 684. It has been many years since I last looked at this; so, check all the citations and read for yourself. The plan’s administrator should get its lawyer’s advice.

About the hyperlinked article and the court decision it explains, neither says that anyone other than the participant did anything wrong.

Did the acquirer buy the shares or capital interests of the company? Or did the acquirer buy assets from the company? Would a non-US human have authority to act for the US corporation, limited-liability company, or partnership that serves as the retirement plan’s administrator? The Form 5500 Instructions include this: “If the plan administrator is an entity, the electronic signature must be in the name of a person authorized to sign on behalf of the plan administrator.” (Or, if the plan’s administrator authorizes its service provider to file, that “manual” signature must be made by someone who has authority to act for the plan’s administrator.) That someone signs under penalties of perjury suggests the signer ought to have acted prudently to form a sincere belief that the Form 5500 report “is true, correct, and complete.” Would a non-US human not previously involved know enough about the plan and its administration to form that belief? This is not advice to anyone.

While recognizing Lou S.’s observation’s put-up-or-shut-up wisdom, consider this too: Unless the adviser is admitted to law practice, recognize that a promise might be legally unenforceable. While the details vary, a State’s law of contracts might not enforce a promise that calls the promisor to commit a crime—the unlawful practice of law. Likewise, an insurance or investment adviser’s errors-and-omissions insurance won’t respond to a claim that the insured gave faulty legal advice. One or more exclusions would remove that from the potential scope of the e&o coverage. This is not advice to anyone.

Although many retirement plans’ administrators often rely, practically, on a third-party administrator or other service provider, deciding how to present a Form 5500 report is the plan administrator’s (typically, the employer’s) decision.

Here’s what’s in the plan documents of a particular client I’m thinking about: “For purposes of this Plan, disability will mean (select one) [of four options]: Option 3: The Participant is eligible to receive disability benefits under the Social Security Act, as determined by the Social Security Administration.” Considering that this might be a shorthand that refers to a fuller provision in the basic plan document, I looked there. Nothing. (The plan sponsor hopes the plan is designed so the plan’s administrator need not face a discretionary decision about whether a participant is disabled.) A possible reading of the quoted definition of disability is that whatever the plan might provide because of a participant’s disability is not provided unless the claimant presents to the plan’s administrator the Social Security Administration’s disability determination. And that this applies even if the participant’s physical or mental condition is such that, were she a citizen with a sufficient work history, she would get the Social Security Act’s disability benefit. But some might worry that denying a benefit because the participant is not a citizen (and is not a qualified alien) might be contrary to one or more Federal civil-rights law, including those that preclude an employer’s discrimination regarding alienage or national origin.

Many adoption-agreement forms for a set of IRS-preapproved documents present a choice of ways to define a disability. Often, one of those ways is to follow the Social Security Administration’s determination that the person is eligible to receive Social Security Disability Insurance benefits under the Social Security Act of 1935. Suppose the plan sponsor ticked that box. But what if there would be no Social Security determination because the participant is an alien, but not a qualified alien, or is a citizen or qualified alien but lacks sufficient Social Security work credits? Does a basic plan document provide a fail-safe provision to determine a disability if there would be no Social Security determination? And what if no document states any such provision: May a plan’s administrator interpret the plan to treat a participant as not disabled, absent a Social Security determination, no matter how bad the individual’s physical or mental condition?

As some comment letters and the Treasury’s preamble explained, some plans’ administrators prefer to have no responsibility to look beyond a Form W-2 wage report. In some circumstances, one W-2 might include wages from employers other than the employer through which the participant is a participant under the plan to be administered. Beyond practical administration in applying a plan’s I.R.C. § 414(v)(7) provision, I’m unaware of a reason a plan’s sponsor or administrator would have for depriving a participant of an otherwise available opportunity to elect non-Roth deferrals.

Even if the plan’s administrator reports the plan’s financial statements with accrual accounting: To determine whether an individual participant “ha[d] [an] account balance[]” as the instructions for Form 5500 line 6g and other elements describe that construct, might it make sense to interpret the instruction considering what the participant would have seen had she looked up her individual account in the recordkeeper’s system on the relevant day? Many individual-account retirement plans are administered using systems and services that have no facility for recording an accrual in an individual’s account. Even if a service provider’s system counts in an individual’s account the individual’s share in the plan’s contribution receivable, does that by itself mean the plan’s administrator adopted accrual accounting for individuals’ accounts? This is not advice to anyone.

Even if the amount might be small, the trust ought to return the mistaken amount with no less net interest or time value of money than the trust obtained or, if more, the amount required under an applicable State wage-payment law. Even if no Federal or State statute specifies that the return is with interest (and nothing in the plan’s or its trust’s governing documents specifies how to deal with mistaken amounts), the law of trusts, agency, or other fiduciary relationships requires a fiduciary that has received money or other property that does not belong to the fiduciary (whether personally, or for the fiduciary relation) to return the property. The property interests to be returned might include not only the mistaken amount but also the time value of money. In correcting the error, consider which person—the trustee or the employer—bears the expenses of the return and other aspects of the correction. This is not advice to anyone.

If participant contributions were paid into a trust, shouldn’t the participant get the return of the mistaken amount with no less net interest or time value of money than the trust obtained? But might this be a small amount?

Without remarking on what is or isn’t typical or what a service recipient might demand or tolerate (or what a service provider might insist on or negotiate): To evaluate an indemnity provision or a limitation-of-liability provision, distinguish whether the provision applies: between the 3(16) fiduciary and the plan; between the 3(16) fiduciary and the plan’s administrator (personally, not as the plan’s fiduciary); between the 3(16) fiduciary and the employer. Each of those can result in different law about what’s void or otherwise legally ineffective, and what might be legally enforceable. If the plan is governed by ERISA’s fiduciary-responsibility provisions, consider ERISA § 410 [29 U.S.C. § 1110] https://uscode.house.gov/view.xhtml?req=(title:29%20section:1110%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1110)&f=treesort&edition=prelim&num=0&jumpTo=true. A plan may exonerate or reimburse a fiduciary for its prudently incurred expenses if the fiduciary did not breach its responsibility. The plan (or a use of the plan’s assets) can’t relieve a fiduciary, including a 3(16) administrator if it is a fiduciary, from its responsibility or liability to the plan. ERISA § 410(a) does not preclude a person other than the plan or its trust from indemnifying a plan fiduciary, as long as that other person uses personal resources rather than the plan’s assets. A court might not enforce an indemnity provision if it has the effect of setting up an incentive for a fiduciary not to perform the fiduciary’s responsibility. Consider Artie M’s suggestion that a service recipient ought to expect a service provider to stand behind its services. That’s so even if the service provider is a mere contractor, and ought to be especially so if the service provider also is a fiduciary. Over the past 41 years, I’ve done all sides of these negotiations. And with many layers of bargaining power. Remember, an indemnity obligation is only as good as the financial capacity and honesty of the obligor. This is not advice to anyone.

Is the group health plan coverage provided by a health insurance contract? Or is the coverage provided under an employer's "self-funded" arrangement? Were participant contributions paid into a trust? Or were participant contributions a set-off from the employer's obligation to pay wages?

Am I right in guessing that the delinquent-filer relief is completely computerized, and does not depend on a Labor department employee being available to process a submission?

If an author of a book partly AI-generated copied, even temporarily for the generative software, others’ works, one wonders about copyright infringement. Those who understand authors’ and publishers’ efforts might not support a book that infringes or otherwise harms an author’s economic, or even moral, rights.

What do the documents governing the plan provide about how to apply forfeitures? (That a plan could allow a use of forfeitures without tax-disqualifying the plan does not by itself mean that the plan does allow such a use of forfeitures.) Does the plan document specify the order in which forfeitures are applied? (Some plan sponsors prefer that the plan’s administrator lack discretion. If there is no choice, one cannot have made it disloyally.) Does the plan document grant the administrator discretion about applying forfeitures? To the extent (if any) that forfeitures may be applied to plan-administration expenses, is paying the market-value adjustment a proper and reasonable expense of administering the plan? If the plan’s administrator treats a payment of the market-value adjustment as a restorative payment [see above], does this suggest the administrator believes it has a reasonable risk of liability for its breach of a fiduciary duty? If so, does the plan’s administrator have a self-interest in a decision about how to apply forfeitures? If so, must or should the plan’s administrator engage an independent decisionmaker or get independent advice? This is not advice to anyone.

It’s sad that Congress enacts a law calling for this PTIN charge but Congress enacts no appropriation that enables the Treasury department to find the many tax preparers who, despite collecting fees to prepare tax returns that require a PTIN, omit this and prepare fraudulent returns.

Consider also what scope of work your service agreement provides, and whether it’s wise or unwise to do something beyond that scope.

Thanks. With your explanation, I see how some plans’ administrators and service providers might prefer not to separate communications from operations. And how some might prefer using cautious amounts until the IRS-announced amounts become available.

David Rigby, thank you for describing a different outlook. About your idea that a statute provides what it provides, and that a provision might not be conditioned on whether an executive agency publishes or omits some further act, there is at least some room for a range of interpretations. Even the now-overruled Chevron doctrine never required deferring to an agency’s interpretation of an unambiguous statute. Now, the Supreme Court’s Loper Bright Enterprises decision holds that a court may consider but does not defer to an executive agency’s rule that interprets a statute. But Loper Bright Enterprises left some room for what the parlance calls a legislative rule—one that implements Congress’s delegation to the agency. Further, reasoning minds differ about how to interpret or apply a statute that includes Congress’s direction that an executive agency do a specified thing. Some of the Internal Revenue Code’s many provisions about inflation adjustments, even if otherwise unambiguous, call for “the Secretary” to set the adjustment. For example: The Secretary shall adjust annually— (A) the $160,000 amount in subsection (b)(1)(A), (B) in the case of a participant who is separated from service, the amount taken into account under subsection (b)(1)(B), and (C) the $40,000 amount in subsection (c)(1)(A), for increases in the cost-of-living in accordance with regulations prescribed by the Secretary. Internal Revenue Code of 1986 (26 U.S.C.) § 415(d)(1) http://uscode.house.gov/view.xhtml?req=(title:26%20section:415%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section415)&f=treesort&edition=prelim&num=0&jumpTo=true; 26 C.F.R. § 1.415(d)-1 https://www.ecfr.gov/current/title-26/section-1.415(d)-1. Neither that paragraph of I.R.C. § 415(d) nor Treasury’s implementing rule specifies what amount applies if the Commissioner of the Internal Revenue does not publish in the Internal Revenue Bulletin an adjustment. Although I.R.C. § 415(d)(2)-(4) specifies the measures and formula, reasoning minds might differ about whether some act of the Treasury department or its Internal Revenue Service is or isn’t needed to set an adjustment. ****** About a fiduciary’s duty of communication, courts’ interpretations that a fiduciary should communicate information a participant needs to enable her to make informed choices suggest that in some circumstances a prudent fiduciary might prefer to communicate reasonably anticipated or estimated information, with an explanation that it is not yet determined. ****** At least some of the adjustments for 2026 seem obvious. For example, I don’t see how the § 414(v)(7) amount could be less than $150,000 (adjusted from $145,000). ****** Neither of 2018’s shutdowns—one that began January 20, and another that began December 22—resulted in furloughs during October, when ordinarily BLS assembles September inflation measures and IRS determines inflation adjustments. ****** BenefitsLink neighbors, do you have different or further observations?