Peter Gulia

Consider some appropriate document, preferably in keeping with Plan A’s provisions about participating employers, to state that Employer B no longer is a participating employer after {date}. Consider the next Form 5500 report and what boxes to uncheck and what items to remove or change so that as of the relevant period’s close Plan A no longer is a multiple-employer plan (absent any other participating employer treated as not the same employer as A). This is not advice to anyone.

While BenefitsLink neighbors can describe more detail, EBSA’s, IRS’s, and PBGC’s guidance about relief following from a declared disaster generally has recognized not only an employer’s or administrator’s, but also a service provider’s, place of business in a covered disaster area. About David Rigby’s third question: Has anyone seen an executive agency expressly grant relief when not the organization but a particular worker is in a disaster area? Might the question never have been raised because the agencies administer the relief by following a filer’s self-certifying statement that a relief applies?

Thanks. Unlike a plan’s administrator, a plan’s sponsor may make plan-design choices without an ERISA fiduciary’s responsibility. About forfeitures, the fiduciary-breach claims assert that a plan’s administrator had discretion and so ought to have loyally and prudently considered which way of applying forfeitures would be advantageous for the plan’s participants and their beneficiaries. If a fiduciary lacks discretion, its duty is to obey “the documents and instruments governing the plan[.]” ERISA § 404(a)(1)(D). In my experience, too often a plan’s governing documents grant the plan’s administrator some discretions an administrator might prefer not to be burdened by.

When I’m stuck with doing meatball surgery on IRS-preapproved documents, I tack on many risk-management provisions, including an exclusive-forum provision. Some clients like the Federal district and its division in which the plan’s administrator has its principal office. Some specify the place that’s most convenient or most effective for the law firm the plan’s administrator or another employer-associated fiduciary would turn to for ERISA litigation. Some specify a district in a circuit with the most favorable set of precedents on questions of law likely to matter (in the client’s particular circumstances) in defending against a fiduciary-breach claim, or in shifting or sharing a liability or expense.

Has anyone seen a complaint survive a motion to dismiss when the plan’s documents specified that forfeiture amounts are applied first against contributions and the documents provide no discretion to vary the plan-specified order for applying forfeitures?

Artie M, thank you for confirming my fear about that text. What’s sad is that the recordkeeper sets up this text for a plan under which the recordkeeper (and every affiliate) has no responsibility. And the State so chosen has no connection to the plan’s sponsor, employer, administrator, trustee, or any named fiduciary. Yet, a participant, beneficiary, alternate payee, or other claimant might argue that the State’s law somehow has some effect regarding the plan.

Does the plan’s administrator (whether by itself, or with a recordkeeper’s or third-party administrator’s services) make, keep, and maintain records that show for each participant whether her most recent deferral election was an affirmative election or resulted from an implied-assent default? If so, such an administrator might omit sending an ERISA § 514(e)(3)(A) notice to those participants whose deferral is supported by an affirmative election. But some administrators lack useful (computer system) records to distinguish whether a participant’s deferral results from an affirmative or default election. And even when the records are maintained and useful, some administrators find that the work of sorting participants would be more expensive or otherwise burdensome than sending a notice to all participants, including those for whom it might not be needed. Different plans with different needs and circumstances might call for different procedures. The stakes can be serious. An employer’s violation of an unpreempted State wage-payment law exposes the employer not only to civil consequences, including extra damages, interest, fines, and other penalties but also, under some States’ laws, criminal punishment. For those and other reasons, an employer might not risk an uncertainty or ambiguity, and might send a yearly ERISA § 514(e)(3)(A) notice to all participants. This is not advice to anyone.

A recordkeeper’s set of IRS-preapproved documents states the user’s plan is governed, to the extent ERISA does not supersede, by “the laws of the state in which [the recordkeeper] is located[.]” The recordkeeper is organized under Delaware law and its registered office is in Delaware. But the principal office is in another State. What does “is located” mean? Is it Delaware? Or is it the other State?

Consider a general rule that a § 415(b) or § 415(c) limit counts the plans of one employer. With employer defined using § 414(b)-(c)-(m)-(n)-(o) and other concepts to collect what counts as one employer. Check that the nongovernmental private business is distinct from all governmental employers. If the judge also participates under any public school’s or charitable organization’s § 403(b) plan, apply 26 C.F.R. § 1.415(f)-1(f)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.415(f)-1#p-1.415(f)-1(f)(2). BenefitsLink neighbors, are there other tax-qualification conditions Dougsbpc should think about?

Brian Gilmore and other BenefitsLink neighbors who work with health plans, we'd welcome your addition to our learning: Does a group health plan accept or refuse payments for COBRA continuation coverage from a person other than the continuee?

Another route: Evaluate ways to order the retirement plans' limitation years, the employer's tax-accounting year, and the individual's tax year to discern whether that might get helpful outcomes.

David Rigby, thank you for your kind words. To my list of process-oriented law and fact questions a plan’s administrator might consider (even if one assumes Brian Gilmore’s observation sets a likely administration), I’ll add a suggestion: If a request from the participant or from the spouse or former spouse even arguably might be a claim, the plan’s administrator might consider following ERISA § 503 and the plan’s claims procedure, with careful attention to who bears a burden of producing evidence of a relevant fact or status (including, for example, the existence or end of a marriage), and with careful communication about a decision, especially one adverse to the claimant. In my experience (although I concede my experience is with retirement plans, not health plans), inviting a frustrated or disappointed person to invoke a process designed to allow someone to be heard and to channel decision-making often helps manage the frustration or disappointment. Some people recognize that one has no useful evidence to present. Others submit something and, even if still disappointed after an adverse decision, feel heard. (A few won’t be helped, no matter how skillful and tactful the administrator is.) And it’s much easier to defend, if need be, a plan administrator’s decision if due process was had. As ever, this is not advice to anyone.

Even when a TPA provides services it says are nondiscretionary with no tax or other legal advice, some TPAs prefer not to be associated, even with nothing more than computer processing, with a plan administrator’s Form 5500 report the TPA feels states inappropriate information. Other TPAs prefer to follow the plan administrator’s instruction, deliberately saying nothing about whether it’s right or wrong (even if it’s unambiguously wrong). Some TPAs look for a context-sensitive ground between those points. How a TPA sorts itself in those themes might involve questions on which a TPA wants its lawyer’s advice. Consider too that advice to a TPA about how to handle these situations might vary with an understanding of the advisee’s business goals, customer relationships, other business relationships, regulatory relationships, operating circumstances, legal and practical liability exposures, reputation aspects, and other facts and assumptions.

Thank you for that context explanation. If you are the successor TPA, you might want your lawyer’s advice about ways to protect yourself.

Here are some questions a plan’s administrator and its lawyer might consider to discern the situation: Does the health plan allow a participant to choose coverage for one’s spouse. (Not all do, but your description about “remain covered” suggests the plan allows coverage for a participant’s spouse.) If the plan allows coverage for a spouse, who decides whether to elect or omit that coverage? The participant? Even if there might be a court’s order that commands the participant to do (or refrain from doing) something, is there any court order that commands the plan’s administrator? Do the health plan’s governing documents specify who is or isn’t a spouse? Does a plan provision do anything more than refer to the status of spouse under public law? (For example, a plan might define the status more narrowly than by reference to public law alone.) Is the plan ERISA-governed? Or is it a non-ERISA church plan? Or a governmental plan? Does the health benefit involve a health insurance contract (not counting a stop-loss insurance contract)? If so, does the health insurance contract define who is or isn’t a spouse? Does the court that ordered the divorce have or lack personal jurisdiction over the plan’s administrator? Does the court that ordered the divorce have or lack personal jurisdiction over the health insurer (if any)? Has the participant taken any action to remove the participant’s spouse or former spouse from the coverage? If the participant did something, does it fit the plan’s provisions against mid-year changes, including provisions designed to follow the Internal Revenue Code § 125? Has the plan’s administrator received the domestic-relations court’s order granting the divorce? If what the administrator received is not an original or a court-certified copy, has the administrator done something to confirm the true document? Does the court order’s text state anything about when it is or becomes effective? If relevant (it might not be), what does the State’s law provide about the effect of an appealed-from court order? Does the appeal assert that the conditions for granting a divorce were not met? Or is the appeal only about economic or other matters (and not about whether the conditions for a divorce were met)? Even if the plan’s administrator is confident about all the facts and law suggested by these and other questions, it still might be smart to lawyer-up. Also, a plan’s administrator might want its lawyer’s advice about proper steps to avoid or defeat a State court’s jurisdiction. Or, if the plan’s administrator is served for a State court’s proceeding, to remove any action against the administrator to a Federal court, preferably the particular court, venue, and forum specified by the plan’s exclusive-forum provision.

Nic Pospiech’s question shows why a plan’s administrator ought to read, carefully, a third-party administrator’s draft of a Form 5500 report. Unless the service provider has discretionary authority and in writing accepted an allocation of fiduciary responsibility for the reporting, the plan’s administrator is responsible. (I’m not saying that different reporting would have been proper, only that the administrator lost an opportunity to consider, initially, the reporting.)

You’re right that politicians’ misleading expressions were deplorable.

austin3515, your second point shows why we should read the statute. (c) QUALIFIED OVERTIME COMPENSATION.— (1) IN GENERAL.—For purposes of this section, the term ‘qualified overtime compensation’ means overtime compensation paid to an individual required under section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate (as used in such section) at which such individual is employed. (2) EXCLUSIONS.—Such term shall not include any qualified tip (as defined in section 224(d)). Internal Revenue Code of 1986 § 225(c), added by An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14, Pub. L. No. 119-21 § 70202(a) (July 4, 2025), 139 Stat. 72, 174 (2025), available at https://www.govinfo.gov/content/pkg/PLAW-119publ21/pdf/PLAW-119publ21.pdf [pdf page 104 of 331].

I don’t yet know anything about how the Treasury department or its Internal Revenue Service might interpret Internal Revenue Code § 224 (Qualified tips) or § 225 (Qualified overtime compensation). I.R.C. (26 U.S.C.) § 224 http://uscode.house.gov/view.xhtml?req=(title:26%20section:224%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section224)&f=treesort&edition=prelim&num=0&jumpTo=true I.R.C. (26 U.S.C.) § 225 http://uscode.house.gov/view.xhtml?req=(title:26%20section:225%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section225)&f=treesort&edition=prelim&num=0&jumpTo=true Neither provides an exclusion from any measure of wages. Neither provides an exclusion from gross income. Each provides a deduction. But I see the possibility of a difficulty. If the IRS might publish a form, instruction, other guidance, or an interpretation that could result in a plan provision some plan sponsors don’t intend, perhaps someone might persuade the Secretary of the Treasury (who now acts as the Commissioner of Internal Revenue) to treat that effect as a “disqualifying provision that [i]s integral to a qualification requirement of the Internal Revenue Code that has been changed”, and so allows a remedial-amendment period. 26 C.F.R. § 1.401(b)-1(b)(3)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(b)-1#p-1.401(b)-1(b)(3)(ii). This is not advice to anyone.

A three-judge panel of the United States Court of Appeals for the Fifth Circuit holds [2-1] that the U.S. Constitution’s Quorum Clause does not require physical presence. The appeals panel’s majority reasons: The enrolled-bill rule does not preclude reaching the Quorum Clause challenge. That “Each House may determine the Rules of its Proceedings” does not negate an Article III court’s duty to decide a question of law about the meaning of the Quorum Clause. The Quorum Clause [art. I, § 5, cl. 1] does not require physical presence. Texas v. Bondi, No. 24-10386 (5th Cir. Aug. 15, 2025), available at https://www.ca5.uscourts.gov/opinions/pub/24/24-10386-CV0.pdf and https://www.govinfo.gov/content/pkg/USCOURTS-ca5-24-10386/pdf/USCOURTS-ca5-24-10386-0.pdf. If nothing intervenes, the mandate is scheduled to issue on October 6, 2025. I’ve not yet read anything about whether any litigant will seek rehearing en banc. Nor guessing about whether nine of the circuit’s 17 active judges would vote to hear the case. If the panel’s majority opinion becomes a published opinion and becomes a precedent of the Fifth Circuit (affecting courts for the nine districts of Louisiana, Mississippi, and Texas), it would be no more than persuasive authority for other appeals courts and their districts.

Recognize that the employee or service provider might have interests and preferences that might not be wholly aligned with those of the employer or service recipient. Each should want separate counsel. Also, one might wonder about how “executive” a select-group participant is if she neglects to collect on her contract right to a six-figure amount. This is not advice to anyone.

Whether a member’s K-1 from a limited-liability company reports income items, loss items, or some of each kind doesn’t necessarily tell you the fair-market value of the member’s LLC interests. If the LLC is taxed as a partnership, remember that different members of a limited-liability company might have different interests. One member might have only a guaranteed-payment right. Another member might have an income interest but no loss interest. Yet another member might bear loss interests, including those not borne by other members. Even if the whole company has a year’s loss or several years’ losses, that by itself does not mean that a particular member’s LLC interests lack value, or even that capital interests lack value. If an asset is not regularly traded on an exchange, doesn’t a third-party administrator rely on what the plan’s administrator says is the value?

An implied-assent default election (with an opt-out) makes most sense after the § 414(v)(7)-affected employee (not an unaffected self-employed individual) has not responded to the plan administrator’s repeated efforts to get the participant’s affirmative election. (Some of us are planning for workforces with hundreds or even thousands of § 414(v)(7)-affected employees, which inevitably will have some nonresponses. A smaller employer might have fewer employees to reach. And remember, a partner or other self-employed individual is unaffected.) Some employers might not apply a default election until the without-catch-up deferral limit is exhausted. For some employees, that might not happen until August or September 2026. Imagine an age 60-63 employee wants 2026 deferrals of $36,500 (2026 est.), is paid on a 24 pay cycle (the 15th and the last day of each month), and instructs $1,520.83 per pay. The first 16 pays would be within the without-catch-up limit, so the first $24,500 (2026 est.) won’t be exhausted until the 17th pay—September 15. Yet, for some employees, a deferral exceeding $24,500 (2026 est.) could happen as soon as January.

Los Angeles Dep’t of Water & Power v. Manhart, 435 U. S. 702, 708, 709-711 (Apr. 25, 1978) (“Even a true generalization about the class is an insufficient reason for disqualifying an individual to whom the generalization does not apply.”) (An employer violated Title VII by requiring its female employees to make larger contributions to a pension fund than male employees to obtain the same monthly benefits upon retirement.) (Congress decided that classifications based on sex, like those based on national origin or race, are unlawful.), https://tile.loc.gov/storage-services/service/ll/usrep/usrep435/usrep435702/usrep435702.pdf. Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, 463 U.S. 1073, 1081, 1084 (July 6, 1983) (“[T]he classification of employees on the basis of sex is no more permissible at the pay-out stage of a retirement plan than at the pay-in stage.”) (“The use of sex-segregated actuarial tables to calculate retirement benefits violates Title VII whether or not the tables reflect an accurate prediction of the longevity of women as a class[.]”), https://tile.loc.gov/storage-services/service/ll/usrep/usrep463/usrep4631073/usrep4631073.pdf.

But how, if at all, does an employer tax-report (for any purpose) a cash tip the employer never saw and the employee never reported to her employer? Some employers estimate unreported-to-the-employer cash tips by extrapolating from records of bank-card tips, but some might not. And there might be some kinds of employers and employees for whom cash tips are the only kind. (Some businesses don’t accept bank-card payment.) As always, read carefully the plan’s governing documents for each definition for each measure of compensation. Consider also that the new Federal law is not an exclusion from gross income; it is a deduction from income in an individual’s tax return. The deduction does not affect any Federal tax law measure of wages, not even Federal income tax wages.