Peter Gulia

Others might suggest a conference. For a book, whether print or electronic, that covers needed information (without wasting your attention on stuff you’re unlikely to need), Brian Pinheiro’s Employee Stock Ownership Plan Answer Book (Wolters Kluwer) is useful.

I meant only that a recordkeeper might not have performed its services on amounts that didn’t pass through the recordkeeper’s processing. If so, the recordkeeper might not have cross-checked what was or wasn’t done by another service provider. And reading into your description of the situation, I imagined that the plan’s sponsor/administrator might not have skillfully or completely controlled the services the plan needs. If the sponsor/administrator had a mistaken assumption about tax-reporting life insurance, what else might they have missed? Who tested whether the life insurance met the incidental limits? Did anyone test whether prohibited-transaction exemptions were met? Might a predecessor service provider have been less capable than AlbanyConsultant? If a third-party administrator or the plan’s administrator provides the services needed but not done by the recordkeeper, that might meet the plan’s needs.

If you prepare or assemble more than a few Form 5500 reports consider A. Paul Protos’s 5500 Preparer’s Manual.

“Robert Choi, the leader of tax-exempt and government entities division, . . . , also [was] put on [administrative] leave.” Erin Slowey, Three Top IRS Leaders Put on Leave in Second Wave of Removals, Bloomberg Daily Tax Report (Aug. 16, 2025, 12:42 PM EDT).

My guess was based on imagining that the § 401(a)(9) statute’s and rule’s reference to § 416 might bring in the whole of § 416, including § 416(g)(4)(C)(i) about the determination date being the last day of the preceding year. Internal Revenue Code § 401(a)(9)(C)(ii)(I) refers to the whole section, not a particular subsection, paragraph, subparagraph, clause, or subclause. Not § 416(i)(1)(A)(ii), and not § 416(i)(1)(B)(i). Also, I’m imagining the text-interpretation aids that every phrase ought to bear meaning, and that a different usage suggests a difference in meaning. Internal Revenue Code § 401(a)(9)(C)(ii)(I) speaks “of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains the applicable age[.]” Internal Revenue Code § 414(q)(2) provides: “An employee shall be treated as a 5-percent owner for any year if at any time during such year such employee was a 5-percent owner (as defined in section 416(i)(1)) of the employer.” If to determine a minimum-distribution 5%-owner Congress meant “at any time during” the applicable-age year, an interpreter might presume Congress would have said so; they knew how, because they did it in § 414(q). And if the look at ownership is not “at any time during” the applicable-age year, it must be at some date—for example, the first day of the year, the last day of the year, or, by bringing in § 416’s determination date, the last day of the preceding year. Except for selectively reading the statute’s and rule’s texts mentioned above, I’ve not yet done research on this. I’ll wait until nearing the end of 2026. The partner’s capital and profits interests could change before 2027, or even before the last day of 2026. Thank you for helping me think about this.

Here’s how ERISA sections 402, 403, and 405 work. ERISA § 403(a)’s starting point is that a plan’s trustee has responsibility to invest the trust’s assets. But that subsection has two exceptions: ERISA § 403(a)(1): A plan may provide that a trustee follows the proper directions of a named fiduciary that is not a trustee. Often, that directing fiduciary is the plan’s administrator. If the plan provides participant-directed investment, the administrator might specify the plan’s investment alternatives, designated and nondesignated. Also, the directions a directed trustee receives might include a direction to follow participants’, beneficiaries’, and alternate payees’ directions within the investment alternatives. ERISA § 403(a)(2): All or some investment authority might be delegated to a § 3(38) investment manager. Some publishers of IRS-preapproved documents include a spot for naming an Investment Manager or an “Investment Fiduciary”. A plan’s administrator or a discretionary trustee might appoint [ERISA § 402(c)(3)] an investment manager to decide—with no approval from an employer, administrator, or trustee—the plan’s menu of designated investment alternatives. You might be surprised by how many small plans do this. It’s not a surprise that an IRS-preapproved document sets up the plan’s administrator as the default investment fiduciary. Many documents are designed so a trustee is a directed trustee, with fiduciary discretion narrowed to no more than deciding whether a direction is improper. ERISA § 402 http://uscode.house.gov/view.xhtml?hl=false&edition=prelim&req=granuleid%3AUSC-prelim-title29-section1102&f=treesort&num=0&saved=%7CKHRpdGxlOjI5IHNlY3Rpb246MTEwMiBlZGl0aW9uOnByZWxpbSkgT1IgKGdyYW51bGVpZDpVU0MtcHJlbGltLXRpdGxlMjktc2VjdGlvbjExMDIp%7CdHJlZXNvcnQ%3D%7C%7C0%7Cfalse%7Cprelim. ERISA § 403 http://uscode.house.gov/view.xhtml?hl=false&edition=prelim&req=granuleid%3AUSC-prelim-title29-section1103&f=treesort&num=0&saved=%7CKHRpdGxlOjI5IHNlY3Rpb246MTEwMiBlZGl0aW9uOnByZWxpbSkgT1IgKGdyYW51bGVpZDpVU0MtcHJlbGltLXRpdGxlMjktc2VjdGlvbjExMDIp%7CdHJlZXNvcnQ%3D%7C%7C0%7Cfalse%7Cprelim This is not advice to anyone.

CuseFan, thank you. The minimum-distribution rule (quoted above) says “who is a 5-percent owner (as defined in section 416) with respect to the [described] year[.]” That’s why I imagine that the measurement date might be one that would be used to determine the key employees for a § 416 top-heavy test. If a plan’s administrator tests whether a plan is top-heavy for 2027, is December 31, 2026 the date for counting a participant’s ownership to determine whether she is a key employee in the 2027 test?

Paul I, thanks. Assume the paymaster is ready to switch a nonresponsive participant's paycheck deferrals from non-Roth to Roth. Imagine that won't need to happen until 2026's summer. Is a notice given in December 2025 good enough? Or might the IRS assert that the participant lacks an "effective opportunity" because by summer she's forgotten the notice she received last December?

About a higher-wage participant’s age-based catch-up, what is an effective opportunity to elect against Roth contributions? For Internal Revenue Code provisions about a higher-wage participant who must make age-based catch-up deferrals as Roth contribution (or get no such catch-up), a proposed rule lets a plan provide a deemed election for Roth contributions. Among other conditions, the plan must provide a § 414(v)(7)-affected participant an “effective opportunity” to make a different election. About what is or isn’t an effective opportunity, the proposed rule points to 26 C.F.R. § 1.401(k)-1(e)(2)(ii): “Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances, including the adequacy of notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections.” For the audience we seek to reach (age 49 or older, 2025 FICA wages > $150,000) and the choice the election asks, what facts do you think makes an effective opportunity? For a small plan with not many § 414(v)(7)-affected participants, one might give this notice with lots of “touch” and without needing a heavily programmed plan-administration regime. But imagine a plan with at least a thousand § 414(v)(7)-affected participants, who specified all deferrals as non-Roth contributions, and didn’t respond before 2026 to 2025’s communications imploring them to make revised deferral elections. When would you send such a participant a notice of the employer/administrator’s intent to treat a non-Roth election as a Roth election (absent an election for no catch-up deferral)? In setting a time for a notice, must it relate to when within the year the particular participant would be switched from non-Roth to Roth? Or is a notice given in December 2025 good enough? Recognize that for some a needed switch from non-Roth to Roth might be as late as summer, and for some it might be as soon as January. What makes sense?

Consider also that some tips paid directly by a customer, not processed through the employer’s payroll, and not W-2-reported by the employer might not count under a particular plan’s definition of compensation for one or more relevant purposes. Also, if a plan sponsor, thinking about changes regarding tips or overtime, wants to amend a plan, the recent budget-reconciliation act does not set a statute-specific remedial-amendment period.

For minimum distribution, what date’s ownership counts to determine a 5%-owner? Here’s my not-entirely hypothetical: A partnership is the plan sponsor and only participating employer of an individual-account § 401(a)-(k) retirement plan. The plan year is the calendar year. The partnership’s tax year is the calendar year. Every partner is on the calendar year for one’s tax year. The partnership has no mandatory retirement age, nor even a presumed ordinary retirement age. A working partner will reach age 73 during 2027 (and expects to continue working into her 80s). “For purposes of section 401(a)(9), a 5-percent owner is an employee [including a deemed employee] who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains the applicable age.” 26 C.F.R. § 1.401(a)(9)-2(b)(3)(ii) (emphasis added) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(3)(ii). Does this mean the measurement date is December 31, 2026? Under the partnership agreement, a partner’s capital interest can change any day. For example, a partner might get distributions from capital, or even might withdraw capital. A partner’s profits interest, if measured as a percentage of the partnership’s profit, can change because the partner’s interest is measured by several factors, including (for a relevant year or other period) the partner’s revenue generation to her practice, expenses specifically allocated to her practice, origination credits for having introduced a client to another partner’s practice, and a proportionate share of the partnership’s general overhead allocated to all practices. The plan’s administrator wants to get the measurement date right so it neither fails to meet § 401(a)(9) nor unnecessarily (and improperly) directs an involuntary distribution the plan does not provide. BenefitsLink neighbors, how’s my guess?

That life insurance is paid for from participant contributions rather than from a matching or nonelective contribution does not by itself nonapply the tax law about a “PS 58 cost” attributed for the life insurance death benefit. Internal Revenue Code of 1986 (26 U.S.C.) § 72(m)(3): Life insurance contracts (A) This paragraph shall apply to any life insurance contract— (i) purchased as a part of a plan described in section 403(a), or (ii) purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) if the proceeds of such contract are payable directly or indirectly to a participant in such trust or to a beneficiary of such participant. (B) Any contribution to a plan described in subparagraph (A)(i) or a trust described in subparagraph (A)(ii) which is allowed as a deduction under section 404, and any income of a trust described in subparagraph (A)(ii), which is determined in accordance with regulations prescribed by the Secretary to have been applied to purchase the life insurance protection under a contract described in subparagraph (A), is includible in the gross income of the participant for the taxable year when so applied. (C) In the case of the death of an individual insured under a contract described in subparagraph (A), an amount equal to the cash surrender value of the contract immediately before the death of the insured shall be treated as a payment under such plan or a distribution by such trust, and the excess of the amount payable by reason of the death of the insured over such cash surrender value shall not be includible in gross income under this section and shall be treated as provided in section 101. http://uscode.house.gov/view.xhtml?req=(title:26%20section:72%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section72)&f=treesort&edition=prelim&num=0&jumpTo=true 26 C.F.R. § 1.72-16(b) https://www.ecfr.gov/current/title-26/part-1/section-1.72-16#p-1.72-16(b). 26 C.F.R. § 1.402(a)-1(a)(3) https://www.ecfr.gov/current/title-26/part-1/section-1.402(a)-1#p-1.402(a)-1(a)(3). That someone mentioned premium payments sent directly to the insurance company instead of to the recordkeeper suggests possibilities for violations beyond the one you ask about. Consider reevaluating whether, or on what fee, and with what scope of engagement, you want the prospective client. This is not advice to anyone.

“If the Beneficiary does not predecease the Participant, but dies prior to the distribution of the death benefit, the death benefit will be paid to the Beneficiary’s ‘designated beneficiary’ (or if there is no ‘designated Beneficiary,’ to the Beneficiary’s estate).” That’s from a document a big recordkeeper provides its customer. (The copyright notice does not name the text’s author.) While that might be a possible beneficiary-ordering regime (and might appear in many service providers’ forms for plan documents), it’s not the only beneficiary-ordering regime, even before looking for a default beneficiary. A plan’s document might not state a beneficiary’s-beneficiary provision, and might provide something else—for example, exhausting all participant-named beneficiary designations, primary and contingent, before turning to anything else. Unless an adviser already knows what its particular advisee’s plan document provides, consider many BenefitsLink neighbors’ reminder: RTFD—Read The Fabulous Document.

Before other steps, check all records available to, and facts known to, the plan’s administrator to look for whether there is a surviving spouse. Look for the participant’s designation of a contingent beneficiary. Then, RTFD—Read The Fabulous Documents. Mainstream plan documents typically set an ordering regime to determine a beneficiary or beneficiaries when no participant-named beneficiary is alive. Don’t imagine or guess what’s provided. These might vary with choices made by an investment provider, service provider, document provider, or even a document user. It might even vary within one provider by different service platforms’ documents or different vintages of documents. After finding, if not the identity of the default beneficiary, at least the relationship that makes one a default beneficiary, RTFD (and any provisions assumed under a remedial-amendment regime) to consider carefully whether a minimum distribution is required. If possibly relevant regarding the plan’s provisions, consider whether the default beneficiary is or might be an eligible designated beneficiary. If the plan does not require a minimum distribution, consider whether an involuntary distribution is mandated, permitted, or precluded. Don’t assume a rollover; not every distribution is eligible for a rollover. If, after carefully following the plan’s default-beneficiary ordering, a default beneficiary is a decedent’s estate, consider whether the plan’s administrator would approve or deny a claim from a claimant who shows not a court’s appointment as a personal representative but rather a small-estate affidavit. This is not advice to anyone. Further, seeing how much effort this might be to dispose a < $1,000 account, should the plan sponsor consider writing more efficiency into the plan’s provisions?

To adjust the § 414(v)(7)(A) amount, its base period is “the calendar quarter beginning July 1, 2023[.]” https://benefitslink.com/boards/topic/80061-is-150000-the-limit-on-2025-fica-wages-before-a-participant-must-make-2026-age-based-catch-up-elective-deferrals-as-roth-contributions/ In July, I estimated that, for 2025 FICA wages to drive how § 414(v)(7) applies for 2026, the $145,000 will become $150,000. John Feldt, how’s my logic and my math?

If the plan is ERISA-governed and the employer/administrator seeks ERISA’s supersedure of a State’s wage-payment law, that likely requires a notice beyond merely having delivered a less-often-than-yearly summary plan description. ERISA § 514(e)(3)(A) requires that the plan’s administrator deliver the notice “within a reasonable period before [each] plan year[.]” 29 U.S.C. § 1144(e)(3)(A) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1144%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1144)&f=treesort&edition=prelim&num=0&jumpTo=true. Likewise, if the plan sponsor or a participating employer wants the arrangement treated as an eligible automatic contribution arrangement, tax law requires a notice before each plan year. I.R.C. (26 U.S.C.) § 414(w)(4) (“before each plan year”); accord 26 C.F.R. § 1.414(w)-1(b)(3)(i) “for a plan year[.]” http://uscode.house.gov/view.xhtml?req=(title:26%20section:414%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section414)&f=treesort&edition=prelim&num=0&jumpTo=true; https://www.ecfr.gov/current/title-26/part-1/section-1.414(w)-1#p-1.414(w)-1(b)(3)(i). Although I might suggest delivering a revised summary plan description before every year, many plans’ administrator don’t use that means of communication. This is not advice to anyone.

Paul I, you’re right to mention that Circular 230 rule. Here’s another outlook. Even when 31 C.F.R. § 10.37 applies or someone volunteers to follow it, the rule refers only to written advice. Further, even if a practitioner applies the rule to oral communications, one might distinguish between advice and information. Here’s § 10.37(a)(2)(vi): “The practitioner must—Not, in evaluating a Federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit.” Some advisers think it’s possible to provide advice or an evaluation about how law applies if all issues and facts are detected and fully pursued AND provide information, especially if one’s client asks, about whether an issue or failure might not be detected, or about whether an executive agency might compromise, or not pursue, enforcement. There is a difference between advising a client to do something, and informing a client about what seems likely or unlikely to happen if one’s client does a thing it describes. Many of us might prefer that persons obey law, even civil tax law. But I don’t always presume that it’s my right as an adviser to cause my advisee to obey law if that’s not the choice the principal would make for itself. I work to enhance my client’s autonomy by adding to its information and decision-making capabilities. (My clients welcome my judgment, but many don’t want to wholly abdicate the principal’s decision-making.) While I might not volunteer information about nondetection and nonenforcement, if a client asks I won’t give a dishonest answer. I might decline to answer. Or if I answer, I might not say any more than I know as fact. Yet, there also can be situations in which providing candid information about nondetection or nonenforcement might help a decision-maker think through legitimate choices with competing values. I’m mindful that some consider that providing information about nondetection or nonenforcement might in context be tantamount to telling one’s client to disobey law. About that, I show my summertime professional-conduct students the exchange of Yale Law Journal articles arguing different outlooks about that point. And other professional-conduct literature about whether an adviser has a “duty to the system.” I don’t see it as my personal responsibility in my work as an adviser to save the government from the government’s choices about law enforcement. (I might have some responsibilities as a citizen; but that’s distinct from my special-purpose role as an adviser.) If an advisee’s behavior is dispiriting, an adviser might consider one’s professional prerogative to withdraw one’s availability.

That these experienced advisers are not in entire concord suggests there are a few interpretations that might meet tax law’s standard for a “substantial authority” position—one that need not be flagged in a tax return. Does a TPA or other consultant write up an explanation of each of those interpretations, to let one’s client choose its risks and opportunities?

As you help the employer think about those and other questions, consider this: If there is a year for which expenses are more than what had been estimated and paid in as the “level-funded” amount, is the employer obligated to pay whatever is needed to meet all claims and other expenses? If the employer bears a bad experience, should it take a good experience? This is not advice to anyone.

Some clients make sincere efforts to administer a retirement plan correctly. Some do right things the right way for no more reason than they feel good about doing so. But some clients ask intelligent questions about how much enforcement an executive agency does. Some intuit that an agency lacks resources even to spot a potential failure. While many lawyers and other advisers don’t volunteer information about nondetection and nonenforcement, when a client asks one must give an honest answer. Even declining to describe how much effort an agency puts on an issue practically reveals the answer—not much, often none. If the tides at EBSA and IRS don’t change soon, the next generation of retirement-plans practitioners will miss experiences that could have been learning opportunities.

From a recent (Aug. 8, 2025, 5:38 PM EDT) Bloomberg Tax article: “Bessent will step in as House Republicans look to cut the [Internal Revenue Service’s] funding by more than 20% to $9.5 billion, an even bigger cut than the White House proposal.”

The Internal Revenue Service has had six people lead the agency this year. Now, Billy Long is out as IRS commissioner, with the Secretary of the Treasury serving as acting commissioner. The deputy commissioner position is vacant. The chief of staff role is vacant. More than half the officer positions are vacant or “(acting)”. What do we imagine about the pace of new examinations in 2025?

When a one-employer group has about 60 distinct plans, is it feasible to use (after data entry) a commercially-developed software product, or must the service provider do the work by custom-crafting?

When Congress provides a remedial-amendment period regarding a statute’s changes, a variation regarding collective bargaining protects an agreement made before the statute’s enactment. The idea is that an employer and the labor union ought not be required to open negotiations until the next time negotiations would regularly open nearing the end of the collective-bargaining agreement’s term. A premise of labor-management relations is that neither side unilaterally changes provisions about retirement benefits; it’s a subject for their bargaining. If the term of a CBA made before the statute’s enactment expired (or would have expired but for an extension or renewal), the employer and the union had an opportunity to discuss what retirement plan provisions they would make (or not) in response to the statute’s changes. This is not advice to anyone.

Paul I and CuseFan, thank you for your gracious help. Following Paul I’s observation that a user of IRS-preapproved documents could vary from them so much that the IRS would find that the user may not rely on the IRS’s opinion letter: Is the consequence only that the IRS would evaluate whether the written plan, including the user’s additions and variations, states provisions that meet § 401(a)’s tax-qualification conditions? Or is there some other consequence that results from having an individually-designed plan?