Peter Gulia

For each previously written provision the plan sponsor now considers incorrect or unintended, is the to-be-amended provision more or less favorable to a participant than what the documents governing the plan now state?

You’ve spotted a real issue that calls for attention to § 409A.

Might a signing bonus not be available until a not-yet employee has signed and become bound by the “separate agreement” California Business and Professions Code § 16608(b)(2)(D)(i) requires to set up a § 16608(b)(2)(D) exception to § 16608(b)(1)? Recognizing that “[t]he worker has an option to defer receipt of the payment to the end of a fully served retention period” [§ 16608(b)(2)(D)(iv)], could the agreement include the not-yet employee’s exercise (or nonexercise) of that option and election, irrevocable, specifying the date or dates of the employer’s payment obligation? If these are so, might the obligee have no legally enforceable right to a signing-bonus payment until its agreed payment date? Might the employer’s obligation be set by the separate agreement?

In my experience, almost all business lawyers suggest bringing in an employee-benefits lawyer—even when working on a micro deal. Often, a client rejects that advice, does not engage an eb lawyer or consultant, and does not authorize the business lawyer to engage an eb lawyer or consultant. Also, some sellers and some buyers keep the deal-making secret from even one’s regular advisers, including some who might bill nothing for useful help. Bad consequences result, but it might not be the fault of a lawyer or other professional.

I hope your seventh book will be the music notation and lyrics of your songs about the law of retirement plans.

Controls about identity or authority might call for different methods when none of the communication is face-to-face.

If the buyer bought shares, LLC interests, or partnership interests of the seller organization such that the buyer now governs the seller organization, the buyer may decide what to do with the seller organization’s retirement plan. If the buyer bought assets from the seller organization (and not shares or other interests of the seller organization), the seller organization, acting by whoever has power to act for it, decides what to with its retirement plan. This is not advice to anyone.

If the documents governing the plan provide no more than is needed to meet § 401(a)(9): “The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. For this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year after the valuation date, but that are not actually made during the valuation calendar year, may be excluded.” 26 C.F.R. § 1.401(a)(9)-5(b)(2)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(b)(2)(i).

If the key reason your client is thinking of dissolving a company is so the company and other business organizations are not treated as one § 414 employer, your client might reevaluate. In 2001, Congress recognized that an employer’s contribution to a retirement plan for a household employee is nondeductible if the contribution is not made for a trade or business. See Internal Revenue Code of 1986 (26 U.S.C.) § 4972(c)(6)(B) https://www.govinfo.gov/content/pkg/USCODE-2023-title26/pdf/USCODE-2023-title26-subtitleD-chap43-sec4972.pdf. I.R.C. § 414(c) refers to “employees of trades or businesses (whether or not incorporated) which are under common control[.]” If the LLC and its household employee do no work for a trade or business, there might be no need to treat the LLC as a part of the same employer as the businesses the owner controls. Consider whether the LLC might establish a § 408(k) SEP or a § 408(p) SIMPLE for its household employee. As always, get one’s lawyers’ advice. This is not advice to anyone.

A caution for others who might do one or both sorts for who might be § 414(v)(7)-affected: An employee who’s 49 at the beginning of a year might turn 50 by the end of the year.

If a portion of the settlement might be “back pay” for wages (or, arguably, self-employment income) that would have happened had the claims complained-of not happened, there might be some opportunities for applying a participant’s elective-deferral election, matching or nonelective contributions (to the extent the plan provided), and years of service (possibly for eligibility, benefit accrual, and vesting). “Back pay. Payments awarded by an administrative agency or court or pursuant to a bona fide agreement by an employer to compensate an employee for lost wages are compensation within the meaning of section 415(c)(3) for the limitation year to which the back pay relates, but only to the extent such payments represent wages and compensation that would otherwise be included in compensation under this section.” 26 C.F.R. § 1.415(c)-2(g)(8) https://www.ecfr.gov/current/title-26/part-1/section-1.415(c)-2#p-1.415(c)-2(g)(8). But the details of how to write the settlement agreement; how to allocate amounts to particular plan, limitation, and tax years; and how to time and document elections are tricky. And there are other employee-benefits issues. If your client does not have a regularly engaged employee-benefits lawyer or that lawyer wants to add one who is specially knowledgeable for this situation, Bradley Horne (Super Lawyers Rising Stars: 2024, 2025, 2026) at Smith & Downey has a developed knowledge of how to handle the retirement, health, and other employee-benefit plans’ aspects regarding settlements of employment-related disputes. https://www.smithdowney.com/professionals/bradley-j-horne/

BenefitsLink neighbors can tell us if I’m guessing wrong, but I guess the conventional approach is to treat the plan as having the provision needed to tax-qualify the § 401(k) arrangement, then recognizing a failure to administer that assumed-in provision as an operational failure.

Jakyasar seems to describe a situation in which, at least for 2026, no participant will be constrained to make age-based catch-up contributions as Roth contributions because no participant will have had 2025 Social Security wages more than $150,000. BenefitsLink mavens, if the plan sponsor is confident no participant will be § 414(v)(7)-constrained to make catch-up deferrals only as Roth contributions, do you think it’s safe for such a plan sponsor to omit a Roth-contribution provision?

My observation was only about what tax law tolerates for when the § 414A-needed automatic-contribution provisions must be stated in what tax law imagines as “the” written plan. Among the conditions of the legal fiction of the remedial-amendment period is that “the plan or contract is operated as if such [delayed, but retroactive] plan or contract amendment were in effect[.]” SECURE 2022 § 501(b)(2)(A). So, a plan’s administrator must administer the plan according to the administrator’s prudent assumption about what the later-amended plan is deemed to have provided retroactively. If that didn’t happen, pursue corrections. For a convenient reference to C.B. Zeller’s pointer, my note above cites Notice 2024-2 and gives the particular hyperlink. (Because the IRS ended printing the weekly Internal Revenue Bulletins, https://www.irs.gov/irb is the official source.) This is not advice to anyone.

Many § 403(b) plans lack a service provider that’s obligated to inform the charity about a perception or suspicion that the plan’s elective-deferral arrangement does not meet § 414A.

Internal Revenue Code § 414A(a)(1) provides: “[A]n arrangement shall not be treated as a qualified cash or deferred arrangement described in section 401(k) unless such arrangement meets the automatic enrollment requirements[.]” A plan might be amended to remove automatic-contribution provisions if the plan is amended to omit an elective-deferral arrangement. But how many plan sponsors want a plan only for an employer’s nonelective contributions?

If the plan was not established before December 29, 2022 (or the plan’s elective-deferral arrangement began on or after December 29, 2022), the plan is neither a governmental plan nor a church plan, and neither the new-employer nor the small-employer exception applies: Are you sure there is, for tax-treatment purposes, a plan-document failure? If the plan provides an automatic-contribution arrangement because the employer presumes it will amend, retroactively, the written plan to meet Internal Revenue Code § 414A’s tax-treatment condition, shouldn’t such an amendment be within Congress’s (SECURE 2022) and the IRS’s remedial-amendment period? IRS, Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024-2 I.R.B. 316, 332-333 (Jan. 8, 2024), at Q&A-J1., https://www.irs.gov/pub/irs-irbs/irb24-02.pdf.

For anyone who might help cheersmate reason through those questions, here’s the final rule: https://www.govinfo.gov/content/pkg/FR-2025-09-16/pdf/2025-17865.pdf. The rule paragraphs cheersmate mentions [26 C.F.R. § 1.414(v)–2(b)(2)-(3)] are on page 44549 [page 23 of 27 in the pdf].

Scrambled Eggs Super! https://seuss.fandom.com/wiki/Peter_T._Hooper Sometimes we might regret that the IRS’s inflation-adjustment notices do not show the Consumer Price Index measures used, and do not show the arithmetic.

If the plan (including loan policy or procedure made under the plan) imposes no restriction or condition beyond those needed to meet tax law: Internal Revenue Code § 72(p)(2)(B)(ii): “Clause (i) [limiting a loan’s term to five years] shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.” Many plans’ administrators’ process claims for a participant loan accepting the claimant’s statements, made under penalties of perjury, on a paper or electronic claim form. A claim form often had been designed to paraphrase text from the statute, regulations, or both. This is not advice to anyone.

And Lethal Weapon.

Thank you for the pop-culture reference to Better Off Dead.

The bonus plan you described is somewhat similar to many banks’ and securities broker-dealers’ bonus plans. You didn’t mention restricted stock, and your employment condition might be shorter than some others. (About who invented what, I won’t comment on Wall Streeters’ designs of these arrangements. Smith Barney, now absorbed into Morgan Stanley, was a Citigroup subsidiary during my inside-counsel work for them.) At least one court found that what some securities broker-dealers consider a usual bonus plan is an ERISA-governed pension plan. Shafer v. Morgan Stanley, No. 20-cv-11047-PGG, 2023 WL 8100717 (S.D.N.Y. Nov. 21, 2023), writ denied and appeal dismissed, 2025 WL 1890535 (2d Cir. July 9, 2025); Shafer v. Morgan Stanley, No. 20-cv-11047-PGG, 2024 WL 4697235 (S.D.N.Y. Nov. 5, 2024). See also Tolbert v. RBC Capital Markets Corp., 758 F.3d 619 (5th Cir. 2014); Paul v. RBC Capital Markets LLC, 2018 WL 784577 (W.D. Wash. Feb. 8, 2018). There are also court decisions that interpret the law and facts differently. An employer might want its lawyers’, including an ERISA lawyer’s, advice on all compensation arrangements. And about governing-law and exclusive-forum clauses in all arrangements, including bonus plans.

It’s not fully accurate to say no compensation is deferred. What is or isn’t a deferral for one or more purposes of Internal Revenue Code § 61, § 83, § 409A, or § 451 does not necessarily control what might be “a deferral of income” within the meaning of ERISA § 3(2)(A). Some might look to tax law to put meaning on a word or phrase in ERISA’s title I, but some might not. Considering your hypothetical example, some might say there was a deferral for only one month—from when the bonus became no longer conditional to when it’s payable or paid. But others might say the bonus was substantially earned based on the work done in 2025, and then is deferred, subject to a condition, until about three years later. Also, might an employee leave her job promptly on collecting a bonus payment? Could that result a deferral, however short, “extending to the termination of covered employment[.]” Until one reads the available court decisions and thinks through the modes of analysis, a prediction about what a court generally, a particular court, or a particular judge would decide might be grounded on little more than instinct. (It’s even harder to predict what an arbitrator might do.) I don’t say anything about what’s a right or wrong interpretation or application of the statute. Rather, I say only that courts (and arbitrators) might differ in how one interprets the statute, or might differ in how one applies an understanding of the statute to a particular set of facts, or both. If I were dealing with a real client, I’d uncover the facts (including some beyond what my client thinks is relevant), do the legal research, and say what I think. And I wouldn’t be afraid to state a conclusion. I might feel that law ought not to treat a bonus plan as a pension plan. But I wouldn’t let my view about what law ought to be cloud my professional responsibility to provide careful advice. This is not advice to anyone.

The counterparties’ dispute is about whether a plan “(i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond[.]” ERISA § 3(2)(A). If what Morgan Stanley Smith Barney calls a bonus plan is such an ERISA-defined pension plan and the plan is not sufficiently limited to a “select group”, the plan is governed by ERISA’s funding and vesting provisions. Here’s the Bakers’ posting of a complaint that asks the Federal court for the Southern District of New York to vacate the advisory opinion as contrary to law and contrary to the Labor department’s procedure. https://benefitslink.com/src/ctop/sheresky-v-chaves-deremer-sdny-complaint-10282025.pdf That court previously found that the Morgan Stanley Smith Barney plan is ERISA-governed. Even if no court vacates EBSA’s advisory opinion, no court or arbitrator need follow it, and some might not be persuaded by EBSA’s interpretation or reasoning.