Peter Gulia

Under some States' laws, a funeral expense might ordinarily include a moderate amount for mourning, including food for mourners. If a participant's claim for what the participant describes as burial or funeral expenses seems excessive, the plan's administrator might consider what expenses a State's law would disallow in that category if a lower-priority creditor, to protect its right to a distribution from the decedent's estate, challenges a personal representative's accounting.

And if not Schedule A, does the plan's administrator have enough information to complete Schedule C regarding the plan's payments for the health-advocacy services? Or did the employer pay without using a plan's assets?

Soon, “a plan providing disability benefits” must design its claims procedure to meet some conditions ERISA’s claims-procedure rule does not otherwise require for a retirement plan’s claims procedure. https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-30070.pdf If a 401(k) plan has immediate vesting for all contributions and allows a distribution on a participant’s severance-from-employment (without considering how the employment ended), is it fair to say the plan provides no disability benefit? Can anyone think of a situation in which a 401(k) plan’s administrator must decide whether a participant has a disability?

According to the Journal of Accountancy: "Although the new [Internal Revenue Manual] section is not yet available on the IRS’s website, its existence has been verified by IRS personnel. The IRS says it plans to communicate the changes to practitioners in the near future."

The Treasury department's rule includes a delegation to the department's bureau: "The Commissioner may prescribe additional guidance of general applicability, published in the Internal Revenue Bulletin ..., expanding the list of deemed immediate and heavy financial needs[.]" 26 C.F.R. 1.401(k)-1(d)(3)(v).

Here’s a link to a relevant section of the Internal Revenue Manual. “This section is intended to provide uniform guidelines to employees who deal with representatives and/or who receive and inspect Form 2848, Power of Attorney and Declaration of Representative (POA), Form 8821, Tax Information Authorization (TIA), and similar documents.” https://www.irs.gov/irm/part4/irm_04-011-055 But if there really is a recent procedure, it might not have been compiled in the Manual (or in the IRS website’s public display of it).

I had not thought there was a problem. But an employer heard (or misheard) its retirement-services provider say "ERISA" precluded the participation.

Gruegen, thank you for spotting a potential issue. Here's one of many other ways to think about the problem: (Assume the plan limits hardship distributions to only the situations stated in 26 C.F.R. 1.401(k)-1(d)(3)(iii)(B)(1)-(6), and assume the plan's governing document exactly follows that text.) If (after 2017) a plan's administrator interprets the plan to allow a hardship distribution in circumstances that met (B)(6) as it applied before December 22, 2017, how likely is it that the Internal Revenue Service would tax-disqualify the plan for its administrator's failure to obey the plan's governing document?

K2retire, Lou S., and RatherBeGolfing, thank you for your prompt good help.

A business owner employs her children (all younger than 14) as employees of her business. The employer’s employment-law counsel has vetted these jobs as proper under Federal and State child-labor laws. The 401(k) plan’s document does not impose age 18 or any age as a condition. Assume each child’s employment involves real work with no more than reasonable compensation. Could anything under ERISA or the Internal Revenue Code preclude such an employee from making elective deferrals and getting the plan’s safe-harbor matching contributions?

In the 1990s I saw a contract that obligated the employer to allocate, each year, to the chief executive's individual account under the employer's retirement plan the amount of the IRC 415 annual-additions limit. The negotiator must have thought at least some about how that obligation related to coverage and non-discrimination conditions: The contract specified also obligations that the employer provide, pay, and allocate contributions for all participants' accounts so that the plan would, during the chief's employment and throughout the year of her separation, be a tax-qualified plan. And the contract specified that the chief was an intended beneficiary of the promises regarding contributions for all participants as needed to keep the plan tax-qualified. The employer delivered a copy of that contract to the plan's recordkeeper and told it to design the least expensive plan that would meet the obligations to the chief executive.

Although it is only a temporary rule, 26 C.F.R. § 1.414(q)-1T Q&A-12(b) is a source of an interpretation about how long a former spouse remains treated as a spouse to determine whether an employee is under IRC 414(q) a highly-compensated employee. https://www.ecfr.gov/cgi-bin/text-idx?SID=d1ee38fe6055307c661f475ded254613&mc=true&node=se26.7.1_1414_2q_3_61t&rgn=div8 "If an individual is a family member with respect to an employee or former employee on any day during the year, such individual is treated as a family member for the entire year. Thus, for example, if an individual is a family member with respect to an employee on the first day of a year, such individual continues to be a family member with respect to such employee throughout the year even though their relationship changes as a result of death or divorce."

A collectively bargained employee can be (if other conditions are met) one who is included in a collective-bargaining unit even if the employee is not a member of the labor union that serves as the unit’s representative. “The requirements of [IRC § 401(a)(4)] are treated as satisfied by a collectively-bargained plan that automatically satisfies section 410(b) under § 1.410(b)-2(b)(7).” 26 C.F.R. § 1.401(a)(4)-1(c)(5) https://www.ecfr.gov/cgi-bin/text-idx?SID=f3b5bc3ae83784c7e815b36bb79fbbab&mc=true&node=se26.6.1_1401_2a_3_24_3_61&rgn=div8 “A plan that benefits solely collectively bargained employees for a plan year satisfies this paragraph (b)(7) for the plan year. If a plan (within the meaning of § 1.410(b)-7(b)) benefits both collectively bargained employees and noncollectively bargained employees for a plan year, § 1.410(b)-7(c)(4) provides that the portion of the plan that benefits collectively bargained employees is treated as a separate plan from the portion of the plan that benefits noncollectively bargained employees. Thus, the mandatorily disaggregated portion of the plan that benefits the collectively bargained employees automatically satisfies this paragraph (b)(7) for the plan year and hence section 410(b). See § 1.410(b)-9 for the definitions of collectively bargained employee and noncollectively bargained employee.” 26 C.F.R. § 1.410(b)-2(b)(7) https://www.ecfr.gov/cgi-bin/text-idx?SID=474fc265e9f103c40593f277b1d96c6b&mc=true&node=se26.7.1_1410_2b_3_62&rgn=div8 “Collectively bargained employee means a collectively bargained employee within the meaning of § 1.410(b)-6(d)(2).” “Noncollectively bargained employee means an employee who is not a collectively bargained employee.” 26 C.F.R. § 1.410(b)-9 https://www.ecfr.gov/cgi-bin/text-idx?SID=474fc265e9f103c40593f277b1d96c6b&mc=true&node=se26.7.1_1410_2b_3_69&rgn=div8 “A collectively bargained employee is an employee who is included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, [if] there is evidence that retirement benefits were the subject of good faith bargaining between employee representatives and the employer or employers. An employee is a collectively bargained employee regardless of whether the employee benefits under any plan of the employer. See section 7701(a)(46) and § 301.7701-17T of this chapter for additional requirements applicable to the collective bargaining agreement. An employee who performs hours of service during the plan year as both a collectively bargained employee and a noncollectively bargained employee is treated as a collectively bargained employee with respect to the hours of service performed as a collectively bargained employee[,] and a noncollectively bargained employee with respect to the hours of service performed as a noncollectively bargained employee. See § 1.410(b)-7(c) for disaggregation rules for plans benefiting collectively bargained and noncollectively bargained employees.” 26 C.F.R. § 1.410(b)-6(d)(2)(i) https://www.ecfr.gov/cgi-bin/text-idx?SID=474fc265e9f103c40593f277b1d96c6b&mc=true&node=se26.7.1_1410_2b_3_66&rgn=div8

Under the soon-to-be new tax law, if a specified service business is a service business for which the reputation or skill of one or more employees or owners is the business’s principal asset, which small businesses don’t fall into that definition?

Another idea I read suggested that the $10,000 limit on a deduction for State and local income taxes might motivate a business owner to use a retirement plan to reduce her income to reduce the undeductible portion of her State and local income taxes. Is that realistic?

I've heard practitioners express differing views about whether it matters how quickly or slowly the Service acts on VCP submissions. Some say a client might perceive a long lag as somehow suggesting the practitioner's lack of care or diligence. Others say a wait is fine because a taxpayer is protected once it has filed the submission. And some say a lag might even help because a practitioner might "supplement" a submission to include further errors. What do BenefitsLink mavens think?

Perhaps the plan’s administrator might treat “notice that [the claimant] won’t receive benefit” as a claim denial or “adverse benefit determination”, and likewise might treat “notice of the amount of [the claimant’s] benefits” as a denial or adverse benefit determination of a claim to a greater amount. If so, the 120-days period might not contravene 29 C.F.R. § 2560.503-1(h)(2)(i), which calls for a claims procedure to “[p]rovide claimants at least 60 days following receipt of a notification of an adverse benefit determination within which to appeal the determination[.]” https://www.ecfr.gov/cgi-bin/text-idx?SID=695269138ec14a5af2fef19167f43fcb&mc=true&node=se29.9.2560_1503_61&rgn=div8

In Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604; 57 Empl. Benefits Cas. (BNA) 1265, 2013 BL 345916 (U.S. Dec. 16, 2013), the Supreme Court held that an ERISA-governed employee-benefit plan may specify a limitations period that bars a benefits claim if the period is reasonable. Ask your lawyer for his or her advice about whether the period you describe is reasonable.

RatherBeGolfing, thanks. Anyone with a different view?

What do you think about how Congress's H.R. 1, including its changes about how a business's income passes through to owners, will affect small-business employers' desire and willingness to create retirement plans?

The attachment is Judge Beetlestone's order enjoining two administrative-law rules about religious or moral exceptions to providing a health plan's coverage for contraception. religious and moral exception rules enjoined.pdf

John Feldt, I doubt that the Internal Revenue Code precludes a sole-proprietor business from establishing a § 401(a)-qualified plan merely because the proprietor is younger than 21 or 18. Some banking, insurance, and securities businesses are unwilling or reluctant to make a contract with a person who has not yet attained the age of competence to make a non-voidable contract. Others reason that a young businessperson who seeks to save or invest seems a good risk. Some might desire the loyalty of such a customer. Even with the businesses that are willing to deal with a young person, doing so might require the approval of someone beyond the ordinary front-line processor. So it might make sense to inquire about this point before sending an application.

And consider 26 C.F.R. section 1.402A-1's Q&A-13. https://www.ecfr.gov/cgi-bin/text-idx?SID=2f15788783ead36e79e54a376e3afcb7&mc=true&node=se26.6.1_1402a_61&rgn=div8 That this rule against "transferring value" from non-Roth accounts to Roth accounts refers not only to a "transaction" but also to an "accounting methodology" suggests that non-Roth and Roth accounts may share an investment if the accounting among the subaccounts of a participant's account is fair.

Those interested in this discussion's observations about which State laws ERISA preempts or does not preempt might consider a recent U.S. Supreme Court decision about the reach of ERISA's preemption. While the factual context is quite different, the opinions describe some interests in 'nationally uniform plan administration', and disagree about how much a State law may interfere. https://www.supremecourt.gov/opinions/15pdf/14-181_5426.pdf Again, I don't state a particular conclusion; only that an employer (and a plan administrator if not the same person) should get its lawyer's advice.

If one relies on 26 C.F.R. § 1.401(k)-3(g), doesn’t the reduction or suspension of safe-harbor contributions apply no earlier than 30 days after eligible employees are provided the -3(g)(2) supplemental notice that explains the plan amendment?