Peter Gulia

jpod and RBG, thank you for the suggestions.

jpod, thank you for the answer I feared. For the situation described above, being harsh to the transferred employee means the employer pays nothing, not even the contribution the worker earned. But being decent would require the employer to pay an extra $3,500 to persuade the IRS that no harm is done by reforming a document to provide a contribution to a non-highly-compensated employee who continues to be loyal to the employer.

jpod, sorry if my query was confusing. The plan's document CURRENTLY refers to just one organization as the plan's sponsor and the only participating employer. But the adoption agreement would allow adding participating employers. Do you think it's reasonable to amend the plan retroactive to 2017?

Imagine a profit-sharing plan that allows § 401(k) elective deferrals, and allows a matching contribution. A participant shares in a year’s matching contribution only if the participant is the Company’s employee on the last day of the year. The plan narrowly defines the Company by naming only one organization, and ignoring its dozens of affiliates. (The volume-submitter document states a “member” of a “controlled group” or an “affiliated service group” does not participate unless it adopts the plan with the plan sponsor’s approval.) A worker who was the named Company’s employee for the first three quarter-years of 2017 became, on October 1, an employee of a non-U.S. organization that is the Company’s 100% wholly-owned subsidiary. This worker is a citizen only of the USA. Under a surface reading of the plan’s document, it seems this worker is not entitled to share in the matching contribution for the year ended December 31, 2017. But is there something I should look for in the 128 pages that might support treating an employee of the subsidiary as an employee of the Company? And if there isn’t, is it feasible now to amend the plan (without unraveling any tax-qualified treatment) to allow the transferred employee to share in 2017’s matching contribution?

I didn't write the strikeout, and that text is my query. Must one apply the rule's reference to the Internal Revenue Code as it now reads?

But UNTIL the Secretary of the Treasury makes a new rule or regulation and it becomes effective and applicable or the Commissioner of Internal Revenue "prescribe additional guidance of general applicability" (within 26 C.F.R. 1.401(k)-1(d)(3)(v)) and publishes it in the Internal Revenue Bulletin, do BenefitsLink mavens agree that one must administer a deemed-need provision by limiting a casualty hardship to "expenses ... that would qualify for the casualty deduction under [Internal Revenue Code] section 165" as Congress's Act changed it?

Here’s another way to think about these questions. When there’s a close question about choosing between permissible, and perhaps even plausible, interpretation of a plan’s provisions, the plan’s administrator might consider its fiduciary duty of loyalty. ERISA § 404(a)(1)(A)(i): “[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—for the exclusive purpose of: providing benefits to participants and their beneficiaries[.]” Also, a fiduciary might consider that its implied duty of impartiality favors interpretations that one can explain as logically consistent for different participants whose circumstances that are relevant under the plan are the same. A plan’s administrator might explain and illustrate its interpretations in the plan’s summary plan description. A duty to do so might be heightened if an interpretation is one that deprives a participant of a contribution, or incremental vesting, in circumstances an “average” participant might perceive as having worked or been employed a whole year.

That “NRW-0975CA.5” is in the form’s footer suggests that someone for Nationwide Retirement Solutions reviewed (perhaps in “11/2015”) the form. But we don’t know whether the review considered tax-law issues. And if it did, we don’t know whether the reviewer relied on Nationwide’s lawyers or the plan’s lawyers.

Consider the Revenue Procedure's conditions, which include making and keeping a "letter" to record the return signer's grant of authority and direction: "The person filing the form must retain a letter, signed by the officer or agent authorized to sign the return, declaring under penalties of perjury that the facsimile signature appearing on the form is the signature adopted by the officer or agent and that the facsimile signature was affixed to the form by the officer or agent or at his or her direction. The letter must list each return by name and identifying number." https://www.irs.gov/businesses/revenue-procedure-2005-39

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?