Peter Gulia

If the plan sponsor’s goal is increasing nonhighly-compensated employees’ elective deferrals: Beyond increasing an arrangement’s initial default percentage for newly eligible employees, consider also: a “reenrollment” so a participant with a deferral percentage (whether affirmative or impliedly elected) less than the new initial default percentage is defaulted to that percentage, unless the participant opts out; an “auto-escalation” provision to increase a participant’s deferral percentage each successive year. (Everything depends on an appropriate notice and a participant’s opportunity to opt out from whatever default is presented.) I don’t advocate these plan designs, but merely mention them as provisions some plan sponsors adopt. Among many factors to consider for these and other plan-design questions, a plan sponsor might consider its guesses and perceptions about how employees might react to a presented default or escalation. Some employers worry that too much attention to an elective-deferral arrangement might awaken some employees, and might lead some to decrease or end one’s deferral election. A plan sponsor might consider doing only what’s feasible within the employer’s capabilities and the recordkeeper’s and third-party administrator’s services.

The relief the IRS describes seems available if, with other conditions, “the amendment is adopted no later than the last day of the first plan year [sic] beginning on or after January 1, 2025[.]” IRS, Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024–2 I.R.B. 316, 331 [middle column] (Jan. 8, 2024), https://www.irs.gov/pub/irs-irbs/irb24-02.pdf. (I’m not aware that the IRS published further relief.) Before considering a due date for a plan amendment, consider whether the employer needs or wants an amendment. Many plan-design features from SECURE 2019 and SECURE 2022 are not available for nongovernmental § 457(b) plans. A plan’s document before December 2019 might state distribution provisions that meet all § 401(a)(9) conditions, even after considering all SECURE 2019 and SECURE 2022 changes. An ERISA-governed select-group plan not governed by ERISA § 206 need not recognize domestic-relations orders, and so need not recognize a Native American Indian tribe’s order. If the plan allows an employee to elect a deferral and allows such an election more often than yearly, an employer might amend its plan to undo a provision that “compensation will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month[.]”

Unless the circumstances fit one of the rule’s specified exclusions, the rule’s definition of a blackout period does not turn on why there is a temporary restriction. 29 C.F.R. § 2520.101-3(d)(1)(i) https://www.ecfr.gov/current/title-29/part-2520/section-2520.101-3#p-2520.101-3(d)(1)(i).

But consider reminding your client that there might be internal records of the company’s resolutions, consents, and other acts. Those records might document which humans have which responsibilities in acting for the company. The company, or an individual, might prefer that those records state accurately who’s responsible for what. And if someone thinks it’s merely a tedious housekeeping chore, consider that these company records might affect the company’s indemnity obligations and an individual’s indemnity rights.

Here’s the rule Bruce1 alludes to: 26 C.F.R. § 1.401(a)(9)-5(d)(1)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(d)(1)(i). That rule applies “for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2025.” How to interpret the rule that applied for years before 2025 is unclear. This is not advice to anyone.

I admire your creative thinking. Not knowing which (if any) of the children is your advisee, or whether the IRA custodian is your advisee: Consider whether trying to do what you suggest might delay the settlement. Consider whether trying to do what you suggest might incur expenses—including for one or more professionals’ time—disproportionate to the stakes for the settlement. If a settlement agreement is only among the children, would it bind the United States? Although you suppose an excise tax on not having received a 2023 minimum distribution, consider that some (or all) of the settlement’s takers might assume, each for oneself, that the individual was not a beneficiary at a relevant time or otherwise is not responsible for an excise tax. Whether for that or another reason, an individual might file her tax returns without Form 5329. The IRS might not detect that some (or all) of the excise tax on a missed minimum distribution is not stated on Form 5329 returns. Consider differences between 26 C.F.R. § 54.4974-1 as it applies to an individual’s tax year that began or begins on or after January 1, 2025 and, for earlier tax years, 26 C.F.R. § 54.4974-2 as published before a July 19, 2024 amendment. See https://www.ecfr.gov/current/title-26/part-54/section-54.4974-1#p-54.4974-1(h). This is not advice to anyone.

And when you turn to reporting one or both changes, Form 5500 part II line 4 and the Instructions for it (page 18) state details about how to report a change in the plan’s name or a change in the sponsor’s name. The format recognizes that either of these names might have changed when the other has not. https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2024-form-5500.pdf https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2024-instructions.pdf

About my query (above): Some lawyers sometimes advise that it might be unwise to state an offer of language assistance (if applicable law does not require it) if the employer/administrator is not certain it will be ready to fulfill the offered assistance. In typical plan document/SPD assembly, does a user get a choice about whether to include an offer of language assistance?

President Trump’s order states: “[N]othing in this order, however, requires or directs any change in the services provided by any agency. Agency heads should make decisions as they deem necessary to fulfill their respective agencies’ mission and efficiently provide Government services to the American people. Agency heads are not required to amend, remove, or otherwise stop production of documents, products, or other services prepared or offered in languages other than English.” About State and local governmental plans, laws and customs differ on whether a plan’s administration provides, or deliberately omits, written communications or even an offer of language assistance in a language other than English. That’s nothing new; it’s been so throughout the 40 years I’ve worked with retirement plans. And which States make which choices might not be those one might suppose or guess.

Using one comparator for all the differing portfolios in a set of target-year funds! And let me guess: Almost none of the customers questions that selection?

I’m curious: If a summary plan description is assembled from the plan-document software the recordkeeper or third-party administrator uses, does the plan sponsor/administrator get a choice about whether to include an offer of assistance in a language other than English? Or does a service provider routinely put in an offer of assistance in one or more languages other than English, even if 29 C.F.R. § 2520.102-2(c) might not require the offer in the particular plan’s circumstances?

Am I right in guessing big recordkeepers show as the 404a-5 comparator for a target-date fund Morningstar’s or S&P Global Ratings’ index of target-date funds of the same or nearest target year?

President Trump’s order Designating English as the Official Language of The United States revokes President Clinton’s order Improving Access to Services for Persons With Limited English Proficiency. https://www.whitehouse.gov/presidential-actions/2025/03/designating-english-as-the-official-language-of-the-united-states/ Here’s the revoked order: https://www.govinfo.gov/content/pkg/FR-2000-08-16/pdf/00-20938.pdf. Although the order is directed to Federal government agency heads, might this affect anything an employee-benefit plan’s administrator must do (or not do)?

Many BenefitsLink neighbors know much more than I know about TPAs' customs for this kind of error.

How about the Labor department’s Employee Benefits Security Administration: Has anyone seen EBSA people slow-play an investigation or inquiry, or either’s documents request?

After Paul I’s explanation, the Treasury department on November 27, 2023 published a proposed interpretation. https://www.govinfo.gov/content/pkg/FR-2023-11-27/pdf/2023-25987.pdf Comments on the proposed interpretation are available at https://www.regulations.gov/document/IRS-2023-0058-0001/comment.

Was that one participant’s allocation of the matching contribution the ONLY one that was incorrect? Might there be other participants credited with an amount more than the correct allocation? Or some credited with an amount less than the correct allocation? If the whole amount the employer paid to the plan’s trust was more than the sum of all participants’ correct allocations in the matching contribution, is there a ground for the plan’s administrator’s finding that an amount was paid under a mistake of fact? ERISA § 403(c)(2)(A)(i), 29 U.S.C. § 1103(c)(2)(A)(i) http://uscode.house.gov/view.xhtml?req=(title:29 section:1103 edition:prelim) OR (granuleid:USC-prelim-title29-section1103)&f=treesort&edition=prelim&num=0&jumpTo=true. If so, does the plan provide for returning to the employer its mistakenly-paid amount? After sorting a correction of the allocations of the matching contribution, the plan’s administrator might decide how to allocate investment gains and losses attributable to an incorrect allocation. This is not advice to anyone.

Attorney General Bondi’s February 5, 2025 memo rescinds Attorney General Garland’s July 1, 2021 memo, which rescinded a memo of a predecessor. Attorney General Sessions’ November 16, 2017 memo set standards for the Justice department’s nonrule guidance. Although the memo addressed only the Justice department, other agencies, including the Labor and Treasury departments, sometimes followed the memo’s principles. Attorney General Bondi directs a report on “strategies and measures that can be utilized to eliminate the illegal or improper use of guidance documents[.]” Although that report is due this week—March 7, it would be an internal report from the Associate Attorney General to the Attorney General. Recognizing deliberative-process and executive privileges, that report won’t be available under the Freedom of Information Act. It might be a while before a public release. Beyond whatever the Justice department might do or not do regarding an executive agency’s decision, we might interpret the February 5, 2025 memo as a general sense against an executive agency using nonrule guidance as a substitute for proper rulemaking, to set a right or duty beyond those already provided by a statute, or to state an interpretation of a statute beyond an interpretation already stated by a proper rulemaking. https://www.justice.gov/ag/media/1388511/dl?inline Prohibition on Improper Guidance Documents 2017-11-16.pdf

Here’s a hyperlink to the IRS’s FY2025 Lapsed Appropriations Contingency Plan: https://home.treasury.gov/system/files/266/IRS-FY24LapsePlan.pdf BenefitsLink neighbors, what do you think: Would stopping IRS examinations be welcome or unwelcome? Would stopping rulemaking and other interpretive guidance be welcome or unwelcome?

Some random thoughts: Can the plan be stated using only IRS-preapproved documents? If so and if the plan sponsor does not apply for an IRS determination, might there be little or no need to persuade the IRS if there is no examination to respond to? Was the amount deposited at least logically consistent with design elements the proposal suggested? Might writings made before or around the same time as opening the account, or to count the amount to deposit, suggest the employer adopted plan-design elements the proposal suggested?

Perhaps after March 14, a furloughed EBSA employee won't ask anything.

Bob Toth is a dear friend. He often has observations about points of law others overlook. Beyond some explanation about whatever SECURE 2022 § 202 might do (or might have caused to have been done, or to be done), Bob’s wider point is that professionals, including the three As—accountants, actuaries, attorneys, who have worked somewhat easily with retirement plans that provide account balances only might need to invoke some different thinking IF an individual-account retirement plan allows annuities, whether QLACs or other kinds. David Goldberg, whether a participant may during a marriage purchase a QLAC or another life-contingent annuity without the spouse’s consent turns on the particular retirement plan’s provisions. An ERISA-governed plan might be designed to meet ERISA § 205. A State or local governmental plan’s provisions might fit the State’s law. A church plan’s provisions might meet the church’s internal law and church doctrine. If ERISA § 205 [29 U.S.C. § 1055] governs: http://uscode.house.gov/view.xhtml?req=(title:29 section:1055 edition:prelim) OR (granuleid:USC-prelim-title29-section1055)&f=treesort&edition=prelim&num=0&jumpTo=true. Read particularly ERISA § 205(b)(1)(c)(ii). Even if other conditions for not requiring a qualified joint and survivor annuity are met, a participant can’t elect a life annuity other than a QJSA without a qualified election with the spouse’s consent. The Retirement Equity Act of 1984 lives.

About such a domestic-relations-order procedure a plan-documents publisher supplies along with its IRS-preapproved documents, the publisher likely does not state that the procedure is consistent with ERISA’s title I generally or even ERISA § 206(d)(3) particularly. And adopting the publisher’s domestic-relations-order procedure typically is not a condition of a user’s reliance on the IRS’s opinion letter that a preapproved document, if used correctly, could state a plan that in form meets some conditions of Internal Revenue Code § 401(a). Some fiduciaries might question whether adopting legal advice from a service provider that denies that it provides legal advice meets ERISA § 404(a)(1)(B)’s standard for a fiduciary’s care, skill, prudence, and diligence. And no matter how serviceable to third persons is the publisher’s lawyer’s advice to her client, the publisher, that advice—even if the advice embedded in a suggested procedure considers general interests of the class of the publisher’s users—can’t consider the particular facts, circumstances, and interests of a particular user. So, a plan’s administrator might want its lawyer’s or other adviser’s advice about writing the administrator’s domestic-relations-order procedure. ERISAlaw, you are not alone in wondering that an administrator need not—and, depending on particular facts and circumstances, perhaps should not—segregate any portion of the participant’s account unless the administrator has received an order that is a domestic-relations order. Even then, an administrator need not restrict any more than what would become distributable to an alternate payee if the DRO is a QDRO. And the administrator may end the segregation when the administrator has decided the DRO is not a QDRO. ERISA § 206(d)(3)(H) [unofficially compiled as 29 U.S.C. § 1056(d)(3)(H)] http://uscode.house.gov/view.xhtml?req=(title:29 section:1056 edition:prelim) OR (granuleid:USC-prelim-title29-section1056)&f=treesort&edition=prelim&num=0&jumpTo=true. Yet, some administrators, preferably with one’s lawyer’s help, evaluate and balance many risks that might come from domestic-relations situations. (I don’t here advocate or describe any view.) ERISAlaw, if you think a publisher’s draft domestic-relations-order procedure isn’t right for your client, might your client want you to write what you think makes sense? This is not advice to anyone.

Also, the retirement plan needs a fiduciary who is independent of the decedent, the decedent’s surviving spouse, the decedent’s children, and any anyone else who might be an heir, legatee, or beneficiary who might take from the decedent’s estate or trust.

The charity (I’m guessing) might want its lawyers’ and accountants’ advice about how these compensation elements will or would be reported in its Form 990 information return, which is publicly available, and in its audited (?), reviewed (?), compiled (?) financial statements.